By Gabriel Joyce
At the recent “SEC Speaks” event, an annual forum sponsored by the Practicing Law Institute, SEC Commissioner Hester Peirce openly criticized her own agency’s regulatory methods, particularly targeting Staff Accounting Bulletin 121 (SAB 121), a policy that has faced scrutiny from lawmakers in recent months.
Peirce, a Republican member of the Securities and Exchange Commission, expressed her dissatisfaction with how the SEC has been interacting with the public, noting that individuals seeking guidance or answers often encounter a lack of response, a situation she metaphorically described as being met with “crickets.”
Peirce Critiques SEC’s Regulatory Landscape as a “Secret Garden”
SEC Commissioner Hester Peirce levied strong criticism against her own agency’s approach to cryptocurrency regulation, referring to a specific piece of accounting guidance as a “pernicious weed” within the regulatory framework.
Speaking at the “SEC Speaks” event, an initiative of the Practicing Law Institute, Peirce highlighted Staff Accounting Bulletin 121 as a prime example of her concerns. She drew parallels to her previous “SECret Garden” speech, which critiqued the SEC’s reliance on staff guidance to shape industry practices in ways that might not align with the official rulebook.
Peirce, known for her distinct viewpoints within the commission, emphasized that her opinions were personal and did not necessarily reflect the SEC’s stance. She articulated the challenges faced by those in the securities industry, where non-final agency actions like SAB 121 demand compliance to avoid the SEC’s enforcement scrutiny, despite there being no formal avenue to contest such directives.
The Controversy Surrounding SAB 121 and Calls for Commission Oversight
Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, has become a focal point of contention within the cryptocurrency community and beyond. The directive mandates that companies holding cryptocurrencies for customers list those holdings as liabilities on their balance sheets.
This approach has sparked fears within the crypto industry and among some financial institutions that it could deter banks from offering digital asset custody services.
The debate over SAB 121 has escalated over the past year, culminating in a resolution proposed by lawmakers last month aimed at revoking the bulletin. This legislative push followed a report from a Congressional watchdog, which suggested that the SEC exceeded its remit by implementing SAB 121 without obtaining explicit approval from Congress.
Commissioner Hester Peirce has voiced her concern over this method of rule-making, arguing that decisions with such significant impact should be made by the full commission rather than by staff members who report directly to the chairman.
Concerns Over Declining Public Engagement at the SEC
Commissioner Hester Peirce expressed her worries regarding what she perceives as a reduction in meaningful engagement between the Securities and Exchange Commission (SEC) and the public.
During her comments, Peirce pointed out that individuals and organizations seeking guidance, clarity, or the opportunity to voice concerns to the SEC are frequently met with silence or indifference, a situation she vividly described using the metaphor of “crickets.”
Peirce attributed the lack of substantive feedback from the SEC not to a lack of effort from the staff but rather to a systemic issue stemming from the agency’s leadership. According to her, the Commission has fostered an environment where staff are discouraged from engaging deeply with the public, often resorting to non-committal responses or delays.
This shift in the SEC’s culture, she argues, not only affects the quality of interactions with stakeholders but reflects a broader change in the agency’s approach to public discourse and regulatory guidance.
