America’s capital markets have long been the world’s envy, providing economic opportunities for millions. The country’s largest institutional investors — including pensions, foundations and charities — rely on an open and transparent market to deliver for beneficiaries.
But the Securities and Exchange Commission’s regulatory agenda is threatening these economic benefits. Under Chairman Gary Gensler, the SEC is proposing numerous government mandates that amount to a massive regulatory overreach and an attack on investors.
The SEC’s slew of new regulations will burden managers with untenable and unnecessary red tape, introducing onerous and unnecessary reporting and disclosure requirements that will do more harm than good. The SEC’s plan will also tilt the balance away from investors and hand a gift to corporate managers, who will have less accountability to shareholders. And those regulations would have a ripple effect on the individuals who benefit most from the industry.
It might not be evident to the typical American, but they benefit in tangible ways from alternative investments such as venture capital, private equity and hedge funds. For example, institutions like university endowments, pension funds and charitable foundations rely on alternative investment funds to grow their portfolios. Returns from these investments enable these institutions to better support students, retirees and communities.
If they can’t grow their portfolios, these institutions will need to raise funds in other ways. Taxes will increase to fund public pensions, tuition will increase for students, and more donations will be required to support charitable causes. By hurting the ability of these institutions to access and benefit from alternative investments, the SEC is also damaging the livelihood of Americans.
Like millions of others, my college education was made possible thanks to grants and scholarships. University endowments use the returns from alternative investments to provide scholarships for low-income students who cannot afford the price of college tuition. Higher education offers a path to many life-changing opportunities, and scholarships help make those opportunities possible. Working parents who strive for a brighter future for their children can realize those dreams in part due to alternative investments. So it is troubling that endowments, and the students they support, stand to be made collateral damage by government regulators’ thirst to regulate.
Not only are these rules damaging, but they are being crammed through the regulatory process. The commission’s rushed comment process hasn’t provided sufficient time for individuals and institutions to weigh in on the effect of the proposals or consider how they all work together. The process has made it difficult for many to examine the rules and warn of their consequences. This is a gross overreach of power by the SEC, disregarding due process and the need for adequate stakeholder inputs. It’s clear the SEC is more focused on pushing a progressive political agenda than establishing sound policy through a fair process.
Alternative investments have a proven record of delivering reliable returns that benefit retirees, aspiring students, communities in need and many others. However, the SEC’s plan clearly disregards its important role. The result? Individual beneficiaries — particularly those from low-income and underserved communities who rely on endowments, pensions and foundations — will see their financial stability and opportunity suffer at a time when economic uncertainty is already taking a toll on many families and communities.
America’s economy works best when free-market principles are channeled to provide economic opportunities for all Americans. If the SEC wants to foster strong markets and protect investors, the agency needs to reassess its misguided, overreaching and politically motivated regulatory agenda.