TIPS ON SELECTING FINANCIAL PROFESSIONAL

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Investor Bulletin: Top Tips for Selecting a Financial Professional


Choosing a financial professional-whether a stockbroker, a financial planner, or an investment adviser-is an important decision. Consider the tips below as you make your choice. Also the third page of this document has a list of questions you can ask a financial professional whose services you are considering.

Tip 1. Do your homework and ask questions.

A lot of the information you’ll need to make a choice will be in the documents the financial professional can provide you about opening an account or starting a relationship. You should read them carefully. If you don’t understand something, ask questions until you do. It’s your money and you should feel comfortable asking about it.

Tip 2. Find out whether the products and services available are right for you.

Financial professionals offer a range of financial and investment services such as:
Financial planning
Ongoing money management
Advice on choosing securities
Tax and retirement planning
Insurance advice
Just like a grocery store offers more products than a convenience store, some financial professionals offer a wide range of products or services, while others offer a more limited selection. Think about what you might need, and ask about what would be available to you. For example, do you want or need:

Access to a broad range of securities, such as stocks, options and bonds, or will you mostly want a few types such as mutual funds, exchange traded funds, or insurance products?
A one-time review or financial plan?
To do your own research, but use the financial professional to make your trades or to provide a second opinion occasionally?
A recommendation each time you think about changing or making an investment?
Ongoing investment management, with the financial professional getting your permission before any purchase or sale is made?
Ongoing investment management, where the financial professional decides what purchases or sales are made, and you are told about it afterwards?
Tip 3. Understand how you’ll pay for services and products, and how your financial professional gets paid as well.

Many firms offer more than one type of account. You may be able to pay for services differently depending on the type of account you choose. For example, you might pay:
An hourly fee for advisory services;
A flat fee, such as $500 per year, for an annual portfolio review or $2,000 for a financial plan;
A commission on the securities bought or sold, such as $12 per trade;
A fee (sometimes called a "load") based on the amount you invest in a mutual fund or variable annuity
A "mark-up" when you buy "house" products (such as bonds that the broker holds in inventory), or a "mark-down" when you sell them
Depending on what services you want, one type of account may cost you less than another. Ask about what alternatives make sense for you.
And remember: even if you don’t pay the financial professional directly, such as through an annual fee, that person is still getting paid. For example, someone else may be paying the financial professional for selling specific products. However, those payments may be built into the costs you ultimately pay, such as the expenses associated with buying or holding a financial product.

While some of these fees may seem small, it is important to keep in mind that they can add up, and in the end take away from the profits you otherwise could be making from your investments.

Tip 4. Ask about the financial professional’s experience and credentials.

Financial professionals hold different licenses. For example, financial professionals who are broker-dealers must take an exam to hold a license, while state regulators often require investment advisers to hold certain licenses. Financial professionals also have a wide range of educational and professional backgrounds. They may also have certain designations after their names, which are titles given by industry groups that themselves are not regulated or subject to standards other than their own. If a financial professional has an industry designation, like "CFA," you can look up what it stands for at the "Understanding Investment Professional Designations" page on FINRA’s website at www.finra.org. Don’t accept a professional designation as a badge of knowledge without knowing what it means.

Tip 5. Ask the financial professional if he or she has had a disciplinary history with a government regulator or had customer complaints.
Even if a close friend or relative has recommended a financial professional, you should check the person’s background for signs of any potential problems, such as a disciplinary history by a regulator or customer complaints. The SEC, FINRA, and state securities regulators keep records on the disciplinary history of many of the financial professionals they regulate.
Check the background of your financial professional to learn more or to help confirm what he or she has told you:
For financial professionals who are brokers: you can find background information on the person and his/her firm at FINRA’s BrokerCheck website.
For financial professionals who are investment advisers registered with the SEC: you can find background information on the person and his/her firm at the SEC’s Investment Adviser Public Disclosure database.
State securities regulators also have background information on brokers as well as certain investment advisers. You can find your state regulator at www.nasaa.org.

