Good afternoon. I’m honored to take part in the first meeting of the Strike Force on Unfair and Illegal Pricing. As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking on behalf of my fellow Commissioners or the staff.
As President Joe Biden said at our most recent Competition Council meeting with him, if you are “engaging in illegal practices that are fraudulent or unfair or deceptive or anti-competitive … we will enforce the law.”[1]
The SEC’s mission is to protect investors, facilitate capital formation, and maintain that which sits in the middle: fair, orderly, and efficient markets. Thus, guarding against deceptive, fraudulent, or anticompetitive practices is at the heart of what we do at the SEC.
When Congress established the SEC 90 years ago, they embedded antifraud provisions in our key statutes. Congress gave us additional authorities in the 1970s to promote competition and guard against anticompetitive practices when the word competition was added to our statute 20 times.[2] The SEC pursues these important mandates from Congress every day in overseeing the more than $110 trillion capital markets.
As President Biden further said when announcing the Strike Force, capitalism without competition is not capitalism.
The SEC addresses unfair, deceptive, and anticompetitive business practices in all of our work, through enforcement, rulemaking, and market oversight.
The SEC, working through its Enforcement Division, is the cop on the beat for the securities markets. The Commission brought 784 enforcement actions in FY 2023, resulting in $4.9 billion in penalties and disgorgement.[3] While there are many cases related to fraud or unfair practices, I’ll highlight three that directly relate to unfair and illegal pricing. Earlier this year we settled an action against TIAA-CREF for making recommendations to retail customers while failing to disclose that substantially equivalent lower-cost shares were available.[4] Last year, we settled a case against Wells Fargo for overcharging advisory accounts.[5] In 2022, we charged three Charles Schwab investment adviser subsidiaries for not disclosing they were sweeping cash to its affiliate bank, loaning it out, and then keeping the difference between the interest earned on the loans and what it paid in interest to clients.[6]
The SEC, through rulemaking projects, works to enhance competition across all three parts of our mission.[7] We do so by promoting transparency, access, and fair dealing in the markets. Among the most important projects are focusing on promoting greater competition and access in the $27 trillion U.S. treasury markets[8] as well as the more than $50 trillion equity markets.[9]
The SEC, through our market oversight, examines registrants. We review the tens of thousands of filings we receive every year from broker-dealers, investment advisers, stock exchanges, clearinghouses, self-regulatory organizations, and issuers. As we conduct such oversight, we stay true to the mandates Congress laid out to guard against fraud and deceptive practices and promote competition.
Before I close, I want to mention what may be one of the most transformative technologies—not only for this time but perhaps our lives, artificial intelligence (AI).[10] This technology offers tremendous promise for individuals and our economy. At the same time, all of our agencies will be pressed to grapple with what this technology means when it comes to guarding against deception, fraud, and anticompetitive behavior.
As it relates to the securities markets, bad actors might seek to use AI to deceive or defraud the public, investors, and the market. Make no mistake, though, under the securities laws, fraud is fraud.
As it relates to the potential for anticompetitive behavior, we’ve seen elsewhere in our economy that one or a small number of tech platforms can come to dominate a field. Due to cost, reach, and network economics, we may see the same come to pass in the fields of AI and related data aggregation. Further, bad actors might try to use AI to game the system and signal to competitors about pricing or otherwise to undermine competition.
I look forward to collaborating with others here on these important matters.
