Report on

Activities

FISCAL YEAR 2022

REPORT ON ACTIVITIES: FISCAL YEAR 2022 | iii

Section 4(g)(6) of the Securities Exchange 

Act of 1934 (Exchange Act), 15 U.S.C. § 

78d(g)(6), requires the Investor Advocate 

to file two reports per year with the Committee 

on Banking, Housing, and Urban Affairs of the 

Senate and the Committee on Financial Services 

of the House of Representatives.1 The two reports 

are the mid-year Report on Objectives covering the 

forthcoming fiscal year and the end-of-year Report 

on Activities covering the preceding fiscal year.

A Report on Objectives is due no later than June 

30 of each year, and its purpose is to set forth 

the objectives of the Investor Advocate for the 

following fiscal year.2 On June 28, 2021, the Office 

of the Investor Advocate (Office) filed a Report on 

Objectives for Fiscal Year 2022, which corresponds 

to the activities carried out during Fiscal Year 2022 

as reported herein.3

A Report on Activities is due no later than December 

31 of each year.4 The Report on Activities describes 

the activities of the Investor Advocate during the 

immediately preceding fiscal year. 

This current Report on Activities for Fiscal Year 

2022 includes, among other things, information 

about the steps the Investor Advocate has 

taken during Fiscal Year 2022 to improve the 

responsiveness of the Securities and Exchange 

Commission (Commission or SEC) and 

self-regulatory organizations (SROs) to investor 

concerns. This Report also contains a summary of 

the most serious problems encountered by investors 

during the reporting period and identifies actions 

taken by the Commission or SROs to address those 

problems. Where applicable, this Report advances 

recommendations, if any, for administrative and 

legislative actions to resolve problems encountered 

by investors.5

Office of the Investor advocate

REPORT ON ACTIVITIES

FISCAL YEAR 2022
i v | OFFICE OF THE INVESTOR ADVOCATE

Functions of the Investor Advocate Reporting Obligation

According to Exchange Act Section 4(g)(4), 15 U.S.C. 

§ 78d(g)(4), the Investor Advocate shall:

(A) assist retail investors in resolving significant 

problems such investors may have with the 

Commission or with SROs;

(B) identify areas in which investors would benefit 

from changes in the regulations of the 

Commission or the rules of SROs;

(C) identify problems that investors have with 

financial service providers and investment 

products;

(D) analyze the potential impact on investors of 

proposed regulations of the Commission and 

rules of SROs; and

(E) to the extent practicable, propose to the 

Commission changes in the regulations or 

orders of the Commission and to Congress any 

legislative, administrative, or personnel changes 

that may be appropriate to mitigate problems 

identified and to promote the interests of 

investors.

According to Exchange Act Section 4(g)(6)(B), 15 

U.S.C. § 78d(g)(6)(B), the Investor Advocate shall 

submit to Congress, not later than December 31 of each 

year, a report on the activities of the Investor Advocate 

during the immediately preceding fiscal year. This 

“Report on Activities” must include the following:

(I) appropriate statistical information and full and 

substantive analysis;

(II) information on steps that the Investor Advocate 

has taken during the reporting period to improve 

investor services and the responsiveness of the 

Commission and SROs to investor concerns;

(III) a summary of the most serious problems 

encountered by investors during the reporting 

period; 

(IV) an inventory of the items described in subclause 

(III) that includes—

(aa) identification of any action taken by the 

Commission or the SRO and the result of 

such action;

(bb) the length of time that each item has 

remained on such inventory; and 

(cc) for items on which no action has been 

taken, the reasons for inaction, and 

an identification of any official who is 

responsible for such action;

(V) recommendations for such administrative and 

legislative actions as may be appropriate to 

resolve problems encountered by investors; and 

(VI) any other information, as determined appropriate 

by the Investor Advocate.

Disclaimer: Pursuant to Exchange Act Section 4(g)(6)(B)(iii), 15 U.S.C. § 78d(g)(6)(B)(iii), this Report on Activities is 

provided directly to Congress without any prior review or comment from the Commission, any Commissioner, any other 

officer or employee of the Commission outside of the Office of the Investor Advocate or the Office of Management and 

Budget. This Report on Activities expresses solely the views of the Investor Advocate. It does not necessarily reflect the 

views of the Commission, the Commissioners, or staff of the Commission, and the Commission disclaims responsibility for 

this Report on Activities and all analyses, findings, and conclusions contained herein.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | v

CONTENTS

MESSAGE FROM THE OFFICE OF THE INVESTOR ADVOCATE. . . . . . . . . . . . . . . . . . .1

INVESTOR ADVOCATE’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ADVOCACY FOR INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Environmental, Social, and Governance (ESG) Disclosure. . . . . . . . . . . . . . . . . . . . . . 3

Rule 10b5-1 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Capital-Raising Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Equity Market Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Novel Exchange-Traded Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Registered Fund Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Broker Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Financial Exploitation of Senior Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Accounting and Auditing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

PROBLEMATIC INVESTMENT PRODUCTS AND PRACTICES. . . . . . . . . . . . . . . . . . . . 17

Digital Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Single-Stock Leveraged and Inverse Exchange-Traded Funds . . . . . . . . . . . . . . . . . . 20

INVESTOR ENGAGEMENT AND OUTREACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

RESEARCH AND INVESTOR TESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Performance Benchmarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Menu Complexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Helping Investors Make Decisions About Mutual Funds Using Visual Aids . . . . . . . . . . . 34

COVID-19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Digital Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Challenges to Testing and Fulfilling OIAD’s Statutory Mission. . . . . . . . . . . . . . . . . . . 42

OMBUDSMAN’S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Ombudsman Role and Standards of Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Streamlined Communications with Retail Investors. . . . . . . . . . . . . . . . . . . . . . . . . .47

Service by the Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Areas of Interest and Importance to Retail Investors. . . . . . . . . . . . . . . . . . . . . . . . 50

Acting In the Interest of Retail Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Ombudsman Outreach and Engagement Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . 54

Objectives and Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

SUMMARY OF INVESTOR ADVISORY COMMITTEE RECOMMENDATIONS AND 

SEC RESPONSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

END NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1

MESSAGE FROM THE OFFICE OF

 THE INVESTOR ADVOCATE

I

t is my privilege to present the Office of the 

Investor Advocate’s Report on Activities for 

Fiscal Year 2022. This is the eighteenth in a 

series of semiannual reports that stretches back to 

the inception of our Office in 2014.

This year has been an annus horribilis for many 

investors, and there is no denying that 2022 has seen 

its share of financial challenges, with high inflation, 

market volatility, global conflicts, geopolitical 

tensions, (crypto) currency fluctuations, spectacular 

business failures, and the threat of recession, 

among a seemingly endless parade of negative 

financial developments. Amid this Pandora’s Box 

of uncertainties, many investors remain hopeful for 

better times ahead as they struggle to fund, maintain, 

or defend their nest eggs, retirement savings, and 

investment portfolios, among other assets. While 

past performance is no guarantee of future results, 

history teaches us that this, too, shall pass.

The year 2022 has also been an eventful one for 

the Office of the Investor Advocate. Certainly, the 

departure of Rick Fleming, the SEC’s first Investor 

Advocate, after more than eight solid years of 

service, was unprecedented for a relatively new 

office such as ours. Yet his legacy endures as the 

Office continues its important mission and activities, 

as described in this Report.

Among the notable activities we highlight in this 

Report is the investor research we conducted 

on the impact of fund 

performance benchmarks 

on investor decisionmaking. This independent 

research study examined 

market data and 

the results of a large 

behavioral experiment 

sampling a general 

population to understand 

how fund companies 

employ benchmarks and how individuals respond 

to the presentation of benchmarks. Following 

publication, the research study was cited repeatedly 

in the Commission’s rulemaking on tailored 

shareholder reports. We will continue to conduct 

independent research and will seek additional 

opportunities to contribute to evidence-based 

rulemaking at the Commission.

Another significant activity that we address in this 

Report is our recommendation to certain major 

securities exchanges to consider revisiting their listing 

standards for special purpose acquisition companies 

(SPACs) to better protect investors during subsequent 

business combination transactions between SPACs 

and private operating companies—so-called 

“de-SPAC transactions” (as explained in greater 

detail in this Report). Our Office recommended 

that those exchanges consider amending their 

SPAC listing standards to prohibit consummation 

of a business combination when public SPAC 
2 | OFFICE OF THE INVESTOR ADVOCATE

shareholders exercise their conversion rights for 

a majority of the shares. One of those exchanges 

subsequently invited public comment regarding the 

recommended conversion rights threshold.

As we look forward to the appointment of the SEC’s 

second Investor Advocate, we continue to work 

tirelessly on behalf of the investors we serve. Those 

investors range from individual investors to large 

sophisticated institutions. We strive to advocate for 

all investors, particularly retail investors, whose 

voices may sometimes go undetected amid the 

amplifications of their institutional counterparts.

From time to time, we are asked how the Office 

of the Investor Advocate fits within the SEC’s 

overarching mission. In 1937, William O. Douglas, 

then the Commission’s third Chairman and later 

a U.S Supreme Court justice, declared the SEC 

“the investor’s advocate.” Indeed, the SEC is the 

investor’s advocate writ large. Congress, however, 

recognized the need to create an individual Investor 

Advocate within the SEC itself. This development 

does not diminish the SEC’s role as the investor’s 

advocate, but rather, imbues a single identifiable 

individual with the responsibility to advocate to the 

SEC and to Congress for policies that would serve 

the interests of investors with respect to securities 

and investor protection issues. Generally, the 

Investor Advocate provides a voice for investors, 

assists retail investors, studies investor behavior, 

and participates as a member on the SEC’s Investor 

Advisory Committee. While the Investor Advocate 

has an independent role within the SEC, the Office 

of the Investor Advocate’s statutory mandate 

is consistent with the Commission’s three-part 

mission to protect investors, facilitate capital 

formation, and maintain fair, orderly, and efficient 

markets. The Office of the Investor Advocate is 

not limited to serving exclusively as an investor 

protection advocate (its foremost function). Nor 

is the Office solely an advocate for fair, efficient, 

and orderly markets, although that role is essential. 

Rather, the Office also is an advocate for capital 

formation and its facilitation through responsible 

regulation. By encompassing these three functions, 

the Office’s advocacy efforts are in alignment with 

the SEC’s mission.

Finally, the Office of the Investor Advocate could 

not have accomplished the activities described 

in this Report without the intensity, hard work, 

and dedication of our staff—especially during the 

interregnum between the departure of the first 

Investor Advocate and the arrival of the next one. 

All the while, our staff have continued seamlessly 

to review and comment on numerous Commission 

rulemakings, conduct significant investor research, 

respond to investor inquiries, provide technical 

assistance and logistical support to the SEC Investor 

Advisory Committee, draft a Congressional 

report, and generally advocate for the interests of 

investors, among myriad other activities on their 

behalf, as detailed in this Report. To paraphrase 

President Theodore Roosevelt’s adage, we work 

hard at work worth doing. We remain focused on 

serving the interests of investors while we await 

the appointment of the new Investor Advocate, a 

welcome development that we hope to highlight in 

our next report to Congress.

Respectfully,

Marc Oorloff Sharma

Chief Counsel

Office of the Investor Advocate
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3

ADVOCACY 

FOR INVESTORS

On June 28, 2021, the Office of the 

Investor Advocate6 filed a Report on 

Objectives for Fiscal Year 2022.7 That 

Report on Objectives identified nine policy areas 

that would be the primary focus of the Office 

during Fiscal Year 2022: (1) environmental, social, 

governance (ESG) disclosure; (2) Rule 10b5-1 

plans; (3) capital raising alternatives; (4) equity 

market structure; (5) novel-exchange traded funds; 

(6) registered fund disclosure; (7) broker conduct; 

(8) financial exploitation of seniors; and (9) 

cryptocurrency. This section of our annual Report 

on Activities describes our activities relating to 

each of those policy areas from October 1, 2021 

to September 30, 2022 (the Reporting Period), 

with the exception of cryptocurrency, which is 

discussed along with digital assets in the section on 

Problematic Investment Products and Practices. 

ENVIRONMENTAL, SOCIAL AND 

GOVERNANCE (ESG) DISCLOSURE

As discussed in our prior reports, and mindful of 

the differing viewpoints surrounding the subject 

of ESG, there nonetheless is ample evidence of 

demand for ESG disclosure among many investors.8

For example, a 2021 survey by a major auditing 

firm found that some investors are willing to 

take action if they believe certain companies are 

not adequately addressing ESG issues, including 

seeking to engage the company in dialogue, seeking 

inclusion of ESG targets in executive pay, voting 

against director appointments and/or executive 

compensation agreements, and even divesting their 

holdings.9 In 2020, the SEC Investor Advisory 

Committee (“Investor Advisory Committee” or 

“IAC”) recommended that the Commission begin 

serious efforts to update public company reporting 

requirements, rejecting voluntary private-sector 

reporting initiatives as insufficient and inadequate 

to meet investor demand for reliable, material ESG 

information.10

We believe that ESG information can be decisionuseful, and we have a history of support for 

high-quality, consistent, and comparable disclosure, 

including ESG disclosure. Further, we have argued 

that, although principles-based ESG measures are 

more flexible and can generate information for 

investors that is most relevant within the context of 

a particular business, principles-based requirements 

tend to generate disclosures that can be difficult 

to compare across a variety of companies.11 For 

that reason, we have advocated for reasonable 

prescriptive requirements to promote comparability 

wherever possible, particularly with respect to 

disclosure requirements for information that is 

material and objectively determinable.

In Fiscal Year 2022, the Commission issued a 

number of ESG disclosure proposals relating to 

issuers and funds. For instance, on March 21, 2022, 

the Commission proposed certain climate-related 

disclosures, partly in response to the intense and 

long-standing investor interest in ESG disclosure.12
4 | OFFICE OF THE INVESTOR ADVOCATE

The proposal, if adopted, would require registrants 

to provide certain climate-related information in 

their registration statements and annual reports, 

including information about climate-related 

financial risks and climate-related financial metrics 

in their financial statements.13 According to the 

Commission, the disclosure of this information 

would provide consistent, comparable, and 

reliable—and therefore decision-useful—information 

to investors to enable them to make informed 

judgments about the impact of climate-related risks 

on current and potential investments.14

One particular area of focus in the proposal is 

greenhouse gas (GHG) emissions. The proposal 

would require public companies to disclose certain 

information about direct GHG emissions (Scope 

1) and indirect GHG emissions from purchased 

electricity and other forms of energy (Scope 2). 

The proposal would also require disclosure of 

indirect emissions from upstream and downstream 

activities in a public company’s value chain (Scope 

3), if material, or if the public company has set a 

GHG emissions target or goal that includes Scope 3 

emissions, in absolute terms, not including offsets, 

and in terms of intensity.15 The proposal would 

not subject Scope 3 emissions disclosure to the 

attestation requirements that would apply to Scope 

1 and Scope 2 emissions.16

As the Commission continues to work through this 

complicated rulemaking, including the more than 

4,000 comment letters submitted to date in response 

to the proposed rules, we will help to ensure that 

investors’ interests remain at the forefront of the 

discussion, while also being mindful of the diversity 

of viewpoints associated with ESG disclosure. We 

further note that it is unclear at this time whether 

and, if so, to what extent the recent ruling by the 

U.S. Supreme Court in West Virginia v. EPA,

17 in 

which the Court addressed the “major questions” 

doctrine, may have an impact on the Commission’s 

approach to this rulemaking moving forward.

Additionally, on March 25, 2022, the Commission 

proposed amendments to rules and reporting forms 

intended to promote consistent, comparable, and 

reliable information for investors concerning funds’ 

and investment advisers’ incorporation of ESG 

factors.18 We discussed the details of these proposed 

amendments in our Report on Objectives for 

Fiscal Year 2023.19 We look forward to continuing 

our engagement with Division of Investment 

Management staff on this rulemaking, and expect to 

discuss any action taken with respect to the proposal 

in a future report.

RULE 10B5-1 PLANS

Another area of corporate disclosure that received 

our attention during the Reporting Period is the 

administration and composition of Rule 10b5-1 

trading plans. Exchange Act Rule 10b-5 specifies 

that the purchase or sale of a security is “on the 

basis of” material nonpublic information, and 

thus potentially prohibited insider trading, if the 

purchaser or seller is aware of material nonpublic 

information when making the purchase or sale.20

In 2000, the Commission adopted Rule 10b5-1, 

which allows a person (often a corporate insider) 

to establish a trading plan before coming into 

possession of material nonpublic information.21 Rule 

10b5-1 plans theoretically provide for continuous 

trading over time, without influence of new 

information, and thus offer traders an affirmative 

defense against insider trading claims.

In reality, evidence suggests some corporate insiders 

have used these plans to skirt the law and trade 

on information not available to the rest of the 

market.22 Critics contend that some executives have, 

for example, established Rule 10b5-1 plans and 

made initial trades based on material nonpublic 

information already in their possession, or suddenly 

canceled or revised such plans based on newlyacquired information.23 In a June 7, 2021 speech, 

SEC Chair Gary Gensler noted that, in his view, 

“these plans have led to real cracks in our insider 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5

trading regime.”24 Aside from misuse of Rule 

10b5-1 plans, the market’s lack of transparency 

into plan details may operate to the disadvantage of 

retail investors.25

On January 13, 2022, the Commission proposed 

amendments to Rule 10b5-1 that would add new 

conditions to the availability of the affirmative 

defense under Exchange Act Rule 10b5-1(c)(1).26

The Commission also proposed, among other 

things, new or amended disclosure requirements 

with regard to (1) certain equity compensation 

awards, (2) company insider trading policies, (3) 

the adoption and termination of Rule 10b5-1 

trading arrangements and certain other trading 

arrangements by directors, officers, and issuers, 

and (4) Exchange Act Forms 4 and 5. On 

December 14, 2022, the Commission adopted 

these amendments with certain modifications in 

response to public comments, including a modified 

“cooling-off” period for directors and officers 

before they may begin trading under a new or 

modified Rule 10b5-1 plan.27 We observe that a 

number of these amendments are consistent with the 

recommendations made by the Investor Advisory 

Committee concerning Rule 10b5-1 plans,28 and 

were supported by the Investor Advocate.29

Other Commission Rulemakings

During the Reporting Period, our Office also 

reviewed a number of Commission rulemakings 

that concern additional aspects of public company 

reporting, proxy voting, and other disclosure 

requirements.

§	As discussed in our previous Report on Activities 

(filed December 2021), on November 17, 2021, 

the Commission adopted amendments to the 

proxy rules to require the use of “universal 

proxy cards” in non-exempt contested director 

elections.30

§	On December 2, 2021, the Commission adopted 

amendments to finalize the interim final rules 

implementing the Holding Foreign Companies 

Accountable Act (HFCAA). The HFCAA 

requires the Commission to prohibit the listing 

of securities for companies whose auditors, or 

accounting firms engaged to assist in the audit, 

are located in jurisdictions that limit the ability of 

the Public Company Accounting Oversight Board 

(PCAOB) to inspect the auditors.31

§	On December 15, 2021, the Commission 

proposed amendments to modernize and improve 

the disclosure requirements regarding repurchases 

of an issuer’s equity securities that are registered 

under Exchange Act Section 12.32

§	On February 10, 2022, the Commission 

proposed to amend certain rules that govern 

beneficial ownership reporting, including 

shortening the filing deadlines for initial and 

amended beneficial ownership reports filed on 

Schedules 13D and 13G.33

§	On March 9, 2022, the Commission proposed 

rules and amendments to enhance and 

standardize public company disclosures regarding 

cybersecurity risk management, strategy, 

governance, and incident reporting.34

§	On June 2, 2022, the Commission adopted 

amendments to mandate the electronic filing or 

submission of certain documents that currently 

are permitted to be filed or submitted in paper 

and to mandate the use of Inline eXtensible 

Business Reporting Language (Inline XBRL) in 

certain instances.35

§	On July 13, 2022, the Commission adopted 

additional amendments to the proxy rules 

regarding proxy advisory firms, which are 

third-party vendors hired by institutional 

investors for advice and assistance in voting.36

These amendments, among other things, rescind 

conditions that required that proxy voting advice 

be made available to subject companies prior to 

or at the time the advice is disseminated to their 

clients, and that these firms provide a mechanism 

by which their clients could be reasonably 

expected to become aware of written responses 
6 | OFFICE OF THE INVESTOR ADVOCATE

by companies to such advice.37 The Investor 

Advocate supported these amendments, which 

rescind the most problematic aspects of the 

Commission’s 2020 rule amendments.38

§	Also on July 13, 2022, the Commission 

proposed to revise three of the substantive bases 

for exclusion (the substantial implementation 

exclusion, the duplication exclusion, and the 

resubmission exclusion) of shareholder proposals 

under Exchange Act Rule 14a-8.39

§	After reopening the comment period for 

the rulemaking on January 27, 2022, the 

Commission adopted amendments on August 25, 

2022 to implement Exchange Act Section 14(i), 

as added by Section 953(a) of the Dodd-Frank 

Act, which directs the Commission to adopt rules 

requiring registrants to provide disclosure of pay 

versus performance.40

§	On September 9, 2022, the Commission 

adopted rule amendments implementing the 

inflation adjustments required by the Jumpstart 

Our Business Startups (JOBS) Act, which 

increase the annual gross revenue threshold in 

the definition of “emerging growth company” 

and increase certain financial thresholds in 

Regulation Crowdfunding.41

CAPITAL RAISING ALTERNATIVES

As discussed in our prior reports, we have had 

concerns about the record numbers of special 

purpose acquisition companies (SPACs) in 2020 

and 2021.42 In general, a SPAC is a company with 

no operations that is organized for the purpose 

of merging with or acquiring one or more private 

operating companies (a de-SPAC transaction) within 

a certain time frame and that offers securities for 

cash in a firm commitment underwritten offering of 

$5 million or more in units consisting of redeemable 

shares and warrants. Following its initial public 

offering, a SPAC generally places all or substantially 

all of the offering proceeds into a trust or escrow 

account, and its shares and warrants begin trading 

on a national securities exchange. The SPAC then 

attempts to identify acquisition candidates and 

complete a de-SPAC transaction, after which the 

combined company will continue operations as a 

public company.43

Unlike the traditional IPO process in which a 

private operating company sells its securities at 

prices arrived at through market-based discovery, 

when a SPAC elects to acquire a private company, 

the SPAC’s sponsors, directors, and officers 

decide how to value it and how much the SPAC 

will pay for it. That creates conflicts of interest 

that investors may not appreciate without clear 

disclosure. In addition, limitations on projections 

and other forward-looking statements present 

another potential difference between the 

protections afforded in traditional IPOs and those 

in de-SPAC transactions. The Private Securities 

Litigation Reform Act of 1995 (PSLRA) provides 

established, publicly-traded reporting companies 

a safe harbor against private lawsuits arising 

from forward-looking statements. Companies 

undergoing a traditional IPO cannot avail 

themselves of that safe harbor, but many argue 

SPACs and their merger targets can do so. Some 

companies may opt to go public through de-SPAC 

transactions in part because of the assumption 

the PSLRA limits investors’ ability to pursue legal 

claims on overly optimistic projections. Similarly, 

the fact that de-SPAC transactions may not involve 

underwriters, which must operate within their 

own regulatory obligations44 and reputational 

risk considerations, may lead some companies 

to believe that going public through a de-SPAC 

transaction will allow them to engage in more 

aggressive marketing.

On March 30, 2022, the Commission proposed 

rules intended to enhance investor protections 

in SPAC IPOs and in de-SPAC transactions.45

Specifically, the Commission proposed new rules 

and amendments to existing rules and forms that, if 

adopted, would:
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7

§	Set forth specialized disclosure requirements with 

respect to, among other things, compensation 

paid to sponsors, conflicts of interest, dilution, 

and the fairness of de-SPAC transactions;

§	Address the application of disclosure, underwriter 

liability, and other provisions in connection with 

de-SPAC transactions;

§	Deem any business combination transaction 

involving a reporting shell company, including 

a SPAC, to involve a sale of securities to 

the reporting shell company’s shareholders 

and amend a number of financial statement 

requirements applicable to transactions involving 

shell companies;

§	Amend the definition of “blank check company” 

to make the liability safe harbor in the PSLRA for 

forward-looking statements, such as projections, 

unavailable in filings by SPACs and certain other 

blank check companies;

§	Update the Commission’s guidance regarding the 

use of projections in Commission filings generally 

and require additional disclosure regarding 

projections when used in connection with 

de-SPAC transactions; and

§	Establish a new safe harbor under the Investment 

Company Act of 1940 that would provide that a 

SPAC that satisfies the conditions of the proposed 

rule would not be deemed to be an investment 

company under that Act.

In the proposing release, the Commission noted 

the concerns and recommendations of the Investor 

Advisory Committee regarding SPACs.46 While the 

number of SPAC IPOs has declined in 2022,47 we 

continue to believe that investors would benefit 

from enhanced disclosure requirements and other 

investor protections in SPAC IPOs and in de-SPAC 

transactions. We look forward to working with 

Commission staff as they evaluate comments on the 

proposed rules and as they consider recommending 

additional action in this area.

Relatedly, in reviewing the Commission’s proposal, 

our Office evaluated the role of other gatekeepers 

that help provide retail investors with access to 

SPACs. As a result of our evaluation, on April 

21, 2022, our Office sent recommendations to 

the New York Stock Exchange LLC (“NYSE”) 

and the Nasdaq Stock Market LLC (“Nasdaq”), 

encouraging them to revisit their respective 

exchanges’ listing standards for SPACs to better 

protect investors during de-SPAC transactions.48

Specifically, our Office recommended that the 

exchanges amend their SPAC listing standards to 

prohibit consummation of a business combination 

when public SPAC shareholders exercise their 

conversion rights for a majority of the shares. 

Nasdaq subsequently invited public comment over 

the proposal to adopt the recommended conversion 

rights threshold.49

EQUITY MARKET STRUCTURE

During the Reporting Period, the Commission 

continued to take action on many aspects of the 

equity market. 

