At the inaugural Financial Technology Forum hosted by the Securities and Exchange Commission (the “SEC”) November 14, 2016, SEC Chairwoman Mary Jo White and Commissioner Michael Piwowar gave remarks addressing the future of fintech regulation and the role of the SEC in such regulation. Both Chairwoman White and Commissioner Piwowar emphasized the potential benefits and risks associated with fintech, and indicated that the SEC is looking closely at how to regulate this emerging area of financial services.

Chairwoman White’s Comments

Chairwoman White’s opening remarks set the stage for the forum and focused on three areas of fintech of particular importance to the SEC: automated investing advice; distributed ledger technology; and online lenders and crowdfunding portals. Within each category, Chairwoman White highlighted the relevance of the following issues to the SEC:

  • Ensuring that automated investing advisers (or “robo-advisers”) meet their fiduciary and disclosure obligations, as well as ensuring that consumer data is adequately protected;
  • Assessing how blockchain technology will be on-boarded within the securities market, and how market participants will overcome challenges to widespread adoption of the technology; and
  • Ensuring that investors receive full and fair disclosure of information in the online lending space, and that investors are adequately protected when using crowdfunding portals.

Chairwoman White also highlighted the potential for fintech innovations to transform parts of the securities industry, and emphasized the need to ensure that technology innovations are not adopted in a way that causes harm to investors or facilitates fraud.  She noted the important and ongoing responsibility of regulators to examine the adequacy of existing regulations in light of the challenges presented by fintech innovation. Finally, Chairwoman White highlighted the work that a fintech working group at the SEC will be undertaking, which may lead to specific, tailored recommendations for new rules or guidance, or confirmation that the existing regulatory framework is sufficient to address fintech innovations.  In connection with this work, the SEC’s fintech working group will solicit input from investors, innovators, and other stakeholders in the fintech ecosystem.

Commissioner Piwowar’s Comments

Commissioner Piwowar expressed the view that the SEC should “take the lead regulatory role in the FinTech space.” According to Commissioner Piwowar, the greatest regulatory challenge facing fintech companies is navigating the myriad of U.S. regulatory regimes to which they may be subject.  To address this problem, he believes one agency should take the lead.  He noted that, as the “only agency with a mission that explicitly includes facilitating capital formation,” the SEC is well-placed to be fintech’s primary regulator. Despite Commissioner Piwowar’s comments, the OCC has been laying the groundwork for federal fintech regulation, including by exploring the possibility of a federal fintech charter.

Commissioner Piwowar also encouraged forum participants to consider a “regulatory sandbox” approach like the one used in the United Kingdom, which can reduce regulatory burdens on market innovators. Earlier this month, Comptroller of the Currency Thomas Curry stated that he opposes a regulatory sandbox approach to fintech.