US SEC Chair Calls for States to Regulate Governance

In a speech delivered earlier this month, Paul Atkins, Chair of the US Securities and Exchange Commission (SEC), argued that states should take the lead in policing corporate governance.

“[W]e are focused on ensuring that States, and not the SEC, regulate matters of corporate governance,” Atkins said. “Over time, the agency has used its disclosure authority to attempt to indirectly establish governance standards that state corporate law should and can address. We must stay in our lane as a disclosure agency and not be a merit regulator.”

Atkins pointed to the SEC’s past focus on governance as an example of what he sees to be a wider problem. “[D]ecades of accretive rulemakings and regulatory adventurism have made the path to becoming a public company narrower—and the experience of remaining one encumbered with rules that can introduce more friction than benefit,” he said. As evidence of this, Atkins noted that the number of companies listed on US exchanges has fallen by roughly 40 percent since the mid-1990s.

Alongside returning governance regulation to the states, Atkins outlined the SEC’s priorities for revitalizing US public markets, which he framed as a return to first principles in securities regulation. That includes modernizing disclosure requirements so they are meaningful to investors rather than driven by regulatory interest. “Materiality, in short, must reclaim its place as the SEC’s north star,” he said. The SEC will also seek to provide public companies with litigation alternatives while preserving shareholders' ability to bring meritorious claims.