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July 22, 2015 at 02:17 PM
Millennials, fiduciary duty and retirement readiness are among the Office of the Investor Advocate’s top concerns for the coming fiscal year.
The Office of the Investor Advocate – which was created at the Securities and Exchange Commission on Feb. 24, 2014, to help ensure that the needs of investors are considered as decisions are made within the Commission, at self-regulatory organizations and in Congress – has released its annual report on objectives. Rick Fleming is the head of the office.
The report establishes the investor advocate’s policy agenda for fiscal year 2016, narrowing its focus to a “manageable” list of eight issues.
Here are eight of the Office of the Investor Advocate’s top concerns:
1. Fiduciary duty
Fiduciary duty has been a hot-button item, thanks to the Department of Labor’s fiduciary rule reproposal and SEC Chairwoman Mary Jo White calling for the implementation of a uniform fiduciary standard for broker-dealers and investment advisers under the Dodd-Frank Act.
The Office of the Investor Advocate’s report warns that “an ill-advised SEC [fiduciary] rule could be worse than no rule at all.”
According to the report, a rule from the SEC could dilute the existing standard for investment advisors in an attempt to adopt a “harmonized” standard for broker-dealers.
A fiduciary duty rule is intended to reduce investor confusion about the differing standards of care for investment advisors and broker-dealers. However, the Investor Advocate believes “a poorly designed rule could create even worse investor confusion by claiming to give investors the protection of a ‘fiduciary duty’ that is, in fact, less stringent than the traditional fiduciary duty that applies in other relationships of trust,” according to the report.
The Office of the Investor Advocate says it will “attempt to provide a voice for investors as this important issue is addressed by policymakers.”
“We will fight to avoid these outcomes and to encourage rulemakings that are as strong as possible for investors,” the report states.
2. Millennials
The office says it will “examine economic issues germane to millennials in greater depth” in the coming fiscal year.
“We will, among other things, evaluate their financial literacy, the manner and extent in which they participate in financial markets, and the differences between millennials and preceding generations,” the report states. “We will also consider whether proposed changes to laws, policies and regulations are forward-looking and anticipate the needs of a new generation of investors.”
3. Retirement readiness
Studies abound on the topic of “retirement readiness,” but the Office of the Investor Advocate finds a lack of consensus on how financially prepared pre-retirees are. Which is why the office believes this area would benefit from further objective study.
“If the research demonstrates that Americans generally are prepared for retirement, then no further action may be required,” the report states.
But if the data finds that Americans are, in fact, unprepared for retirement, the office says it will consider potential policy approaches to address the problem.
4. Disclosure effectiveness
The office plans to work alongside others at the SEC to improve disclosure to investors – including the modernization of investment company reporting and variable annuity disclosure.
On May 20, the SEC proposed amendments to modernize the reporting and disclosure of information by registered investment companies – which the investor advocate supports.
5. Financial reporting and auditing
6. Municipal market reform
7. Equity market structure
8. Shareholder rights and corporate governance