Investor Checklist
Some Key Questions for Hiring a Financial Professional

Expectations of the Relationship
How often should I expect to hear from you?
How often will you review my account or make recommendations to me?
If my investments aren’t doing well, will you call me and recommend something else?
If I invest with you, how can I keep track of how well my investments are doing?
Experience and Background
What experience do you have, especially with people like me? What percentage of your time would you estimate that you spend on people with situations and goals that are similar to mine?
What education have you had that relates to your work?
What professional licenses do you hold?
Are you registered with the SEC, a state securities regulator, or FINRA?
How long have you done this type of work?
Have you ever been disciplined by a regulator? If yes, what was the problem and how was it resolved?
Have you had customer complaints? If yes, how many, what were they about, and how were they resolved?
Products
What type of products do you offer?
How many different products do you offer?
Do you offer "house" products? If so, what types of products are they, and do you receive any incentives for selling these products, or for maintaining them in a customer’s account? What kind of incentives are they?
Payments and Fees
Given my situation and what I’m looking for, what is the [best / most cost effective] way for me to pay for financial services? Why?
What are the fees that I will pay for products and services?
How and when will I see the fees I pay?
Which of those fees will I pay directly (such as a commission on a stock trade) and which are taken directly from the products I own (such as some mutual fund expenses)
How do you get paid?
If I invested $1000 with you today, approximately how much would you get paid during the following year, based on my investment?
Does someone else (such as a fund company) pay you for offering or selling these products or services?

PONZI FRAUD FOR SENIORS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Brings Charges in $42 Million Offering Fraud Targeting Seniors

The Securities and Exchange Commission today announced charges against Bradley A. Holcom, of Welches, Oregon, and Jose L. Pinedo, of San Diego, California, in connection with a fraudulent scheme that sold $42 million of promissory notes to more than 150 investors located across the United States, many of whom are senior citizens.

According to the complaint against Holcom, he lured investors by offering them guaranteed monthly interest payments on purportedly safe deals. He promised that their funds would be used to finance the development of specific pieces of real estate, and that each investment would be fully secured. In reality, the investments were unsecured, and the same piece of underlying property was often pledged as purported collateral on numerous investors’ promissory notes.

In addition to his misrepresentations, the complaint alleges that Holcom was also running a classic Ponzi scheme. While Holcom used some of the investors’ money to develop real estate, he also relied on those funds to make interest and principal payments on promissory notes as they came due. Holcom also used investor funds for personal use and on unrelated business ventures. By 2008, as the real estate market declined, Holcom’s scheme collapsed. Investors lost principal in excess of $25 million.

The Commission also alleges that Pinedo, who served as Holcom’s bookkeeper and as an officer or manager of Holcom’s numerous corporate entities, routinely signed promissory notes and other false and misleading documents that were sent to investors.

The Commission alleges that Holcom violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission is seeking a permanent injunction, disgorgement plus pre- and post-judgment interest, and civil penalties against Holcom. Without admitting or denying the allegations in the Commission’s complaint against him, Pinedo has agreed to settle the matter, and consented to a final judgment enjoining him from violations of Sections 5(a), 5(c), 17(a)(2) and 17(a)(3) of the Securities Act.

DARK POOL OPERATOR AGREES TO PAY $800,000 PENALTY

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Oct. 3, 2012 — The Securities and Exchange Commission today charged Boston-based dark pool operator eBX LLC with failing to protect the confidential trading information of its subscribers and failing to disclose to all subscribers that it allowed an outside firm to use their confidential trading information.

According to the SEC’s order instituting a settled administrative proceeding, eBX operates the alternative trading system LeveL ATS, which it calls a "dark pool" trading program. Dark pools do not display quotations to the public, meaning that investors who subscribe to a dark pool have access to potential trade opportunities that other investors using public markets do not. eBX inaccurately informed its subscribers that their flow of orders to buy or sell securities would be kept confidential and not shared outside of LeveL. eBX instead allowed an outside technology firm to use information about LeveL subscribers’ unexecuted orders for its own business purposes. The outside firm’s separate order routing business therefore received an information advantage over other LeveL subscribers because it was able to use its knowledge of their orders to make routing decisions for its own customers’ orders and increase its execution rate. eBX had insufficient safeguards and procedures to protect subscribers’ confidential trading information.

eBX agreed to pay an $800,000 penalty to settle the charges.

"Dark pools are dark for a reason: buyers and sellers expect confidentiality of their trading information," said Robert Khuzami, Director of the SEC’s Division of Enforcement. "Many eBX subscribers didn’t get the benefit of that bargain – they were unaware that another order routing system was given exclusive access to trading information that it used for its own benefit."

