U.S. financial markets have, for too long, been mired in an outdated, overly complicated package of rules that no longer serve their original purpose: to protect investors and maintain market integrity. Regulatory delay and an otherwise aggressive stance on the industry have slowed innovation while the rest of the world enjoys racing ahead of the U.S. But with this new leadership, there is an opportunity to rethink how we approach financial market regulation, particularly when it comes to digital assets.
President Trump’s bold push for deregulation and a “revolution of common sense” presents an infrequent chance to break away from old thinking, remove barriers, and design forward-thinking frameworks that foster innovation rather than stifle it. Instead of building rigid regulations based on past crises or technologies, we could create flexible structures that support progress. This approach makes me think of something former SEC Chairman Harvey Pitt (2001-2003) once said. He suggested that the U.S. securities laws should be guided by a set of simple, clear principles, like the Ten Commandments.
These guiding principles, Pitt posited, would prevent market conduct from getting lost in too much technical jargon. The tendency among regulators and participants in the markets is often too much concern over the minutiae of the rule and not understanding its ultimate intent. Where such laws, norms, and standards are indispensable, these ten principles would lay the bedrock of any regulatory structure that comes about. Understand what federal securities law is designed to do in the first instance:
These laws regulate securities transactions, like shares and investments, ensuring transparency and fairness. Created after the 1929 stock market crash to prevent abuses like insider trading, their purpose was to protect investors while helping businesses raise capital. Over time, however, these laws have become overly complex, stifling competition and limiting investor freedom. To adapt to digital assets, we must return to the original principles of fairness, transparency, and efficiency without burdening honest businesses.
Here are 10 principles that I believe would be a sound foundation for a trustworthy, forward-looking financial markets
Disclosure of Material Information: Full and honest disclosure is at the heart of the securities laws. Issuers must give investors full and honest information so they can make an informed choice. Concealing or distorting material information erodes trust.
No Deception or Manipulation: Fraud and market manipulation distort the true value of securities and cause harm to both investors and the market itself. Protecting against these practices is essential to fairness.
No Insider Trading: Insider trading defeats the principle of a level playing field. All participants in the market should have an equal opportunity to know everything.
Speak Truth About Your Financial Health: Financial statements should be presented in such a manner that it reflects the true financial condition of the company, so investors can assess risks and rewards.
Equitable Treatment of All Investors: Every investor should have an equal opportunity to get information and enjoy equal opportunities without any discrimination or insider advantage.
Clearly disclose risks: Investors must know the risks associated with any investment to make decisions that are in line with their financial goals.
Act in the best interest of others: Professionals such as financial advisors and corporate directors must act in the best interest of their clients and shareholders, not in their own self-interest.
Disclose conflicts of interest: Conflicts of interest should be avoided or minimized. If they cannot be avoided, they must be fully disclosed to maintain trust.
Ensure Fair and Transparent Markets: Markets should operate based on genuine supply and demand, without artificial interference. This ensures fair pricing and promotes trust.
Promote Market Efficiency and Orderliness: Efficient, smooth-running markets with transparent pricing and equal access for all participants lead to greater stability and investor confidence.
By embracing these core principles, we can design adaptable regulations that keep pace with emerging technologies and foster innovation. Instead of being shackled by outdated laws, we have the chance to build a regulatory framework that anticipates the future-one that ensures fairness, clarity, and trust while encouraging growth and new opportunities.
Conclusion
The future of financial markets regulation must be built on foundational principles that ensure fairness, transparency, and efficiency, while fostering innovation and growth. The outdated, complex rules of the past no longer serve their intended purpose in the rapidly evolving landscape, especially with the rise of digital assets. By focusing on core principles such as honest disclosure, preventing fraud, ensuring equal access to information, and acting in the best interest of investors, we can create a regulatory framework that is flexible and forward-thinking. This approach would not only protect investors but also stimulate economic progress, making the U.S. financial markets competitive and adaptable to future challenges.
