The Securities and Exchange Commission’s (SEC) Investor Advisory Committee held its inaugural meeting Tuesday at SEC headquarters in Washington, and the consensus among the diverse group of members was that their top goal would be to focus on protection of retail investors and to boost their confidence in the markets.
But SEC Chairwoman Mary Schapiro told AdvisorOne as the committee broke for a lunch break that the committee would “no doubt” also be instrumental in providing some valuable insights to the SEC as it continues to craft its rule to put brokers under a fiduciary mandate. “I hope we can take advantage of all this talent in the room,” she said.
Indeed, committee member Barbara Roper, director of investor protection for the Consumer Federation of America, told AdvisorOne that while the fiduciary duty debate is “not central” to most committee members’ agenda—as they instead expressed a desire to focus on the needs of retail investors—“there is no issue of higher importance for retail investors than how we regulate the intermediaries [such as the advisors and broker-dealers] they rely on.”
Staff members from various SEC divisions also pointed to other areas of investor protection that committee members should focus on: equity crowdfunding, which the SEC says is still “illegal” until the agency crafts rules; target date funds; and identity theft.
In her prepared remarks, Schapiro noted the “variety of backgrounds and perspectives” the various committee members bring to the table, which she said “is a great strength but probably also a challenge.” The goal of the committee—which will set its own agenda—she said, is to bring the “investor perspective” to the commission. The Investor Advisory Committee’s work, Schapiro said, will be “supplemented” by the SEC’s Office of Investor Advocate. The SEC is currently seeking someone to head this office, Schapiro said.
The SEC created an Investor Advisory Committee in 2009, but the Dodd-Frank Act replaced that committee with the current one. Another committee was formed in the 1990s under former SEC Chairman Arthur Levitt.
SEC Commissioner Luis Aguilar (left) noted during his opening remarks at the meeting that the Committee will provide “input on regulatory priorities, on disclosure and other regulatory issues, on initiatives to protect investor interest, and on initiatives to promote investor confidence and the integrity of the securities marketplace.”
Aguilar urged committee members to “focus on the needs of retail investors,” as these are the investors who “directly or indirectly provide the bulk of all capital invested in securities.” He cited reports that suggest “many individual investors feel like they are under siege,” noting one recent survey that said only 15% of Americans trust the stock market.
“Investors continued to withdraw cash from U.S. equity funds in 2011, continuing a trend that has seen a total outflow of a half a trillion dollars from domestic equity funds since 2006,” Aguilar said. Some of this shift, he continued, “may be a natural result of the aging population of baby boomers. But research suggests there may also be a decline in the willingness of even younger investors to invest in the stock market.” While the reasons for the withdrawal from the stock market “are many,” concerns sparked by the May 2010 “flash crash,” the recent debacles of the Facebook IPO, and a market structure that is “increasingly complex and opaque” have no doubt contributed to investors’ angst, he said. “All these factors contribute to a sense that Wall Street is rigged against the individual investor, damaging confidence and impeding capital formation.”