According to the SEC’s order, eBX and the outside firm it hired to run LeveL signed a subscription agreement in February 2008, after which the outside firm’s separate order routing business began to use certain LeveL subscribers’ confidential trading data. In November 2008, eBX signed a new agreement with the outside firm that allowed its order routing business to remember and use all LeveL subscribers’ unexecuted order information. As a result of the agreements, the outside firm’s order routing business began to fill far more of its orders than other LeveL users did. Its order router also knew how other eBX subscribers’ orders in LeveL were priced and could use that information to determine whether to route orders to LeveL or another venue based on where it knew it might get a better price for its own customers’ orders.

According to the SEC’s order, eBX failed to disclose in required SEC filings that it allowed LeveL subscribers’ unexecuted order information to be shared outside of LeveL.

In addition to the $800,000 penalty, eBX was censured and ordered to cease and desist from committing or causing further violations of certain provisions of the federal securities laws regulating alternative trading systems.

The SEC’s investigation was conducted by Mark Gera, James Goldman, Kathleen Shields, and Dawn Edick in the SEC’s Boston Regional Office. Mr. Gera led the related examination with assistance from Paul D’Amico and Rhonda Wilson under the supervision of Associate Regional Director Lucile Corkery.

SEC CHARGES REGISTERED REPRESENTATIVE WITH FRAUD FOR ISSUING FALSE ACCOUNT STATEMENTS AND MISAPPROPRIATING INVESTOR FUNDS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission announced that on Friday, September 21, 2012, it filed an injunctive action in the United States District Court for the Eastern District of Pennsylvania against David L. Rothman of Richboro, PA, a registered representative, Vice President, and minority owner of Rothman Securities, Inc., a registered broker-dealer, for conducting a fraud by issuing false account statements and misappropriating investor funds.

The Commission alleges that from 2006 to 2011, Rothman created and issued false account statements to certain elderly and unsophisticated investors that materially overstated the value of their investment accounts. The Commission's Complaint further alleges that when the investors discovered that Rothman had misrepresented the value of their investments, Rothman engaged in a scheme to conceal his fraudulent conduct by agreeing to pay those investors the investment returns he reported on the false account statements. When Rothman could no longer afford to make those payments, he misappropriated funds from another elderly and unsophisticated investor and from two trust accounts for which he serves as trustee. Rothman also used a substantial portion of the misappropriated funds for his personal benefit.

As a result of the conduct described in the Complaint, the Commission alleges that Rothman violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint seeks a permanent injunction, disgorgement together with prejudgment interest, and civil penalties from Rothman. Criminal charges have also been filed against Rothman in a parallel criminal case.

The Commission thanks the United States Attorney for the Eastern District of Pennsylvania and the Federal Bureau of Investigation for their assistance in this matter.

ALLEGED FRAUDULENT INVESTMENT SCHEME BASED ON "UNIQUE TRADING STRATEGY"

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC CHARGES FOUR DEFENDANTS IN FRAUDULENT INVESTMENT SCHEME
The Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of Indiana, charging Rudolf D. Pameijer, Lindsay R. Sayer, Ryan W. Koester and his entity Rykoworks Capital Group, LLC ("Rykoworks") with running a fraudulent investment scheme. The complaint alleges that the defendants in this scheme misappropriated nearly $1.7 million from investors.

As alleged in the complaint, Koester held himself out as an expert foreign currency trader, and falsely represented to investors that his unique trading strategy offered investors a principal guaranteed investment opportunity. As alleged in the complaint, Koester and Pameijer, a career insurance salesman, agreed to a profit sharing arrangement for clients Pameijer brought to Rykoworks. The complaint alleges that, starting in 2010, Pameijer and his daughter, Sayer, began soliciting clients to invest with Rykoworks through promissory notes which purported to guarantee investor principal while offering risk free returns from forex trading.

As alleged in the complaint, Pameijer and Sayer misappropriated the majority of funds they raised from investors for personal use. The complaint alleges that Pameijer used investor money to pay for luxury automobiles, a motorcycle, a boat, home renovations, his son’s college tuition, and Sayer’s wedding and honeymoon in St. Lucia. The complaint further alleges that Sayer used investor money to pay rent and wedding expenses, and for other personal expenditures. According to the complaint, the remaining investor funds Pameijer and Sayer transferred to Koester and Rykoworks, and additional funds Koester raised from investors directly, Koester depleted through trading losses and misappropriation of funds for personal expenses. The SEC alleges that, as part of the scheme, each of the proposed defendants made materially false representations to investors, including providing investors with false account statements and information.

