Investments and Capital Markets from the Point of View of SEC Commissioner Hester Peirce

The mission of the SEC is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. This week on The Angel Next Door, Marcia talks with one of the five SEC Commissioners, Hester Peirce. Listeners get to hear Commissioner Peirce’s story on becoming a commissioner and her take on some hot topics in today’s investment arena. 

Commissioner Peirce begins by discussing her background, starting off as a securities attorney at a private law firm. After making connections within the SEC, she became a staff attorney there for about 8 years. She left the SEC and worked for the Senate Banking Committee, while researching how to make regulation better and more efficient, before eventually returning to the SEC as a commissioner. She explains the role of a commissioner and how they work together to do what is best for U.S. based investors and business owners. The commissioners are not allowed to meet with each other unless all are present and it is public or publicly disclosed as a closed meeting. Despite this obstacle, Commissioner Peirce states that all the commissioners are independently talking to investors, companies, and people affected by SEC regulations and they are able to lean on the experience and knowledge of their colleagues to make better decisions together. 

Marcia and Commissioner Peirce go on to discuss fraud and the misperception that failure is fraud in the private investment world. They make the point that just because an investment fails doesn’t mean there is fraud, but it is often perceived that the failure may be due to fraud. Commissioner Peirce explains that this misperception is fueled by a lack of interaction with people actively engaged in private markets. They also touch on the recent bank failures and how having a variety of sources of funding is very important, as different companies rely on different forms of funding at different stages. In her role, it is important to Commissioner Peirce that she supports a variety of sources of capital formation that can fill the voids when other sources fail by creating a regulatory structure that makes sense, protects investors, and keeps the capital spigots flowing. 

Lastly, Marcia and Commissioner Peirce talk about the accredited investor definition and diversity in capital markets. The commissioner worries there is a move to raise the thresholds to be an accredited investor, and she looks for ways that sophistication can  be determined outside of income thresholds. Although it is difficult to write legislation on issues that are not definitively measurable, she believes that education and experience can be used to counter the concerns that wealth is not a proxy for sophistication. Commissioner Peirce also discusses how there are alternatives for diversifying capital markets, but they are not always obvious to those searching. She explains we need to get the word out to founders that there are pools of available capital and that we need to get word to investors that sometimes they need to go looking where they haven't thought to look for the right investment. This is an intriguing episode that provides a unique perspective on investing and capital formation from one of the top regulators in the nation. Tune in to hear the discussion!