Washington D.C.–(Newsfile Corp. – December 15, 2020) – The Securities and Exchange Commission today announced that Brett Redfearn, Director of the SEC’s Division of Trading and Markets, will conclude his tenure as Director by the end of the year after leading the Division for over three years.   

Since joining the SEC in October 2017, Mr. Redfearn led the Division’s 255 professional staff, including 168 attorneys, on a wide range of initiatives critical to the efficient and fair functioning of our trading markets and the protection of Main Street investors.  Notably, Director Redfearn played a leading and essential role in coordinating the public and private sector efforts to maintaining fair, orderly, and efficient markets in March and April of 2020 when our markets faced unprecedented volatility and liquidity stresses.

“Brett’s extensive, practical knowledge of markets, market operations, and industry participants has enhanced greatly the SEC’s efforts to promote market integrity and improve market structure for the benefit of investors,” said Chairman Jay Clayton. “It is rare that one person can materially lift the expertise and effectiveness of a large, well-functioning group.  Brett is that rare person.  We have relied on his steady hand from the onset of the COVID-19 pandemic and, throughout his tenure, his deep understanding of complex issues and market structure.  Brett has applied his expertise deftly to assist the Commission in getting many important rulemaking and other initiatives across the finish line. It has been a privilege to work with Brett and his team.”   

“It has been a tremendous honor and privilege to lead this Division during a period that included incredibly challenging times for markets, investors, and the economy.  I am immensely grateful to the Division staff for their thoughtfulness, hard work and dedication, and to Chairman Clayton for his leadership, support and unwavering commitment to support the Division’s efforts to tackle a wide array of complex issues,” said Mr. Redfearn.  “In addition to TM staff, I want to thank the outstanding staff across the agency, who demonstrated an impressive ability to surmount one obstacle after another to bring myriad important initiatives to completion, often with bipartisan support.”   

Under Mr. Redfearn’s leadership, the Division of Trading and Markets conducted numerous, groundbreaking initiatives touching a broad cross-section of our markets.

Response to COVID-19 Market Stresses and Operational Challenges

Mr. Redfearn and the Division provided steady guidance to markets and market participants in response to the extraordinary market volatility that resulted during the COVID-19 pandemic.  Under his direction, the Division quickly facilitated targeted regulatory assistance and relief to maintain the continuing orderly and fair functioning of the securities markets.  This included working closely with exchanges, clearing agencies, transfer agents, broker-dealers and FINRA, among others, to assist them in expeditiously implementing novel business continuity measures, including shifting to fully remote work environments, while ensuring important investor and market protections.  While reassuring investors of the stability and resiliency of our markets, Director Redfearn led the Division as it collaborated with market participants to identify appropriate adjustments to exchange rules and other regulatory requirements, and expedited the review and approval of dozens of temporary rule changes that, among other things, facilitated the closing of physical trading floors and the transition to all-electronic trading, provided temporary relief from certain filing deadlines and listing standards, and temporarily modified certain shareholder approval rules and broker vote requirements related to delivery of proxy materials to beneficial shareholders.  During this period, the Division also developed new tools to monitor the operations of markets and regulatory mechanisms that help to moderate extraordinary volatility.  Mr. Redfearn and his Trading and Markets colleagues also proactively engaged market participants to help identify and assess emerging issues and to inform regulatory responses.  As part of the broader effort to improve the Commission’s insight into market operations, Mr. Redfearn also took steps to enhance relationships with other regulators.  These relationships informed policy in a number of ways and were particularly critical during periods of market stress. 

