Source: SEC Official Website

Translation: Golden Finance

On the morning of December 2, local time in the United States, Paul S. Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), rang the opening bell at the New York Stock Exchange and delivered an important speech titled "Revitalizing America's Capital Markets on the 250th Anniversary of Our Nation." In his speech, he elaborated on the reform of SEC capital market regulatory rules and the specific measures currently being taken by the SEC, indicating a vision for strengthening the U.S. capital markets for the next century.

Paul S. Atkins stated in his speech that one of his top priorities is to reform the SEC's disclosure rules, focusing on achieving two goals. First, the SEC must base its disclosure requirements on the principle of financial materiality. Second, these requirements must align with the size and development stage of the company. He also noted that disclosure reform is just one of the three pillars for revitalizing the glory of IPOs. The second pillar is to depoliticize shareholder meetings, refocusing them on voting for director elections and significant corporate matters. Additionally, the SEC must reform the legal environment for securities litigation, eliminating frivolous lawsuits while preserving avenues for shareholders to raise legitimate concerns.

Below is the full text of Paul S. Atkins' speech:

Ladies and gentlemen, good morning. Lynn, first, I want to thank you for your enthusiastic introduction and for hosting this event at the exchange. I also want to thank all the market participants present today. Of course, I am also pleased to see colleagues from various government departments. Thank you all for being here, and I appreciate your understanding that the views I express today are solely my own as Chairman and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (SEC) or any of the Commissioners.

Introduction

To think about the future of the American financial system, there is perhaps no better place than here. The New York Stock Exchange is the temple of capital markets, filled with various rhythms and rituals that allocate resources to socially valuable uses. If you listen closely, you can hear the low hum of human wisdom that has long echoed in this hall. And today, that echo still resonates around us.

Stepping out of this door, the surrounding blocks tell the story of America. No matter which direction you walk for a short distance, you can reach some landmark buildings, such as Federal Hall, where Washington took his oath of office and Congress established the Treasury; and that sycamore tree, under which more than twenty stockbrokers founded the predecessor of today's exchange; as well as those cobblestone streets, which were the cradle of commerce long before Manhattan's skyscrapers rose.

This square mile around us is less a place than a prologue—a beginning of a story, and now this story will be continued by us.

Of course, seven months from now, this history will reach a rare milestone—we will celebrate the 250th anniversary of our nation. Two hundred fifty years ago, a group of revolutionaries declared that rights are neither permissions to be fought for nor privileges to be taken away. They advocated for the right to self-governance, yes, but also for the right to self-sufficiency. They championed the right to work, to take risks, to prosper through their own efforts, and to pursue happiness and property. Indeed, our Founding Fathers sought autonomy both in the centers of power and in the marketplace of ideas.

Such an important anniversary calls for more than just ceremony; it demands more from us. It invites us to reflect, and more importantly, it compels us to resolve to ensure that the future we shape is worthy of the legacy we inherit.

The Beginning of American Capital Markets

So, allow me to take a few minutes to review how this history began.

Before the United States became a nation, it was merely an investment.

The earliest permanent British settlement in the Western Hemisphere was financed through joint-stock companies, which allowed people to pool funds, share risks, and share profits in this uncertain venture. For example, the Virginia Company—the first large security issued by Britain for the Americas—was funded through stock subscriptions to support the Jamestown colony, with investors expecting returns through land, trade, and dividends.

Decades later, similar structures laid the foundation for the embryonic form of this great city, foreshadowing New York's future as the center of the global securities market. In fact, today's Manhattan was originally a corporate investment project. This morning, we bring a copy of the company's original stock issuance document—the "birth certificate" of New Amsterdam—which constantly reminds us that the establishment of Manhattan was based on the idea that prosperity comes from putting capital to its most effective use.

Of course, this premise—and the financial system that derived from it—has deeper roots, tracing back to the English Glorious Revolution. At that time, Parliament seized despotic power from the monarchy and established principles that protected property rights, enforced contracts, and bound the state to predictable rules rather than the personal will of a monarch. By creating an environment conducive to market prosperity, England became a financial powerhouse. Our Founding Fathers inherited this worldview and built a more perfect union upon it—most notably Hamilton, whose grave we gather across from today.

Hamilton understood that a well-structured market could unleash America's tremendous vitality, something no monarch or government institution could achieve. After all, a free market is the hallmark of free people. As Ludwig von Mises aptly pointed out, "If history teaches us anything, it is that private property and civilization are inseparable."

