Smith Questions Biden Nominees On New ‘Sophisticated Financial Products’ For Small Business Owners

3 months ago

Earlier this month, Sen. Tina Smith (D-MN) questioned Biden banking nominees on small business investments during a Senate Banking Committee hearing.

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Transcript

00:00Thank you, Chair Brown and Ranking Member, and welcome to all of you.

00:03Thank you very much for your willingness to serve.

00:07I'm very grateful for that.

00:08Ms. Crenshaw, I'm going to start with you.

00:11You know, I think one of the things that I see is that retail investing has just changed

00:17dramatically.

00:18It's really almost unrecognizable for what it was even 10 years ago.

00:22Smartphones, the capacity for people to trade is so easily accessible.

00:27Social media has become a way to draw people into new schemes.

00:31And as a result, I think retail investors' appetite and access to new and more sophisticated

00:39financial products is growing and quite dramatic.

00:43So could you talk to us, please, about how you view the SEC's role in protecting retail

00:48investors and maintaining fair markets, particularly in the face of these evolving, the evolving

00:55investment environment?

00:56Absolutely.

00:57Thank you, Senator.

00:59First and foremost, I think education is fundamentally important.

01:03We need to educate investors on how to assess the pros and cons of various investments,

01:07of how to assess the risks and opportunities that different investments opportunities provide.

01:13So first and foremost, I would start with that.

01:16Second, we need to ensure that the intermediaries are abiding by their obligations, the investment

01:21advisors, the broker-dealers, and ensuring that they are abiding by their fiduciary obligations

01:30or the regulation best interest.

01:34And we need to ensure that we hold bad actors to account so that there is faith in the market.

01:39So really, accountability and transparency, I think, are the fundamental ways that we

01:45need to ensure that those retail investors, which is good.

01:48We want to encourage retail investors because, again, retirement is in their hands more than

01:52ever.

01:53But we do need to ensure that it's a safe place for them so that they have more returns

01:57when they get their money out than they did when they started.

02:00Thank you very much.

02:01I think, just as a follow-up, I think that oftentimes there is some confusion about whether

02:07these new investment tools or products still have to abide by the same consumer protection

02:14rules that we have in place.

02:15Could you just address that?

02:17Because I think that creates, sometimes it seems to create nearly a loophole.

02:21And how would you approach that at the SEC?

02:24Absolutely.

02:25I think to the degree they are securities, they must abide by all of the securities laws

02:30and regulations.

02:31And I think it's as straightforward as that.

02:34And when they are not, we have enforcement tools to hold them to account.

02:37I think that's also where education comes into account, both for investors but for the

02:42marketplace.

02:44For example, ETPs are very different from ETFs.

02:48And you hear a lot about ETFs, they're ubiquitous in retirement accounts.

02:52We've recently passed some ETPs, they are not ETFs.

02:55The protections around them are incredibly different.

02:57And both the marketplace and the investors need to understand what their obligations

03:01are.

03:02Great.

03:03Thank you very much.

03:04Thank you very much.

03:05Commissioner Goldsmith-Romero, I really appreciated the conversation that we had and appreciated

03:10very much the professionalism and the deep bench of experience that you bring to this

03:16extremely important role.

03:18And I know that Chair Brown asked you about the ways in which your experience at TARP

03:25will shape your leadership at the FDIC.

03:29And Chair Brown, I found that very, very helpful.

03:32So I'm going to just briefly follow up on a bit of what a ranking member was asking.

03:38As you tackle the need for culture change and accountability at FDIC, I, for one, think

03:45that somebody with a fresh perspective, somebody who is not part of that culture but is coming

03:49in can provide the kind of leadership that's needed.

03:54And so could you just address that for me?

03:57And could you talk a bit about how you see coming in as a new person in an agency that

04:03needs culture change, which is very difficult to do, let's be honest, how you see approaching

04:08that?

04:09Thank you, Senator.

04:10I appreciate the question.

04:12So I've been in the federal government for 22 years, so I know what is right and what

04:17is good.

04:18And what I'm reading here in this report is not that.

04:21It's not that at all.

04:22And I've had the great opportunity to work at three different agencies and lead a federal

04:26office for 11 years.

04:29So it's not everybody there.

04:32There's, I'm sure, a great number of people who are doing the right thing.

04:36And here, the agency's reputation is tarnished.

04:38So I'm going to go in and go back to reestablishing the FDIC as being a premier regulator.

04:44Like I said, herald the people who are doing the right thing.

04:48Put in all the normal processes, procedures, best practices that I have enjoyed and led,

04:54and make sure that everyone feels safe and can be focused on mission.

05:00I appreciate that answer.

05:01And I think, again, it demonstrates how your experience will allow you to be an effective

05:04leader in a very important agency.

05:07Thank you, Mr. Chair.

Smith Questions Biden Nominees On New ‘Sophisticated Financial Products’ For Small Business Owners

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