By engaging in this conduct, the SEC alleges that each of the defendants violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. In addition, the complaint alleges that Pameijer and Sayer violated Section 15(a) of the Exchange Act by acting as unregistered brokers. The SEC action seeks injunctions, disgorgement with prejudgment interest, and civil monetary penalties.

Pameijer and Sayer have agreed to judgments, which are subject to Court approval, that permanently enjoin them from violating Section 17(a) of the Securities Act, and Sections 15(a) and 10(b) of the Exchange Act and Rule 10b-5 thereunder, and provide that upon subsequent motion the Court will determine issues relating to monetary relief. In addition, Pameijer and Sayer each have consented to a Commission order, pursuant to Section 15(b)(6) of the Exchange Act, barring them from future association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and barring them from participating in any offering of a penny stock.

Koester and Pameijer also are subject to pending Indiana state criminal charges. The SEC thanks the Indiana Division of Securities for its assistance in this matter.

SEC COMMISSIONER GALLAGHER SPEAKS ON SEC PRIORITIES

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
U.S. Securities and Exchange Commission
Commissioner Daniel M. Gallagher

SIFMA Regional Conference
Charlotte, N.C.
September 24, 2012
Thank you, Ken, for that kind introduction. It is a true honor to be here with you today.

As you all expect, I must tell you that my remarks today are my own, and they do not necessarily represent the views of the Commission or of any other Commissioner.

I would like to talk today about regulatory distraction. By that, I mean a state of affairs in which a regulatory body is so inundated with external mandates that it risks losing focus of its core responsibilities. Given the mandates flowing from Congress, in particular those in the massive, 2319 page Dodd-Frank legislation, this is a condition that we at the Commission must be very careful to avoid.

As the newest Commissioner at the SEC – I started just over ten months ago, I knew I was coming back to the agency during an intensely regulatory and reactive period, given the Dodd-Frank mandates, the response to the Madoff and Stanford Ponzi schemes, and the reaction to allegations of policy failures leading up to the crisis. Indeed, I was on the Staff before and during the crisis, and later during the negotiation of what eventually became Dodd-Frank, so this was no surprise. I assumed I would be faced with two major tasks – evaluating and voting on regulations responsive to the financial crisis, and working to ensure that the Commission maintains a clear focus on its core responsibilities. To be sure, we are busy working on many of these activities, but the balance is not what you might have expected it to be.

Dodd-Frank was enacted to, among other things "promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail," and to protect the American taxpayer by ending bailouts." These are all extremely laudable goals. However, the statute's goals and its mandates are often unrelated.

All-told, Dodd-Frank contains approximately 400 specific mandates to be implemented by agency rulemaking. A conservative estimate assigns almost 100 Dodd-Frank mandates to the SEC for implementation by rule. Many of those have statutory deadlines. The SEC has adopted final rules implementing nearly a third of those statutory mandates. So while the SEC, like other financial sector agencies, will be busy implementing Dodd-Frank for a long time to come, it is equally true that one immediate effect of Dodd-Frank was to increase dramatically both the volume and pace of SEC rulemaking. It is not an exaggeration to say that the Commission is handling ten times the normal rulemaking volume. And "normal" was the post Sarbanes-Oxley normal, which was a marked increase from the pace before that law’s enactment. Any one of the rules we promulgated in the last three months would have been considered the "rule of the year" just five or six years ago. The pace is unrelenting, and the substance is critically important to the U.S. capital markets. We need to get a lot done fast – no question about it – but it’s even more important that we get it right.

Some Dodd-Frank mandates are more responsive to the financial crisis than others. Some are not responsive at all, derived instead from long-held ambitions of policymakers, bureaucrats, and special interest groups. For example, the mandate in Dodd-Frank Section 939A for federal agencies to remove references to credit ratings from their rulebooks may well be the clearest, most direct mandate we at the SEC have been given. It has the virtue of being responsive to one of the core problems underlying the financial crisis – over reliance on credit ratings by investors and regulators during a time when the rating agencies were falling down on the job.

On the other side of the coin, a majority of the Commission - which I was not part of - just approved final rules under Sections 1502 and 1504 of Dodd-Frank, which mandated unprecedented new disclosure rules relating to conflict minerals from the Congo, and extractive resource payments made by U.S. listed oil, gas and mining companies. These statutory provisions and the rules based on them were meant to serve laudable humanitarian and geo-political purposes. Specifically, they are aimed at curtailing armed violence in the Congo and increasing the accountability of governments worldwide to their citizens. I wholeheartedly support those goals, but I believe that the SEC is the wrong tool with which to accomplish them.

