Inaugural Meeting of the SEC ‘s Investor Advisory Committee
AT TODAY’S INAUGURAL SECURITIES AND EXCHANGE COMMISSION INVESTOR ADVISORY COMMITTEE MEETING, Lori Schock, Director of the Office of Investor Education and Advocacy, SEC Chairman Mary Schapiro and Commissioners Elisse Walter, Luis Aguilar, Troy Paredes, and Daniel Gallagher said the focus of the new committee is protecting retail investors and boosting their confidence in the markets. Schapiro thanked the members of the committee for dedicating their time and effort to advising the SEC on issues of investor disclosure, conduct, trading, and other regulatory standards. She also noted that the committee’s work will be supplemented by the Office of the Investor Advocate, a position also implemented by the Dodd-Frank Act.
Walter commented on the challenges of understanding the true needs of investors and the importance of future recommendations and guidance from the committee. Aguilar said he is “incredibly delighted” the committee is now a reality, and urged members to focus on retail investors. He said individual investors lack the time and resources to interact and participate with the SEC and “make their needs known.” He also suggested paying more attention to preventing the financial abuse of seniors, examining differing standards of conduct for different types of investors and investigating the effectiveness of disclosure. Paredes praised the committee for its diversity of perspective and said he looked forward to hearing their concerns. Gallagher also praised the committee, noting that the committee’s work is timely because “something is obviously not right with investing in America.”
Following the opening remarks, individual members of the committee introduced themselves. The committee members include Mark Tresnowski, Managing Director and General Counsel of Madison Dearborn Partners; Roger Ganser, Chairman of the Board of Directors of Better Investing; Craig Goettsch, Director of Investor Education and Consumer Outreach of the Iowa Insurance Division of the North American Securities Administrators Association; Joe Grundfest, Professor of Law at Stanford Law School; Jean Setzfand, Director of Financial Security for the AARP; Joe Dear, Chief Investment Officer at California Public Employees’ Retirement System; Darcy Bradbury, Managing Director and Director of External Affairs of D.E. Shaw and Company; Roy Katzovicz, Partner and Investment Team Member and Chief Legal Officer of Pershing Square Capital Management; Anne Sheehan, Director of Corporate Governance of California State Teachers’ Retirement System; Damon Silvers, Associate General Counsel for the ALF-CIO; Kurt Schacht, Managing Director of the CFA institute; Stephen Holmes, General Partner and Chief Operating Officer at InterWest Partners; Adam Kanzer, Managing Director and General Counsel of Domini Social Investments and the Chief Legal Officer of the Domini Funds; Eugene Duffy, Partner and Principal of Paradigm Asset Management Company; Barbara Roper, Director of Investor Protection at the Consumer Federation of America; Steve Wallman, Founder and Chief Executive Officer of Foliofn; Alan Schnitzer, Vice Chairman and Chief Legal Officer of The Travelers Companies; Jim Glassman, Executive Director of the George W. Bush Institute; Ann Verger, Executive Director of the Council of Institutional Investors; Mellody Hobson, President and Director of Ariel Investments; and J. Robert Brown, Jr., Professor of Law at University of Denver.
Charter and By-Laws Discussion
Schock read the committee charter and by-laws and announced that the stated purpose of the committee is to “advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.”
The Charter and By-Laws were approved after some discussion over specific language regarding boundaries of discussion, conflicts of interest, what constitutes a proxy vote, which members can place items on the agenda, and the adoption of Robert Rules of Order.
Elections
After some deliberation, Dear was elected Chairman. He promised to be a strong consumer advocate while remaining sensitive to the varying needs of individuals and communities. Dear also stressed the importance of increasing investor confidence and said he expects the committee to focus on the issue.
Goettsch was elected Vice Chairman. He noted that he will receive input from securities jurisdictions across the country, and pledged to serve and protect retail investors.
Brown (absent from this meeting) was elected Secretary and Jean Setzfand was elected Assistant Secretary.
Staff Presentations
The Division of Corporate Finance gave a presentation on the JOBS Act, disclosure operations, and banking review models. The division is currently working on implementing and drafting regulations for Titles V and VI of the JOBS Act, particularly focusing on rules regarding soliciting, accreditation, and offerings registration. They highlighted their inclusion of both across-the-board and industry specific rules in their review process. The presenters also mentioned the investor alert system for flagging risky investor products, their continuous review team, and their “Dear CFO” letters.
The Division of Investment Management discussed target date requirement funds and identity theft. The presenters said target date requirement funds are designed and intended for investors retiring on a certain date and have grown immensely (“possibly dangerously so”) in the past few years. The SEC is aware of the issue and has proposed some regulations for these funds, including increased disclosure on intended allocation. The division also said they are exploring rules that would establish a process for firms to identify red flags and respond to them.
The Division of Trading and Markets provided an overview of the current suitability and market structure issues the SEC is addressing. The division is looking at regulations limiting solicitations of seniors, military personnel, and consumers with cognitive impairment. Also under consideration are ‘limit up, limit down’ proposals that would halt trading on a certain product for five minutes if the price changes by 5% within a certain time frame.
Presentations from the Division of Risk, Strategy, and Financial Information and the Office of the Chief Account were postponed due to time constraints.
Subcommittees
After a thorough discussion of the issues the committee is charged with addressing, the group created four Subcommittees on the following issue areas:
- Market Structure
- Financial Literacy
- Retail Investor Issues
- Investor as Owner
After input from SEC officials, the officers of the Investor Advisory Committee will decide if a separate committee should be established to specifically assess the JOBS Act and the Dodd-Frank Act. Subcommittee assignments were postponed until a later date.