Thus, in Federalist No. 11, Hamilton praised the "spirit of adventure" inspired by the "American commercial spirit"—"this unparalleled spirit of enterprise, which characterizes American merchants and navigators, is itself an inexhaustible source of wealth," and he predicted that this spirit had the potential to make America "the object of admiration and envy in the world."

Hamilton saw in this "spirit of adventure" the potential of a vibrant young nation, whose people could create their own prosperity. Indeed, he believed that the government must establish stable rules, maintain public credit, and reliably enforce contracts. But within this framework, the securities market would emerge, unlocking the most astonishing capital mobilization in human history.

Canals connecting the interior to the coasts were financed by government bonds. Railroads connecting the entire continent required unprecedented massive investments, giving rise to secondary markets, auditing standards, and modern corporate governance structures in the process. The steel that built our cities, the oil that powered our factories, and the electricity that illuminated our homes all depended on the generosity of domestic and foreign investors willing to invest in the still-forming American national idea.

Of course, we must humbly acknowledge that as a nation, we have sometimes failed to adhere to some of the most basic founding principles. But by the early twentieth century, millions of Americans owned securities and had a framework for realizing their aspirations. In fact, the wealth accumulated through financial markets accelerated social mobility.

As the century progressed, various ideologies competed to build economic power from the top down, while our model steadily proved its value on the global stage. We redefined the boundaries of possibility through inventions like the telephone and phonograph, assembly lines and airplanes, semiconductors that made computers ubiquitous, internet protocols that connected the world, GPS technology that located the world, social media platforms that spread information at the speed of thought, and the new field of artificial intelligence that is now changing the way we live and work.

Throughout this long history of innovation, a clear pattern emerges: the great leaps in American life have always stemmed from people's willingness to tolerate and accept risk, which has been supported by a system that rewards those who dare to take risks. Our prosperity is not a historical accident, nor is our future leadership a given. The twentieth century was a victory of economic freedom over various restrictive dogmas. However, principles do not perpetuate themselves. Freedom is not an inheritance we receive but a responsibility we bear. In recent years, our regulatory framework has strayed from the founding principles that helped make America the preferred destination for publicly listed companies.

The Deviation of SEC Capital Market Regulation

As background, since the enactment of the Securities Act of 1933, Congress has passed a series of legislations aimed at addressing the fraud and manipulation that existed on Wall Street before the stock market crash. Congress enacted federal securities laws to rebuild public confidence in the markets, thereby increasing market transparency. After all, markets need trust, and trust requires transparency.

Shortly before the Securities Act took effect, President Franklin Roosevelt articulated his vision for this groundbreaking legislation in a message to Congress. He opposed the federal government playing the role of a "selective regulator," where the government would approve securities offerings and deem them suitable for public investment merely because their value was expected to grow. Instead, President Roosevelt sought to protect investors through a disclosure-based regulatory mechanism—requiring companies issuing securities to the public to provide all material information about those securities.

In short, the Securities Act maintained the Hamiltonian model by incentivizing capital to flow toward opportunities based on investors' judgments. President Roosevelt explained in the same message to Congress that "the purpose of the Securities Act is to protect the public interest with as little interference with legitimate business as possible."

But over time, the inherent tendencies of the federal government became apparent. The pace of regulatory additions outstripped the problems they were originally intended to address—and in the process of deviating from Congress's original intent, the government attempted to substitute its judgment for that of market participants.

Shortly after I left the SEC in the mid-1990s, there were over 7,000 publicly listed companies on the exchanges, encompassing a range of firms from small innovative companies to industry giants. However, by the time I returned to the SEC as Chairman earlier this year, that number had declined by about 40%.

Everything that happened during those decades has sounded the alarm for regulatory overreach. This story tells us that the path to public ownership has become increasingly narrow, the costs have risen, and it is filled with excessive rules that often do more harm than good.

These trends have weakened America's competitiveness; excluded ordinary investors from some of the most vibrant companies; and forced entrepreneurs to seek funding elsewhere, whether in private markets or abroad.

This decline is neither inevitable nor irreversible. Although the SEC has accumulated many rules and practices in need of reform over the decades, perhaps nothing better reflects the overreach of regulation than the lengthy disclosure requirements in the Commission's rulebook today.

SEC Capital Market Regulatory Reform Measures

For many years, especially over the past two decades, special interest groups, politicians, and sometimes even the SEC itself have exploited the disclosure regime created by Congress for our markets to advance social and political agendas that have strayed far from the SEC's mission to promote capital formation, protect investors, and ensure fair, orderly, and efficient markets.