Even so, given the extreme costs associated with both these new rules, I very much hope they somehow have the desired effect. It is, nevertheless, undeniable that these two rules have nothing whatever to do with the goals of the Dodd-Frank Act, which I quoted to you earlier. These new rules don’t address the crisis; they don’t make a future crisis less likely. Indeed, these new rules have nothing to do with the SEC’s statutory mission. It is appropriate to be skeptical of our prospects in achieving objectives the SEC was not designed or staffed to achieve. But laws are laws, so we spent a very significant amount of time working on the final rules – certainly as much - and likely more - than we did on any other rules we have handled since I arrived.

And now the key difference between the 939A credit rating removal and 1502 and 1504 social mandates is that the latter are completed, while the former remains substantially unfinished over a year after the congressional deadline. This raises the question of whether our priorities are as they should be. Given that the Commission has been analyzing the removal of rating agency references since former Chairman Cox and the Commission proposed removing them in 2008, I hope the staff will put forward a recommendation soon on the two most significant SEC rules embedded with such references - the so-called net capital rule, and the money market fund rule. Action on these matters would not only satisfy a Dodd-Frank congressional mandate, but it would be a long-delayed and much needed step towards addressing a core problem infecting the U.S. financial markets and regulatory system. More than any other action the Commission has taken since Congress took bold action to give the SEC formal oversight authority over credit rating agencies, fulfillment of the 939A mandate, if done properly, would serve to protect investors and markets alike from the failures of the credit rating agency industry.

* * *

There are, of course, several other similarly stark comparisons one could just as readily draw from among the SEC’s Dodd-Frank mandates. We have Title VII mandates that require us to create a regulatory regime for OTC derivatives, and at the same time we have a Title IX mandate to create, along with the MSRB, an entirely new regulatory program for municipal advisors. One of these things is not like the other. While there is a debate about whether OTC derivatives were a cause of the financial crisis, few would doubt that they exacerbated many of the problems faced by regulators and market participants during the crisis. In particular, because of the opacity of those markets, they presented a significant unknown to regulators. Putting aside the wisdom of some of the more complicated Title VII mandates, moving towards transparency in this area makes good sense. Regulation of municipal advisors, on the other hand, is an area wholly outside the context of the crisis. I support efforts by the Commission to gain a more sophisticated understanding of the municipal securities markets - directly as well as through MSRB efforts. I am skeptical, however, that a mandated set of rulemakings to regulate a broad category of municipal advisors is the most appropriate use of regulatory resources at this time.

It’s all about priorities and relative priorities. Because of these disparate statutory mandates, many of which are not grounded in the crisis, the SEC is left with a long list of decisions to make. Decisions about how to prioritize and sequence the rulemakings, decisions about how to give effect to each separate mandate as we tackle them, and decisions about the utility of pursuing certain mandates instead of going back to Congress to seek reconsideration when the mandates simply don’t make sense given our statutory mission.

At the same time, it is important that we recognize that there are areas that are crisis-related, but are not addressed or even referenced in Dodd-Frank. They nevertheless warrant Commission time and resources – perhaps on a considerably more pressing basis than certain of the Dodd-Frank mandates. The number one issue at the SEC that falls into that bucket is – still today – money market fund reform. Believe it or not, money markets funds, despite being called by some the third rail of systemic risk, and despite featuring prominently in the financial crisis, were not addressed in 2319 pages of financial crisis legislation. And now this, as most of you have probably seen, has become a highly contentious issue at the Commission. Despite recent headlines, I hope and expect that the Commission will make a decision on appropriate reforms in this area soon after our economists have conducted an analysis of the key issues Commissioners Aguilar, Paredes, and I have raised. Acting without the benefit of such an analysis - in the context of a $2.5 trillion industry critical to investors, municipalities, and other issuers - would, quite frankly, be irresponsible.

There are, in addition, other areas within the SEC’s jurisdiction that were subjected to stresses during the crisis, but certainly were not, in any sense, causes of the crisis. They, too, beg for our attention. In that bucket, a primary concern for me is the Securities Investor Protection Act, or SIPA. As many of you know, SIPA, which authorized the creation of SIPC, was enacted by Congress after the back office crisis of the late ‘sixties. Although it is relatively young compared to some of the statutes we are charged with implementing, SIPA is in serious need of reconsideration given problems that have arisen following the failure of Lehman Brothers, the Madoff Ponzi scheme, the Stanford Ponzi scheme, and still other, lesser failures. As it stands now, SIPA is a mystery not only to investors, but arguably even for SIPC members.