In August 2021, the Commission approved a 

proposal from the exchanges and the Financial 

Industry Regulatory Authority (FINRA) to 

modernize the governance of National Market 

System (NMS) plans that produce public 

consolidated equity market data and that 

disseminate trade and quote data from trading 

venues.50 This new governance structure could 

reduce inherent conflicts of interest, in no 

small part by providing for non-SRO voting 

representatives on the operating committees for the 

NMS plans. In July 2022, the US Court of Appeals 

for the D.C. Circuit vacated the order, finding 

one aspect of the plan that provided voting rights 

to non-SRO entities exceeded the Commission’s 

statutory authority.51 It is now incumbent upon the 

exchanges and FINRA to resubmit a proposal in 

keeping with the court decision.
8 | OFFICE OF THE INVESTOR ADVOCATE

More broadly on equity market trading data, 

in February 2022, the Commission instituted 

proceedings to determine whether to approve or 

disapprove the SROs’ proposed fee schedule that 

would modernize the overall infrastructure for the 

collection, consolidation, and dissemination of 

market data for NMS stocks.52 Commenters, while 

acknowledging the amendments could provide 

key upgrades to the content and infrastructure for 

“core data” consolidated and widely distributed 

by central securities processors (the SIP), raised 

significant issues with the current proposal from the 

exchanges, arguing that the fees are based on flawed 

methodologies and fail to provide a cost-based 

justification.53 The Commission disapproved these 

proposals in September 2022.54 We look forward to 

the exchanges and FINRA submitting an improved 

proposal that will address commenters concerns.

On February 9, 2022, the Commission proposed 

to shorten the security settlement period in the 

U.S. financial markets from a two-day settlement 

(referred to as T+2) to one-day (or shorter) for 

transactions in U.S. equities, corporate and 

municipal bonds, and unit investment trusts.55

This proposal responds to the Investor Advisory 

Committee’s 2015 recommendation on the matter,56

and could reduce behind-the-scenes regulatory 

requirements that may have contributed to retail 

investor confusion and frustration during a period 

of volatile stock trading in January 2021.57

On February 25, 2022, the Commission proposed 

enhanced transparency in short selling58 following 

up on the November 18, 2021 proposal to enhance 

transparency in the opaque network of stock lending 

and borrowing that facilitates the practice.59 The 

period of volatile stock trading in January 2021, in 

several cases involving companies with significant 

short interest, raises a number of policy questions 

around these topics. Having a repository of relevant 

data could improve the Commission’s ability to 

monitor this area of the market in real time. In 

Fiscal Year 2023, we will continue to monitor the 

Commission’s progress in considering comments on 

these proposals.

There were a number of other rule proposals 

from SROs that we monitored closely during the 

Reporting Period.60 For example, we reviewed 

a proposal from CboeBYX that made clarifying 

changes related to its periodic auction mechanism, 

potentially improving investor understanding of 

how the novel process would work.61 We are also 

monitoring the Commission’s consideration of 

the 24X National Exchange LLC application for 

registration as a national securities exchange, given 

the novel proposal to operate continually over 

twenty-four hours a day, seven days a week.62

We continue to monitor progress on the 

implementation of the Commission’s Consolidated 

Audit Trail (CAT), which is intended to enhance, 

centralize, and generally update the regulatory data 

infrastructure available to market regulators.63 Full 

implementation should occur in the near future,64

and in Fiscal Year 2023, we will encourage the 

Commission to use CAT data to help improve its 

regulatory processes. We will also consider ways 

to enhance the CAT. For example, in October 

2020, the Commission sought public comment on 

amendments to enhance data security for the CAT 

database,65 and we continue to consider the helpful 

comments provided in response to that request.

NOVEL EXCHANGE-TRADED FUNDS

As anticipated in our Report on Objectives for 

Fiscal Year 2022 (published on June 28, 2021), 

we continued to focus on developments in the 

exchange-traded fund (ETF) marketplace during 

the Reporting Period. Regulation of the ETF 

market has changed dramatically in recent years, 

and we remain concerned that investor protection 

efforts may not necessarily be keeping pace with 

the introduction of increasingly complex and risky 

exchange-traded products. Without significantly 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 9

altering existing investor protection safeguards, the 

Commission recently: (i) authorized the introduction 

of non-transparent ETFs into the marketplace;66 (ii) 

made it easier for ETF sponsors to form and operate 

new leveraged and inverse ETFs;67 and (iii) paved 

the way for ETF sponsors to bring to market exotic 

products branded as “single-stock ETFs.”68 These 

accelerating changes in the ETF marketplace present 

a number of investor protection concerns and 

warrant our continued scrutiny.

For decades following the Commission’s approval 

of the first ETF in 1992, ETF sponsors relied 

on special relief from securities laws (known as 

exemptive orders) to form and operate ETFs as 

investment companies.69 The approval process for 

this special relief helped ensure that ETFs complied 

with a number of conditions designed to protect 

investors, especially retail investors. Over time, 

the Commission grew comfortable enough with 

traditional ETFs to allow them to form and operate 

pursuant to a new rule (ETF Rule), adopted in 2019 

to establish “a consistent, transparent, and efficient 

regulatory framework for ETFs.”70 The ETF Rule 

codified many of the conditions that were previously 

included in exemptive orders, including requiring an 

ETF to provide full daily portfolio transparency on 

its website.71 The ETF Rule also included a provision 

expressly excluding leveraged and inverse ETFs from 

the rule’s scope.72 The ETF Rule’s adopting release 

acknowledges that “leveraged/inverse ETFs are 

complex products that serve a markedly different 

investment purpose than most other ETFs,” and 

indicates that it would be “premature” to permit 

sponsors to form and operate leveraged and inverse 

ETFs in reliance on the rule without first addressing 

certain investor protection concerns.73

The Commission’s cautious approach towards 

leveraged and inverse ETFs in 2019 was consistent 

with many years of concern about these ETFs 

from SEC staff, Commissioners, and other market 

observers. The Commission ceased granting 

exemptive orders to any new would-be sponsors of 

leveraged and inverse ETFs in 2009.74 That same 

year, the Commission’s Office of Investor Education 

and Advocacy (OIEA) issued an alert “because 

individual investors may be confused about the 

performance objectives of leveraged and inverse 

[ETFs].”75 FINRA issued a 2009 regulatory notice 

reminding firms of their sales practice obligations 

for leveraged and inverse ETFs, cautioning that 

“inverse and leveraged ETFs that reset daily typically 

are unsuitable for retail investors who plan to hold 

them for longer than one trading session.”76 In 

2015, the Commission sought public comment on 

a broad range of issues relating to exchange-traded 

products, including comment on the extent to which 

individual investors understand the nature and 

operation of complex exchange-traded products 

such as leveraged/inverse ETFs.77 Enforcement cases 

at the Commission and FINRA have demonstrated 

that even investment professionals often lack a 

basic understanding of these complex products.78

Market observers including media outlets, consumer 

advocacy groups, and others have documented the 

confusion and harm leveraged and inverse ETFs may 

cause to unsuspecting retail investors.79 SEC staff 

and Commissioners have routinely issued remarks 

expressing concerns about these ETFs.80

Despite all of these warnings, in recent years 

the Commission has encouraged increasingly 

complex innovation in the ETF market without 

addressing the Commission’s longstanding investor 

protection concerns. After requiring daily portfolio 

transparency for ETFs seeking to rely on the ETF 

Rule, in 2019 the Commission granted special relief 

to several non-transparent ETFs, which allowed 

them to enter the ETF marketplace.81 Then in late 

2020, the Commission amended the ETF Rule 

to bring many leveraged and inverse ETFs within 

the rule’s scope.82 At the proposal stage, these 

amendments were paired with enhanced sales 

practice requirements for leveraged and inverse 

ETFs,83 but the final adopted amendments scrapped 
1 0 | OFFICE OF THE INVESTOR ADVOCATE

such requirements.84 Finally, ETF sponsors took 

advantage of the newly amended ETF Rule in 

2022 to introduce ETFs that provide leveraged and 

inverse returns based on the daily performance of a 

single underlying stock (single-stock ETFs).85

We first highlighted the introduction of 

non-transparent ETFs, also known as portfolioshielding ETFs, in our Report on Objectives 

for Fiscal Year 2022.86 The goal of these ETFs 

is to allow portfolio managers to pursue active 

investment strategies without revealing their 

portfolio holdings on a daily basis. Novel variations 

on the traditional ETF arbitrage mechanism 

make this possible, and there is a risk that these 

variations may not function as anticipated. 87

Were non-transparent ETFs’ alternative arbitrage 

mechanisms to fail, the ETFs’ share prices 

could deviate from the intrinsic values of their 

portfolios, widening spreads and lessening liquidity. 

Non-transparent ETFs have now developed a track 

record in the marketplace without encountering 

these disruptions thus far, and we are cautiously 

optimistic that the products will continue to function 

as intended. We note, however, that these ETFs 

remain unproven in times of severe market distress, 

and believe the Commission should continue to 

monitor their operations and the risks they may 

present to investors. A lack of market demand has 

somewhat mitigated our concerns, as data shows 

non-transparent ETFs have captured only 1.5% of 

the active ETF market as of September 30, 2022.88

Leveraged and inverse ETFs, meanwhile, continue 

to present the same dangers that they threatened 

when first introduced. These ETFs rebalance their 

portfolios on a daily or other periodic basis in 

order to maintain a constant leverage ratio, and 

the resulting effects of compounding can result in 

performance that differs significantly from many 

investors’ expectations of how index investing 

generally works.89 A leveraged/inverse ETF can 

underperform a simple multiple of its index’s 

performance over several days of volatile returns.90

After asserting that leveraged and inverse ETFs

should not be incorporated into the ETF Rule before

investor protection concerns about them could be

addressed,91 the Commission did exactly that in

2020.

92 Years later, as even riskier ETFs continue to

be introduced, investors are still waiting for the same

investor protection concerns to be addressed.

The long-acknowledged dangers of leveraged and

inverse ETFs are amplified by single-stock ETFs,

first introduced into the marketplace during the

Reporting Period. These ETFs function much like

the leveraged and inverse ETFs discussed above,

but they aim to provide daily returns reflecting a

multiple or an inverse of the daily performance

of an underlying single stock instead of the daily

performance of an index.93 As OIEA Director Lori 

Schock explains:

Investors should be aware that if they were 

to hold these funds for longer than a day, 

the performance of these funds may differ 

significantly from the levered and/or inverse 

performance of the underlying stock during 

the same period of time. Additionally, unlike 

traditional ETFs, or even other levered and/

or inverse ETFs, these levered and/or inverse 

single-stock ETFs track the price of a single 

stock rather than an index, eliminating the 

benefits of diversification. Because levered 

single-stock ETFs in particular amplify the 

effect of price movements of the underlying 

individual stocks, investors holding these 

funds will experience even greater volatility 

and risk than investors who hold the underlying stock itself.94

The considerable risks inherent in single-stock ETFs 

has led Commissioner Caroline Crenshaw to warn 

that “it would likely be challenging for an investment 

professional to recommend such a product to a retail 

investor while also honoring his or her fiduciary 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1 1

obligations or obligations under Regulation Best 

Interest.”95 Retail investors are likely to access these 

ETFs via self-directed trading, however, and as 

Commissioner Crenshaw noted, “While investors 

can gain similar upside and downside exposures to 

an equity security through the use of options and 

other derivatives, single-stock ETFs are likely to be 

uniquely accessible and convenient for self-directed 

retail investors, in particular.”96

Cognizant of the risks of single-stock ETFs, on 

December 8, 2022 the Investor Advisory Committee 

hosted a panel to discuss these products.97 The 

Commission continues to assess the risks of singlestock ETFs as well. Chair Gensler directed SEC staff 

to study “the potential risks of complex financial 

products that are listed and traded on exchanges” in 

2021.98 Similarly, in 2020, then-Chair Jay Clayton 

stated that SEC staff would “review the effectiveness 

of the existing regulatory requirements in protecting 

investors—particularly those with self-directed 

accounts—who invest in leveraged/inverse products 

and other complex products.”99 While we support 

these efforts, we are concerned that they have not yet 

resulted in tangible investor protection safeguards. 

As innovation in the ETF marketplace continues to 

accelerate, we look forward to working with our 

colleagues to ensure that investor protection efforts 

do not fall further behind.

REGISTERED FUND DISCLOSURE

During the Reporting Period, we continued to 

focus on the effectiveness of disclosure provided to 

investors in SEC-registered funds. As we have noted 

in prior reports, such disclosure is at the heart of the 

Commission’s efforts to help ensure that investors 

are making thoughtful, well-informed decisions 

about their investments as they save for college 

expenses, look towards retirement, or plan for 

other goals. The Commission and its staff strive to 

provide registered fund investors with clear, concise 

disclosure regarding funds’ investment strategies, 

risks, costs, and other attributes.

With these considerations in mind, we note that 

on October 26, 2022, the Commission finalized 

significant rule and form amendments affecting the 

disclosure that mutual fund and ETF shareholders 

receive. This rulemaking (Tailored Shareholder 

Reports) requires mutual funds and ETFs to 

transmit concise and visually engaging shareholder 

reports and to promote transparent and balanced 

presentations of fees and expenses in investment 

company advertisements.100 More specifically, 

the final rule and form amendments require: 

(i) shareholder reports tailored to the needs of 

retail shareholders; (ii) availability of additional 

information on Form N-CSR and online; (iii) 

paper or online delivery of full shareholder reports 

rather than notices of availability; and (iv) certain 

changes to the presentation of fund fee and expense 

information in advertisements. We discuss briefly 

each of these requirements below. The rulemaking 

utilized investor research this Office conducted on 

the impact of fund performance decision-making, 

and we are hopeful that that this work will 

demonstrate the value of more data-driven, investortested policymaking efforts.

Shareholder Reports Tailored to 

the Needs of Shareholders

The rulemaking will require mutual funds and 

most ETFs to deliver concise and visually engaging 

annual and semiannual reports to shareholders, 

designed to highlight information that the 

Commission believes is particularly important for 

retail shareholders to assess and monitor their fund 

investments on an ongoing basis. This information 

will include—among other things—fund expenses, 

performance, and portfolio holdings.101 Funds will 

have the flexibility to make electronic versions of 

their shareholder reports more user-friendly and 

interactive.102 In addition, funds will be required 

to tag the information in their shareholder reports 

using Inline XBRL structured data language.103
1 2 | OFFICE OF THE INVESTOR ADVOCATE

Availability of Additional Information

Taking a layered approach to disclosure, the 

rulemaking requires additional information 

(relevant to financial professionals and other 

investors who desire more in-depth info) to be made 

available online. This information will be filed on 

a semi-annual basis with the Commission as well, 

on Form N-CSR.104 The information includes, for 

example, the schedule of investments and other 

financial statement elements. The rulemaking also 

includes requirements designed to help ensure 

that investors can easily reach and navigate the 

information that appears online.105

Delivery of Full Shareholder Reports

The rulemaking includes amendments to exclude 

mutual funds and most ETFs from the scope of 

Investment Company Act Rule 30e-3. Rule 30e-3 

generally permits certain registered investment 

companies to satisfy delivery requirements for 

shareholder reports by making these reports and 

other materials available online and by providing 

a notice of the reports’ online availability, instead 

of providing the reports to shareholders directly.106

The amendments excluding these funds from 

rule 30e-3 are intended to help ensure that more 

investors will experience the benefits of the new 

tailored shareholder reports.107 Fund shareholders 

will directly receive the new tailored annual and 

semiannual reports in paper or, if the shareholder 

has so elected, electronically.

Fee and Expense Information 

in Advertisements

Finally, the rulemaking includes amendments 

requiring mutual funds, ETFs, and other types of 

funds to disclose fees and expenses in advertisements 

and sales literature in a manner consistent with 

relevant prospectus fee table presentations.108 The 

fee and expense information presented must also be 

reasonably current.109 Additionally, the rulemaking 

addresses representations of fees and expenses that 

could be materially misleading.110

The Tailored Shareholder Reports rulemaking 

had set forth additional disclosure changes at the 

proposal stage, which ultimately were not adopted. 

Perhaps most significantly, the proposed rulemaking 

would have provided a new alternative approach to 

satisfy prospectus delivery requirements for existing 

fund investors.111 New investors would have received 

a fund prospectus in connection with their initial 

investment in a fund, as they currently do, but funds 

could have opted into an alternative approach under 

which they would not deliver annual prospectus 

updates to investors thereafter.112 The proposed 

framework would instead have relied on shareholder 

reports and timely notifications to shareholders 

to keep investors informed about their fund 

investments. Additionally, the proposed rulemaking 

would have made certain changes to the funds’ 

prospectus disclosure requirements related to fees, 

expenses, and risks.113 The Commission indicated 

in its adopting release that, in light of the comments 

received related to these proposed changes, the 

changes would merit further consideration and 

would not be adopted at this time.

We believe the disclosure changes that have been 

adopted will help investors more easily digest the 

information they need to make informed investment 

choices, and we support the Division of Investment 

Management’s (IM’s) thoughtful approach to this 

rulemaking. We also agree with the decision to 

consider further the proposed disclosure changes 

to prospectus delivery requirements and prospectus 

fee, expense, and risk information before any such 

changes are finalized. In particular, we recognize the 

importance of comparability across the disclosure 

documents that investors receive, and hope that 

any final action in these areas will make it easier 

for investors to compare their current investment 

choices to alternative opportunities.

In addition to the substance of the rulemaking, we 

are encouraged that IM incorporated the investor 

research conducted by our Office into the process 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1 3

of developing the final rule and form amendments. 

As discussed more fully in the Research and 

Investor Testing section of this Report, the Tailored 

Shareholder Reports rulemaking utilized this 

research when considering investor preferences 

and behaviors in response to fund disclosure. 

The adopting release indicates that SEC staff will 

“evaluate investor preferences and behaviors 

as they evolve in the future, including through 

mechanisms such as investor testing and investor 

surveys where appropriate, taking into account 

relevant developments in connection with fund 

practices, investors’ preferences, the fund industry, 

and financial markets in connection with any future 

regulatory initiatives.”114 This Office has long 

championed the use of investor testing to inform 

rulemaking initiatives, particularly those initiatives 

involving changes to disclosures provided to retail 

investors, and we look forward to working with our 

Commission colleagues to continue this progress.

BROKER CONDUCT

Since the implementation of Regulation Best 

Interest (Reg BI) in 2020, we have monitored how 

the Commission and FINRA have used the new 

regulatory tools to address unethical or abusive 

conduct in the brokerage business. As our Office 

stated at the time, Reg BI appears to be a step 

in the right direction because it includes several 

improvements over the suitability standard for 

broker-dealers.115 However, the utility of Reg BI will 

ultimately depend upon how it is enforced by the 

Commission and FINRA. We continue to monitor 

its enforcement on behalf of investors.

We are also reviewing the comments received on 

the Commission’s re-proposal of amendments to 

an existing exemption for certain “exchange-only” 

brokers from membership in FINRA.116 Narrowing 

the exemption would extend FINRA oversight to 

potentially dozens of broker-dealers that currently 

rely on the exemption, and could potentially help 

protect investors by increasing SRO oversight of 

these brokers’ cross-market trading activity. 

More generally, we have monitored FINRA’s 

rulemaking efforts to protect retail investors and 

were encouraged to see the Commission approve 

FINRA’s proposal to enhance Rule 2165, governing 

the financial exploitation of specified adults in 

January 2022, as discussed in more detail below.117

These amendments could benefit investors because 

they grant additional time for brokerage firms to 

resolve matters of suspected financial exploitation, 

and for adult protective service agencies, state 

regulators, and law enforcement to conduct 

thorough investigations.

More recently, FINRA submitted a proposal to 

release information on BrokerCheck related to 

a brokerage firm’s designation as a “Restricted 

Firm” under FINRA Rule 4111 (Restricted 

Firm Obligations), which targets firms with a 

disproportionate history of misconduct relative 

to similarly sized peers.118 As proposed, this 

amendment would allow FINRA to release 

information on BrokerCheck as to whether a 

particular firm is currently designated as a Restricted 

Firm pursuant to Rule 4111. This information 

could be useful to investors that use BrokerCheck 

to evaluate brokers, and we continue to review 

the comments received by the Commission as it 

evaluates this proposal.

We continue to review other initiatives by FINRA 

that remain outstanding. For example, in March 

2022, FINRA requested comment on sales practice 

obligations for complex products and options.119

As FINRA noted in the release, regulatory concerns 

arise when investors trade complex products without 

understanding their unique characteristics and risks, 

and it appears appropriate for FINRA to consider 

whether there may be more effective practices for 

brokers that deal with retail investors.
1 4 | OFFICE OF THE INVESTOR ADVOCATE

FINANCIAL EXPLOITATION OF 

SENIOR INVESTORS

On January 31, 2022, the Commission approved 

amendments to FINRA Rule 2165 (Financial 

Exploitation of Specified Adults).120 Prior to the 

rule change, Rule 2165 permitted a brokerage 

firm to place a temporary hold on a disbursement 

from the account of a “specified adult” customer 

for up to 25 business days if the criteria of the 

rule are satisfied. A “specified adult” is defined 

as someone age 65 and older, or age 18 and 

older if the member firm reasonably believes that 

a mental or physical impairment has rendered 

the person incapable of protecting their own 

interests. As amended, FINRA Rule 2165 now 

permits firms to: (1) place a temporary hold on 

securities transactions, subject to the same terms 

and restrictions applicable to a temporary hold on 

disbursements of funds or securities; and (2) extend 

a temporary hold for an additional 30 business 

days, if the brokerage firm reports the matter to a 

state regulator or agency of competent jurisdiction, 

or a court of competent jurisdiction.

Also relevant for efforts to combat the financial 

exploitation of senior investors is a bill pending 

before the House Committee on Financial Services 

(H.R. 7923—Investor Justice Act of 2022).121 If 

enacted, the bill would establish grants for qualified 

investor advocacy clinics associated with a law 

school or a tax-exempt organization to provide 

free legal representation to investors with securities 

arbitration and mediation claims pending before 

a registered national securities association. Such 

investor advocacy clinics frequently cater to 

senior investors, including those from minority 

and underserved communities who may lack 

the resources to pursue securities arbitration or 

mediation claims on their own. On June 9, 2022, the 

Investor Advisory Committee recommended that the 

Commission support this pending legislation.122 Also 

on June 9, 2022, the Investor Advisory Committee 

issued a related recommendation supporting the 

funding of the qualified investor advocacy clinics as 

proposed in H.R. 7923. 123

Additionally, during the Reporting Period, the 

Office of the Investor Advocate hosted the first-ever 

SEC-North American Securities Administrators 

Association (NASAA) roundtable featuring 

AARP, to explore financial topics related to older 

investors, including the financial exploitation of 

senior investors. This event allowed the SEC to hear 

directly from a diverse group of older, primarily 

retail investors, and to better anticipate that 

community’s needs in the future.

ACCOUNTING AND AUDITING

The Public Company Accounting Oversight Board 

(PCAOB) has launched an ambitious plan to 

overhaul audit standards, test the recent agreement 

with Chinese regulators on inspecting foreign 

audit firms, and shake up its management ranks. 

Recently, PCAOB opened for public comment its 

revisions to the attestation standards originally 

adopted on an interim basis from 2003 Association 

of International Certified Professional Accountants 

(AICPA) standards.124 We expect PCAOB to address 

audit quality standards next. PCAOB has also 

reconstituted its advisory groups,125 which have 

begun deliberations, and has appointed a new 

Investor Advocate, Saba Qamar,126 as well as a new 

Director of Communications and Engagement, 

Kent Bonham.127 Meanwhile, a recruitment search 

is underway for a new Director of Enforcement and 

Investigations.128 In addition, PCAOB has begun 

to implement the Holding Foreign Companies 

Accountable Act (HFCAA) and its regulations, with 

numerous foreign companies having been identified 

conclusively by the SEC.129 We are monitoring 

legislative developments, which, if enacted, would 

reduce the HFCAA time period required for 

delisting from three to two years.130
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1 5

Similar to our interaction with PCAOB, we monitor 

actions of the Financial Accounting Standards 

Board (FASB) and auditing and accounting 

policies at the Commission. On October 22, 

2022, the Commission adopted a rulemaking 

for listing standards of companies to implement 

their own policies for clawing back erroneous 

compensation.131 An important development for 

the rulemaking is the guidance issued by the U.S. 

Department of Justice for corporate resolutions and 

the potential benefit to an issuer that has a policy 

for clawing back erroneous compensation.132 We 

also await the much-anticipated FASB standard 

on supplier finance after an open comment period 

earlier this year.133

One area of particular interest has been the 

guidance from the Commission’s Office of the 

Chief Accountant on the accounting for digital 

asset custodial obligations, commonly known 

as Staff Accounting Bulletin No. 121 (SAB 

121).134 For those entities that have obligations 

to safeguard digital assets135 held for platform 

users, the guidance provides clear direction on 

how to record both a safekeeping asset (similar 

to an indemnification asset) and a safekeeping 

liability. Significantly, the guidance does not suggest 

recording the underlying digital assets themselves. 

There are differing views on SAB 121, which has 

met with mixed reactions. For instance, upon its 

release, Commissioner Hester Peirce accepted the 

substance of the guidance but disagreed with the 

manner in which it was issued as a staff accounting 

bulletin rather than as a new accounting standard 

subject to public comment.136 Yet others contend 

the accounting standard has hindered the take-up 

of custody of digital assets by traditional financial 

institutions because, under that standard, bank 

custodians may have their safekeeping assets 

subjected to capital and liquidity requirements.137

REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1 7

PROBLEMATIC INVESTMENT 

PRODUCTS AND PRACTICES

Among other statutory duties, the Investor 

Advocate is required to identify problems 

that investors have with financial service 

providers and investment products. Exchange 

Act Section 4(g)(6)(B) mandates that the Investor 

Advocate, within the annual Report on Activities, 

shall provide a summary of the most serious 

problems encountered by investors during the 

preceding fiscal year. The statute also requires the 

Investor Advocate to make recommendations for 

such administrative and legislative actions as may be 

appropriate to resolve those problems.138

To determine the most serious problems related to 

financial service providers and investment products, 

staff of the Office of the Investor Advocate reviewed 

information from the following sources:

§	Investor Alerts, Tips, and Bulletins issued by the 

SEC, FINRA, and the North American Securities 

Administrators Association, Inc. (NASAA);

§	SEC enforcement actions and FINRA disciplinary 

actions;

§	NASAA’s Activity Report,139 2021 Enforcement 

Report,140 and Top Investor Threats;141

§	Municipal Securities Regulatory Board’s Annual 

Letter to the Office of the Investor Advocate 

identifying areas of concern in the municipal 

securities market;

§	The SEC Division of Examinations’ 2022 

Examination Priorities;142

§	SEC and SRO staff reports providing guidance and 

interpretations relating to investment products; 

§	Discussions with SRO staff; and

§	Commissioner remarks. 