The accumulation of regulations over the years has generated a significant amount of paperwork, which often obscures rather than clarifies issues. Today, lengthy annual reports and proxy statements impose substantial costs on companies, as they consume considerable time from boards and management, requiring extensive preparation by professional lawyers, accountants, and consultants. Despite these high costs, investors sometimes fail to benefit from this information because they find it difficult to understand, or they feel overwhelmed by the sheer volume and complexity of the content, ultimately choosing to ignore it.

As Chairman, one of my top priorities is to reform the SEC's disclosure rules, focusing on achieving two goals. First, the SEC must base its disclosure requirements on the principle of financial materiality. Second, these requirements must align with the size and development stage of the company.

Regarding the first goal, the Supreme Court has clarified the objective standard of materiality, explaining that if a reasonable shareholder is highly likely to consider certain information critical to their investment decision, then that information is material. Achieving this goal requires the SEC to exercise restraint and caution when formulating rules, and Congress should do the same when directing the SEC to mandate the disclosure of specific topics. The prosperity of our capital markets does not depend on the quantity of disclosures but rather on the clarity and relevance of the information to investors. Justice Thurgood Marshall warned in an opinion he wrote for the Supreme Court: "The materiality of some information is questionable, and insisting on disclosing such information may do more harm than good… If the standard of materiality is set too low… shareholders may be overwhelmed by a mass of trivial information—this is clearly detrimental to their ability to make informed decisions."

To avoid information overload for investors, we should heed this warning. As President Roosevelt advocated, our disclosure system is most effective when the SEC provides the minimum effective regulation for obtaining information critical to investors. At the same time, we should allow market forces to drive companies to disclose any additional operational information that may benefit investors. Conversely, if the SEC requires all companies to provide the same information without allowing them to tailor disclosures to their specific circumstances, merely demanding that information be "consistent and comparable" across companies, then such a disclosure system becomes ineffective.

In fact, even amidst today's numerous disclosure requirements, companies still provide additional information, such as non-GAAP data or key performance indicators, which are tailored to their business or industry and are driven more by investor demand than by the SEC's rulebook.

When the SEC's disclosure system is misused, requiring the disclosure of information unrelated to materiality, investors do not benefit. Warren Buffett highlighted a typical example of this risk in his recent Thanksgiving letter to shareholders. No summary can adequately capture Mr. Buffett's original words. Therefore, I will quote a passage from his letter:

In my lifetime, reformers have tried to shame CEOs by requiring the disclosure of their compensation compared to that of the average worker. The length of proxy statements quickly ballooned from 20 pages or less to over 100 pages.

But these well-meaning efforts have not worked; they have backfired. Based on my observations, CEO A looks at competitor B and subtly suggests to the board that he should be paid more. Of course, he also raises the pay of the directors and is particularly careful in selecting members of the compensation committee. The new rules have sparked jealousy rather than restraint.

This upward spiral has spiraled out of control.

I share Mr. Buffett's views and concerns, which is why the SEC held a roundtable earlier this year that brought together companies, investors, law firms, and compensation consultants to discuss the current state of the agency's executive compensation disclosure rules and potential reforms. I was somewhat surprised to find that participants unanimously agreed that the length and complexity of executive compensation disclosures limit their practicality and insight for investors. We need to reexamine these and other SEC disclosure requirements, and this roundtable was one of the first steps I took to ensure that the principle of "materiality" becomes a core objective of the SEC's disclosure system.

Another priority regarding the SEC's disclosure rules is to adjust requirements based on the size and stage of development of companies. When Congress directs the SEC to formulate disclosure rules, it is particularly important to balance the disclosure obligations with the ability of companies to bear compliance burdens, especially when such rules may disproportionately impact certain companies. Of course, this is not a new concept. As early as 1992, during my first tenure at the SEC, the Commission tailored disclosure requirements for smaller public companies for the first time. Twenty years later, Congress passed the bipartisan Jumpstart Our Business Startups (JOBS) Act, which provided certain newly public companies with an "IPO on-ramp," allowing them to delay compliance with some SEC disclosure requirements.

Now is the time to revisit these proven and worthy ideas. As part of this effort, the SEC should seriously consider distinguishing between "large" companies (which must comply with all SEC disclosure rules) and "small" companies (which need only comply with some rules). The last comprehensive reform of these thresholds occurred in 2005. This regulatory neglect has resulted in companies with market capitalizations as low as $250 million having to comply with the same disclosure requirements as companies with market capitalizations a hundred times greater.