Modernizing the National Market System

Mr. Redfearn’s expertise in market structure enabled him to play a critical role in the Commission’s efforts to modernize the National Market System (“NMS”).  Most recently, the Division’s work led to the Commission’s adoption of a set of rules that will significantly expand the content of NMS market data, improve the timeliness with which investors receive that data, and foster a competitive environment for the consolidation and dissemination of that data.  During his leadership, the Commission also approved an order requiring equity exchanges and FINRA (together, the “SROs”) to propose a new NMS plan for equity market data that responds to an array of market developments.  The order addresses conflicts of interest inherent in the current governance structure of the existing NMS plans responsible for the dissemination of consolidated equity market data and is designed to improve the efficiency of NMS plan operations and the responsiveness of the plan to the concerns of non-SRO market participants.  The Commission also rescinded a rule exception that allowed NMS plan fees to become effective upon filing, a change that will enhance the transparency of the process for assessing new NMS plan fees by ensuring that these fees benefit from review and public comment and evaluation by the Commission before they can be charged. 

Regulation Best Interest

During Mr. Redfearn’s tenure, the Commission adopted the Regulation Best Interest (“Reg BI”) rulemaking package, including Form CRS.  Reg BI is designed to substantially enhance investor protection by requiring broker-dealers to make recommendations of securities transactions or investment strategies involving securities (including securities accounts), that are in the best interest of their retail customers.   Form CRS requires registered investment advisers and broker-dealers to deliver to retail investors a relationship summary providing succinct, plain English information about the relationships and services the firm offers, the fees, costs, conflicts of interest and required standard of conduct associated with those relationships and services, and whether the firm and its financial professionals have reportable legal or disciplinary history.  These enhancements, which became effective on June 20, 2020, are of significant importance to retail investors, to registered broker-dealers and investment advisers, and to our markets more generally.

Mr. Redfearn and his colleagues in the Division have been active participants in the Commission’s cross-divisional and office efforts to facilitate the implementation of Reg BI.  These efforts have included, among other things, the issuance of FAQs and other statements, and a public roundtable in October 2020 to discuss initial observations regarding Reg BI and Form CRS implementation.

Implementing Dodd-Frank Title VII Rules & Harmonization with the CFTC

During Mr. Redfearn’s tenure, the Division prioritized standing up the Dodd-Frank Title VII regime for security-based swap dealers and major security-based swap participants (together, “SBS Entities”).  Mr. Redfearn led the Division’s efforts for the Commission to finalize the rules necessary to implement the registration and regulation of SBS Entities, including:

• Proposing and adopting a rule on risk mitigation techniques for portfolios of uncleared security-based swaps;
• Adopting capital, margin, and segregation rules for SBS Entities;
• Adopting recordkeeping and reporting rules for SBS Entities; and
• Proposing and adopting revised cross-border rules.

As a result of these actions, the Commission has set a registration compliance date for SBS Entities of October 6, 2021, which will also be the compliance date for a number of additional Dodd-Frank rules.  During Mr. Redfearn’s tenure, the Commission also proposed an order granting substituted compliance to the Federal Republic of Germany, in furtherance of a pragmatic approach to the operational and jurisdictional challenges associated with the cross-border regulation of security-based swaps.

Under Mr. Redfearn’s leadership, the Division also worked to promote harmonization with the Commodity Futures Trading Commission (“CFTC”) on the Title VII regime and other initiatives.  On October 22, 2020, the Commission and the CFTC held a joint open meeting to adopt final rules to harmonize the minimum margin level for certain security futures and to issue a joint request for comment on the portfolio margining of uncleared swaps and non-cleared security-based swaps.  

Combating Retail Investor Fraud

Another of Mr. Redfearn’s top market structure objectives has been to combat fraud against retail investors.  To this end, under his leadership, the Division recommended that the Commission propose and adopt amendments to Rule 15c2-11 that enhanced and modernized the requirements for quotations for OTC securities, which will better protect retail investors.  Under the rule, information about an issuer will need to be current and publicly available before a broker-dealer may initiate or resume quotations in such issuer’s security or rely on an exception to the rule that permits one broker-dealer to “piggyback” off of another broker-dealer’s review of current and publicly available information.   Staff also issued a bulletin highlighting for broker-dealers risks to our markets and to investors arising from transactions in “penny stocks” and other low-priced securities, reminding broker-dealers of common fact patterns and red flags, and discussing broker-dealers’ obligations in such circumstances.