The table below lists certain potentially problematic 

products or practices during Fiscal Year 2022 as 

reported by these sources. Although not exhaustive, 

the lists reflect some of the concerns of these 

organizations. Details regarding these products and 

practices are available on the organizations’ websites.

SEC143 NASAA144 FINRA145 MSRB146

 Performance Claims 

 Social Media and 

Investment Fraud

 Single-Stock Leveraged 

and Inverse ETFs 

 Foreign Companies 

Under the HFCAA 

 The Metaverse

 Finfluencers

 Reassigned Investment 

Accounts

 DeFi Defined

 Financial Fragility

 Victim Blaming in 

Financial Fraud

 Financial Literacy 

Declines

 Macroeconomic 

Conditions

 Deeply Discounted 

Bonds

 Exempt Limited Bond 

Offerings

 Mutual Fund Flows

 Asymmetric Information

 Evolving ESG 

Considerations
1 8 | OFFICE OF THE INVESTOR ADVOCATE

Each of the products and practices listed above 

represents an area of concern for investors during 

the Reporting Period. Based on our review of 

the resources described above and consultations 

with knowledgeable practitioners, we profile the 

following two areas of concern: digital assets; 

and single stock leveraged and inverse ETFs. 

Previous reports have highlighted other issues, 

including payment for order flow,147 meme 

stocks,148 SPACs,149 reverse factoring, dual-class 

share structures, the LIBOR transition, initial coin 

offerings, binary options, public non-traded REITS, 

municipal market disclosure practices, belowminimum denomination positions in municipal 

securities, Simple Agreements for Future Equity 

in crowdfunding investments,150 the new-issue 

process for investment-grade corporate bonds, and 

leveraged and inverse exchange-traded funds.

DIGITAL ASSETS

The digital asset market, which includes 

cryptocurrencies, continues to evolve and expand 

into what is emerging as a new asset class. Despite 

a bear market in 2022, developers continue to 

innovate and bring new crypto products to market. 

Indeed, recent market conditions have tested 

the confidence of market participants, and the 

resulting fallout has perpetuated bankruptcies, 

restructurings, and investor class actions in the 

digital asset space.

We have advocated consistently for digital platforms 

to register as exchanges with the Commission as 

an investor protection measure. In our Report on 

Objectives for Fiscal Year 2022 (published on June 

28, 2021), we warned that the lack of regulation 

of cryptocurrency exchanges could result in broad 

harm to investors.151 We indicated that because so 

many crypto assets trade on unregulated exchanges, 

there is no government oversight of their trading 

rules, that these unregulated trading platforms can 

unfairly discriminate among their users, and that 

the platforms could have significant undisclosed 

conflicts of interest.152 Absent registration, these 

digital asset platforms lack the same integrity as 

that provided by the regulated national securities 

exchanges. 

Underscoring similar concerns, in a November 

16, 2022 speech, Commissioner Jaime Lizárraga 

pondered whether “the digital asset market” 

has “truly developed into a viable alternative to 

traditional finance” and whether it offers “genuine 

financial inclusivity and robust protections for 

digital asset purchasers and investors.”153 He 

concluded that, “as of now, and despite the best 

intentions of many, the answer is no.”154While 

some believe that existing regulations and guidance 

are adequate to address infractions in the digital 

asset marketplace, others consider attempts to 

enforce such regulations to constitute so-called 

“regulation-by-enforcement.” Commissioner Hester 

Peirce observed in a November 10, 2022 public 

interview that the “lack of regulatory authority” 

in the digital asset space “is problematic” and such 

“ambiguity has not served the American public well 

either.”155 The ongoing upheavals in the digital asset 

marketplace may generate sufficient momentum 

for legislation or additional regulatory guidance to 

help ensure a clear and comprehensive regulatory 

framework for digital assets.

As the industry matures, we expect more 

digital asset platforms to pursue registration as 

national securities exchanges, many crypto asset 

transactions to be registered with regulators, 

and dozens of fintech firms to register as broker 

dealers, intermediaries, and custodians. It is our 

view that registration is the natural evolution of the 

digital asset market in terms of providing financial 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 1 9

legitimacy, protecting investors, and facilitating 

capital formation. As with traditional financial 

products and practices, we believe that regulation 

begets confidence, confers a degree of investor 

protection and, by doing so, enhances trust in the 

system and thereby promotes capital formation.

The Commission has ramped up its efforts to police 

violations in the digital asset market. Notably, the 

Commission, along with thirty-two States, pursued 

action against digital asset platform BlockFi for 

violating the registration and antifraud provisions 

of the Securities Act of 1933 and the registration 

provisions of the Investment Company Act of 

1940.156 As a result of this action, BlockFi agreed 

to bring its business into compliance with the 

Investment Company Act.157 Although the recent 

bankruptcy filing of BlockFi may significantly 

impact its business, that development will 

not diminish the significance of the action the 

Commission took against the platform.158

The Commission has also been building up its digital 

asset expertise. The Division of Corporation Finance 

recently announced the creation of a new disclosure 

office designated the Office of Crypto Assets.159 The 

Division of Enforcement has doubled the number 

of staff in its Crypto Assets and Cyber Unit, which 

is under new leadership.160 The Commission’s hive 

for digital asset regulation is its Strategic Hub for 

Innovation and Financial Technology (FinHub), 

which continues to grow as more resources are 

devoted to its important efforts.161 We support the 

Commission’s focus on strengthening its resources 

to address matters associated with digital assets, and 

we believe that, ultimately, all Commission staff 

should become familiar with and trained to handle 

digital asset matters across divisions and offices on a 

multidisciplinary basis.

Beyond the Commission, we take notice of efforts 

across federal agencies, States, and standard setters 

in the digital asset space. For example, FASB has set 

out a path to develop a new accounting standard 

for one segment of the digital asset market, crypto 

assets.162 The Department of Treasury has issued 

three reports pursuant to Executive Order 14067—

“Ensuring Responsible Development of Digital 

Assets.”163 Those reports were released for public 

comment and the next steps will involve formulating 

any changes to policy.164 Enforcement has broadened 

with recent coordinated actions by eight States’ 

attorneys general against a particular crypto lending 

platform.165 The pursuit of remedies has not been 

limited to public actions, however. In the first half 

of 2022, securities class actions against digital asset 

companies, their directors, and their officers have 

surged as investors endure a deep bear market and 

so-called crypto winter.166

As the market for digital assets continues to 

evolve, new developments seem to emerge on 

a regular basis. The FTX situation is a recent 

example. Although the collapse of FTX occurred 

after the Reporting Period, we cannot ignore the 

magnitude of its demise and its implications for 

the overall digital asset market. Once the fourth 

largest digital asset platform by volume, FTX has 

filed for bankruptcy, a pivotal event in the industry 

with serious ramifications for the regulation of 

digital asset platforms going forward. While we 

agree that retail investors have a responsibility to 

conduct basic due diligence and to understand any 

financial product before investing in that product, 

doing so does not diminish the necessity for a 

robust regulatory framework for digital assets, be 

it the current regulatory regime or an entirely new 

regulatory ecosystem for the asset class. It is our 

expectation that the FTX collapse will accelerate the 
2 0 | OFFICE OF THE INVESTOR ADVOCATE

shift toward registration of digital asset platforms, 

which we believe would not only foster greater 

innovation and capital formation, but also enhance 

investor protection in the digital asset marketplace.

SINGLE-STOCK LEVERAGED 

AND INVERSE ETFS

As discussed earlier in the Advocacy for Investors 

section of this Report, single-stock ETFs entered the 

marketplace for the first time during the Reporting 

Period. These products can be problematic for 

retail investors for several reasons. First, by design, 

even more “traditional” index-based leveraged 

ETFs produce more dramatic swings in daily 

returns than the indexes underlying those ETFs. 

A hypothetical 2x ETF with underlying index 

ABC, for example, would typically lose 40% of 

its value on a day where the ABC index decreases 

by 20%. Second, while the volatility of an indexbased leveraged ETF may be somewhat mitigated 

by a diversified collection of underlying securities 

(some of which may increase in value while others 

decrease), a single-stock ETF’s performance is 

entirely dependent on the movement of just one 

security. This makes single-stock ETFs even more 

volatile than most leveraged ETFs. Third, volatility 

makes these products function differently than 

many investors may reasonably expect. If our 

hypothetical ABC index increases by 4% over the 

course of two days, for example, a buy-and-hold 

investor may expect the value of their investment 

in our corresponding 2x ETF to increase by 8% 

over those two days. In reality, however, the 

investor may see a return significantly less than 

8%, and may even incur a loss. Finally, the risks 

of these ETFs are difficult to explain to investors 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 2 1

in a concise, engaging manner. Traditional 

regulatory goals such as fully ensuring that all 

material risks are disclosed and that investors are 

making informed choices, therefore, are difficult to 

accomplish with respect to these products.

Assume for the sake of the following example that 

an investor purchases $10,000 worth of a 2x XYZ 

single-stock ETF. The ETF’s stated investment 

objective is to provide daily returns equal to two 

times the daily performance of XYZ stock. Assume 

further that the ETF’s underlying XYZ stock drops 

and returns to slightly more than its original value 

over the course of two days:

§	Day 1: XYZ stock decreases from $100/share to 

$80/share (-20%)

§	Day 2: XYZ stock increases from $80/share to 

$104/share (+30%)

The XYZ stock initially valued at $100 is now 

valued at $104/share at the end of day 2, an increase 

of 4%.

The investor’s $10,000 investment in the 2x XYZ 

single-stock ETF, however, would change in value as 

follows:

§	Day 1: $10,000 initial investment decreases by 2 

x 20% (or 40%), making the investment equal 

to $6,000 (i.e., the initial $10,000 lost $4,000, or 

40% of $10,000)

§	Day 2: $6,000 remaining investment increases by 

2 x 30% (or 60%), making the investment equal 

to $9,600 (i.e., the remaining $6,000 gained 

$3,600, or 60% of $6,000)

The initial $10,000 investment in the 2x XYZ 

Single-Stock ETF is now valued at $9,600, a 

decrease of 4%.

This example illustrates the issues that make singlestock ETFs so problematic for retail investors. First, 

by design, the daily returns of the ETF were more 

volatile than the performance of the underlying 

stock. Second, the performance of the ETF was 

based on the performance of one single security, 

making extreme swings more likely. Third, the “2x” 

ETF functioned differently than many investors 

may reasonably expect. At the end of two days, 

the underlying stock had increased 4% in value, 

but rather than increasing 8% (two times 4%), 

the corresponding single-stock ETF had decreased

by 4%. While it may be possible to disclose 

these features of single-stock ETFs, the example 

shows that it can be very difficult, incorporating 

counterintuitive concepts. Advice from a registered 

financial professional may help an investor who is 

considering an investment in a single-stock ETF. As 

noted above, however, many financial professionals 

themselves do not fully understand these products167

and many retail investors may purchase these 

ETFs without consulting a registered financial 

professional at all.168

REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 2 3

INVESTOR ENGAGEMENT 

AND OUTREACH

The mission of the Office of the Investor 

Advocate is to help ensure that the 

concerns of investors are appropriately 

considered as decisions are being made and policies 

are being adopted at the Commission, at SROs, 

and in Congress. As required by statute, our 

Office analyzes the potential impact on investors 

of proposed rules and regulations, identifies areas 

in which investors would benefit from changes 

in rules and regulations, and proposes policies to 

resolve problems that investors have with financial 

service providers and investment products, among 

other things.169 This engagement with investors 

more fully informs the Investor Advocate about 

the impact various rules or regulations may have 

on the investing public and helps us identify 

emerging issues that may merit further attention by 

policymakers.

To fulfill this mission, our Office conducts a 

number of engagement and outreach functions 

designed to engage with investors and potentially to 

receive feedback about policy questions and other 

important topics. During the Reporting Period, these 

meetings included consultations with individual 

investors, small business investors, institutional 

investors, and representatives from organizations 

that are comprised of, and represent the interests 

of, investors as well as other market participants 

and industry experts. There were also a number of 

public events conducted that support this mission, 

including investor roundtables, public meetings, and 

academic engagement. Of particular note was the 

Office’s focus on diversity, equity, inclusion, and 

accessibility (DEIA), whereby we actively sought 

to include the voices of minority and underserved 

investors, Veterans and Military Spouses, investors 

with disabilities, investors from Native American/

First Nations’ communities, older American 

investors, and investors with a broad range of 

epistemological philosophies. 

During Fiscal Year 2022, we hosted multiple events 

with investors designed to obtain their feedback 

on policy-related topics, including the first-ever 

SEC-North American Securities Administrators 

Association (NASAA) roundtable featuring AARP, to 

examine topics related to older investors. This event 

allowed the SEC to hear directly from a diverse 

group of older, primarily retail investors, and to 

better anticipate the community’s needs in the future. 

The Office of the Investor Advocate also serves as 

a resource for other Divisions and Offices within 

the Commission, by consulting on policy matters 

and providing input relating to investor issues. 

For example, in preparation for the development 

of the Division of Examinations’ 2023 Exam 

Priorities, we gathered together relevant groups of 

investors and held confidential listening sessions 

with the Division of Examination’s leadership, 

which encouraged investors to reflect on issues 

of importance to them (related to the SEC’s 

examinations functions). 
2 4 | OFFICE OF THE INVESTOR ADVOCATE

Another way in which our Office hears from 

investors is through the SEC’s Investor Advisory 

Committee, on which the Investor Advocate serves 

as a statutory member. The IAC advises and consults 

with the Commission on regulatory priorities, 

including initiatives to protect investor interests, 

promote investor confidence, and maintain the 

integrity of the securities marketplace.170 The IAC 

includes four subcommittees to help formulate 

its policies and recommendations: 1) Investoras-Owner; 2) Investor-as-Purchaser; 3) Market 

Structure; and 4) Disclosure (established in Fiscal 

Year 2022). The IAC held four quarterly public 

meetings and approved six recommendations to the 

Commission in Fiscal Year 2022.

Looking ahead, the Office plans to continue to 

prioritize retail investor-related engagements and 

seek out broad input from the entire investor 

community. In 2023, we will engage investors on 

topics that are of interest to them, as well as on 

the yet-to-be-determined emerging topics of the 

future. We anticipate that digital assets, ESG-related 

investing, and capital formation opportunities, 

among other subjects, will remain on the forefront 

of investors’ agenda. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 2 5

RESEARCH AND 

INVESTOR TESTING*

The Policy-Oriented Stakeholder and 

Investor Testing for Innovative and Effective 

Regulation—or POSITIER—initiative was 

launched in 2017 to provide a toolkit to both the 

Office of the Investor Advocate (OIAD) and the 

Commission to better understand investors and to 

increase efficacy of policymaking activities for the 

benefit of investors and other stakeholders. 

In designing POSITIER, we wanted to give investors 

a stronger voice in policymaking at the Commission. 

Generally, in rulemaking activities, the public 

notice and comment process can provide important 

feedback, but many of the comments submitted 

tend to represent the priorities of interested parties 

that oftentimes have massive resources to commit 

to following, understanding, and commenting on 

proposals. The general public, including households 

that invest as well as households that do not yet 

invest, may have a limited impact during this process 

because they may find it burdensome and complex 

to comment, given the legal or technical nature of 

many rulemaking releases. As such, POSITIER is 

designed to provide research and data that would 

help the Commission identify and understand issues 

that affect a broad cross section of investors and the 

general public. 

We have aimed to provide a panoramic view of 

how investors and other stakeholders may be 

affected by the Commission’s policy proposals and 

better understand how investors and stakeholders 

interact with the investment marketplace. The 

POSITIER infrastructure can enable OIAD and 

the Commission to, among other things: 1) more 

thoroughly “identify areas in which investors 

would benefit from changes in the regulations of 

the Commission or the rules of self-regulatory 

organizations”; 2) conduct pre-adoption (ex-ante) 

testing of potential policies, identifying areas 

in which investors would benefit from changes 

in regulation, and allowing the Commission to 

“analyze the potential impact on investors of 

proposed regulations of the Commission, . . . 

proposed rules of self-regulatory organizations . . . 

and . . . to the extent practicable, propose to the 

Commission changes in the regulations”; 3) conduct 

post-adoption (ex-post) evaluation of policies so 

that the Commission could more effectively conduct 

“retrospective analysis of rules” after they are rolled 

out;171 4) generate evidence for better organizational 

management and overall efficacy, particularly in 

the sense of “outcome” indicators of performance; 

and, 5) study and understand investor dynamics 

in order to serve as an early warning system to 

* The views expressed in this report on investor testing represent solely the views of the Office of Investor Research and do 

not necessarily represent the views of the Office of the Investor Advocate, the Commission, the Commissioners, or any other 

Commission staff. Note: figures herein are illustrative; for actual stimuli and question text, please refer to original reports.
2 6 | OFFICE OF THE INVESTOR ADVOCATE

identify vulnerabilities for investors and other 

stakeholders in order to better “identify problems 

that investors have with financial service providers 

and investment products.” 172

As we designed POSITIER, we prioritized the 

following:

§	High-quality data collection methods—

inaccurate measures of efficacy, or biased views 

of investor reactions, might mislead policymakers 

about the benefits or costs of different policies. 

This is why we often focus on use of high-quality 

data collection methods that are conducive to 

population-generalizable conclusions; 

§	Multi-modality data collection approaches—

recognizing that there are pros and cons to any 

particular methodology, and that many research 

and policy questions require multidimensional 

perspectives;

§	Studying outcomes that represent meaningful 

changes for investors—to ensure our work will 

have an impact. For example, when thinking 

about questions such as the efficacy of how 

information is disclosed one might have to 

consider how proposed changes impact investor 

actions and whether the changes inhibit or 

empower action; 

§	Making our work extremely cost-effective 

and rapid—so that time and money are not a 

rationale for forgoing research and testing. 

Over the years, we have enjoyed considerable 

support at the Commission level for our work, 

including the recognition that our research fills 

a substantial evidence gap. While Commission 

leadership may debate the best ways to create 

policy to serve the public interest, POSITIER takes 

an independent data-driven view and is neither 

a toolkit for more regulation nor less regulation, 

but rather, for what we consider to be “smarter” 

regulation. Our work provides concrete steps to 

help improve the usability of mandated disclosures 

and study emerging financial market products, as 

well as insight into the way that macroeconomic 

and market trends affect investors’ finances and 

decisions. We have also studied methods to more 

accurately collect data from investors, which will 

allow us to improve the precision of future data 

collection activities and continually improve the 

Commission’s perspective on how investors think 

and act. 

As we look to the horizon to determine how to 

best position the Office of Investor Research (OIR), 

OIAD, and the Commission to best serve the 

interest of investors and the general public, we have 

realized that the policy challenges the Commission 

faces are multi-faceted and complex, and are not 

purely economic-study issues, but issues that are 

best addressed by combining the perspectives of 

multiple fields in the social sciences. For example, 

the fields of decision science, marketing, and 

psychology have long considered ways to raise 

individual attention to important information and 

how to better engage individuals with information. 

For their part, economics and finance contribute 

important tools to help understand and quantify 

important aspects of decision-making with 

economic and financial assets. Because of the 

interdisciplinary nature of our research demands, 

as we have started to build out our research team, 

we have sought to create a group that brings these 

various disciplinary perspectives to bear on highly 

complex problems. While our staffing resources 

have not yet been adequate to round out a team that 

investors may fully benefit from, our workgroup 

has incorporated expertise and perspectives from 

economics, decision science, marketing, and 

psychology, providing much richer depth to the 

problems we study. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 2 7

Our productivity in terms of data collection and 

research execution is impressive. Since POSITIER’s 

founding in June of 2017, we have conducted over 

40 survey research projects, dozens of experiments, 

as well as nearly a dozen qualitative data collection 

projects and several other projects. The POSITIER 

toolkit is unique and flexible and has served as 

a model for government agencies working to 

implement the Evidence Act.173 This year, the 

innovative nature of POSITIER was recognized 

governmentwide: OIAD Chief Economist Brian 

Scholl received the 2022 “Federal Evaluation 

Innovator Award” from the Evaluation Officer 

Council.174 This award honors one evaluation 

innovator in the federal government who thinks 

of creative and “outside the box” evaluation 

ideas, helps design them, and sees them through 

to execution. The award recognizes the fact that 

POSITIER was uniquely designed to creatively and 

flexibly respond to issues faced by the SEC and 

investors, and ensure that these issues are 

addressed using best practices in research and 

evaluation science. 

Several other important milestones were achieved in 

our research group during 2022. These include:

§	The creation of the new Office of Investor 

Research, which houses the POSITIER initiative 

and our interdisciplinary research team. Created 

in 2022, this office officially establishes investor 

issues and investor testing as priority areas for 

the Commission. With the establishment of 

this office, we engaged in a long-term strategic 

planning process to codify our long-term research 

goals and determine how we can have the biggest 

impact for investors. 

§	Expansion and deepening of the research 

group. Our research team currently comprises 

team members with research backgrounds in 

communications, decision science, economics, 

marketing, and psychology. 

§	Completion of a novel, rigorous investor testing 

research project on mutual fund benchmarking 

that proved extremely useful to the Division 

of Investment Management in its rulemaking 

activities, while maintaining critical independence 

of OIAD’s research team. 

As always, there is much more work to be done 

to better serve the needs of investors and the 

Commission. Looking forward, we will continue to 

work to tirelessly promote the public’s participation 

and trust in the investment marketplace. Using 

leading edge tools of scientific research, we will 

identify and analyze policies that enable the public 

to make better investment decisions and reach their 

goals. To that end, and as described below, our 

research expansively touches on interactions among 

individual investors, their decision context, and 

macroeconomic trends. The rest of this year’s report 

on investor testing includes elaboration on some of 

the above points and presents results from several 

highly impactful research projects. We conclude with 

a brief discussion of ongoing challenges to our work 

as well as a sketch of some future directions for our 

research group. 

Below we feature snapshots of several recent 

research projects. Together these projects showcase 

a variety of important findings about investor 

decisions and demonstrate POSITIER’s ability to 

flexibly adapt methodologies for the benefit of 

investors. 

PERFORMANCE BENCHMARKS

Historically, the Commission’s analysis of 

rulemaking impact on investors has often been 

constrained by a lack of input from everyday
investors. Through POSITIER, we have sought to 

give the SEC an alternative method for engaging 

directly with the public, and for learning what 

individual investors need to make informed 

investment decisions. This year, OIAD had the 

opportunity to inform policy through qualitative 

and quantitative testing related to mutual fund 

benchmarks. This research was heavily cited in the 

recently-adopted “Tailored Shareholder Reports” 

rule.175 The research is described in full in the paper 

“How Do Consumers Understand Investment 

Quality? The Role of Performance Benchmarks.”176

Funds are required to provide comparative 

information when presenting performance data in 

their shareholder reports. Funds that are presenting 

performance information must accompany their 

performance with an “appropriate broad-based 

securities market index” in annual shareholder 

reports that are provided to existing investors. 

The intention is to provide contextual information 

that investors can use to better evaluate the 

performance of the fund. Funds have the option 

of presenting performance relative to one or more 

additional indexes. These additional indexes can be 

“broad-based,” as with the first, or more narrowly 

tailored to the assets and strategy of the fund; 

however, funds have considerable discretion on the 

choice of benchmarks.

Ultimately the choice of benchmarks might not 

make much difference if funds select different 

benchmark indices that essentially provide a similar 

frame of reference for the investor. At the same 

time, some comment writers suggested that funds 

should be able to use a narrow benchmark as their 

only benchmark. 

Important questions for this rulemaking are 

“To what extent do benchmarks affect investor 

choices?” and “Do investors prefer broad 

benchmarks, narrow, or both?” These research 

questions are not entirely straightforward to 

answer. From the perspective of economic theory, 

benchmarks do not offer a clear path to affecting 

investor decisions because they presumably 

contain information that is easily accessible to the 

investor elsewhere. The inclusion of additional 

information on the fund would seem ignorable in 

many economic modeling contexts, with no clear 

path to it affecting a person’s evaluation of a fund. 

At the same time, given human nature, it seems 

entirely possible that a fund’s performance relative 

to a benchmark may make the fund seem relatively 

better or worse. 

To better understand how benchmarks are used 

by funds and affect investor decision-making, 

our research project involved four separate data 

sources. First, we studied market data on funds 

and their benchmarks, as well as funds’ usage 

of benchmarks. Second, we conducted in-depth 

one-on-one interviews with a small group of 

investors that hold mutual funds, exchange traded 

funds, or similar investments to help us better 

understand how investors think about benchmarks. 

Third, we ran a large and innovative experiment 

to more scientifically understand how investor 

decision-making was affected by different ways 

a benchmark can be presented on a performance 

graph of the type that was under consideration in 

the rule proposal. Finally, we collected survey data 

that helped us to better understand the preferences 

and beliefs of ordinary people with respect to 

benchmark presentation and usage.177

Analysis of Market Data

Our analysis of market data was important for 

understanding funds’ actual choices of benchmarks 

under the pre-rule regulatory framework. Our data 

captures “primary” and “secondary” benchmarks, 

which provide an imperfect mapping to “broad” 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 2 9

and “narrow” indexes as described in regulatory 

requirements.178 Consistent with the rules 

providing funds with discretion over their choice 

of benchmarks, the number of different primary 

benchmarks used in a sector ranges from 10 to 22. 

One important question is: do benchmarks help 

investors compare performance to a meaningful 

metric? Perhaps undermining this line of thinking, 

we found great variety in the benchmarks that 

funds use, even within a sector. The most recent 

ten-year return for the best performing benchmark 

for large growth funds was over 480% greater than 

the returns for the poorest performing benchmark 

in this sector. We found similar patterns for other 

sectors. Yet, without follow-up testing, we did not 

understand if benchmarks had the potential to 

affect investors’ decisions.

