On February 1, Brooklyn Law School faculty, alumni, and current and former Fellows of the Block Center for International Business Law gathered at the Down Town Association for a “Fireside Chat” with U.S. Securities and Exchange Commissioner Troy A. Paredes, moderated by Professor Dana Brakman Reiser. Commissioner Paredes spoke on a range of topics including the rule-making process at the SEC, implementing rules pursuant to the JOBS Act and Dodd-Frank, and the global securities market.
With respect to rule-making, Commissioner Paredes emphasized the need for the SEC to establish thorough processes, which should include both data and cost-benefit analysis. In order to facilitate good decision making, he explained, there must be a full analysis of the range of outcomes, the consequences of each, and the potential trade-offs. He added that he strongly believes in a retrospective review. “Just as important as the factors that go into the pre-decision making stage is the post-decision review, which can help the SEC learn from its mistakes as well as its successes,” he said.
Commissioner Paredes applied these factors to a currently hot issue: high frequency trading. Going forward, he urged the SEC to take action driven by proven data, not as a reactionary response to the glitches in the system. According to Commissioner Paredes, research shows that high frequency trading is making a contribution to the equity markets. Therefore, the focus should be on what it is that drives the need for trading to be faster. He suggested that if the answer is that the current regulatory regime is the cause, perhaps the solution is in amending the rules rather than hindering such trading.
Commissioner Paredes also discussed the global securities market in the context of the flow of people and capital across borders. “The ramifications to the U.S. securities markets would be detrimental if global issues were not taken into account,” he said. Those who understand the complex interplay of contemporary global securities recognize that overburdening investors in the U.S. will send them elsewhere, he explained. He then listed several important factors to consider, including duplication of securities regulation, conflict between different regulation schemes, and the cumulative effect of multiple regulation schemes.
Ending on a somewhat cautionary note, Commissioner Paredes stated that he was doubtful that Dodd-Frank will play a role in preventing the next financial crisis. He questioned whether there is a real consensus as to the cause of the most recent financial crisis and cautioned that the factors going forward are not likely to be the same.
By Cassandra Vogel ‘13