The SEC Office of the Investor Advocate ("OIA") set forth its priorities for protecting and promoting the interests of retail investors in its annual report on objectives for the coming fiscal year. The report is required under SEA Section 4(g)(6).

The OIA will focus on the following eight areas:

  • Corporate Disclosure: The OIA will continue to review disclosure requirements and determine whether the SEC is requiring the reporting of information that is material to "modern" investors. The OIA report suggests that it may advocate for further disclosure of environmental, social and governance (ESG) information.
  • The Proxy Process and Other Proxy Issues: The OIA will focus on proposals aimed at improving the proxy voting process, including those that concern fostering accurate vote counts, voter reconciliations and the confirmation of votes for investors.
  • Equity Market Structure: The OIA will continue to evaluate the rulemaking process regarding equity market structure, including reforms designed to (i) address issues affecting thinly traded securities, (ii) defend retail investors from fraudulent conduct and (iii) enhance the national system of market data and market access. In addition, the OIA will continue to review rule proposals filed with the SEC by SROs.
  • Fixed Income Market Reform: The OIA will monitor, analyze and review fixed income market activity.
  • Accounting and Auditing: The OIA will (i) follow developments relating to companies' internal controls over financial reporting and rulemaking, (ii) examine ways to close expectation gaps on financial reporting and the role of the auditor, and (iii) stay current regarding international accounting and auditing developments.
  • Non-Transparent Exchange-Traded Funds: The OIA will continue to be involved in the SEC's decision-making process regarding non-transparent exchange-traded funds.
  • Protecting Senior Investors: The OIA intends to raise public awareness and explain policy choices regarding the financial exploitation of the elderly. The OIA will monitor legal and regulatory developments and stay involved in the SEC's plans to protect senior investors.
  • Broker Migration and Misconduct: The OIA will monitor FINRA's rulemaking and initiatives to protect retail investors against bad actors that are both individuals and firms. Advocacy against broker misconduct will be led by Ombudsman Tracey McNeil as she and her staff continue their dialogue with FINRA into Fiscal Year 2020.

Commentary Steven Lofchie

The objectives are a bit of a mixed bag. These are not inherently the topics that should most interest an office focused on retail investors. In practice, retail investors largely trade off of the prices that are established by more knowledgeable institutional investors. Issues as to the quality of the accounting function should not logically be the focus of the OIA. By contrast, the focus on senior investors and on broker migration makes a lot of sense.

Two very recent SEC actions are absent from this list and would seem to be particularly relevant for retail investors. OIA should be focusing on Regulation Best Interest and related guidance as to the scope of Advisers Act duties: Do these actions provide better results to retail investors? Does it result in a diminution of the availability of full-service brokerage? Do broker-dealers deregister and become investment advisers? OIA also should consider a number of the questions raised by the SEC in its concept release on private placements, such as how the term "accredited investor" should be defined.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.