In-Depth Interviews

To begin to explore investors’ responses, we 

started with in-depth, one-on-one interviews. In 

the interviews, we showed participants a mock-up 

shareholder report for a hypothetical fund. We 

showed participants a variety of performance 

graphs with different benchmark information, in 

a layered approach that allowed us to begin to 

understand how their thinking might evolve with 

additional benchmark information. All interviewees 

commented about relative performance between 

the fund and its benchmark(s) as affecting 

their perception of the fund. For example, 

one interviewee noted, “Clearly the fund has 

outperformed the [index shown], fairly significantly 

over time.” These interviews were not sufficient 

evidence on their own to make strong conclusions 

Figure 1: The Number of Unique Benchmarks by Type Used by Mutual Funds in Various Sectors

0 5 10 15 20 25 30 35 40

16

10

12

14

17

15

10

18

22

20

20

15

17

17

16

11

14

23

31

39

22

19

21

23

Fn. Large Growth

Small Value

Mid-Cap Growth

Mid-Cap Value

Small Growth

Fn. Large Blend

Small Blend

Divers. Emer. Mkts

Large Value

Large Blend

Large Growth

Primary

Mid-Cap Blend Secondary

Number of broad and narrow benchmarks employed in each sector
3 0 | OFFICE OF THE INVESTOR ADVOCATE

about the role of benchmarks in investor decisionmaking. However, they provided a preliminary 

suggestion about the importance of relative 

performance in determining investor evaluations of 

funds, which we sought to study more directly in a 

follow-up experiment.

Experimental Evidence

Qualitative testing provides rich impressionistic 

data, but the labor-intensive method means that 

we typically can only interview a limited number 

of respondents. To provide a more comprehensive 

view on how benchmarks affect respondents, 

Figure 2: Examples of Stimuli Used in Experiment

Imprimiis Total U.S. Market 1000 Index

Middlewood Materials Fund

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

$10,000

$5,000

$

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

 $42,815 

 $35,402 

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Imprimiis Total U.S. Market 1000 Index

Middlewood Materials Fund

 $27,988

 $35,402 

$
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3 1

we also conducted a large-scale experiment that 

we designed based on the intuition gained in the 

interviews. For this experiment, we recruited over 

4,000 participants using a nationally representative 

probability-based survey panel. Most experiments 

only have a few hundred participants,179 but we 

required more participants to explore several 

different experimental conditions while having 

enough participants in each condition for a 

statistically viable sample. The experiment varied 

benchmarks in presentations with the same fund to 

see how benchmarks affect investor opinions and 

decisions. Whether the benchmarks were broad 

or narrow was also changed. Our presentations 

included one, two, or no benchmarks. For 

presentations with two benchmarks, one 

benchmark was outperforming the fund and one 

was underperforming. While having the fund 

between two benchmarks may appear a special 

situation, in reality, the experimental conditions we 

created represent a large fraction of presentation 

conditions observed in actual market data. Figure 2 

illustrates features of two of our presentations: one 

with a benchmark outperforming the fund and one 

with a benchmark underperforming the fund.

A key finding is that providing a benchmark 

that outperforms the fund has a large, negative 

impact on investor perceptions. For participant 

ratings of the fund on a zero to one hundred 

scale, the average rating was 56 when the fund 

underperformed the benchmark (i.e. benchmark 

performance was better than fund performance) 

versus 65 when the fund was better than the 

benchmark (Figure 3). We also see that, when 

given the opportunity in a choice task designed 

to simulate real-world decisions, participants 

invested less in the fund after viewing performance 

alongside a benchmark that outperformed the 

fund. These findings suggest a meaningful impact 

of benchmarks on investor perceptions and 

decision-making. When comparing responses 

for broad and narrow benchmarks, decisions 

were similar whether the benchmark was broad 

or narrow. We did not find any evidence that 

investors differentiated between broad and narrow 

benchmarks. Average ratings of the fund when 

the fund outperformed the benchmark were the 

same for broad and narrow benchmarks. This is 

in contrast to a claim by some commenters that 

the narrow benchmark is a better reference point 

than the broad benchmark. The results suggest that 

benchmarks can influence investor decisions. 

Survey

Finally, we also collected some survey data from a 

nationally representative, probability-based panel. 

Our survey asked various questions, including 

Figure 3: Average Attractiveness Ratings by

Selected Experimental Conditions

Underperforming 

the benchmark

Outperforming 

the benchmark

Outperforming a 

broad benchmark

Outperforming a 

narrow benchmark

56/100 65/100

65/100 65/100

Average subjective attractiveness ratings by selected 

experimental conditions. Top pair: attractiveness rating 

for fund underperforming the benchmark (i.e. benchmark 

performs better than fund; left figure) vs. fund 

outperforming benchmark (i.e. fund performs better 

than benchmark; right figure).
3 2 | OFFICE OF THE INVESTOR ADVOCATE

some measuring preferences for benchmark 

information. In response to these questions, 

participants expressed a preference for seeing both 

broad and narrow benchmarks (Figure 4). When 

shown a performance graph with two benchmarks 

(a broad and a narrow), most respondents 

expressed the belief that the performance graph 

was a reliable source of information and not simply 

designed to make the fund look good (Figure 5). 

This survey data must be interpreted carefully 

because participants may not have a full ability 

to internalize the context of the hypothetical 

situation in a non-decision-making context, but 

the survey data do suggest investors’ interest in 

contextualizing the fund’s performance alongside 

both broad and narrow benchmark performance 

information. 

Using a novel, large-scale experiment with a national 

sample, as well as in-depth analysis of real-world 

benchmark use, our paper presents a comprehensive 

set of findings on how funds use benchmarks and 

how investors may react to them. While this topic 

deserves further research to understand other 

dimensions of how investors respond to benchmarks, 

the research summarized in this paper highlights the 

complex ways in which information provided by 

firms affects investor perceptions and decisions.

MENU COMPLEXITY

While U.S. financial markets are extremely broad 

and deep, not every investor can access every type 

of investment instrument. For example, investors in 

brokerage or retirement accounts may have only a 

handful of mutual funds and ETFs to consider. More 

Figure 4: Stated Preferences for Benchmark Presentation by Investor Type

10

20

30

40

50

60

70

11.45

6.45

15.69

66.5

11.58

15.18

59.78

13.46

20.87

43.44

17.21 18.48

Independent Investors Retirement

Investors

Non-Investors

Both benchmarks Broad only Narrow only Fund only

Percentage of each investor status group (independent investor, retirement investor, non-investor) that expressed a 

preference for presentation of broad benchmark only, narrow benchmark only, fund only (no benchmarks), or both 

broad and narrow benchmarks. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3 3

limited choice is not necessarily bad if the choices 

are well-curated for the investor, but some menus 

may offer some poor options to investors. Moreover, 

the fund menus themselves may be confusing to 

investors in a number of ways. 

A recent experimental study180 examined one 

particular area of potential confusion for investors: 

whether or not the complexity of evaluating tradeoffs 

between features of menu items might contribute to 

worse decision-making by investors. For example, 

in some “low complexity” menus, investors may 

face a set of choices such that one option is better in 

terms of all features (e.g., fees, performance, risk), 

so that worse options are quite obvious. In a high 

complexity menu, the investor may need to weigh 

one feature against another to make a choice that 

seems right for them. To the researcher, it is not 

obvious how the consumer will decide. 

In an experiment we conducted, study participants 

were randomly assigned menus of five index 

mutual funds. The choice set here is important: 

as index funds tracking the same index, the funds 

have nearly identical returns and risk, but have 

one important distinguishing feature: fees. Fees 

can differ dramatically in this market and lead 

to substantially different long-run returns even 

though the pre-fee returns and risk of the funds is 

substantively similar; at a 7 percent annual return 

over 25 years, an initial $100,000 balance will 

grow to about $400,000 for the highest fee fund we 

identified versus almost $540,000 for the lowest fee 

fund—a difference of about $140,000, or about 35 

percent. As this example illustrates, and is widely 

recognized in the household finance literature,181

the best choice among the options that the study 

curated was to pick the lowest fee fund on the 

menu. The menus that were curated allowed for a 

fine-tuning of the complexity tradeoff on the menu. 

Figure 5: Perceptions of Performance Graphs, by Investor Type 

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2.91 2.84

2.67

3.46 3.38

3.23

The graph displayed was designed to 

make the fund look good

The displayed graph is a reliable 

source of information about the fund

Independent Investor Retirement Investors Non-investors

Survey respondents were shown a performance graph with two benchmarks (one broad, one narrow). Graph provides 

average response by investor status group (independent investor, retirement investor, non-investor) that stated agreement 

with the associated survey question (answers on a 1–5 point scale from 1=strongly disagree to 5=strongly agree). 
3 4 | OFFICE OF THE INVESTOR ADVOCATE

What the paper found was quite remarkable. By 

increasing from the lowest level of complexity to the 

highest level, study participants paid considerably 

more in fees—and, because the funds were index 

funds, the extra fees offered no benefit to the 

investor in terms of risk and return. This suggests 

that the way menus are constructed could have 

an impact on investor choices. At the same time, 

few participants selected the cheapest fund on the 

menu. In fact, even at the lowest level of complexity 

offered, many participants paid much higher than 

the optimal amount in fees. The implication here 

is that investors not only may be easily confused 

by complexity, but that even at the lowest levels of 

complexity, investors find it difficult to choose funds 

from a menu. This choice set is considered relatively 

simple because in most real-world menus, the 

investor would be expected to evaluate many more 

dimensions of choice and many more investment 

options than they did in this experiment—for 

example, by evaluating the investment sectors of 

different options, the different risks, returns, brands, 

and so forth. 

Another remarkable feature about the results from 

this paper is that this complexity effect largely holds 

across different subgroups. The more investmentsavvy subgroups that were examined (e.g. higher 

education, higher financial literacy) tended to pay 

lower fees than the less savvy groups, but in most 

cases still made worse choices when they were faced 

with higher levels of complexity. 

While the preliminary findings of this research 

paper do not aim to offer any concrete policies for 

consideration, it does help to document an aspect of 

the complexity of financial decisions, and could help 

the Commission think more about financial literacy 

interventions. The specific issue may be too subtle 

to educate individual investors on, yet the findings 

highlight the importance of menu construction and 

thus may be informative to, for example, company 

decision-makers offering retirement accounts to their 

employees. These firms are often seeking to provide 

retirement options for their employees, but may not 

be aware of how difficult the choice environment is 

for those employees. In addition to identifying this 

potential concern, another important contribution 

of the paper has been to develop a research 

methodology for incentivized decision-making that 

has enabled OIAD to pursue several additional 

projects. 

HELPING INVESTORS 

MAKE DECISIONS ABOUT MUTUAL 

FUNDS USING VISUAL AIDS

Over the past several years, OIAD has tried 

to identify ways that decision aids could be 

introduced into disclosures to help investors 

become more aware of the importance of fees and 

make it easier for investors to make good decisions 

about their investments. A new OIR paper 

develops a prototype for a mutual fund decision 

aid. The goal of this new aid is to help investors 

compare fees across funds. Motivated by other 

agencies’ successful use of cost comparisons (e.g., 

the Federal Trade Commission’s “Energy Guide” 

cost rating scale) and other academic research 

on “nudges” that can assist consumer decision 

making, we developed a mutual fund fee visual that 

depicts the distribution of fees within a fund type. 

Background Context 

There has been extensive policy and academic 

concern that investors are paying too much in 

mutual fund fees.182 Investors too frequently 

prioritize past performance in their selection of 

mutual funds, despite decades of academic research 

demonstrating that very few funds consistently 

outperform the market.183, 184 Performance is an 

investor’s ultimate goal, but it is also difficult to 

predict: a top performing fund in one year may be 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3 5

mediocre or low-performing in the next. By contrast, 

fees are easy to predict and have an enormous impact 

on investors’ long run investment performance.185

Because of the investor emphasis on returns,186

policymakers have introduced specific disclosure 

statements or guidance such as a warning that 

“Past performance is no guarantee of future 

results.” Yet, buried in a long financial document 

and extensive fine print, these textual statements 

may go unnoticed by investors. Even if disclosure 

statements are noticed, they may not be understood. 

These labels may not be sufficient to help investors 

overcome their deep-rooted biases toward past 

investment performance in decision-making. 

Additional efforts to encourage consumers to use 

mutual fund costs in their decisions by providing 

simplified prospectus documents have also shown 

less than hoped-for results across a range of tests 

from the academic community.187 Given that 

performance remains a central focus with fees too 

infrequently considered, we developed a prototype 

decision aid that we hoped would lead consumers 

to consider fees in their decisions. We then tested 

whether the aid was more effective than legally 

compliant short form disclosure documents. The 

design of this visual was motivated by an existing 

decision aid from the Federal Trade Commission. 

The Federal Trade Commission’s Energy Guide 

label helps consumers compare products’ energy 

costs with a black and yellow scale that depicts the 

average annual cost for that product.188 This cost 

can be directly compared to another product in the 

same store. In other contexts, aids of this kind have 

been used to help consumers make decisions better 

aligned with their preferences.189, 190

Figure 6: Participant Characteristics for Fee Visuals Study 1

55%

45%

answered using

 a desktop

answered using a 

smartphone or tablet

owned 41% mutual funds

47.1% 52.9%

Female

Male

Ages of those able to 

answer on electronic devices 

20%

36%

22.6% 21.3%

18-29 30-44 45-59 60+
3 6 | OFFICE OF THE INVESTOR ADVOCATE

Investor Testing: Fee Visual Prototypes

When an investor is faced with a mutual fund 

decision, they may not know whether 0.1%, 

1%, or even 10% in annual expenses is too 

much to pay. Visuals that convey costs may help 

investors—in the moment and without having 

to do more research—understand that picking 

the wrong fund might end up costing more than 

necessary. Academic literature has demonstrated 

that visuals provide the most benefit when they 

speak to a decision maker’s goals, provide relative 

comparisons between options, and provide 

information with numbers that convey impact.191

This research tests whether a mutual fund fee 

visual, like visual decision aids in other domains, 

can have a positive impact on investment decisions. 

To test a prototype fee visual, we conducted three 

interrelated studies on nationally representative 

samples in which investors received mutual fund 

performance information and fee information with 

summary prospectus documents that meet current 

disclosure requirements and decided how to invest 

money across several funds.

Additionally, some of the participants would view 

the prototype fee visual. Figure 7 provides a sample 

fee visual for one of the anonymized funds that 

participants viewed. For each Low-to-High scale, 

we depict the range of mutual fund expenses for a 

particular fund sector (S&P 500 index funds, in this 

case), with fund fees above the median shaded in red 

to both serve as a warning about the fee’s relative 

level and to capture attention, prompting decision 

makers to think about fees in general. In this 

example, fees are depicted in dollar amounts, rather 

than basis points, to help convey the impact that fees 

could have on financial goals. Using an experimental 

methodology developed in our other research, the 

participants were asked to choose from menus in 

which they should have a preference for minimizing 

fees as much as possible, because the choices we 

asked them to choose between only differed on cost. 

We measured the fees that investors would pay over 

the next year, assuming they held the funds for that 

period. Across our studies, we consistently observed 

that when investors saw the fee visuals, they invested 

more money in the less-expensive funds. 

Figure 7: Sample Fee Visual Graphic

Low High Class: S&P500 

Index Funds

Lowest fee funds in class

Fees: $173.60*

...per $10,000 invested 

now for 20 years

Average fund in class

Fees: $356.31*

...per $10,000 invested 

now for 20 years

* Assumes return of 5% per year for $20 years.

Note: fees calculated based on total balance, not on returns. 

Returns are gross (before fees are subtracted).

This fund: Lincoln

Fees: $2,013.72*

...per $10,000 invested 

now for 20 years
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3 7

Additional statistical tests in a follow-up study 

examined whether visual element variations 

impacted the visuals’ effectiveness. Figure 8 

represents characteristics of the sample for one of 

those studies.

While we observed minor differences in the 

effectiveness of specific elements (e.g., scale 

labeling), all fee visual variants showed significant 

improvement compared to the summary prospectus 

document. For example, in our first study, we 

observed a 27% (approximately nine basis points) 

total fee reduction for the visual condition compared 

to the summary prospectus document condition. The 

figure below depicts the results for the allocations 

to each fund. The fee visual reduced investment 

in the most expensive fund in the study (one 

costing 50 basis points) and increased investment 

to the least expensive fund (one costing 3 basis 

points). Critically, the fee visual did not result in 

less “participation.” Participants did not opt more 

for a cash option (with no associated expense) 

when presented with a fee visual compared to the 

summary prospectus document. If adopted by the 

SEC and applied to the $25 trillion mutual fund 

industry, even a modest nine basis point reduction in 

fees could possibly save investors in the range of $22 

billion annually. 

Looking Forward/Policy Implications

While these fee visual prototype tests were 

successful, we do not claim to have identified 

the optimal design. However, our results provide 

an important demonstration that such decision 

aids may augment disclosure documents and 

help investors prioritize cost information in their 

decisions. Ultimately, having more awareness of 

costs will facilitate better investment decisions.

COVID-19

Investment decisions are influenced by household 

balance sheets. People are more likely to invest when 

they have disposable income available. Conversely, 

people who have recently faced emergency shocks 

may be less likely to invest, and may draw down on 

investment assets in a time of need.

Figure 8: Participant Characteristics for Fee Visual Study 2

46.1% female participants

Ages off those who answered online

44.5%

Ages 60+ 24.3%

Ages 

30-44

3% 28.3%

Ages 

Ages 45-59

18-29

55.8%

smartphone 

or tablet

44.2%

desktop

owned 

mutual funds

69% 
3 8 | OFFICE OF THE INVESTOR ADVOCATE

The COVID-19 pandemic caused a large 

macroeconomic shock that potentially reverberated 

through many households. Some immediate 

impacts of the pandemic were that many jobs were 

lost and many people were unable to get to work 

safely. Aid that was made available to households 

during this time may have helped with sudden 

financial hardships; however, the pandemic had 

other, far-reaching effects. For some households, the 

pandemic may have led to lasting issues such as the 

death of a breadwinning spouse. 

To better understand the evolution of household 

finances during this crisis, OIAD conducted 

regular, monthly surveys on a wide range of topics. 

Building off an initial survey of 6,000 households 

in September 2019, POSITIER conducted a 

nationally representative panel study from July 2020 

through June 2021. This monthly panel tracked 

the evolution of household perceptions, including 

their finances, investment activity and health status 

during the COVID-19 pandemic. These data help 

shed light on how Americans fared during the crisis. 

The POSITIER infrastructure and the fortuitous 

collection of survey data in 2019 offered a unique 

opportunity for OIAD to both paint a before-andafter picture and to rapidly launch a high frequency 

survey at a time when conventional economic data 

sources such as gross domestic product (GDP) were 

simply too slow and infrequent to be meaningful in 

such a rapidly changing environment. 

The data show that the onset of the pandemic was 

a difficult time for many households. The number 

of households experiencing a large income drop 

tripled compared with the 2019 survey. Rates of 

hospitalization more than doubled. Self-reported 

cases of having lost money in an investment fraud 

scheme also increased with the rate of households 

experiencing fraud tripling. There were also large 

changes in households’ net worth with households 

exposed to COVID having the greatest decreases.

Figure 9: Fee Visuals Reduce Investment in Expensive Funds

0

5

10

15

20

25

30

35

0.03% 0.10% 0.25% 0.50% Cash

Fee Visual

Prospectus 

Document

Fund Basis Point Cost

Percent of Investment

This figure shows average percent allocation to each fund by condition. Fee visuals reduced allocation to the expensive 

(.5%) fund and increased allocation to less expensive funds (.03% and .1%).
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 3 9

Despite an increase in social sector supports for 

many households, households responded to these 

shocks by drawing down their savings. Those with 

eight months of unemployment were twice as likely 

to spend money out of savings than those that were 

not unemployed during this period. Figure 11 shows 

the increased likelihood of having spent money out 

of savings as the number of months unemployed 

increased. Concerns about being able to pay for 

housing and get medical care increased as members 

of households spent more time unemployed. Many 

households that sold securities reported doing so to 

pay for large expenses.

To evaluate the overall impact on households, we 

also measured households’ self-reported financial 

well-being.192 We did not see much change in this 

measure over the course of the pandemic. This could 

be due to social sector supports for households, or 

it could suggest that the financial well-being index 

we used is simply not sensitive to changes in a 

household’s financial circumstances. More research is 

needed to better understand this observation. 

According to our data, there was also an increase 

in investment trading during the pandemic. In 

December 2019, 4% of households reported having 

traded during that month, compared with 17% of 

households in December of 2020. The increased 

trading activity lasted throughout our data on the 

pandemic. From the end of 2020 to June 2021, there 

was a steady increase of investors reporting that 

they purchased securities because they believed that 

overall market returns were increasing. 

POSITIER surveys enabled OIAD to evaluate the 

impact that the pandemic had on investors, capital 

formation, and the maintenance of fair, orderly 

Figure 10: Respondents Reporting a Financial Shock, by Shock Type 2019 vs. 2020

0%

10%

20%

30%

40%

50%

60%

70%

63%

21% 21%

43%

8%

39%

3%

9%

Income Drop Hospitalization Other Unexpected 

Expense

Lost Money in 

Fraudulent 

Investment Scheme

2019 2020

Estimated percent of households having experienced the respective shock in 2019 compared with 2020.
4 0 | OFFICE OF THE INVESTOR ADVOCATE

and efficient markets. The pandemic’s effects were 

large and far-reaching with many households 

experiencing decreases in their income. Our survey 

results quantified many of the challenges that 

households faced during this time, and offered the 

opportunity to provide data to the Commission on 

many unpredictable market movement or economic 

shock issues that investors may face going forward. 

Additional leveraging of these survey resources 

would provide the Commission with valuable 

insight into investors and the problems they face, as 

well as insight on impediments to capital formation 

and market fairness and efficiency, and overall offer 

the potential to provide the Commission with an 

early warning system on a wide range of investor 

and market issues. 

DIGITAL ASSETS

Consumer interest in digital assets, including 

cryptocurrencies (DAC) has increased substantially 

in the last few years. In an effort to better 

understand use of these products, including which 

demographic groups use them and how retail 

investors view them, we conducted complementary 

survey and qualitative research regarding DACs. In 

our survey research, we fielded two surveys of the 

U.S. population, one in fall of 2019 and another in 

spring of 2021, asking whether respondents owned 

DACs. Additionally, we conducted a qualitative 

study with a small group of owners of DACs in 

summer of 2020 to provide more depth on how they 

viewed these products.

Figure 11: Percent of Households Reporting Spending Savings by Duration of Unemployment

10

0 1 2 3 4 5 6 7 8

20

30

40

50

60

70

80

90

Months of Unemployment

39%

35%

50%

39% 41%

60%

55%

70%

82%

The figure represents the fraction of individuals reporting having spent money out of their savings by the number of 

consecutive months of unemployment they were experiencing at the time. Households with eight consecutive months 

of unemployment had more than double the rate of spending savings than households that were not experiencing 

unemployment.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 4 1

Our surveys reveal significant growth in the 

proportion of the U.S. population that owns 

DACs. From the fall of 2019, to the spring of 

2021, estimated ownership of DACs grew from 5.2 

percent to 11.8 percent of households in the US, as 

shown in Figure 12. The general trend of increasing 

ownership occurred widely, with increases for most 

sociodemographic groups, including across income 

and net worth categories. However, there were 

some persistent trends in ownership across groups. 

Younger people were much more likely to own 

DACs. People who are 18–29 have approximately 

10 times higher ownership rates than people who 

are 60 or older. Examining ownership by race 

and ethnicity, we find the lowest rates of DAC 

ownership among non-Hispanic white people 

relative to the other race and ethnicity groups 

collected and highest among African Americans in 

2021. Finally, DAC ownership rates are higher for 

people who have retirement accounts, relative to 

those without retirement accounts, and higher still 

for people who have non-retirement investment 

accounts (e.g., a brokerage accounts). It will be 

important to continue tracking ownership of DACs, 

with particular attention to who owns these assets 

and the relationship between DAC ownership and 

other investing. 

In the qualitative study, our small group of 

participants first reported their perceived level of 

expertise regarding DACs; we split the respondents 

into “self-identified expert” and “self-identified 

novice” groups. Each group was given its own 

message board to discuss their views of DACs. Some 

DAC owners view DACs as both investments and 

currencies. The owners tend to get their information 

about DACs from social media and check for 

fraud by reviewing the DAC’s website. To better 

understand people’s ability to detect fraudulent 

DACs, they were directed to a mock Initial Coin 

Offering (ICO) website, one meant to mimic a 

coin offering, but also designed to include features 

common in fraud. The website was originally 

designed to help raise awareness about potential 

fraud schemes that may be masked as initial coin 

offerings. About three-quarters of our self-reported 

DAC experts said they would be likely to invest 

in the mock ICO, while only 16% of self-reported 

novices said they would be likely to invest. This is 

quite surprising since we would expect experts to 

be more familiar with DACs and be wary of the 

unreasonably good terms offered on the website, 

such as a guaranteed rate of return, leading them to 

be less likely to invest. Unfortunately, it is difficult to 

generalize from these findings since they come from 

a very small sample of individuals. Yet, the findings 

highlight investors’ susceptibility to fraudster tricks. 

More data will need to be collected before we are 

able to have a firm understanding of how investors 

engage with DACs. 

Figure 12: DAC Ownership Rates Over Time

2019

5.2%

2021

11.8%

DAC ownership rates in 2019 and 2021.
4 2 | OFFICE OF THE INVESTOR ADVOCATE

CHALLENGES TO TESTING 

AND FULFILLING OIAD’S 

STATUTORY MISSION

Despite an impactful research program, OIR faces 

significant headwinds in attempting to fulfill OIAD’s 

statutory mandate. Headwinds include:

§	Extended approval process for the release of 

research: the approval process for many of the 

projects discussed above took longer than we had 

anticipated. 

§	Resource constraints: while the Commission has 

many important competing interests for scarce 

resources, and OIR has been recognized to have 

made impactful contributions with extremely 

limited budgetary and human resources, we 

believe that with a level of support comparable 

to research programs in other agencies and other 

research teams at the Commission, we could 

provide considerable additional benefits to the 

Commission, investors and other stakeholders. 

