SEC’s Director of Corp. Finance Testifies before HFSC on Key Policy Rulemakings

On July 18, the HFSC Capital Markets Subcommittee held a hearing with Erik Gerding, Director of the SEC’s Division of Corporation Finance, serving as the sole witness. The SEC’s Conflicts of Interest proposed rule was raised by several members of the subcommittee who expressed concerns over the rule’s market impact. Specifically, Rep. Brad Sherman (D-CA) questioned whether the rule allows for market participants to hedge interest rate risk. Rep. Wiley Nickel (D-NC) and Rep. Emmanuel Cleaver (D-MO) asked whether mortgage insurance-linked notes were included as synthetic ABS. Mr. Gerding responded that he did not want to prejudge any facts as he is not sure the financial products mentioned are definitively scoped in, but that he was carefully reviewing the numerous letters submitted by Members of Congress on the matter. Additionally, Mr. Gerding was pressed by both Democrats and Republicans on the SEC’s climate disclosure rule who voiced concerns related to the Scope 3 requirements and the information’s materiality to investors.

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