Enhanced Transparency

Mr. Redfearn also championed several initiatives to enhance market transparency.  Under his leadership of the Division, the Commission:

• Adopted amendments to Rule 606 to require broker-dealers to provide more information about routing and execution of certain institutional (not held) orders to customers, as well as enhanced disclosures for order routing of certain retail (held) orders;
• Adopted amendments to Regulation ATS to enhance operational transparency and regulatory oversight of alternative trading systems (“ATSs”) (commonly known as “dark pools”) that trade NMS stocks;
• Proposed amendments to Regulation ATS and Regulation SCI to require that ATSs that trade government securities comply with certain additional regulations; apply “fair access” provisions to certain Government Securities ATSs; enhance operational transparency by requiring Government Securities ATSs to file information about their operations publicly; and subject Government Securities ATSs to enhanced oversight;
• Requested comment on certain issues related to the regulatory framework for electronic trading platforms in corporate and municipal securities markets.
• Addressed the substantial governance, design and security issues that had greatly impaired the implementation of the Consolidated Audit Trail, establishing a detailed and achievable path for an operational CAT with an improved security posture. 

Additional Statements on Key Issues

Mr. Redfearn also placed significant focus on developing and issuing guidance on several issues of vital importance to market participants, including: 

• A Commission statement inviting exchanges and other market participants to submit innovative proposals designed to improve the secondary market structure for thinly traded securities, including proposals for innovations in conjunction with the potential suspension of Unlisted Trading Privileges and/or the possibility of exemptive relief from Regulation NMS and other rules.  The staff in the Division of Trading and Markets simultaneously issued a companion paper providing additional background on the unique trading challenges and characteristics related to thinly traded securities.
• Staff no-action letters to respond to differences between the European Commission’s MiFID II regime and U.S. securities law requirements related to payments for research, issued in close collaboration with the Division of Investment Management after extensive consultation with a cross section of market participants.  
• Staff guidance to assist national securities exchanges and FINRA with filing proposed fee changes that meet their burden as SROs to demonstrate that proposed fees are consistent with the requirements of the Exchange Act, including, among other things, that fees be reasonable, equitably allocated, not unfairly discriminatory, and not an undue burden on competition.
• A staff report on algorithmic trading, submitted at the request of Congress, on the risks and benefits of algorithmic trading in the U.S. capital markets. 
• A staff report on clearing agency regulation highlighting key trends and related developments in the national system for clearance and settlement and emphasizing the importance of strong governance arrangements and risk management, as well as having robust written rules, policies, and procedures to address these trends.

Public Engagement

• To engage market participants and the public on key policy issues, the Division, under Mr. Redfearn’s leadership, held multiple market structure roundtables, including on: the Market Structure for Thinly Traded Securities, Combating Retail Investor Fraud, and Market Data and Market Access.  Each of these roundtables helped to provide meaningful insight to inform future policy initiatives of the Commission and the Division.
• Also, during Mr. Redfearn’s tenure, the Division oversaw on-going deliberations of the Fixed Income Market Structure Advisory Committee (“FIMSAC”), which has provided the Commission with diverse perspectives on the structure and operations of the U.S. fixed income markets, as well as advice and recommendations on matters related to fixed income market structure.  The FIMSAC has held 11 public meetings and numerous subcommittee meetings, and has made 16 recommendations to the Commission.

Mr. Redfearn has a long history in securities markets, with a continued focus on the interaction among evolving technologies, regulations and trading practices across asset classes and geographic regions.  Prior to being named Director in 2017, Mr. Redfearn served as the Global Head of Market Structure for the Corporate and Investment Bank at J.P Morgan.  Mr. Redfearn started his career in financial services at the American Stock Exchange, where he ran the exchange’s equities transactions business and business strategy. 

Mr. Redfearn earned his M.A. in political science from the New School for Social Research and his B.A. from the Evergreen State College in Olympia, Washington.

Upon Mr. Redfearn’s departure, Christian Sabella, currently a deputy director of the Division, will assume the role of Acting Director.