§	Institutional culture: our independent 

benchmarking research project was deemed 

important enough to be heavily cited by the 

Division of Investment Management in its 

Tailored Shareholder Reports Rulemaking. 

We have made some encouraging strides in 

communicating the benefits of our independent 

research to other policymaking divisions, but this 

may require additional efforts on our part to help 

them better understand the ways in which they 

can leverage our work and skills. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 4 3

Looking Forward

For policies that have a direct impact or interface 

with investors, a serious, data-driven evidentiary 

basis should be the starting point for policy 

development. Over OIAD’s past several Reports on 

Activities, the Reports on Investor Testing therein 

have outlined ways in which the Commission 

could be more effective at doing this.193 In our 

view, considerable cultural and process change is 

key to more effective Commission policymaking. 

The POSITIER architecture, along with the 

interdisciplinary OIR team, was designed to provide 

specific capacities that will enable the Commission 

to maximize effectiveness, and in particular to 

support inclusion of investor perspectives in the 

policymaking process. 

As OIR continues to shape out a vision to the 

Commission and to extol the benefits of social 

science and testing, our work progresses on other 

fronts, particularly our quest to provide deep 

insights to the Commission that would help to 

better identify problems investors face and test 

potential solutions. Our forthcoming internal 

strategic plan outlines priority areas in realms 

such as investor and household characteristics and 

capabilities; information provision and delivery 

context; and macroeconomic and financial market 

factors affecting investors. We are ever continuing 

in our pursuit of deep knowledge and research 

to help the Commission better protect investors, 

maintain fair, orderly, and efficient markets, and 

facilitate capital formation.
4 4 | OFFICE OF THE INVESTOR ADVOCATE
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 4 5

OMBUDSMAN’S REPORT

As set forth in Exchange Act Section 4(g)(8), 

15 U.S.C. § 78d(g)(8), the Ombudsman 

is required to: (i) act as a liaison between 

the Commission and any retail investor in resolving 

problems that retail investors may have with the 

Commission or with self-regulatory organizations; 

(ii) review and make recommendations regarding 

policies and procedures to encourage persons 

to present questions to the Investor Advocate 

regarding compliance with the securities laws; 

and (iii) establish safeguards to maintain the 

confidentiality of communications between 

investors and the Ombudsman.194

The Ombudsman is also required to “submit a 

semi-annual report to the Investor Advocate that 

describes the activities and evaluates the effectiveness 

of the Ombudsman during the preceding year” 

(Ombudsman’s Report).195 The Ombudsman’s 

Report must be included in the semi-annual 

reports submitted by the Investor Advocate to 

Congress. To maintain reporting continuity, the 

Ombudsman’s Report included in the Investor 

Advocate’s June 30 Report on Objectives describes 

the Ombudsman’s activities during the first six 

months of the current fiscal year and provides an 

overview of the Ombudsman’s objectives for the 

following full fiscal year. The Ombudsman’s Report 

included in the Investor Advocate’s December 31 

Report on Activities describes the activities and 

discusses the effectiveness of the Ombudsman196

during the full preceding fiscal year. Accordingly, 

this Ombudsman’s Report describes the activities 

and discusses the effectiveness of the Ombudsman 

for the full fiscal year from October 1, 2021 through 

September 30, 2022 (the Reporting Period), and 

provides a brief outlook for Fiscal Year 2023. 

OMBUDSMAN ROLE AND 

STANDARDS OF PRACTICE

The SEC Ombudsman is a confidential, impartial, 

and independent resource who serves as a liaison 

to help retail investors resolve problems they may 

have with the SEC or with the self-regulatory 

organizations (SROs) the SEC oversees. The 

Ombudsman also reviews and recommends 

policies and procedures to encourage persons to 

present questions and feedback about the securities 

laws, and establishes safeguards to maintain 

the confidentiality of communications between 

individuals and the Ombudsman. Specific assistance 

the Ombudsman may provide includes, but is not 

limited to, the following: 

§	listening to inquiries, concerns, complaints, and 

related issues; 

§	helping persons explore available SEC options 

and resources; 
4 6 | OFFICE OF THE INVESTOR ADVOCATE

§	clarifying certain SEC decisions, policies, and 

practices; 

§	taking objective measures to informally resolve 

matters that fall outside of the established 

resolution channels and procedures at the SEC; 

and 

§	providing periodic updates to SEC leadership 

so that they are aware of trends and significant 

emerging issues that are brought to our 

attention, and otherwise acting as an alternate 

channel of communication between retail 

investors and the SEC. 

In practice, individuals often seek the Ombudsman’s 

assistance as an initial point of contact to resolve 

their inquiries or as a subsequent or ongoing 

point of contact when they are dissatisfied with 

the outcome, rate of progress, or resolution of 

previous inquiries. The broad role and function of 

the Ombudsman is somewhat similar to the broad 

roles and functions of ombudsmen at other federal 

financial regulators. 

Like ombudsmen at other federal financial 

regulators, the Ombudsman follows three core 

standards of practice: 

Confidentiality Impartiality Independence

The Ombudsman has established 

safeguards to protect confidentiality, 

including the use of an electronic 

platform for receiving inquiries, a 

separate email address, dedicated 

telephone and fax lines, and secure file 

storage. The Ombudsman generally 

treats matters as confidential, and 

takes reasonable steps to maintain the 

confidentiality of communications. The 

Ombudsman also attempts to address 

matters without sharing information 

outside of the Ombudsman staff, 

unless given permission to do so. 

However, the Ombudsman may 

need to contact other SEC divisions 

or offices, SROs, entities, and/or 

individuals and share information 

without permission under certain 

circumstances including, but not 

limited to: a threat of imminent risk or 

serious harm; assertions, complaints, 

or information relating to violations 

of the securities laws; allegations of 

government fraud, waste, or abuse; or 

if otherwise required by law. 

The Ombudsman does not 

represent or act as an advocate for 

any individual or entity, and does 

not take sides on any issues. The 

Ombudsman maintains a neutral 

position, considers the interests 

and concerns of all involved parties, 

and works to resolve questions and 

complaints by clarifying issues and 

procedures, facilitating discussions, 

and identifying options and 

resources.

By statute, the Ombudsman reports 

directly to the Investor Advocate, 

who reports directly to the Chairman 

of the SEC. However, the Office 

of the Investor Advocate and the 

Ombudsman are designed to 

remain somewhat independent from 

the rest of the SEC. Through the 

Congressional reports filed every six 

months by the Investor Advocate, 

the Ombudsman reports directly to 

Congress without any prior review or 

comment by the Commission or other 

Commission staff.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 4 7

The Ombudsman’s Challenge 

The mission statement of the SEC is to “protect 

investors, maintain fair, orderly, and efficient 

markets and facilitate capital formation.”197 A 

predictable question we encounter, then, is what 

can the Ombudsman do to protect investors? 

Among many other things, staff in our Office 

submits tips, complaints and referrals regarding 

credible allegations of securities law violations 

to the Division of Enforcement. We conduct 

independent research and craft tailored solutions 

for an investor’s question or problem. We monitor 

trends in retail investor complaints to identify 

emerging areas of concern. Sometimes, however, 

our staff is unable to provide investors with the 

assistance or relief they request. For instance, the 

Ombudsman Office may not:

§	decide the facts in a dispute that the investor 

has with the Commission or an SRO, or in a 

dispute before an SRO, such as an arbitration or 

mediation; 

§	intervene on behalf of, or represent the 

interest of, an investor in a formal dispute or 

investigation process; 

§	provide advice on how the federal securities laws 

may impact their particular investments or legal 

options; or 

§	change formal outcomes, including decisions 

about whether to investigate an allegation of 

wrongdoing, settle an enforcement action, or 

create a Fair Fund. 

Given these limitations, when investors contact 

our Office with such requests, we may identify 

other means to protect their interests and preserve 

their legal rights. When appropriate, our staff may 

direct investors to other SEC resources that will 

address their questions or concerns, or we may 

direct investors to external avenues of assistance. 

For example, when an investor contacts the 

Ombudsman with concerns that fall under the 

purview of another federal financial regulator, our 

staff may, after obtaining consent from the investor, 

facilitate communication between the investor and 

the ombudsman from the appropriate regulatory 

agency to resolve the matter. 

In addition to responding to investor complaints, 

requests and concerns on an ad hoc basis, 

Ombudsman staff also stays current on policy 

issues that affect retail investors by engaging with 

investor advocacy groups and law school securities 

arbitration clinics that provide legal services to 

harmed investors. Through this engagement, we 

gain a deeper understanding of potential legal and 

structural difficulties retail investors may face as 

they interact with industry professionals and with 

SROs. This understanding may prompt broader 

Ombudsman action and advocacy on behalf of retail 

investors, such as research into a particular area of 

investor concern. 

STREAMLINED COMMUNICATIONS 

WITH RETAIL INVESTORS 

The Ombudsman Matter Management System 

(OMMS) is an electronic platform for receiving 

inquiries, tracking and analyzing matter and 

contact information, and ensuring our Office meets 

all necessary data management, confidentiality, 

and reporting requirements. The OMMS Form, 

a web-based, mobile-friendly form permitting the 

submission of inquiries, complaints, and documents 

directly to the Ombudsman, guides the submitter 

through a series of questions specifically designed 

to elicit information concerning matters within the 

scope of the Ombudsman’s function. In addition, 

the OMMS Form allows submitters to easily upload 

and submit related documents for staff review. When 

an OMMS matter record is created, Ombudsman 

staff can review the matter details and communicate 

with the investor via the OMMS platform. OMMS 
4 8 | OFFICE OF THE INVESTOR ADVOCATE

also enables the Ombudsman and staff to search and 

analyze matters and contacts by submitter, primary 

issue, fiscal year, and a number of other categories, 

and to review data and customize specific reports 

when a deeper examination is required. 

While the Ombudsman encourages persons to 

submit their inquiries via the OMMS Form, persons 

who do not wish, or are unable, to use the OMMS 

Form may contact the Ombudsman by email, 

telephone, fax, and mail. 

The following graphic illustrates the general 

lifecycle of what happens when investors or other 

interested persons contact the Ombudsman for 

assistance: 

Figure 12: What Happens When You Contact the Ombudsman.

START

END

We review 

your information, 

determine if you are a 

retail investor and if your 

matter concerns the SEC 

or a related SRO, and 

confirm that your 

matter is entered 

in OMMS. We review 

your matter in detail, 

including any related 

background information, 

laws, and policies.

The Ombudsman 

may contact you, 

SEC sta, and other key 

persons for more details 

on the matter. The 

Ombudsman will discuss 

your concerns about 

confidentiality, if any, 

at this point.

The Ombudsman 

and sta discuss 

your matter internally

 to determine the best 

options for resolution 

and to identify other 

resources that may 

be helpful to you.

The Ombudsman 

and sta may contact 

you to gather more 

information and to 

reply to any interim 

correspondence. This 

may occur several times 

as we work to resolve 

your matter.

The Ombudsman 

resolves your matter 

or provides options for 

you to consider. You may 

be advised to contact 

another SEC division or 

oce, or another entity, 

for further assistance or 

resolution options.

We update 

your matter record 

accordingly. This 

provides the Ombudsman 

with easy access to your 

matter information 

should you have 

additional questions 

or concerns.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 4 9

SERVICE BY THE NUMBERS 

To respond to inquiries effectively and efficiently, 

Ombudsman staff monitors the volume of 

inquiries and the resources devoted to addressing 

the particular concerns raised. Ombudsman staff 

tracks all inquiries received by, or referred to, 

the Ombudsman Office, as well as all related 

correspondence and communications to and from 

Ombudsman staff. We track the status of the 

inquiry from its receipt to its resolution or referral, 

and we monitor the staff engagement and resources 

utilized to respond to the inquiry. This helps our 

Office identify systemic or problematic issues, 

analyze matter volume and trends, and provide 

data-driven support for recommendations to the 

Investor Advocate. 

Inquiry volume is measured in terms of matters 

and contacts. A matter is created when an initial 

contact—a new, discrete inquiry—is received by 

or referred to the Ombudsman. When a matter 

is created, Ombudsman staff reviews the facts, 

circumstances, and concerns, and assesses the staff 

engagement and resources that may be required to 

respond to, refer, or resolve the matter. 

To note, a single matter may generate numerous 

subsequent contacts—related inquiries and 

communications to or from the Ombudsman staff 

deriving from the matter. These contacts often 

require staff to answer additional investor questions, 

to explain or clarify proposed resolution options, or 

to discuss issues with appropriate SEC or SRO staff. 

Data across Primary Issue Categories 

The Primary Issue Categories identified below are 

broad descriptive labels that reflect the nature of 

the primary issue raised in a submission, in light 

of the information in that submission. During 

this Reporting Period, retail investors, industry 

professionals, concerned citizens, and other 

interested persons contacted the Ombudsman for 

assistance on 2,780 matters covering 12 primary 

issue categories: 

Figure 13: Matters by Primary Issue Category198

October 1, 2021 – March 31, 2022 

We note that the volume of matters received 

increased from 2,401 in FY 2021 to 2,780 in 

FY 2022, or an increase of almost 16%. We 

attribute this increase, in part, to the growing market 

participation of retail investors and accompanying 

retail investor interest in SEC activities, as well as 

a heightened awareness of the SEC Ombudsman’s 

Total Matters 2780

0.3%

0.5%

0.9%

0.8%

Investment Products / Retirement Accounts (407)

SEC Questions / Complaints (287)

Allegations of Securities Law Violations / Fraud (187)

SEC Investigations / Litigation / Enforcement Actions (172)

Non-SEC / Other Matters (171)

Atypical Matters (115)

Securities Laws / Rules / Regulations / Procedures (13)

FINRA Complaints / Questions / Procedures (11)

Company Disclosures and Information (7)

Securities Ownership (4)

13.6%

29.6%

12.5%

12.4%

8.4%

20.9%
5 0 | OFFICE OF THE INVESTOR ADVOCATE

role. For instance, we are aware that users of 

various Reddit fora have directed retail investors 

to our Office for assistance or to voice complaints 

about SEC action or inaction. With the prospect of 

amplified exposure for this Office in the future, we 

expect the trend toward a greater volume of investor 

matters to continue.

How the Numbers Inform Our Efforts 

The Ombudsman Office tracks matter and 

contact data to maintain a comprehensive view 

of the allocation of staff resources and to identify 

matters and contacts that significantly alter 

workflow volumes, call for the realignment of 

Ombudsman staff assignments, or require added 

staff support. The data also informs staff resource 

allocation considerations related to proposed 

program development, training, and outreach 

efforts. By tracking data across primary issue 

categories, the Ombudsman may more easily 

identify potential areas of concern for retail 

investors, and may act as an early warning system 

about the impact of particular issues or policies on 

retail investors and others. 

While the numbers above capture the volume and 

categories of submissions our Office receives, the 

data does not capture the full value of the services 

that Ombudsman staff provides to the investing 

public. Assisting just one investor with one issue can 

make a significant difference to that investor, and 

at times, may inform our Office’s approach as we 

examine SEC or SRO policies and rulemakings. 

AREAS OF INTEREST AND 

IMPORTANCE TO RETAIL INVESTORS 

During the Reporting Period, Ombudsman staff 

received just under 2,800 submissions, and initiated 

thousands more contacts by telephone and email 

with persons who came to our office for assistance. 

The summaries that follow are simplified composite 

descriptions of inquiries and complaints, with details 

generalized, modified, or removed to avoid the 

disclosure of nonpublic or confidential information. 

These summaries should help the reader better 

understand the variety of submissions we receive, as 

well as how we respond to those submissions. 

§	A group of investors complained of an SRO’s 

purported negligence, which allegedly caused 

their financial loss. Ombudsman staff gathered 

information relevant to the allegations and 

provided it to the Division of Enforcement. 

§	We offered guidance to persons seeking to 

remove or redact certain personal information 

from historical SEC publications.

§	We assisted harmed investors seeking to recoup 

their losses from an established SEC Fair Fund.

§	We educated interested parties about the 

status of proposed and adopted Commission 

rulemakings.

§	We thwarted fraudulent investment schemes after 

identifying several red flags in communications to 

investors. 

§	We alerted appropriate FINRA and SEC staff 

when investors were targeted by FINRA or SEC 

impersonators. 

§	We helped investors understand their choices 

when they were dissatisfied with the processes or 

outcome of their arbitrations.

ACTING IN THE 

INTERESTS OF RETAIL INVESTORS

To sufficiently address issues that affect retail 

investors, our Office may participate in or undertake 

an objective analysis of those issues, and, when 

possible, we may identify ways to improve existing 

SEC and SRO policies or processes. 

Toward this end, during the Reporting Period, 

Ombudsman staff continued its study of the 

incidence and potential effects of discovery abuse 

in the FINRA forum. We conducted a preliminary 

review of the usage of mandatory pre-dispute 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5 1

arbitration clauses in investment advisory 

agreements. We additionally monitored other 

policy areas that affect retail investors, such as 

FINRA’s proposal to amend the rules relating to 

expungement. We discuss each of these efforts below.

Mandatory Arbitration Clauses in 

Investment Advisory Agreements

Our Office is aware of the growing concern 

surrounding the usage of mandatory arbitration 

clauses in investment advisory agreements.199 The 

proliferation of such clauses in the brokerage 

industry and, we understand, among certain 

SEC-registered RIAs flows from the notion that 

arbitration is a lower cost and more efficient means 

of dispute resolution than litigation.200 Proponents 

of mandatory arbitration sometimes assert that 

customers would prefer to arbitrate their disputes, 

benefitting from the efficiencies of arbitration, rather 

than to litigate their disputes.201 And for industry 

participants, mandatory arbitration provides 

certainty about the forum in which disputes will 

be resolved, as well as clarity and control over 

the costs associated with dispute resolution.202

However, critics of RIA arbitration have argued 

that the advantages of arbitrating a dispute might 

be undermined by cost-prohibitive private forum 

fees that might preclude claimants from filing a 

claim.203 Other critics have posited that arbitral 

fora have a financial incentive to adopt rules that 

make them seem favorable to RIAs, and, assuming 

RIAs select arbitral fora that are likely to treat them 

favorably, arbitration outcomes might be industrybiased.204 Commenters have also pointed out that, 

in contrast to arbitration through FINRA Dispute 

Resolution Services, arbitrations in other private 

fora are opaque, where neither the SEC nor an 

SRO has oversight of or insight into the processes 

or outcomes of those private arbitrations.205 For 

instance, while FINRA makes its dispute resolution 

statistics publicly available,206 other private 

arbitration fora do publish similar statistics.

Notably, with the introduction of the Financial 

Services and General Government Appropriations 

Act,207 on June 28, 2022, the U.S. House of 

Representatives submitted a report that would direct 

the SEC to “gather detailed information about how 

such [pre-dispute arbitration] contracts are used by 

SEC-registered investment advisers and the effect 

such contracts have on investors who are harmed 

by the conduct of advisers.”208 As introduced, the 

House Report would require the SEC to collect 

information about the following: 

§	whether a dispute resolution forum has been 

designated; 

§	whether particular forum rules are designated; 

§	whether a venue is designated; 

§	whether a class action waiver is included; 

§	whether there are limitations on claims that may 

be asserted or damages that may be awarded;

§	whether the contract includes any fee shifting 

provision; 

§	whether any complaints have been filed against 

the advisor in accordance with the contract; and

§	whether the firm has any arbitration awards or 

unpaid arbitration awards in the last five years.209

Recognizing the significant impact that mandatory 

arbitration might have on RIA clients, the 

Ombudsman Office—with the assistance of staff 

from the Office of the Investor Advocate—recently 

completed a preliminary review of a random 

sampling of SEC-registered investment advisory 

agreements. With this information, we look forward 

to participating in the broader conversation about 

RIA arbitration in the near future. 

Discovery Abuse in FINRA Arbitration

Because arbitrators act as gatekeepers for the 

distribution of information between parties in an 

arbitration, it is critical that arbitrators ensure the 

parties “cooperate to the fullest extent practicable 

in the exchange of documents and information 
5 2 | OFFICE OF THE INVESTOR ADVOCATE

to expedite the arbitration.”210 A party’s lack of 

access to discovery will likely impede that party’s 

ability to present its case. Viewed more broadly, 

as FINRA recently noted, “[f]ailure to comply 

with the discovery rules hinders the efficient and 

cost-effective resolution of disputes and undermines 

the integrity and fairness of FINRA’s forum.”211

During the Reporting Period, Ombudsman staff 

finalized preparations and document collection for 

a wide-ranging study to identify what correlations 

might exist, if any, between the parties’ failure to 

comply with FINRA’s discovery rules and the cost, 

duration, and outcome of FINRA arbitrations. We 

will advance our efforts with this study in FY 2023.

Newly Proposed Revisions to FINRA’s 

Expungement Rules: FINRA 2022-24

The expungement of customer dispute information 

from the Central Registration Depository 

(CRD) system and from FINRA BrokerCheck 

(BrokerCheck) has been the subject of industry 

debate for some time.

Initially, FINRA intended for expungement to be 

only an “extraordinary remedy.”212 Nonetheless, 

a 2014 study by the Public Investors Advocate 

Bar Association (PIABA) found that, of cases 

where expungement was requested, expungement 

was granted in the vast majority (87.8%) of 

these cases.213 PIABA’s 2021 follow-up study also 

found that the frequency with which arbitrators 

recommended expungement did not align with 

FINRA’s “factually impossible or clearly erroneous” 

standard for granting expungement prescribed in 

FINRA Rule 2080.214

Prompted by requests for reform in this area, in 

2017, FINRA issued Regulatory Notice 17-42 

(“Notice 17-42”), seeking comment on a number 

of recommended expungement rule changes.215 In 

September 2020, FINRA filed with the Commission 

SR-FINRA 2020-030 (“FINRA 2020-030”), which 

proposed various amendments to the existing 

expungement rules.216 FINRA received a number 

of comment letters217 objecting to the proposals 

in FINRA 2020-30, primarily from parties who 

believed that the newly proposed rules would 

not sufficiently raise the threshold for obtaining 

expungement relief.218 After proposing additional 

amendments based on commenter concerns,219

FINRA withdrew FINRA 2020-30 from SEC review 

in May of 2021.220

In August 2022, FINRA filed SR-FINRA 2022-24 

(“FINRA 2022-24”) with the SEC, re-proposing 

changes to its expungement rules.221 The proposals 

in FINRA 2022-24 are distinct from FINRA’s 

previously proposed changes and existing rules in 

several key respects, as outlined below.222

Panel Size and Composition

FINRA 2022-24 provides that all expungements, 

including simplified arbitrations,223 be decided 

by three arbitrators selected from a Special 

Arbitrator Roster.224 To be eligible for the Special 

Arbitrator Roster, an arbitrator would need to 

complete FINRA’s chairperson training and: (1) 

have a law degree, bar membership in at least 

one jurisdiction, and prior experience serving 

as an arbitrator through award on at least one 

arbitration administered by an SRO in which 

hearings were held; or (2) have prior experience 

serving as an arbitrator through award on at least 

three arbitrations administered by an SRO in which 

hearings were held.225

In Notice 17-42, FINRA originally recommended 

establishing a roster of public chairpersons from 

which a panel of three arbitrators would be 

chosen.226 However, FINRA 2020-30 would have 

permitted a single arbitrator to make expungement 

decisions in simplified arbitrations.227
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5 3

While FINRA 2022-24’s three-arbitrator 

requirement has been generally well received, 

commenters have split on the question of the 

qualifications for the Special Arbitrator Roster. 

For instance, one commenter recommended that 

the Roster not be limited to chair-qualified public 

arbitrators, asserting that understanding the 

value of a customer complaint should be the most 

important qualification.228 Another commenter 

expressed concerns that the proposed amendments 

did not require arbitrators to possess substantive 

securities experience, without which the arbitrators 

may struggle to understand the nuances of 

investors’ complaints.229

Unanimous vs Majority 

Decision for Expungement 230

FINRA 2022-24 would require an arbitration panel 

to unanimously agree that expungement relief was 

merited,231 a departure from the proposal in FINRA 

2020-030 that a mere majority of the panel could 

grant expungement relief.232

Commenters varied in their support of a 

unanimous arbitrator decision. One supporter of 

the proposal argued that a unanimous decision 

more closely aligns with the view of expungement 

as an extraordinary remedy.233 Some critics of the 

proposal asserted a single arbitrator’s power to 

veto an expungement decision would likely result 

in the failure to remove inaccurate CRD data,234

and a unanimity requirement was unnecessary, 

as unanimous decisions are commonplace235 and 

already encouraged.236

Notification to State Regulators

A third notable aspect of FINRA 2022-24 is 

the enhanced notification requirement to allow 

customers and State regulators to attend and 

participate in expungement hearings.237 While 

FINRA-2020-030 introduced the requirement that 

state regulators be given notice of expungement 

proceedings within 30 days of receiving an 

expungement request,238 FINRA 2022-24 makes 

further allowance for state regulatory participation 

by providing state regulators with earlier notice of 

expungement hearings.239

In its comment letter, the North American 

Securities Administrators Association (NASAA) 

acknowledged the potential benefit of earlier notice 

of expungement hearings for state regulators, 

but noted that state regulatory representation in 

expungement proceedings might be limited due 

to limited resources and state-specific procedural 

requirements.240

Time Limits for Expungement Requests

Under the provisions of FINRA 2022-24, 

expungement requests filed separately from a 

customer arbitration (“straight-in requests”) would 

need to be filed within three years after the date the 

customer complaint was initially reported in the 

CRD system, and within two years after the close of 

any customer-initiated arbitration or civil litigation 

associated with the customer dispute.241

Supporters of this proposed change regard it 

as an important step in limiting the number of 

complaints an associated person may seek to 

expunge,242 and in improving the parties’ ability 

to produce relevant documents relating to more 

recent disputes.243 Critics of this proposal, many of 

whom are registered broker-dealer representatives 

and registered investment advisers, generally 

expressed the view that financial professionals 

should have the necessary time to seek expungement 

relief, particularly where customer complaints are 

withdrawn or where a financial professional is 

unfamiliar with expungement as a remedy.244
5 4 | OFFICE OF THE INVESTOR ADVOCATE

FINRA 2022-24’s proposed limits are more 

generous than Notice 17-42’s recommendation of 

a one-year limitation period after the underlying 

customer case closed,245 but more restrictive than the 

two-year time limit proposed by FINRA 2020-30.246

Status of Proposal

On September 27, 2022, the SEC extended 

the time for the Commission to take action on 

FINRA 2022-24 until November 11, 2022.247

The Ombudsman Office continues to monitor 

developments with respect to this rulemaking, given 

its impact on retail investors’ access to the customer 

dispute information needed to make an informed 

decision when hiring a financial professional.

