Like people, regulation doesn’t always fit inside a box

On this episode of Women of Washington, Gigi Schumm welcomed Hester Peirce,  commissioner at the Securities and Exchange Commission. In this role, Peirce actively seeks to protect investors, facilitate capital formation and maintain fair, orderly and efficient markets.

Peirce was confirmed as commissioner in January 2017 by President Donald Trump. She was first nominated in 2015 during the Obama administration, but her nomination did not come before the Senate.

“It was an honor to be nominated by both President Obama and President Trump,” she said. “It was a long process. … You go through a hearing and you go through a lot of preparations and so it is quite time consuming. But I had the benefit of working at a place where I could continue to work.”

Before stepping into the federal workforce, Peirce worked as a senior research fellow at George Mason University’s Mercatus Center. There she also served as the director of what is now called the Program on Financial Regulation.

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She said she has been an intellectual most of her life. In fact, her father was also an economist. But her decision to join the field had less to do with her father and more due to interest she developed while studying at Case Western Reserve University.

“It wasn’t until I took an economics class in college that my eyes were opened and it changed the way I looked at the whole world,” Peirce said. “Because it really does revolutionize the way you think about things when you think about the role that prices play in conveying information to people and in decisionmaking. And how the markets work in a way that efficiently allocates resources.”

It was through both her studies and role at GMU that she developed her passion behind helping newer and private companies develop. She also spends time encouraging private companies to make the decision to go public. While there are more regulations on public companies, the investor pool is much larger.

“Another thing that’s really important is to try to look at what prevents companies from going public and try to remove some of the barriers while still ensuring that investors are protected,” she said. “Because we really want investors to be able to participate in companies at the beginning of their growth cycle rather than at the end.”

The transition of practices from one administration to another can be difficult for an agency, especially when the senior staff changes. Peirce said the SEC transition was smooth because her office focuses more on promoting innovation and less on promoting individual businesses.

“It’s not about being pro-business or anti-regulation,” she said. “It’s about getting the regulatory balance right and it’s about economic liberty and freedom for individuals to pursue their dreams and to build the company they want to build, to invest in the companies they want to invest in. It’s not about trying to protect any particular business.”

Promoting new ideas has become more difficult in the internet age. The need for more robust cybersecurity measures has placed stress on the market and regulatory processes. Peirce said the SEC holds large amounts of data for public companies and their consumers.

They now have to make sure the companies they regulate have the proper systems in place to keep that data secure and to learn when the proper time is to disclose breaches, as public companies are required to do.

Peirce mentioned the recent Yahoo! case where the company failed to disclose information from a 2014 data breach. Hackers stole data from over 500 million accounts. In response, the SEC issued a $35 million fine. Peirce’s team then released a guide to help companies avoid these potential mistakes.

Peirce said she’s happy they are looking into new investment opportunities, such as cryptocurrency. But the SEC must also take into account what regulations are necessary to put in place to help companies avoid cyber attacks and threats.

“I’m enthusiastic that people are thinking creatively and I want to make sure that whatever the SEC does allows that creativity to blossom and allows people to experiment with things,” she said. “But we need to be clear about what the regulatory framework is, and so I think that’s part of what we’re trying to do now … understand the new technologies.”

As new technology and programs develop, the SEC understands how difficult it would be to creative a regulatory box for all of them. Peirce said it is her goal to help lay out clear parameters that both promotes innovation and ensures that company projects are still consistent with the law.

Peirce said her leadership style is focused on pushing people to find their potential and help the markets get stronger and more efficient.

“I think the thing that drives me the most is a belief in the potential of everyone around me. I really think that everyone has … a unique set of talents, abilities and experiences. And I love just seeing those blossom,” she said. “That’s the motivator for me. What I hope to do is to bring out those things that are hidden.”