And there is a laundry list of other areas of basic "blocking and tackling" to which the Commission needs to pay considerably more attention. In that bucket, I would place updating our rules regarding transfer agents, final rules for the 17h broker-dealer risk assessment program, and hopefully soon a final rulemaking implementing the so-called Onnig amendments, which contain important net capital and customer protection rule amendments. And on a topic near and dear to this audience, I continue to believe that the Commission needs to provide guidance to the industry regarding failure to supervise liability for legal and compliance personnel, and I hope we can find the right vehicle to do that in the near future.

And, of course, we need to finally move forward with considering rules that will update and formalize the Automation Review Policy, or ARP. The ARP program has been voluntary since it was created in response to the 1987 market crash. Recent events in the equities markets have raised concerns about exchange controls, and it is my hope that the upcoming technology roundtable and related interaction with stakeholders will provide the Commission with sufficient data to thoroughly evaluate our options, and ultimately allow the Commission to make appropriate policy choices in an ARP rulemaking process.

* * *

So we come back to the purpose of the SEC as an expert independent agency. The SEC’s mission is threefold: "protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

And that brings us to the key question: Given that threefold mission, given the conditions we are actually experiencing four years after the 2008 crisis, is the SEC spending its time as it should? Do the priorities reflected in the SEC’s current rulemaking agenda stem from our expert appreciation of current market conditions and the most pressing problems within them? Do they, moreover, reflect the SEC’s proper situation in the regulatory constellation? By what criteria or standards do we seem to set our priorities? To what extent do our apparent priorities stem from other agencies’ policy preferences or institutional mandates?

Those questions seem to me well worth critical consideration. After all, the SEC can’t do everything. The Commission and its staff’s time and attention are more limited commodities than are policy options in Washington – especially if our solutions need not address any demonstrable problem. And we, as an agency, no less than individually, find ourselves surrounded with many superficially attractive ways to distract ourselves.

* * *

Our agenda is necessarily shaped by legislation. Dodd-Frank and the JOBS Act are the current headline-grabbers. But, we must not forget the fundamentals; we must not lose sight of our core mission.

And when we engage in any rulemaking, we must heed the statutory requirements that seek to ensure that our rules are based on sound analytic foundations, rather than policy preferences alone. When we write rules, we are required to consider how the rule will protect investors, as well as whether it will promote efficiency, competition, and capital formation." When the Commission engages in Exchange Act rulemaking, we must consider the "effect on competition" of the proposed rule, with the proviso that we may not adopt the rule if the burden it would impose on competition is not "necessary or appropriate in furtherance of the purposes of the act." And we are subject to the generally applicable "notice and comment" rulemaking process established under the Administrative Procedure Act of 1946, which not only requires us to put out our proposed rules for public notice and comment, but also provides that our rules may be set aside if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." The SEC is subject to a rigorous economic analysis requirement, and we must ensure that we, in turn, apply the same rigor to substantive SRO rule filings.

* * *

So where does all this leave me? What lesson do I find in the Commission’s scatter-shot menu of short-term and reactive priorities? Largely this: It’s important for the SEC to prioritize the basics – the "blocking and tackling" under our original statutory mandate, but in the context of the new realities of our markets. And with respect to the JOBs Act, we must understand that each of the congressional mandates involves a core area of SEC oversight.

Where Congress has seen fit to send us to exercise discretion in novel areas, we should carefully assess the facts and all relevant data in their full context, including potential knock-on effects of our possible responses before we act. Where Congress gives us a simple direction to act in a precise manner not susceptible to discretionary quibbling – like removing the ban on general solicitation pursuant to section 201(a) of the JOBS Act – we should use our full procedural armory to do so without delay.

And all the while, let's not forget common sense: foreign policy should be left to the State Department, and economic analysis to economists. And, for that matter, environmental science to the scientists. The Commission should not be afraid to use its exemptive authority as necessary to ensure that our rules don’t have needlessly burdensome or counterproductive effects as applied. That is why Congress gave it to us. And where job creation and capital formation are at issue, the Commission should be doing everything in its power to fulfill its statutory obligation to facilitate positive change. That, too, is our job.

Thank you all for your attention. I wish you a successful and educational conference.