OMBUDSMAN OUTREACH AND 

ENGAGEMENT EFFORTS 

2022 Investor Advocacy Clinic Summit

The Office of the Ombudsman and the Division 

of Enforcement’s Retail Strategy Task Force 

(RSTF) hosted the third SEC Investor Advocacy 

Clinic Summit (the Summit) on March 31, 2022. 

Because the agency was operating under a 

mandatory telework posture at the time, the event 

was held virtually.248

The Summit consisted of a public outreach event, 

livestreamed on www.sec.gov, and a closed session 

for SEC staff and invited guests. During the closed 

session, students from law school investor advocacy 

clinics across the country presented on various 

issues of importance to retail investors, and engaged 

in collaborative sessions with senior SEC staff. In 

addition to opening remarks from SEC Chair Gary 

Gensler, the Summit also featured remarks from 

Commissioners Caroline Crenshaw, Allison Herren 

Lee, Hester Peirce, then-SEC Investor Advocate Rick 

Fleming, and Gerri Walsh, President of FINRA’s 

Investor Education Foundation and Senior Vice 

President of Investor Education. Over 400 viewers 

joined the livestreamed portion of the event, and 

over 150 viewers joined the closed session through 

the virtual platform, making this year’s Summit the 

most widely attended to date. 

“Safeguarding the Golden Years: 

Avoiding Financial Fraud”

The SEC’s RSTF hosted the public outreach 

portion of the event, titled “Safeguarding the 

Golden Years: Avoiding Financial Fraud.” During 

this part of the program, law students from 

Fordham University’s Securities Arbitration and 

Litigation Clinic discussed ways that predatory 

financial professionals might target senior 

investors. Law students from the University of 

Miami’s Investor Rights Clinic discussed the 

importance of establishing a caregiver plan. 

Panelists from the SEC, AARP and the FINRA 

Investor Education Foundation provided expert 

advice on how seniors and their caregivers might 

avoid predatory financial professionals, and 

responded to moderated questions and questions 

submitted through a designated Summit Inbox. 

Given the success of this first collaboration with 

RSTF, Ombudsman staff looks forward to working 

with RSTF in future efforts to further retail 

investor interests.

Clinic Student Presentations

The closed portion of the program featured 

presentations from nine law school clinics about 

areas of complexity and concern for retail investors. 

Each presentation was followed by question and 

answer sessions with a panel of SEC subject matter 

experts in these areas.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5 5

In the first panel, “Speculative Investing: Digital 

Assets and Meme Stocks,” students from the 

University of Pittsburgh School of Law Securities 

Arbitration Clinic, Cornell Law School Securities 

Law Clinic, and the Seton Hall University School of 

Law FINRA Investor Advocacy Project presented 

on the risks for retail investors when investing 

in digital assets, meme stocks, and non-fungible 

tokens (NFTs). 

The second panel focused on the “Risks of Options 

and Margin Trading.” Students from Howard 

University School of Law Investor Justice and 

Education Clinic, Cardozo Law School Securities 

Arbitration Clinic, and St. John’s University School 

of Law Securities Arbitration Clinic discussed real 

life hazards for retail investors who trade in options 

and on margin, and identified potential gaps for 

regulatory consideration.

During the third panel, “Gamification and Investor 

Behavior,” students from Northwestern Pritzker 

School of Law’s Investor Protection Center, New 

York Law School’s Securities Arbitration Clinic, 

and Pace University Elisabeth Haub School of Law’s 

RealFi Investor Rights Clinic addressed the impact of 

“gamification” on their own experiences as novice 

investors, as well as its impact on clinic clients. After 

identifying various “gamification” techniques used 

by investing apps, the students suggested possible 

ways to address these techniques through regulation 

and other app features.

Closing, Feedback and Future Summit Planning

In a Post-Summit Networking and Debriefing 

Session, SEC staff answered clinic students’ 

questions and expressed appreciation for the clinic 

directors and students’ commitment to protecting 

retail investors. The clinic directors highlighted 

the funding challenges they faced, along with the 

difficulty in meeting the needs of potential and 

actual clinic clients. They shared that, without 

additional funding, some clinics were under pressure 

to reduce or cease operations. The clinics serve 

an essential role in retail investor protection by 

providing retail investors access to free, quality legal 

representation in securities industry disputes. The 

Ombudsman Office will continue to promote public 

awareness of the clinics’ efforts, and to support 

greater clinic funding. 

Feedback about the Summit—and, more specifically, 

about the student presentations—was uniformly 

positive. Viewers and panelists commended the 

students’ mastery of the applicable securities laws, 

the professional quality of their presentations, and 

their thought-provoking suggestions. 

In the wake of such positive feedback and increased 

Summit participation year over year, Ombudsman 

staff have already begun planning for the fourth 

annual Investor Advocacy Clinic Summit in the 

spring of 2023. We look forward to leveraging 

the institutional knowledge of talented SEC staff, 

listening to the perspectives of our guest speakers, 

and learning from the unique experiences of the 

students and clinic directors on the front lines of 

retail investor protection.

Additional Engagement Activities

In addition to the Summit, Ombudsman staff 

participated in and attended select securities industry 

events with the goal of improving our service to 

retail investors and educating external groups about 

the assistance our Office can provide. These events 

included the Coalition of Federal Ombudsman 2021 

Annual Conference, SEC Speaks 2022, quarterly 

meetings with the Public Investors Arbitration 

Bar Association (PIABA), and the 2022 Securities 

Arbitration Clinic Directors Annual Roundtable. 
5 6 | OFFICE OF THE INVESTOR ADVOCATE

In Fiscal Year 2023, we hope to expand the 

footprint of this Office by more actively 

participating in external securities industry activities, 

and by establishing and fortifying relationships with 

other SEC divisions and offices through enhanced 

internal engagement efforts.

OBJECTIVES AND OUTLOOK

This Reporting Period has been a time of much 

transition and accompanying challenges for our 

Office. In this vein, we would like to express our 

gratitude to Latisha Brown, who previously served as 

Acting Ombudsman, and who gracefully helped guide 

Ombudsman staff through this period of change. 

We would also like to thank our Senior Counsel 

Nancy Doty, who transferred to the Office of 

Investor Education and Advocacy in Fiscal Year 

2022. Nancy was an invaluable member of the 

Ombudsman team and a principal influence 

in how we serve investors. In her place, it has 

been our pleasure to welcome Lisa Skrzycki as 

Senior Counsel. Lisa has already made significant 

contributions during her short time in the 

Office, and, together with Joshua Tolbert-Smith 

(Senior Law Clerk, (Contractor)) and Charity 

Miti-Kavuma (Senior Paralegal (Contractor)), she 

rounds out our capable team. We hope to grow our 

team with the addition of another Attorney Adviser 

in Fiscal Year 2023.

Despite staffing challenges and an increasing 

portfolio of responsibilities, our team continues 

to provide thoughtful and timely assistance to the 

retail investors that ask for our help. We continue 

to meet these new responsibilities with enthusiasm 

and a deep commitment to public service. As the 

role of the Office grows and evolves, we look 

forward to the new ways that we will provide 

effective and compassionate assistance to those 

most in need.

Stacy A. Puente 

Acting Ombudsman
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5 7

SUMMARY OF INVESTOR ADVISORY 

COMMITTEE RECOMMENDATIONS AND 

SEC RESPONSES

Congress established the Investor Advisory 

Committee (IAC) to advise and consult 

with the Commission on regulatory 

priorities, initiatives to protect investor interests, 

initiatives to promote investor confidence and the 

integrity of the securities marketplace, and other 

issues.249 The IAC is composed of the Investor 

Advocate, a representative of state securities 

commissions, a representative of the interests of 

senior citizens, and not fewer than 10 or more 

than 20 members appointed by the Commission to 

represent the interests of various types of individual 

and institutional investors.250

Exchange Act Section 39 authorizes the IAC 

to submit findings and recommendations for 

review and consideration by the Commission.251

The statute also requires the SEC “promptly” to 

issue a public statement assessing each finding or 

recommendation of the IAC and disclosing the 

action, if any, the Commission intends to take 

with respect to the finding or recommendation.252

While the Commission must respond to the IAC’s 

recommendations, it is under no obligation to agree 

with or act upon the recommendations.253

In each of its reports to Congress, including this one, 

the Office of the Investor Advocate summarizes the 

IAC recommendations and the SEC’s responses to 

them.254 We continue to report on recommendations 

until we believe the Commission’s response is final. 

For summaries of Commission activities related to 

previous IAC recommendations, please refer to our 

earlier reports to Congress. The Commission may 

in fact be pursuing initiatives that are responsive 

to IAC recommendations, but such initiatives may 

not yet be public. Commission staff—including the 

staff of this Office—are prohibited from disclosing 

nonpublic information.255 Therefore, any such 

initiatives are not reflected in this Report.

Topic Date IAC Recommendation SEC Response

Accounting 

Modernization

Sept. 21, 2022 Establish an Advisory Committee on 

Accounting Modernization that can 

assist the FASB in its standard-setting 

process. Require that the FASB study 

the costs of delayed rulemaking, 

and urge the FASB to create a 

single searchable database of its 

authoritative literature that would be 

freely available to the public.

Pending.
5 8 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Climate-Related 

Disclosure

Sept. 21, 2022 Add a requirement of a “Management 

Discussion of Climate-Related 

Risks & Opportunities;” add a 

required disclosure of material 

facility locations; and eliminate the 

disclosure requirement around board 

expertise.

Pending.

Cybersecurity 

Disclosure

Sept. 21, 2022 Require companies to disclose 

the key factors used to determine 

the materiality of a cybersecurity 

incident; extend certain disclosure 

provisions to registration statements; 

and reconsider the disclosure 

requirement around board 

cybersecurity expertise.

Pending.

Protecting Elder 

Investors

June 9, 2022 Propose various reforms to improve 

the deterrence and prosecution of 

investment fraud against seniors.

Pending.

Funding Investor 

Advocacy Clinics

June 9, 2022 Renewing a 2018 IAC 

recommendation to provide grants 

to law school clinics which represent 

investors.

Pending.

Individual Retirement 

Accounts (IRAs)256

Dec. 2, 2021 Encourage federal agencies to 

address portability and force-outs; 

have the SEC address the use of 

alternative investments in IRAs; and 

coordinate with other federal and 

state regulators to improve investor 

protections over retirement savings.

Pending.

Special Purpose 

Acquisition 

Companies 

(SPACs)257

Sept. 9, 2021 Enhance disclosure requirements 

regarding the SPAC sponsor, 

potential conflicts of interest, 

mechanics of the SPAC and 

de-SPAC transactions, the target 

search process, and any additional 

funding. Publish an analysis of SPAC 

participants, their compensation, and 

their incentives.

On March 30, 2022, the SEC 

proposed adding and amending 

rules to enhance investor protection 

and disclosure related to SPAC and 

de-SPAC transactions.258

Rule 10b5-1 Plans259 Sept. 9, 2021 Require a “cooling off” period and 

prohibit overlapping Rule 10b5-1 

plans. Require enhanced plan 

reporting and disclosures.

On Jan. 13, 2022, the SEC proposed 

amendments to Rule 10b5-1, including 

enhancements to plan reporting 

and disclosure.260 On December 

14, 2022, the Commission adopted 

these amendments with certain 

modifications in response to public 

comments.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 5 9

Topic Date IAC Recommendation SEC Response

Minority and 

Underserved 

Inclusion261

March 11, 2021 Support regulations, legislation, 

programs and other steps that 

increase acquisition of financial 

assets and services by minority 

communities. Continue and build 

upon SEC programs that are directed 

toward increasing financial literacy 

and supporting minority investment.

In process. Among other things, the 

SEC’s Strategic Plan for Fiscal Years 

2022-2026 identifies one of its goals 

as supporting a skilled workforce that 

is diverse, equitable, and inclusive. 

The Strategic Plan states expressly 

that the Commission will focus on the 

workforce to increase capabilities, 

leverage shared commitment to 

investors, and promote diversity, 

equity, inclusion, accessibility, and 

equality of opportunity.

Consistent with its support of steps 

that increase acquisition of financial 

assets and services by minority 

communities, SEC Chair Gary Gensler 

and other Commissioners welcomed 

the establishment of an access and 

inclusion working group within the 

Investor Advisory Committee in 

December 2022.

Credit Rating 

Agencies262

March 11, 2021 Identify in Office of Credit Ratings 

(OCR) reports specific nationally 

recognized statistical rating 

organizations whose conduct was 

deemed to be materially deficient. 

Remodel OCR’s annual examination 

reports to conform to the approach 

utilized in the Public Company 

Accounting Oversight Board’s annual 

public inspection reports.

Pending.

Accounting and 

Financial Disclosure263

May 21, 2020 Reconsider a 2020 rulemaking 

proposal to amend Regulation 

S-K that would permit issuers 

to omit fourth quarter results in 

annual reports and that would 

eliminate the tabular presentation of 

contractual obligation information. 

Closely monitor issuers’ use of 

non-GAAP metrics and accounting 

developments relating to reverse 

factoring.

On June 23, 2020, the SEC’s 

Division of Corporation Finance 

staff published disclosure guidance 

addressing supplier finance programs 

in the context of pandemic-related 

disruptions.264 On October 21, 

2020, the FASB decided to add a 

project to its technical agenda to 

address the disclosure of supplier 

finance programs involving trade 

payables.265 On November 19, 

2020, the Commission adopted 

the amendments to Regulation 

S-K, largely as proposed.266 On 

December 20, 2021, FASB proposed 

new disclosures of supplier finance 

programs.267
6 0 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

ESG Disclosure268 May 21, 2020 Commence an effort to update issuer 

reporting requirements to include 

material, decision-useful disclosure 

concerning environmental, social, and 

governance matters. Consider the 

utility of both principles-based and 

prescriptive reporting requirements.

On February 24, 2021, Acting Chair 

Allison Lee directed the SEC’s 

Division of Corporation Finance 

to enhance its focus on climaterelated disclosure in public company 

filings.269 On March 3, 2021, the SEC’s 

Division of Examinations announced 

its 2021 examination priorities, which 

included a greater focus on climaterelated risks.270 On March 4, 2021, the 

Commission announced the creation 

of a Climate and ESG Task Force in its 

Division of Enforcement.271 On March 

15, 2021, Acting Chair Lee issued 

a call for public input on climate 

change disclosures.272 On March 

21, 2022, the SEC proposed a new 

disclosure rule for climate-related 

information in public company 

filings.273 On May 25, 2022, the SEC 

proposed amendments to rules and 

reporting forms intended to promote 

consistent, comparable, and reliable 

information for investors concerning 

funds’ and advisers’ incorporation of 

ESG factors.274

Disclosure 

Effectiveness275

May 21, 2020 Enhance the effectiveness of new and 

existing disclosure relied on primarily 

by retail investors by, among other 

things, adopting an iterative process 

that includes disclosure research, 

design, and testing.

On October 26, 2022, the 

Commission adopted rule and form 

amendments to require mutual 

funds and exchange-traded funds 

to transmit concise and visually 

engaging shareholder reports 

and to promote transparent and 

balanced presentations of fees and 

expenses in investment company 

advertisements.276
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 6 1

Topic Date IAC Recommendation SEC Response

SEC Guidance and 

Rule Proposals on 

Proxy Advisors 

and Shareholder 

Proposals277

Jan. 24, 2020 Revisit priorities in improving the 

proxy system, revise and republish 

the 2019 proxy voting rulemaking 

proposals, and reconsider the 2019 

proxy voting guidance.

On July 22, 2020, the Commission 

adopted the amendments to the 

proxy rules without republishing 

them for further comment.278 On 

September 23, 2020, the Commission 

adopted the amendments to 

Exchange Act Rule 14a-8 without 

republishing them for further 

comment.279

On June 1, 2021, Chair Gensler 

directed Commission staff to 

consider whether to recommend 

further regulatory action regarding 

proxy voting advice, in particular 

whether to recommend the 

Commission revisit its related 2019 

and 2020 actions.280 Also on June 

1, 2021, the Division of Corporation 

Finance issued a statement that it 

will not recommend enforcement 

action based on the 2019 guidance 

or the 2020 amendments while the 

Commission is considering further 

regulatory action in this area.281 On 

November 17, 2021, the Commission 

proposed additional amendments 

to the rules governing proxy advice 

in light of, among other things, 

feedback from market participants 

and certain developments in the 

market for proxy voting advice.282

On July 13, 2022, the Commission 

adopted these amendments.283

Exchange Rebate Tier 

Disclosure284

Jan. 24, 2020 Require the national securities 

exchanges to provide the 

Commission with regular disclosures 

regarding rebate tiers offered to their 

members, and take steps to require 

monthly public disclosure of these 

rebate practices.

Pending.
6 2 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Proxy Plumbing285 Sept. 5, 2019 Require end-to-end vote 

confirmations to end users of the 

proxy system, require all involved to 

cooperate in reconciling vote-related 

information, conduct studies on 

investor views on anonymity and 

share lending, and finalize the 2016 

universal proxy rulemaking proposal.

On April 16, 2021, the Commission 

reopened the comment period 

on the proposed rules for the 

use of universal proxy cards in 

all non-exempt solicitations for 

contested director elections.286 On 

November 17, 2021, the Commission 

adopted rule and form amendments 

to require the use of a universal 

proxy card in all non-exempt 

director election contests, 

except those involving registered 

investment companies and business 

development companies.287

Structural Changes 

to the US Capital 

Markets Regarding 

Investment Research 

in a Post-MiFID II 

World288

July 25, 2019 Prioritize certain concepts and 

guiding principles, including the 

following: (1) consumers of research, 

regardless of location, should be 

allowed to choose whether to 

purchase research “bundled” or 

“unbundled” from trading costs; 

and (2) there should be greater 

transparency regarding research 

costs and how those costs are borne.

On November 12, 2019, the 

Commission extended temporary 

no-action relief from compliance with 

registration under the Advisers Act 

for brokers that receive payments for 

research in hard dollars or through 

research payment accounts from 

managers subject to MiFID II through 

July 3, 2023.289

Human Capital 

Management 

Disclosure290

Mar. 28, 2019 Revise issuer disclosure requirements 

to elicit more insightful disclosure 

concerning how human capital within 

a firm is managed and incentivized.

On August 26, 2020, the Commission 

adopted rule amendments to 

modernize the description of 

business, legal proceedings, and 

risk factor disclosures that issuers 

are required to make pursuant to 

Regulation S-K. The amendments 

include the addition of human capital 

resources as a disclosure topic.291

Financial Support 

for Law School 

Clinics that Support 

Investors292

Mar. 8, 2018 Explore ways to improve external 

funding sources to the law school 

investor advocacy clinics. Work with 

FINRA, NASAA, and other potential 

partners, and request legislation from 

Congress to consider permanent 

funding.

Pending. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 6 3

Topic Date IAC Recommendation SEC Response

Dual Class and 

Other Entrenching 

Governance 

Structures in Public 

Companies293

Mar. 8, 2018 Direct Division of Corporation 

Finance staff to scrutinize disclosure 

documents filed by issuers with 

dual class and other entrenching 

governance structures, comment on 

such documents so as to enhance the 

salience and detail of risk disclosure, 

and develop guidance to address a 

range of issues that such structures 

raise.

Pending.

Shortening the 

Settlement Cycle294

Feb. 12, 2015 Shorten the security settlement 

period in the U.S. financial markets 

from a three-day settlement cycle 

(referred to as T+3) to a one-day 

settlement cycle (T+1) for “at 

least” transactions in U.S. equities, 

corporate and municipal bonds, and 

unit investment trusts

On February 9, 2022, the Commission 

proposed to shorten the settlement 

cycle to T+1 for equities, corporate 

bonds and other non-exempt 

securities.295

Accredited Investor 

Definition296

Oct. 9, 2014 Evaluate whether the current 

definition achieves the goal of 

identifying a class of individuals 

who are able to make an informed 

investment decision and protect their 

interests without the protections of 

registration and disclosure. Consider 

other definitional approaches.

On August 26, 2020, the Commission 

adopted amendments to the 

definition of accredited investor.297

Among other changes, the 

amendments allow individuals to 

qualify as accredited investors if 

they possess certain professional 

credentials or affiliations, even if they 

do not meet the income or net worth 

thresholds. The Commission chose 

not to modify the definition’s income 

or net worth thresholds.

Impartiality in 

the Disclosure of 

Preliminary Voting 

Results298

Oct. 9, 2014 Ensure impartiality in the disclosure 

of preliminary voting results.

Pending. 
6 4 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Universal Proxy 

Ballots299

July 25, 2013 Allow universal ballots in connection 

with short-slate director nominations.

On October 26, 2016, the 

Commission proposed amendments 

to the proxy rules to require parties in 

a contested election to use universal 

proxy cards that would include 

the names of all board of director 

nominees.300

On November 17, 2021, the 

Commission adopted final rules 

relating to the use of universal 

proxy cards in contested director 

elections.301
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 6 5

ENDNOTES

1 Exchange Act § 4(g)(6), 15 U.S.C. § 78d(g)(6).

2 Exchange Act § 4(g)(6)(A)(i), 15 U.S.C. § 78d(g)(6)(A)

(i).

3 See SEC, Off. of the Inv. Advoc., Report on 

Objectives, Fiscal Year 2022 (June 28, 2021) 

[hereinafter Report on Objectives, Fiscal Year 

2022], https://www.sec.gov/files/sec-office-investoradvocate-report-on-objectives-fy2022.pdf. 

4 Exchange Act § 4(g)(6)(B)(i), 15 U.S.C. § 78d(g)(6)(B)

(i).

5 Id. Exchange Act Section 4(g)(6)(B) requires the Report 

on Activities to include an “inventory” of the most 

serious problems encountered by investors during the 

Reporting Period. The inventory must identify any 

action taken by the Commission or an SRO to resolve 

each problem, the length of time that each item has 

remained on our inventory and, for items on which no 

action has been taken, the reasons for inaction and an 

identification of any official who is responsible for such 

action. 

6 The Office of the Investor Advocate was established 

pursuant to Section 915 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act of 2010 

(Dodd-Frank Act). 

7 Report on Objectives, Fiscal Year 2022, supra note 

3. 

8 See SEC, Off. of the Inv. Advoc., Report on 

Objectives, Fiscal Year 2023 (June 30, 2022) 

[hereinafter Report on Objectives, Fiscal Year 

2023], https://www.sec.gov/files/sec-office-investoradvocate-report-objectives-fy2023.pdf at 12.

9 See James Chalmers, Emma Cox, & Nadja Picard, 

The Economic Realities of ESG, PwC (Oct. 28, 2021) 

(highlighting results of PwC 2021 Global Investor 

Survey).

10 SEC, Recommendation of the Investor Advisory 

Committee Relating to ESG Disclosure (May 21, 

2020), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/esg-disclosure.pdf.

11 Report on Objectives, Fiscal Year 2022, supra

note 3, at 5, https://www.sec.gov/files/sec-officeinvestoradvocate-report-on-objectives-fy2022.pdf.

12 See The Enhancement and Standardization of ClimateRelated Disclosures for Investors, Securities Act Rel. 

No. 11042, Exchange Act Rel. No. 94478, 17 C.F.R. 

pts. 210, 229, 232, 239, 249 (Mar. 21, 2022) https://

www.sec.gov/rules/proposed/2022/33-11042.pdf

[hereinafter Climate Release].

13 Id.

14 Id.

15 SEC, Fact Sheet, The Enhancement and Standardization 

of Climate-Related Disclosures for Investors at 2, 

https://www.sec.gov/files/33-11042-fact-sheet.pdf.

16 In addition, the proposal offers some accommodations 

for Scope 3 emissions disclosure: (1) a safe harbor 

for Scope 3 emissions disclosure from certain forms 

of liability under the federal securities laws; (2) an 

exemption for smaller reporting companies (SRCs) 

from the Scope 3 emissions disclosure provision; and 

(3) a delayed compliance date for Scope 3 emissions 

disclosure. Climate Release, supra note 12, at 210.

17 West Virginia v. EPA, 597 U.S. __ (2022).

18 See Enhanced Disclosures by Certain Investment 

Advisers and Investment Companies about 

Environmental, Social, and Governance Investment 

Practices, Investment Adviser Act Release No. 6034, 

Investment Company Act Release No. 34594, 17 

C.F.R. pts. 200, 230, 232, 239, 249, 274, 279 (May 

25, 2022), https://www.sec.gov/rules/proposed/2022/

ia-6034.pdf [hereinafter Adviser ESG Release].

19 See, e.g., Report on Objectives, Fiscal Year 2023, 

supra note 8, at 10. 

20 17 C.F.R. § 240.10b-5 (2020).

21 17 C.F.R. § 240.10b5-1 (2020).

22 See Letter from Allison Herren Lee, Acting Chair, SEC, 

to Elizabeth Warren, U.S. Senator (Apr. 14, 2021) 

[hereinafter Lee, Apr. 14, 2021 Letter] (listing recent 

Commission enforcement actions involving Rule 

10b5-1 plans), https://www.warren.senate.gov/imo/

media/doc/Warren%20et%20al%20-%20Rule%20

10b5-1%20-%20ES159896%20Response.pdf.
6 6 | OFFICE OF THE INVESTOR ADVOCATE

23 Taylan Mavruk & H. Nejat Seyhun, Do SEC’s 10b5-1 

Safe Harbor Rules Need to be Rewritten?, 2016 

Colum. Bus. L. Rev. 133, 181-82, https://journals.

library.columbia.edu/index.php/CBLR/article/

view/1734/754; see also Letter from Elizabeth Warren, 

Sherrod Brown & Chris Van Hollen, U.S. Senators, 

to Allison Herren Lee, Acting Chair, SEC (Feb. 10, 

2021) [hereinafter Letter from Elizabeth Warren 

et al.], https://www.warren.senate.gov/imo/media/

doc/02.10.2021%20Letter%20from%20Senators%20

Warren,%20Brown,%20and%20Van%20Hollen%20

to%20Acting%20Chair%20Lee.pdf.