For newly public companies, the SEC should consider enhancing the "IPO on-ramp" established by Congress in the JOBS Act. For example, allowing companies to remain in the "on-ramp" for at least a few years, rather than forcing them to exit after the first year post-IPO, could provide greater certainty for companies and encourage more to go public, especially smaller ones.

American entrepreneurs have built the most vibrant economy in history by going public and sharing the rewards with employees, savers, and investors. This partnership deserves to be revitalized. If we want the next generation of innovators to choose our public markets, we need to adjust disclosure content based on the size and development stage of companies; this content should be market-driven; and within the SEC's framework, it should be based on substantive content rather than arbitrary social or political purposes.

Of course, disclosure reform is just one of the three pillars of my plan to revitalize the glory of IPOs. The second pillar is to depoliticize shareholder meetings, refocusing them on voting for director elections and significant corporate matters. Finally, we must also reform the legal environment for securities litigation, eliminating frivolous lawsuits while preserving avenues for shareholders to raise legitimate concerns. The SEC has been working diligently to implement this plan, and I look forward to sharing progress with everyone soon.

Raising funds through IPOs should not be the privilege of a few "unicorn" companies. An increasing number of public offerings are concentrated in a handful of companies, which typically belong to only one or two industries. Our regulatory framework should provide IPO opportunities for companies at all stages of development and from various industries, especially those aimed at raising funds for the company rather than merely providing liquidity for insiders.

Future Outlook for American Capital Markets

The reforms I have outlined are a valuable and necessary starting point. They will help capital flow more quickly and freely to its highest and best uses, which is where human initiative and creativity reside. They will also help guide the SEC back to the fundamental financial principles upon which its mission is based.

But this is just the first step in a broader effort to return our markets to their most fundamental purpose: to empower all Americans, rather than regulatory agencies.

As we look forward to the 250th anniversary of our nation, let us remember that no other country has granted individuals as much autonomy, nor has any country reaped such rich rewards as a result. Yet, even as history and evidence affirm this truth, there are some in our society who begin to question whether capital markets remain the most reliable engine for upward mobility. They argue that politically driven capital allocation is superior to the allocation by free market forces. They call for the "seizure of the means of production." They often claim through cleverly rhymed slogans that government decisions are more efficient and fair than those made by the people. They ask, "Can capitalism help people transcend the limitations of their origins or backgrounds?" Can it embody our highest values?

I personally believe that capital can do just that—history has proven it. Because the best state of capital is as a tool for individuals to mobilize resources in a free society, pursuing shared prosperity. It enables us to create value for others by creating our own value. In fact, our markets are a profoundly moral enterprise because they are mutually beneficial. Every transaction has the potential to benefit both parties. Our markets affirm the dignity of the human spirit and unleash the potential for human creativity, construction, innovation, and flourishing, unmatched by any other choice.

This is why the work of the SEC is so vital. Because when our capital markets are strong, they can elevate the dignity of people around the world. No force is more capable of helping people escape poverty, broaden pathways to opportunity, or address society's most intractable problems than capital investment made through capital markets.

In the coming months, we will advance the reforms I discussed today, along with several others, with the urgency and caution they deserve. We will work closely with Congress and the government. We will listen carefully to the views of market participants and investors. We will proceed steadily with sound principles and clear mandates, filled with confidence. But most importantly, we will advance reforms with the determination that a nation eager for prosperity deserves.

Conclusion

Finally, I believe our capital markets are not merely financial mechanisms—they are, at their core, a reflection of our national character. This character inspires generations of Americans to take risks and reap rewards, to innovate tirelessly, and to believe that the future is in our own hands.

As we approach the 250th anniversary of our nation, the question before us is not whether our entrepreneurs have the ability to revitalize our capital markets, but whether we as regulators have the resolve to do so.

As the SEC enters a new day under the leadership of President Trump, I am pleased to report that we indeed have.

Indeed, I firmly believe we can safeguard the future of our capital markets, ensuring they continue to thrive in the next 250 years and beyond. I believe we will reclaim the spirit of enterprise that Hamilton envisioned, which will surely be a source of our strength. And I believe we will ensure that the American story is not only sustained through memory and speeches but is also passed down through the courage of those determined to write its new chapters.

Thank you all for taking the time to be here today. Your patience and understanding are greatly appreciated. I look forward to our work ahead. Thank you.

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