The U.S. financial markets have long been encumbered by a patchwork of outdated, overly complex, and paternalistic regulations. This regulatory environment, combined with the government’s failure to establish a clear regime for digital assets, has stifled innovation and caused the U.S. to fall behind its global counterparts.
Now, under President Trump’s leadership, we stand on the brink of a historic shift. His declarations of the “largest deregulation campaign in history” and a “revolution of common sense” present a unique opportunity to dismantle artificial barriers, retire outdated philosophies, and completely rethink our approach to the regulation of financial markets and digital asset ecosystems. Rather than being confined by reactive regulations designed for past crises and technologies, we can move towards crafting flexible, forward-looking frameworks that foster innovation.
A guiding light in envisioning these frameworks is the wisdom shared by former Securities and Exchange Commission Chairman Harvey Pitt (2001-2003), a venerated figure in the securities bar. Chairman Pitt suggested a straightforward yet impactful approach to enhancing U.S. equity markets: developing clear guiding principles. He likened these principles to God’s Ten Commandments—essential tenets that should govern conduct in the industry.
Regulators and market participants often become mired in the minutiae of prescriptive laws, losing sight of their core intent. While norms and rules certainly have their place, the proposed “ten commandments” serve as a sturdy foundation for developing future regulatory frameworks. The starting point must be a clear understanding of the purpose of federal securities laws.
At their essence, these laws govern transactions involving securities—whether they be shares in a company, promises of loans, or equity stakes. When individuals entrust you with their money, you owe them specific duties. The primary function of securities laws is to provide a disclosure regime that guarantees fair and transparent exchanges, equipping investors with the information needed to evaluate the risks and rewards of their investments.
These laws originated in the aftermath of the 1929 stock market crash, a catastrophe accelerated by unethical practices such as insider trading and market manipulation, alongside significant information asymmetry between buyers and sellers. The Securities Act of 1933 and the Securities Exchange Act of 1934 were established to prevent such abuses, facilitate companies in obtaining capital, protect investors, and ensure that markets operate fairly and efficiently, while minimizing burdens on honest business endeavors.
Despite their good intentions, these regulations have grown overly complex, hindering competition and constraining investor freedoms. To reimagine our approach to financial market regulation, especially in light of emerging technologies and digital assets, we must return to foundational principles that underpin these laws—principles designed to foster fairness while minimizing obstacles for legitimate businesses.
Building on Chairman Pitt’s vision, I have distilled the core values for market participants into a set of ten commandments for a trustworthy market:
- Thou shalt disclose material information. Issuers are required to provide full and fair disclosure of truthful, complete, and nondeceptive material information, enabling investors to make informed decisions.
- Thou shalt not deceive or manipulate. Fraud and manipulation distort the true value of securities and harm both investors and the market; prohibiting these practices ensures fairness.
- Thou shalt not trade on material nonpublic information. Insider trading grants unfair advantages to privileged individuals, undermining market integrity.
- Thou shalt tell the truth about your financial health. Accurate and transparent financial statements are paramount, reflecting a company’s true condition to assist investors in assessing risks.
- Thou shalt treat all investors equally. Ensuring equal access to material information preserves fairness and prevents insider advantages.
- Thou shalt reveal the risks involved. Investors must be informed of associated risks to make decisions aligned with their goals and risk tolerance.
- Thou shalt act in accordance with your duties to others. Market participants must prioritize the interests of their clients and shareholders, avoiding actions for personal gain.
- Thou shalt strive to avoid conflicts of interest. Conflicts should be minimized and disclosed when unavoidable, preserving transparency and trust.
- Thou shalt ensure fair and transparent markets. Markets must reflect true supply and demand, uninfluenced by artificial manipulation.
- Thou shalt promote efficient and orderly markets. Smooth operations and transparent pricing foster market stability and investor confidence.
By focusing on these core principles, we can establish adaptable regulatory frameworks that evolve alongside technological advancements and circumvent the constraints of antiquated laws. This is the moment for a transformative shift in financial regulation toward an approach that anticipates future markets and innovations. By ensuring clarity, fairness, and order, we can build a financially resilient system that benefits all stakeholders.