24 Gary Gensler, Chair, SEC, Prepared Remarks, CFO 

Network Summit (June 7, 2021), https://www.sec.gov/

news/speech/gensler-cfo-network-2021-06-07.

25 Under the rule, for example, plans may provide that 

if company shares hit a predetermined price level, 

company executives will automatically sell previouslydetermined portions of their shares. 17 C.F.R. § 

240.10b5-1(c)(1)(B)(2) (2020). These potentially 

large sales may then limit or depress share value after 

positive news, which purchasing investors have no 

ability to predict. See Letter from Elizabeth Warren et 

al., supra note 23 (discussing research findings).

26 See Rule 10b5-1 and Insider Trading, Securities Act 

Rel. No. 33-11013, 17 C.F.R. pts. 229, 232, 240 

and 249 (Jan. 13, 2022), https://www.sec.gov/rules/

proposed/2022/33-11013.pdf.

27 See Insider Trading Arrangements and Related 

Disclosures, Securities Act Rel. No. 33-xxxxx, 17 

C.F.R. pts. 229, 232, 240 and 249 (Dec. 14, 2022), 

https://www.sec.gov/rules/final/2022/__________.pdf.

28 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the 

Investor-as-Owner Subcommittee on Rule 10b5-1 Plans 

(Sept. 9, 2021), https://www.sec.gov/spotlight/investor 

advisory-committee-2012/draft-recommendation-of 

the-iao-subcommittee-on-10b5-1-plans-082621.pdf.

29 See, e.g., SEC, Off. of the Inv. Advoc., Report 

on Activities, Fiscal Year 2021 (Dec. 16, 2021) 

[hereinafter Report on Activities, Fiscal Year 

2021], https://www.sec.gov/files/FY21_OIAD_SAR_

ACTIVITIES_REPORT_FINAL_508.pdf at 5.

30 See Universal Proxy, Exchange Act Rel. No. 93596, 17 

C.F.R. pt. 240 (Nov. 17, 2021), https://www.sec.gov/

rules/final/2021/34-93596.pdf.

31 See Holding Foreign Companies Accountable Act 

Disclosure, Exchange Act Rel. No. 93701, 17 C.F.R. 

pts. 200, 232, and 249 (Dec. 2, 2021), https://www.sec.

gov/rules/final/2021/34-93701.pdf.

32 See Share Repurchase Disclosure Modernization, 

Exchange Act Rel. No. 34-93783, 17 C.F.R. pts. 229, 

232, 240, 249, and 274 (Dec. 15, 2021), https://www.

sec.gov/rules/proposed/2021/34-93783.pdf.

33 See Modernization of Beneficial Ownership Reporting, 

Securities Act Rel. No. 11030, 17 C.F.R. pts. 232 

and 240 (Feb. 10, 2022), https://www.sec.gov/rules/

proposed/2022/33-11030.pdf.

34 See Cybersecurity Risk Management, Strategy, 

Governance, and Incident Disclosure, Securities Act 

Rel. No. 33-11038, Exchange Act Rel. No. 34-94382, 

17 C.F.R. pts. 229, 232, 239, 240, and 249 (Mar. 9, 

2022), https://www.sec.gov/rules/proposed/2022/33-

11038.pdf. Over the years, we have monitored the 

efforts of the Commission in addressing cybersecurity 

risks affecting the securities markets, and we are 

generally supportive of the Commission’s proposed 

rules in this area.

35 See Updating EDGAR Filing Requirements and Form 

144 Filings, Securities Act Rel. No. 11070, 17 C.F.R. 

pts. 230, 232, 239, 240 and 249 (June 2, 2022), https://

www.sec.gov/rules/final/2022/33-11070.pdf.

36 See Proxy Voting Advice, Exchange Act Rel. No. 

95266, 17 C.F.R. pts. 240 and 276 (Jul. 13, 2022), 

https://www.sec.gov/rules/final/2022/34-95266.pdf.

37 See id. In addition, the Commission removed 

paragraph (e) of the note to Exchange Act Rule 14a-9 

in order to avoid any misperception that the addition 

of Note (e) to Rule 14a-9 purported to determine 

or alter the law governing that rule’s application 

and scope, including its application to statements of 

opinion.

38 See Report on Activities, Fiscal Year 2021, supra

note 29 at 7.

39 See Substantial Implementation, Duplication, and 

Resubmission of Shareholder Proposals Under 

Exchange Act Rule 14a-8, Exchange Act Rel. No. 

95267, 17 C.F.R. pt. 240 (Jul. 13, 2022), https://www.

sec.gov/rules/proposed/2022/34-95267.pdf.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 6 7

40 See Pay Versus Performance, Exchange Act Rel. No. 

95607, 17 C.F.R. pts. 229, 232, and 240 (Aug. 25, 

2022), https://www.sec.gov/rules/final/2022/34-95607.

pdf.

41 See Inflation Adjustments under Titles I and III of the 

JOBS Act, Securities Act Rel. No. 11098, 17 C.F.R. pts. 

227, 230, 239, and 240 (Sept. 9, 2022), https://www.

sec.gov/rules/final/2022/33-11098.pdf.

42 Over the course of 2020, 248 SPACs were formed, a 

420% increase over 2019’s 59. In 2021, 613 SPACs 

were launched. See SPAC Statistics, SPACInsider, 

https://spacinsider.com/stats/ (last visited November 9, 

2022).

43 SEC, Div. of Corp. Fin., Disclosure Guidance: Topic 

No. 11, Special Purpose Acquisition Companies (Dec. 

22, 2020), https://www.sec.gov/corpfin/disclosurespecial-purpose-acquisition-companies.

44 See, e.g., Securities Act § 11, 15 U.S.C. § 77k; Securities 

Act § 12(a)(2), 15 U.S.C. § 77l(a)(2). Pursuant to 

the Commission’s December 22, 2020 approval of a 

listing rule from the New York Stock Exchange, direct 

listings also do not require use of a firm-commitment 

underwriter. In a December 23, 2020 public statement, 

Commissioners Lee and Crenshaw discussed possible 

investor protection risks arising from the absence of 

an underwriter. See Allison Herren Lee & Caroline A. 

Crenshaw, Comm’rs, SEC, Statement on Primary Direct 

Listings (Dec. 23, 2020), https://www.sec.gov/news/

public-statement/lee-crenshaw-listings-2020-12-23.

45 See Special Purpose Acquisition Companies, Shell 

Companies, and Projections, Securities Act Rel. No. 

11048, 17 C.F.R. pts. 210, 229, 230, 232, 239, 240, 

249, and 270 (Mar. 30, 2022), https://www.sec.gov/

rules/proposed/2022/33-11048.pdf.

46 See id. at 16.

47 As of November 9, 2022, there were 82 SPAC IPOs 

in 2022. See SPAC Statistics, SPACInsider, https://

spacinsider.com/stats/ (last visited November 9, 2022).

48 SEC, Recommendation of the Investor Advocate to 

NYSE concerning SPAC Listing Standards (Apr. 21, 

2022), https://www.sec.gov/about/offices/investorad/

recommendation-of-the-investor-advocate-nyse-spaclisting-standards-042122.pdf; SEC, Recommendation 

of the Investor Advocate to NASDAQ concerning 

SPAC Listing Standards (Apr. 21, 2022), https://www.

sec.gov/about/offices/investorad/recommendationof-the-investor-advocate-nasdaq-spac-listingstandards-042122.pdf. 

49 See NASDAQ Listing Qualifications, Invitation to 

Share Views: SEC Investor Advocate Letter Related to 

SPAC Listing Standards (2022), https://listingcenter.

nasdaq.com/assets/Invitation%20to%20Share%20

Views%20-%20SEC%20Investor%20Advocate%20

Letter%20Related%20to%20SPAC%20Listing%20

Standards.pdf. 

50 Joint Industry Plan, Order Approving, as Modified, a 

National Market System Plan Regarding Consolidated 

Equity Market Data, Exchange Act Release No. 92586, 

86 Fed. Reg. 44,142 (Aug. 11, 2021), https://www.

federalregister.gov/d/2021-17113.

51 See The Nasdaq Stock Mkt. LLC v. SEC, 38 F.4th 1126 

(D.C. Cir. 2002). 

52 See, e.g., Consolidated Tape Association, Order 

Instituting Proceedings to Determine Whether to 

Approve or Disapprove the Twenty-Fifth Charges 

Amendment to the Second Restatement of the CTA 

Plan and Sixteenth Charges Amendment to the 

Restated CQ Plan, Exchange Act Release No. 94309, 

87 Fed. Reg. 11,763 (Mar. 2, 2022), https://www.

federalregister.gov/d/2022-04334. 

53 See id. at 11,766. 

54 See, e.g., Consolidated Tape Association, Order 

Disapproving the Twenty-Fifth Charges Amendment 

to the Second Restatement of the CTA Plan and 

Sixteenth Charges Amendment to the Restated CQ 

Plan, Exchange Act Release No. 95851, 87 Fed. Reg. 

58,613 (Sept. 27, 2022), https://www.federalregister.

gov/d/2022-20833. 

55 See Proposed Rule, Shortening the Settlement Cycle, 

Exchange Act Release No. 94196 (Feb. 9, 2022), 

87 Fed. Reg. 10,436 (Feb. 24, 2022), https://www.

federalregister.gov/d/2022-03143. 

56 See SEC, Recommendation of the Investor Advisory 

Committee: Shortening the Trade Settlement Cycle in 

U.S. Financial Markets (Feb. 12, 2015), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

settlement-cycle-recommendation-final.pdf. 

57 See SEC, Staff Report on Equity and Options Market 

Structure Conditions in Early 2021 (Oct. 14, 2021), 

https://www.sec.gov/files/staff-report-equity-optionsmarket-struction-conditions-early-2021.pdf. 
6 8 | OFFICE OF THE INVESTOR ADVOCATE

58 See Proposed Rule, Short Position and Short Activity 

Reporting by Institutional Investment Managers, 

Exchange Act Release No. 94313, 87 Fed. Reg. 

14,950 (Mar. 16, 2022), https://www.federalregister.

gov/d/2022-04670. 

59 See Proposed Rule, Reporting of Securities Loans, 

Exchange Act Release No. 93613, 86 Fed. Reg. 69,802 

(Dec. 8, 2021), https://www.federalregister.gov/d/2021-

25739. 

60 In addition to reviewing Commission rulemakings, 

the Office of the Investor Advocate is responsible for 

analyzing the potential impact on investors of proposed 

rules of self-regulatory organizations (SROs). See

Exchange Act § 4(g)(4), 15 U.S.C. § 78d(g)(4).

61 See Self-Regulatory Organizations; Cboe BYX 

Exchange, Inc.; Notice of Filing of Amendment No. 

2 and Order Approving on an Accelerated Basis a 

Proposed Rule Change, as Modified by Amendment 

No. 2, To Make Clarifying Changes Regarding Its 

Periodic Auctions, Exchange Act Release No. 94012, 

87 Fed. Reg. 4,060 (Jan. 26, 2022), https://www.

federalregister.gov/d/2022-01465. 

62 See In the Matter of the Application of 24X National 

Exchange LLC for Registration as a National Securities 

Exchange; Order Instituting Proceedings to Determine 

Whether to Grant or Deny an Application for 

Registration as a National Securities Exchange Under 

Section 6 of the Securities Exchange Act of 1934, 

Exchange Act Release No. 95651 (Sept. 1, 2022), 87 

Fed. Reg. 54736 (Sept 7, 2022) (File No. 10-239). 

63 See Joint Industry Plan, Order Approving the National 

Market System Plan Governing the Consolidated 

Audit Trail, Exchange Act Release No. 79318 (Nov. 

15, 2016), https://www.sec.gov/rules/sro/nms/2016/34-

79318.pdf.

64 See Timeline, Consolidated Audit Trail, 

available at https://www.catnmsplan.com/timeline

(last visited Oct. 19, 2022); see also Full CAIS 

Production Certification and Compliance Deadlines 

Extended, Consolidated Audit Trail, https://www.

catnmsplan.com/announcements/full-cais-productioncertification-and-compliance-deadlines-extended (last 

visited Oct. 19, 2022). 

65 See Proposed Amendments to the National Market 

System Plan Governing the Consolidated Audit Trail 

to Enhance Data Security, Exchange Act Release No. 

89632, 85 Fed. Reg. 65,990 (Oct. 16, 2020), https://

www.govinfo.gov/content/pkg/FR-2020-10-16/

pdf/2020-18801.pdf.

66 See Investment Company Act Release No. 33477 

(May 20, 2019); Investment Company Act Release 

No. 33710 (Dec. 10, 2019); Investment Company 

Act Release No. 33711 (Dec. 10, 2019); Investment 

Company Act Release No. 33712 (Dec. 10, 2019); 

Investment Company Act Release No. 33713 (Dec. 10, 

2019).

67 See Use of Derivatives by Registered Investment 

Companies and Business Development Companies, 

Investment Company Act Release No. 34084 (Oct. 28, 

2020), https://www.sec.gov/rules/final/2020/ic-34084.

pdf [hereinafter Derivatives Adopting Release], at 

section II.F.6.

68 See Caroline A. Crenshaw, Comm’r, SEC, Statement on 

Single-Stock ETFs (July 11, 2022), https://www.sec.gov/

news/statement/crenshaw-single-stock-etfs-20220711

[hereinafter Crenshaw Single-Stock ETF Statement].

69 See Exchange-Traded Funds, Securities Act Release No. 

10695, Investment Company Act Release No. 33646, 

84 Fed. Reg. 57162 (Oct. 24, 2019), https://www.

federalregister.gov/documents/2019/10/24/2019-21250/

exchange-traded-funds [hereinafter ETF Rule Adopting 

Release] at notes 2-5 and accompanying text.

70 See id. at section I.

71 See id. at section II.C.4.

72 See id. at section II.A.3.

73 Id.

74 See id. at note 75. 

75 See Office of Investor Education and Advocacy, SEC, 

Leveraged and Inverse ETFs: Specialized Products with 

Extra Risks for Buy-and-Hold Investors Investor Alert 

and Bulletins (Aug. 1, 2009), available at http://www.

sec.gov/investor/pubs/leveragedetfs-alert.htm.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 6 9

76 FINRA, Non-Traditional ETFs: FINRA Reminds of 

Sales Practice Obligations Relating to Leveraged and 

Inverse Exchange-Traded Funds, Regulatory Notice 

09-31 (June 2009), available at https://www.finra.org/

rules-guidance/notices/09-31.

77 See Request for Comment on Exchange-Traded 

Products, Exchange Act Release No. 75165 (Jun. 

12, 2015), available at https://www.sec.gov/rules/

other/2015/34-75165.pdf.

78 See, e.g., Press Release, SEC, SEC Charges Wells Fargo 

in Connection with Investment Recommendation 

Practices (Feb. 27, 2020), https://www.sec.gov/

news/press-release/2020-43 (“The order finds that 

some Wells Fargo brokers and advisers did not fully 

understand the risk of losses these complex products 

posed when held long term. As a result, certain 

Wells Fargo investment advisers and registered 

representatives made unsuitable recommendations to 

certain clients to buy and hold single-inverse ETFs for 

months or years. According to the order, a number 

of these clients were senior citizens and retirees who 

had limited incomes and net worth, and conservative 

or moderate risk tolerances.”); In the Matter of 

Morgan Wilshire Securities Inc., Exchange Act Release 

No. 89979 (Sept. 24, 2020), https://www.sec.gov/

litigation/admin/2020/34-89979.pdf (“During the 

relevant period, certain Morgan Wilshire registered 

representatives recommended that a number of their 

retail customers buy inverse ETFs without regard to 

holding periods. Based on these recommendations, 

Morgan Wilshire customers purchased and held 

these inverse ETFs for longer than a single day, and 

in many cases, months, or years. Those registered 

representatives did not adequately understand all of the 

features and risks of inverse ETFs.”).

79 See, e.g., Chris Flood, SEC Decision on Leveraged 

ETFs Sparks Concern for Retail Investors, Fin. 

Times (Oct. 29, 2020), https://www.ft.com/content/

f607fc5d-8b10-4c09-9274-d040e617caa6 (noting 

that, despite the single-day investment horizon for 

leveraged/ inverse ETFs, “about a quarter of the 

investors in some popular leveraged ETFs held on to 

these positions for more than a month while 8 percent 

owned their holdings for three months.”); Securities 

Litigation and Consulting Group, Leveraged ETFs, 

Holding Periods and Investment Shortfalls (2010), 

at 13 (“The percentage of investors that we estimate 

hold [leveraged/inverse ETFs] longer than a month is 

quite striking.”); ETF Rule Adopting Release, supra

note 69, at n.78 (discussing comment letters submitted 

by Consumer Federation of America (urging the 

Commission to consider additional investor protection 

requirements for leveraged/inverse ETFs) and by 

Nasdaq (stating that “there is significant investor 

confusion regarding existing leveraged/inverse ETFs’ 

daily investment horizon”)).

80 See, e.g., Jay Clayton, Chairman, SEC, Dalia Blass, 

Director, SEC Division of Investment Management, 

William Hinman, Director, SEC Division of 

Corporation Finance, and Brett Redfearn, Director, 

SEC Division of Trading and Markets, Joint Statement 

Regarding Complex Financial Products and Retail 

Investors (Oct. 28, 2020), https://www.sec.gov/news/

public-statement/clayton-blass-hinman-redfearncomplex-financial-products-2020-10-28 (“We believe 

that these leveraged/inverse products and other 

complex products may present investor protection 

issues—particularly for retail investors who may not 

fully appreciate the particular characteristics or risks 

of such investments, including the risks that holding 

such products may pose to their investment goals.”) 

[hereinafter Joint Complex Products Statement]; Jay 

Clayton, Chairman, SEC, Public Statement: Taking 

Significant Steps to Modernize Our Regulatory 

Framework (Sept. 26, 2019), https://www.sec.gov/

news/public-statement/clayton-2019-09-26-threerulemakings (“I believe it would be premature to 

include leveraged and inverse ETFs within the scope of 

[the ETF Rule] before the Commission has addressed 

the investor protection concerns that have been raised 

regarding these products.”); Allison Herren Lee, 

Commissioner, SEC, Public Statement: Statement on 

the Final Rule on Funds’ Use of Derivatives (Oct. 28, 

2020), https://www.sec.gov/news/public-statement/

lee-derivatives-2020-10-28 (“[R]etail investors (and 

even investment professionals) often do not understand 

the risks involved in holding leveraged and inverse 

ETFs for periods exceeding the fund’s relevant time 

horizon.”).
7 0 | OFFICE OF THE INVESTOR ADVOCATE

81 See Investment Company Act Release No. 33477 

(May 20, 2019); Investment Company Act Release 

No. 33710 (Dec. 10, 2019); Investment Company 

Act Release No. 33711 (Dec. 10, 2019); Investment 

Company Act Release No. 33712 (Dec. 10, 2019); 

Investment Company Act Release No. 33713 (Dec. 10, 

2019).

82 See Derivatives Adopting Release, supra note 67 at 

section II.F.6.

83 See Use of Derivatives by Registered Investment 

Companies and Business Development Companies; 

Required Due Diligence by Broker-Dealers and 

Registered Investment Advisers Regarding Retail 

Customers’ Transactions in Certain Leveraged/Inverse 

Investment Vehicles, Investment Company Act Release 

No. 33704, 85 Fed. Reg. 4,446 (proposed Nov. 25, 

2019), https://www.sec.gov/rules/proposed/2019/34-

87607.pdf [hereinafter Derivatives Proposing Release], 

at section II.G.2.

84 See Derivatives Adopting Release, supra note 67 at 

section II.F.1.

85 See Andres Ricon, Are Single-Stock ETFs the Next Big 

Trend (Aug. 30, 2022), https://www.tdsecurities.com/

ca/en/are-single-stock-etfs-the-next-big-trend (“The 

SEC recently backed the listing of several single-stock 

ETFs, many of which gained traction thanks to retail 

investors.”).

86 See Report on Objectives, Fiscal Year 2022, supra

note 3 at 11.

87 For a discussion of the traditional ETF arbitrage 

mechanism and the variations that nontransparent 

ETFs utilize, see id. at 11.

88 Brian Ponte, Ignites, Portfolio-Shielding ETFs: ‘Dead 

in the Water’ (Oct. 25, 2022), https://www.ignites.

com/c/3792874/490704/portfolio_shielding_etfs_dead_

water?referrer_module=emailMorningNews&module_

order=0&code=YzJoaGNtMWhiVUJ6WldNdVoyOTJMQ0F4TURBd056UTVMQ0EwTnpRME9EY3lNVFE9. 

89 See ETF Rule Adopting Release, supra note 69, at 

II.A.3.

90 See id.

91 See id.

92 See Derivatives Adopting Release, supra note 67, at 

II.F.6.

93 See Lori J. Schock, Director, SEC Office of Investor 

Education and Advocacy, Statement on Single-Stock 

Levered and/or Inverse ETFs (July 11, 2022), https://

www.sec.gov/news/statement/schock-statementsingle-stock-levered-and-or-inverse-etfs-071122. 

During the Reporting Period, certain fund managers 

also filed, then later withdrew, plans for single-stock 

ETFs that would provide one-to-one (non-leveraged, 

non-inverse) exposure to non-U.S. securities that 

U.S. retail investors are currently unable to access. 

See Steve Johnson, Fund Managers Pull Nearly 130 

Single-Stock ETF Applications, Fin. Times (Sept. 

30, 2022), https://www.ft.com/content/26682b0de117-4add-b4b7-eebcaa79b912 (“Kelly Intelligence, 

Roundhill Investments and Tema Global had filed with 

the Securities and Exchange Commission to create 

ETFs linked to the share price of a slate of non-US 

companies, such as Saudi Aramco, Volkswagen and 

Tencent . . . [T]he proposed new products would 

not have employed leverage, and simply aimed to 

improve retail access to foreign securities, given that 

many brokers, such as Robinhood, do not provide this 

service.”).

94 See id.

95 See Crenshaw Single-Stock ETF Statement, supra note 

68.

96 See id.

97 Meetings of the Investor Advisory Committee are 

regularly made available as webcasts at https://www.

sec.gov/spotlight/investor-advisory-committee. 

98 Gary Gensler, Chair, SEC, Statement on Complex 

Exchange-Traded Products (Oct. 4, 2021), https://

www.sec.gov/news/public-statement/gensler-statementcomplex-exchange-traded-products-100421.

99 See Joint Complex Products Statement, supra note 80.

100 Tailored Shareholder Reports for Mutual Funds and 

Exchange-Traded Funds; Fee Information in Investment 

Company Advertisements, Investment Company Act 

Release No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 

5, 2020)], https://www.sec.gov/rules/final/2022/33-

11125.pdf [hereinafter Tailored Shareholder Reports 

Adopting Release].

101 Id. at sections II.A.2 and II.B.1.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7 1

102 Id. at II.A.4.

103 Id. at II.H.

104 Form N-CSR is a combined reporting form that is to be 

used for reports of registered management investment 

companies under Section 30(b)(2) of the Investment 

Company Act of 1940 and Section 13(a) or 15(d) of the 

Securities Exchange Act of 1934, filed pursuant to Rule 

30b2-1(a) under the Act (17 CFR 270.30b2-1(a)).

105 See Tailored Shareholder Reports Adopting Release, 

supra note 100, at II.C.2.b.

106 See Optional Internet Availability of Investment 

Company Shareholder Reports, Investment Company 

Act Release No. 33115 (June 5, 2018) [83 FR 

29158 (June 22, 2018)], https://www.sec.gov/rules/

final/2018/33-10506.pdf. 

107 See Tailored Shareholder Reports Adopting Release, 

supra note 100, at text accompanying n. 65.

108 Id. at II.G.

109 Id.

110 Id.

111 See Tailored Shareholder Reports, Treatment of 

Annual Prospectus Updates for Existing Investors, 

and Improved Fee and Risk Disclosure for Mutual 

Funds and Exchange-Traded Funds; Fee Information 

in Investment Company Advertisements, Investment 

Company Act Release No. 33963 (Aug. 5, 2020) 

[85 FR 70716 (Nov. 5, 2020)] [hereinafter Tailored 

Shareholder Reports Proposing Release] at section II.F.

112 See section 5(b)(2) of the Securities Act [15 U.S.C. 

77e(b)(2)] (generally requiring that a fund or financial 

intermediary deliver a prospectus to an investor in 

connection with a purchase of the fund’s securities). 

Because section 5(b)(2) requires funds to deliver a 

prospectus to an investor purchasing shares, including 

existing shareholders who purchase additional shares, 

funds generally provide annual updates of prospectuses 

to all shareholders.

113 See Tailored Shareholder Reports Proposing Release, 

supra note 111, at sections II.H.1.b-e.

114 See Tailored Shareholder Reports Adopting Release, 

supra note 100, at I.A.3.

115 See Statement Regarding the SEC’s Rulemaking 

Package for Investment Advisers and Broker-Dealers, 

Rick A. Fleming, Investor Advocate (June 5, 2019), 

available at https://www.sec.gov/news/public-statement/

statement-regarding-sec-rulemaking-packageinvestment-advisers-broker-dealers. 

116 See Proposed Rule, Exemption for Certain Exchange 

Members, Exchange Act Release No. 95388 (July 29, 

2022), 87 Fed. Reg. 49,930 (Aug. 12, 2022), https://

www.federalregister.gov/d/2022-16711. 

117 See, e.g., Self-Regulatory Organizations; Financial 

Industry Regulatory Authority, Inc.; Order Approving a 

Proposed Rule Change to Amend Rule 2165 (Financial 

Exploitation of Specified Adults), Exchange Act Release 

No. 94061 (Jan. 25, 2022), 87 Fed. Reg. 4,974 (Jan 31, 

2022), https://www.federalregister.gov/d/2022-01843. 