More information on this hearing can be found here.
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AT TODAY’S INAUGURAL SECURITIES AND EXCHANGE COMMISSION INVESTOR ADVISORY COMMITTEE MEETING, Lori Schock, Director of the Office of Investor Education and Advocacy, SEC Chairman Mary Schapiro and Commissioners Elisse Walter, Luis Aguilar, Troy Paredes, and Daniel Gallagher said the focus of the new committee is protecting retail investors and boosting their confidence in the markets. Schapiro thanked the members of the committee for dedicating their time and effort to advising the SEC on issues of investor disclosure, conduct, trading, and other regulatory standards. She also noted that the committee’s work will be supplemented by the Office of the Investor Advocate, a position also implemented by the Dodd-Frank Act.
Walter commented on the challenges of understanding the true needs of investors and the importance of future recommendations and guidance from the committee. Aguilar said he is “incredibly delighted” the committee is now a reality, and urged members to focus on retail investors. He said individual investors lack the time and resources to interact and participate with the SEC and “make their needs known.” He also suggested paying more attention to preventing the financial abuse of seniors, examining differing standards of conduct for different types of investors and investigating the effectiveness of disclosure. Paredes praised the committee for its diversity of perspective and said he looked forward to hearing their concerns. Gallagher also praised the committee, noting that the committee’s work is timely because “something is obviously not right with investing in America.”
Following the opening remarks, individual members of the committee introduced themselves. The committee members include Mark Tresnowski, Managing Director and General Counsel of Madison Dearborn Partners; Roger Ganser, Chairman of the Board of Directors of Better Investing; Craig Goettsch, Director of Investor Education and Consumer Outreach of the Iowa Insurance Division of the North American Securities Administrators Association; Joe Grundfest, Professor of Law at Stanford Law School; Jean Setzfand, Director of Financial Security for the AARP; Joe Dear, Chief Investment Officer at California Public Employees’ Retirement System; Darcy Bradbury, Managing Director and Director of External Affairs of D.E. Shaw and Company; Roy Katzovicz, Partner and Investment Team Member and Chief Legal Officer of Pershing Square Capital Management; Anne Sheehan, Director of Corporate Governance of California State Teachers’ Retirement System; Damon Silvers, Associate General Counsel for the ALF-CIO; Kurt Schacht, Managing Director of the CFA institute; Stephen Holmes, General Partner and Chief Operating Officer at InterWest Partners; Adam Kanzer, Managing Director and General Counsel of Domini Social Investments and the Chief Legal Officer of the Domini Funds; Eugene Duffy, Partner and Principal of Paradigm Asset Management Company; Barbara Roper, Director of Investor Protection at the Consumer Federation of America; Steve Wallman, Founder and Chief Executive Officer of Foliofn; Alan Schnitzer, Vice Chairman and Chief Legal Officer of The Travelers Companies; Jim Glassman, Executive Director of the George W. Bush Institute; Ann Verger, Executive Director of the Council of Institutional Investors; Mellody Hobson, President and Director of Ariel Investments; and J. Robert Brown, Jr., Professor of Law at University of Denver.
Charter and By-Laws Discussion
Schock read the committee charter and by-laws and announced that the stated purpose of the committee is to “advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.”
The Charter and By-Laws were approved after some discussion over specific language regarding boundaries of discussion, conflicts of interest, what constitutes a proxy vote, which members can place items on the agenda, and the adoption of Robert Rules of Order.
Elections
After some deliberation, Dear was elected Chairman. He promised to be a strong consumer advocate while remaining sensitive to the varying needs of individuals and communities. Dear also stressed the importance of increasing investor confidence and said he expects the committee to focus on the issue.
Goettsch was elected Vice Chairman. He noted that he will receive input from securities jurisdictions across the country, and pledged to serve and protect retail investors.
Brown (absent from this meeting) was elected Secretary and Jean Setzfand was elected Assistant Secretary.
Staff Presentations
The Division of Corporate Finance gave a presentation on the JOBS Act, disclosure operations, and banking review models. The division is currently working on implementing and drafting regulations for Titles V and VI of the JOBS Act, particularly focusing on rules regarding soliciting, accreditation, and offerings registration. They highlighted their inclusion of both across-the-board and industry specific rules in their review process. The presenters also mentioned the investor alert system for flagging risky investor products, their continuous review team, and their “Dear CFO” letters.
The Division of Investment Management discussed target date requirement funds and identity theft. The presenters said target date requirement funds are designed and intended for investors retiring on a certain date and have grown immensely (“possibly dangerously so”) in the past few years. The SEC is aware of the issue and has proposed some regulations for these funds, including increased disclosure on intended allocation. The division also said they are exploring rules that would establish a process for firms to identify red flags and respond to them.
The Division of Trading and Markets provided an overview of the current suitability and market structure issues the SEC is addressing. The division is looking at regulations limiting solicitations of seniors, military personnel, and consumers with cognitive impairment. Also under consideration are ‘limit up, limit down’ proposals that would halt trading on a certain product for five minutes if the price changes by 5% within a certain time frame.
Presentations from the Division of Risk, Strategy, and Financial Information and the Office of the Chief Account were postponed due to time constraints.
Subcommittees
After a thorough discussion of the issues the committee is charged with addressing, the group created four Subcommittees on the following issue areas:
- Market Structure
- Financial Literacy
- Retail Investor Issues
- Investor as Owner
After input from SEC officials, the officers of the Investor Advisory Committee will decide if a separate committee should be established to specifically assess the JOBS Act and the Dodd-Frank Act. Subcommittee assignments were postponed until a later date.
More information on this hearing can be found here.