SEC Office of Investor Advocate Publishes Goals for 2016

Rick Fleming Deputy General Counsel NASAAThe Office of the Investor Advocate is a relatively new addition to the Securities and Exchange Commission. Its creation was mandated by Dodd-Frank which was enacted in 2010.  This new regulatory role is required by statute to file two separate reports each year: A report on the office’s activities is due no later than December 31st and a report on objectives for the coming year are required by June 30th. Both of these reports eventually make their way to Capitol Hill where they are presented to both the House and the Senate.

The very first individual to hold the office is Rick Fleming, who was appointed by SEC Chair Mary Jo White in 2014.  Fleming was previously counsel at the North American Securities Regulator Association, an entity that represents state securities regulators.

Fleming’s core responsibilities include pursing policies that are beneficial for investors, supporting the Investor Advisory Committee and acting as an ombudsmen.

The investor advocate has determined the following items are priorities for 2016:

  • Equity Market Structure: Focusing on whether the equity market is fair for investors both large and small.
  • Municipal Market Reform: Addressing the relative illiquidity and lack of price transparency in municipal securities has inhibited the efficiency of the municipal securities market.
  • Fiduciary Duty: Work to increase investor protection and reduce investor confusion and develop a standard that harmonizes rules for Broker Dealers and Investment Advisors.
  • Disclosure Effectiveness: Advocate for disclosure requirements that enhances investors ability to understand it while remaining complete and accurate.
  • Millennials: Review the issues that are important for this generation that is quickly reaching economic maturity.
  • Retirement Readiness: Further study on the challenges of financial preparation for retirement and potential policy approaches.
  • Shareholder Rights and Corporate Governance: Issues regarding the rules governing shareholder proposals and proxy voting.
  • Financial Reporting and Auditing: Evaluating the potential impact pertaining to a forthcoming concept release on audit committee disclosures.

One glaring omission from this list is the issue regarding the definition of an accredited investor. Since the office was created to advocate on behalf of all investors, it is disappointing that Mr. Fleming did not pick up the call and add his voice to the growing chorus of individuals requesting reform as to which investors have access to private offers.  The current definition has disenfranchised the many, while providing access to the elite few, for these private placement issues.  Early stage investing, while risky, can provide significant opportunity for capital gain.  A wealth based barrier that equates a bank balance to sophistication is myopic at best.  Adding it to the list of objectives would reflect positively on the Advocates office.

The report is embedded below.


 

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