118 See, e.g., Self-Regulatory Organizations; Financial 

Industry Regulatory Authority, Inc.; Order Instituting 

Proceedings to Determine Whether to Approve or 

Disapprove the Proposed Rule Change to Amend 

FINRA Rule 8312 (FINRA BrokerCheck Disclosure) to 

Release Information on BrokerCheck Relating to Firm 

Designation as a Restricted Firm, Exchange Act Release 

No. 95791 (Sept. 15, 2022), 87 Fed. Reg. 57,731 (Sept. 

21, 2022), https://www.federalregister.gov/d/2022-

20376. 

119 See, e.g., FINRA Reminds Members of Their Sales 

Practice Obligations for Complex Products and 

Options and Solicits Comment on Effective Practices 

and Rule Enhancements, Regulatory Notice 22-08 

(Mar. 8, 2022), https://www.finra.org/sites/default/

files/2022-03/Regulatory-Notice-22-08.pdf.

120 See Financial Industry Regulatory Authority, Inc.; 

Order Approving a Proposed Rule Change to Amend 

Rule 2165 (Financial Exploitation of Specified Adults), 

Exchange Act Release No. 94061, 87 Fed. Reg. 4,974 

(Jan. 31, 2022), https://www.federalregister.gov/

documents/2022/01/31/2022-01843/self-regulatoryorganizations-financial-industry-regulatory-authorityinc-order-approving-a-proposed.

121 See Investor Justice Act of 2022, H.R. 7923, 117th

Cong. (2021-2022), https://www.congress.gov/

bill/117th-congress/house-bill/7923?q=%7B%22search

%22%3A%5B%22HR+7923%22%2C%22HR%22

%2C%227923%22%5D%7D&s=1&r=1.
7 2 | OFFICE OF THE INVESTOR ADVOCATE

122 See Recommendation of the SEC Investor Advisory 

Committee to Better Protect Older Adult Investors 

(June 9, 2022), https://www.sec.gov/spotlight/investoradvisory-committee-2012/20220609-protecting-olderinvestor-recommendation.pdf.

123 See Recommendation of the SEC Investor Advisory 

Committee Regarding Investor Advocacy Clinic 

Funding, https://www.sec.gov/spotlight/investoradvisory-committee-2012/20220609-investor-clinicrecommendation.pdf.

124 PCAOB, Request for Information and Comment, The 

Application and Use of PCAOB’s Interim Attestation 

Standards (Sep. 26, 2022), https://pcaob-assets.

azureedge.net/pcaob-dev/docs/default-source/standards/

staff-request-for-comment/rfc-application-use-interimattestation-standards.pdf. 

125 PCAOB, News Release, PCAOB Announces Members 

of New Advisory Groups, Sets Dates for First Meetings 

(May 9, 2022), https://pcaobus.org/news-events/

news-releases/news-release-detail/pcaob-announcesmembers-of-new-advisory-groups-sets-dates-firstmeetings. 

126 PCAOB, News Release, Saba Qamar Named Investor 

Advocate at the PCAOB (Jun. 7, 2022), https://

pcaobus.org/news-events/news-releases/news-releasedetail/saba-qamar-named-investor-advocate-at-thepcaob. 

127 PCAOB, News Release, Kent Bonham Named 

Director of PCAOB’s Office of Communications 

and Engagement (Sep. 12, 2022), https://pcaobus.

org/news-events/news-releases/news-release-detail/

kent-bonham-named-director-of-the-pcaob-s-office-ofcommunications-and-engagement. 

128 PCAOB, News Release, Mark A. Adler to Serve 

as Acting Director of Division of Enforcement and 

Investigations as Patrick Bryan Is Set to Depart 

(Sep. 14, 2022), https://pcaobus.org/news-events/

news-releases/news-release-detail/mark-a-adler-to-serveas-acting-director-of-division-of-enforcement-andinvestigations-as-patrick-bryan-is-set-to-depart. 

129 SEC, Holding Foreign Companies Accountable Act, 

https://www.sec.gov/hfcaa (last visited Nov. 17, 2022).

130 Accelerating Holding Foreign Companies Accountable 

Act, H.R. 6285, 117th Cong. (2021-2022), https://

www.congress.gov/bill/117th-congress/housebill/6285?r=37&s=1. 

131 See Adopted Rule, Listing Standards for Recovery of 

Erroneously Awarded Compensation, Exchange Act 

Release No. 34-96159, (Oct. 26, 2022), https://www.

sec.gov/rules/final/2022/33-11126.pdf. 

132 Kenneth A. Polite, Assistant Attorney General, 

Department of Justice, Prepared Remarks, University of 

Texas Law School (Sep. 16, 2022), https://www.justice.

gov/opa/speech/assistant-attorney-general-kennethpolite-delivers-remarks-university-texas-law-school. 

133 FASB, News Release, FASB Proposes to Enhance 

Transparency Around Supplier Finance Programs (Dec. 

20, 2021), https://fasb.org/page/getarticle?uid=fasb_

Media_Advisory_12-20-21_Body_0228221200. 

134 SEC, Staff Accounting Bulletin No. 121, 17 C.F.R. 

§ 211, https://www.sec.gov/oca/staff-accountingbulletin-121. 

135 We use the term digital assets to refer to an asset that 

is issued and/or transferred using distributed ledger or 

blockchain technology including cryptocurrencies.

136 Hester Peirce, Commissioner, SEC, Response 

to Staff Accounting Bulletin No. 121 (Mar. 31, 

2022), https://www.sec.gov/news/statement/peirceresponse-sab-121-033122. 

137 Hal Scott and John Gulliver, An SEC Rule May 

Cost FTX Crypto Customers Billions, Wall Street 

Journal, Nov. 14, 2022, https://www.wsj.com/articles/

an-sec-rule-may-cost-ftx-customers-billions-tradingexchange-crypto-assets-broker-dealers-investorsmarkets-11668455906?mod=opinion_lead_pos7. 

138 Exchange Act § 4(g)(6)(B)(ii)(V), 15 U.S.C. § 78d(g)(6)

(B)(ii)(V).

139 NASAA, NASAA 2021 Activity Report, Leading the 

Way on Investor Protection (2021), https://www.nasaa.

org/newsroom/publications/nasaa-activity-report/. 

140 NASAA, NASAA Enforcement Report: 2022 Report 

Based on 2021 Data (Sept. 2022), https://www.nasaa.

org/wp-content/uploads/2022/09/2022-EnforcementReport-FINAL.pdf. 

141 NASAA, Top Investor Threats, https://www.nasaa.org/

investor-education/fraud-center/top-investor-threats/

(last visited Nov. 14, 2022).

142 SEC, Division of Examinations, Examination Priorities 

for 2022 (Mar. 30, 2022), https://www.sec.gov/

files/2022-exam-priorities.pdf. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7 3

143 This list of problematic products identified by the SEC 

is based on staff analysis of the alerts and bulletins 

issued by the SEC’s Office of Investor Education and 

Advocacy and the SEC’s Division of Examinations 

during Fiscal Year 2022. See SEC, Office of Investor 

Education and Advocacy, Investor Alerts and Bulletins, 

https://www.sec.gov/investor/alerts (last visited Nov. 14, 

2022); see also SEC, Division of Examinations, Risk 

Alerts, https://www.sec.gov/exams (last visited Nov. 14, 

2022).

144 See NASAA, Investor Advisories, https://www.nasaa.

org/category/investor-education/investor-advisories/ 

(last visited Nov. 14, 2022).

145 This list of problematic products is based on news 

alerts issued by the FINRA Foundation during FY 

2022. See FINRA Foundation, News, https://www.

finrafoundation.org/news (last visited Nov. 14, 2022).

146 Letter of Mark Kim, Chief Executive Officer, Municipal 

Securities Rulemaking Board, Nov. 3, 2022.

147 report on activities, fiscal year 2021, supra note 

29, at 18-23.

148 Id.

149 Id.

150 SEC, Office of the Investor Advocate, Report 

on Activities, Fiscal Year 2016 (Dec. 21, 2016), 

at 20-21, https://www.sec.gov/advocate/reportspubs/

annual-reports/sec-investor-advocate-report-onactivities-2016.pdf. 

151 Report on Objectives, Fiscal Year 2022, supra note 

3, at 13.

152 Id.

153 Jaime Lizárraga, Commissioner, SEC, Prepared 

Remarks, Brooklyn Law School Keynote Address (Nov. 

16, 2022), https://www.sec.gov/news/speech/lizarragabrooklyn-law-school-20221116. 

154 Id.

155 Hester Peirce, Commissioner, SEC, Interview – SEC’s 

Peirce Disappointed With Crypto Regulation, 

Bloomberg (Nov. 10, 2022), https://www.bloomberg.

com/news/videos/2022-11-10/sec-s-peirce-disappointedwith-crypto-regulation-video.

156 SEC, Press Release, BlockFi Agrees to Pay $100 Million 

in Penalties and Pursue Registration of Its Crypto 

Lending Product (Feb. 14, 2022), https://www.sec.gov/

news/press-release/2022-26. 

157 Id.

158 MacKenzie Sigalos and Rohan Goswami, CNBC, 

Crypto Firm BlockFi Files for Bankruptcy as FTX 

Fallout Spreads (Nov. 28, 2022), https://www.cnbc.

com/2022/11/28/blockfi-files-for-bankruptcy-as-ftxfallout-spreads.html.

159 SEC, Press Release, SEC Division of Corporation 

Finance to Add Industry Offices Focused on Crypto 

Assets and Industrial Applications and Services 

(Sept. 9, 2022), https://www.sec.gov/news/pressrelease/2022-158. 

160 SEC, Press Release, SEC Nearly Doubles Size of 

Enforcement’s Crypto Assets and Cyber Unit (May 3, 

2022), https://www.sec.gov/news/press-release/2022-78. 

161 SEC, Strategic Hub for Innovation and Financial 

Technology, https://www.sec.gov/finhub (last visited 

Nov. 17, 2022).

162 FASB, Project Update, https://www.fasb.org/Page/

ProjectPage?metadata=fasb-Accounting-for-andDisclosure-of-Crypto-Assets (last visited Nov. 17, 

2022).

163 Janet L. Yellen, Secretary, Department of the Treasury, 

Statement from Secretary of the Treasury Janet L. 

Yellen on the Release of Reports on Digital Assets 

(Sept. 16, 2022), https://home.treasury.gov/news/pressreleases/jy0956. 

164 Ensuring Responsible Development of Digital 

Assets; Request for Comment, 87 Fed. Reg. 57,556 

(Sept. 20, 2022), https://www.federalregister.gov/

documents/2022/09/20/2022-20279/ensuringresponsible-development-of-digital-assets-request-forcomment. 

165 Jacquelyn Melinek and Anita Ramaswamy, 

TechCrunch, Crypto Platform Nexo Sued by New 

York, California and Six Other US Regulators (Sep. 

26, 2022), https://techcrunch.com/2022/09/26/cryptoplatform-nexo-sued-by-new-york-california-and-sixother-us-regulators/. 
74 | OFFICE OF THE INVESTOR ADVOCATE

166 Justin Wise, Bloomberg, Crypto Lawyers Bet Big 

on Class Action Lawsuits as Market Slides (Sep. 21, 

2022), https://news.bloomberglaw.com/businessand-practice/crypto-lawyers-bet-big-on-class-actionlawsuits-as-market-slides. 

167 See supra note 78.

168 See Crenshaw Single-Stock ETF Statement, supra note 

68.

169 U.S. Securities and Exchange Commission’s Fiscal Year 

2023 Congressional Budget Justification https://www.

sec.gov/files/fy-2023-congressional-budget-justificationannual-performance-plan_final.pdf#page=59.

170 Exchange Act § 39(a), 15 U.S.C. § 78pp(a). 

171 See Exec. Order No. 13563, 3 C.F.R. 13563 (2011). 

172 See Exchange Act § 4(g)(4)(B), 15 U.S.C. § 78d(g)(4)

(B).

173 See Foundations for Evidence-Based Policymaking Act. 

Pub. L. No. 115-435, 132 Stat. 5529 (2019).

174 See SEC, Off. of Mgmt. & Budget, Announcing 

the Recipients of the 2022 Evaluation Community 

Awards (Oct. 22, 2022), https://www.evaluation.

gov/2022-10-20-announcing-2022-evaluationcommunity-awards/.

175 See Tailored Shareholder Reports Adopting Release, 

supra note 100.

176 See Alycia Chin, Jonathan Cook, Jay Dhar, Steven 

Nash, and Brian Scholl, How Do Consumers 

Understand Investment Quality? The Role of 

Performance Benchmarks (2022), https://www.sec.gov/

files/performance-benchmarks-2022-01.pdf.

177 See id.

178 Our data captures “primary” and “secondary” 

benchmarks, which provide an imperfect mapping 

to “broad” and “narrow” indexes as described in 

regulatory requirements. Results presented here refer 

to a remapping of data provided by Morningstar 

Direct regarding funds’ benchmarks to more closely 

align to the regulatory definitions. In separate 

analysis, we conducted the same analysis using the 

original Morningstar Direct identifiers of primary and 

secondary benchmarks; the results from that analysis 

were largely unchanged. For more detail, please see id. 

179 See, for example, James J. Choi, David Laibson, & 

Brigitte C. Madrian, Why Does the Law of One Price 

Fail? An Experiment on Index Mutual Funds, Review 

of Financial Studies 23, No. 4, 1405 (2010).

180 See Brian Scholl, Menu Set Complexity and Investment 

Choice (Oct. 29, 2019), https://www.sec.gov/files/

menu-complexity-102019.pdf.

181 See Choi et al., supra note 179.

182 IAC, Recommendation of the Investor as Purchaser 

Subcommittee: Mutual Fund Cost Disclosure (Apr. 

14, 2016), https://www.sec.gov/spotlight/investoradvisory-committee-2012/recommendation-mf-feedisclosure-041916.pdf.

183 See Eugene F. Fama & Kenneth R. French, Luck Versus 

Skill in the Cross-Section of Mutual Fund Returns, The 

Journal of Finance 65, No. 5 (2010): 1915-1947.

184 See Warren Bailey, Alok Kumar, and David Ng, 

Behavioral Biases of Mutual Fund Investors, Journal of 

Financial Economics 102, No. 1 (2011): 1-27.

185 See Kenneth R French, Presidential address: The Cost 

of Active Investing, The Journal of Finance 63, No. 4 

(2008): 1537-1573.

186 See Juhani T. Linnainmaa, Brian T. Melzer & 

Alessandro Previtero, The Misguided Beliefs of 

Financial Advisors, The Journal of Finance 76, No. 2 

(2021): 587-621.

187 See John Beshears, James J Choi, David Laibson & 

Brigitte C Madrian, How Does Simplified Disclosure 

Affect Individuals’ Mutual Fund Choices?, Chicago: 

University of Chicago Press, 2011.

188 See Federal Trade Commission, How EnergyGuide 

Labels Help Consumers Save, https://www.ftc.gov/

news-events/topics/tools-consumers/energyguide-labels.

189 See Environmental Protection Agency, Basic 

Information on Fuel Economy Labeling, https://www.

epa.gov/fueleconomy/basic-information-fuel-economylabeling.

190 See Environmental Protection Agency, Interactive 

Version of the Gasoline Vehicle Label, https://www.

epa.gov/fueleconomy/interactive-version-gasolinevehicle-label.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7 5

191 See Richard P. Larrick, Jack B. Soll & Ralph L. Kenney, 

Designing Better Energy Metrics for Consumers, 

Behavioral Science & Policy 1 No. 1 (2015), 63-75.

192 See Consumer Financial Protection Bureau, Financial 

Well-Being Report (May 26, 2017), https://www.

consumerfinance.gov/data-research/research-reports/

financial-well-being-technical-report/.

193 See, SEC, Report on Activities for Fiscal Year 

2020, https://www.sec.gov/advocate/reportspubs/annualreports/sec-investor-advocate-report-activities-2020.pdf. 

194 Exchange Act § 4(g)(8)(B), 15 U.S.C. § 78d(g)(8)(B).

195 Exchange Act § 4(g)(8)(D), 15 U.S.C. § 78d(g)(8)(D).

196 As used in this report, the term “Ombudsman” may 

refer to the Ombudsman, the Ombudsman and staff in 

the Office of the Ombudsman, and, at times, to staff, 

contractors, and interns in the Office of the Investor 

Advocate directly supporting the ombudsman function.

197 See SEC, About the SEC, https://www.sec.gov/about.

shtml (last visited Nov. 1, 2022).

198 To note, matters categorized as “Non-SEC/Other 

Matters” refer to matters outside the jurisdiction of 

the SEC, which fall within the jurisdiction of another 

regulatory agency. Matters characterized as “Atypical 

Matters” refer to matters where the submitter’s 

characterization or description of the issue makes it 

difficult to determine the nature of the complaint.

199 For a fuller discussion about mandatory arbitration 

in the SEC-registered adviser context, see Report on 

Objectives, Fiscal Year 2023, supra note 8, at 27-28.

200 See FINRA, What to Expect: FINRA’s Dispute 

Resolution Process, at 2 (2012), https://www.finra.org/

sites/default/files/Education/p117486.pdf, (“Arbitration 

is similar to going to court, but is usually faster, cheaper 

and less complex.”).

201 See, e.g., Kevin M. Carroll, Managing Director and 

Associate General Counsel, Securities Industry and 

Financial Markets Association, “Securities Arbitration 

System Works Effectively and Benefits Investors,” 

(Oct. 5, 2021), https://www.sifma.org/resources/news/

securities-arbitration-system-works-effectively-andbenefits-investors/ (“Securities arbitration rules, first 

created in 1972, are based on the belief – true then 

and still true nearly five decades later – that many 

customers would prefer to arbitrate and benefit from 

arbitration.”).

202 See id.

203 Report on Objectives, Fiscal Year 2023, supra note 

8, at 27-28.

204 Id.

205 Id.

206 See FINRA, Dispute Resolution Statistics, https://www.

finra.org/arbitration-mediation/dispute-resolutionstatistics.

207 H.R. 8254, Financial Services and General 

Government Appropriations Bill for FY 2023, 

Report No. 117-393 (June 28, 2022), https://www.

congress.gov/117/bills/hr8254/BILLS-117hr8254rh.pdf.

208 See Financial Services and General Government 

Appropriations Bill, 2023, Report 117-393, (“House 

Report”) at 104 (June 28, 2022), https://www.congress.

gov/117/crpt/hrpt393/CRPT-117hrpt393.pdf.

209 Id. 

210 See FINRA, Rule 12505, Cooperation of Parties in 

Discovery, https://www.finra.org/rules-guidance/

rulebooks/finra-rules/12505. 

211 See FINRA, 2022 FINRA Dispute Resolution Services 

Arbitrator’s Guide, at 41 (Nov. 2022), https://www.

finra.org/sites/default/files/arbitrators-ref-guide.pdf. 

212 See Sec. Exchange Act Rel. No. 34-72649; File No. 

SR-FINRA-2014-020, at p. 3 (July 22, 2014); 79 Fed. 

Reg. 43,809 (July 28, 2014), https://www.govinfo.gov/

content/pkg/FR-2014-07-28/pdf/2014-17640.pdf.

213 PIABA, Update to the 2013 Expungement Study of 

the Public Investors Arbitration Bar Association, 

at 3 (Oct. 20, 2015), https://piaba.org/sites/default/

files/newsroom/2015-10/Update%20on%20the%20

2013%20Expungement%20Study%20of%20

PIABA%20%28October%2020%2C%202015%29.

pdf.
7 6 | OFFICE OF THE INVESTOR ADVOCATE

214 See FINRA Rule 2080. See also PIABA & The PIABA 

Found., 2021 Updated Study on FINRA Expungements 

– A Seriously Flawed Process That Should Be Fixed 

Now to Protect the Integrity of the Public Record 

(May 2021), https://www.sec.gov/comments/sr-finra2020-030/srfinra2020030-8815751-238026.pdf; 

Pub. Invs. Arb. Bar Ass’n, Expungement Study of the 

Public Investors Arbitration Bar Association (Oct. 

2013), https://piaba.org/piaba-newsroom/reportexpungement-study-public-investors-arbitration-barassociation-october-16; Pub. Invs. Arb. Bar Ass’n, 

Update to the 2013 Expungement Study of the Public 

Investors Arbitration Bar Association (Oct. 2015), 

https://piaba.org/piaba-newsroom/report-update-2013-

expungement-study-public-investors-arbitration-barassociation.

215 See generally FINRA, Regulatory Notice 17-42 

(“Notice 17-42”) (Dec. 2017), https://www.finra.

org/sites/default/files/notice_doc_file_ref/RegulatoryNotice-17-42.pdf.

216 See Sec. Exchange Act Rel. No. 34-90000, File No. 

SR-FINRA-2020-030 (Sept. 25, 2020); 85 Fed. Reg. 

62,142 (Oct. 1, 2020), https://www.federalregister.gov/

documents/2020/10/01/2020-21660/self-regulatoryorganizations-financial-industry-regulatory-authorityinc-notice-of-filing-of-a.

217 Public comments are available at https://www.sec.gov/

comments/sr-finra-2020-030/srfinra2020030.htm.

218 See e.g., Letter from Benjamin P. Edwards, William S. 

Boyd School of Law, https://www.sec.gov/comments/

sr-finra-2020-030/srfinra2020030-8266713-227998.

pdf, the PIABA Foundation, https://www.sec.gov/

comments/sr-finra-2020-030/srfinra2020030-8262461-

227978.pdf; but cf. Letter from SIFMA, https://www.

sec.gov/comments/sr-finra-2020-030/srfinra2020030-

8262491-227963.pdf.

219 See Letter from Mignon McLemore, Assistant General 

Counsel, Office of General Counsel, FINRA, to 

Vanessa Countryman, Secretary, Commission (Dec. 

18, 2020), https://www.sec.gov/comments/sr-finra2020-030/srfinra2020030-8163215-226938.pdf. See 

also Notice of Filing of Amendment No. 1 to File 

No. SR-FINRA-2020-030, Sec. Exchange Act Rel. 

No. 90734 (Dec. 18, 2020), 85 Fed. Reg. 84,396 

(Dec. 28, 2020), https://www.federalregister.gov/

documents/2020/12/28/2020-28509/self-regulatoryorganizations-financial-industry-regulatory-authorityinc-notice-of-filing-of.

220 See SR-FINRA-2020-030 - Withdrawal of Proposed 

Rule Change (May 28, 2021), https://www.finra.

org/sites/default/files/2021-05/SR-FINRA-2020-030-

Withdrawal.pdf.

221 See File No. SR-FINRA 2022-024, Sec. Exchange Act 

Rel. No. 95455 (Aug. 9, 2022); 87 Fed. Reg. 50,170 

(Aug. 15, 2022), https://www.federalregister.gov/

documents/2022/08/15/2022-17430/self-regulatoryorganizations-financial-industry-regulatory-authorityinc-notice-of-filing-of-a.

222 Public comments are available at https://www.sec.gov/

comments/sr-finra-2022-024/srfinra2022024.htm.

223 Simplified arbitrations are those involving $50,000 or 

less, exclusive of interest and expenses. See FINRA, 

Rule 12800, Simplified Arbitration, https://www.finra.

org/rules-guidance/rulebooks/finra-rules/12800. 

224 See 87 Fed. Reg. 50,170, supra note 221, at 50,179.

225 Id.

226 See Notice 17-42, supra note 215, at 10.

227 See 85 Fed. Reg. 62,142, supra note 216, at 62,169.

228 See Letter from Celiza Bragança, President, PIABA and 

Jason R. Doss, Past-President and Founding Director, 

PIABA to Deputy Secretary J. Matthew DeLesDernier, 

SEC at pp. 2-3 (Sept. 6, 2022), https://www.sec.

gov/comments/sr-finra-2022-024/srfinra2022024-

20138354-308386.pdf.
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7 7

229 See Letter from Robin M. Traxler, Senior Vice 

President, Policy & Deputy General Counsel, Financial 

Services Institute to Secretary, SEC, at 4 (Sept. 6, 2022), 

https://www.sec.gov/comments/sr-finra-2022-024/

srfinra2022024-20138366-308399.pdf.

230 We note that, unlike Notice 17-42, neither FINRA 

2020-030 nor FINRA 2022-24 would require an 

arbitrator panel to find the information to be expunged 

had no investor protection or regulatory value. See

Notice 17-42, supra note 215, at 4.

231 See 87 Fed. Reg. 50,170, supra note 221, at 50,184.

232 See 85 Fed. Reg. 62142, supra note 216, at 62,169.

233 See Letter from Michael S. Edmiston, President, PIABA, 

to Vanessa Countryman, Secretary, SEC, p. 2 (Sept. 

6, 2022), https://www.sec.gov/comments/sr-finra2022-024/srfinra2022024-20138300-308359.pdf.

234 See Letter from Robin M. Traxler, supra note 229, at 

5; see also Letter from Kevin M. Carroll, Managing 

Director and Associate General Counsel, Securities 

Industry and Financial Markets Association to Vanessa 

Countryman, Secretary, SEC, at 7 (Sept. 2, 2022), 

https://www.sec.gov/comments/sr-finra-2022-024/

srfinra2022024-20138245-308330.pdf.

235 See Letter from Kevin M. Carroll, supra note 234. 

236 See Letter from Robin M. Traxler, supra note 229, at 5.

237 See 87 Fed. Reg. 50,170, supra note 221, at 50,185.

238 See 85 Fed. Reg. 62,142, supra note 216, at 62,154.

239 Id.

240 See Letter from Melanie Senter Lubin, President and 

Maryland Securities Commissioner, to J. Matthew 

DeLesDernier, Assistant Secretary, SEC, at 3 (Sept. 

6, 2022), https://www.sec.gov/comments/sr-finra2022-024/srfinra2022024-20138300-308359.pdf.

241 See 87 Fed. Reg. 50,170, supra note 221, at 50,181.

242 See Letter from Scott Eichhorn, Acting Director, 

University of Miami, School of Law et al. to Deputy 

Secretary J. Matthew DeLesDernier, SEC, at 5 (Sept. 

6, 2022), https://www.sec.gov/comments/sr-finra2022-024/srfinra2022024-20138359-308392.pdf, 

but cf. Letter from Hennion & Walsh, https://www.

sec.gov/comments/sr-finra-2022-024/srfinra2022024-

20138364-308397.pdf (“Time limits for filing an 

expungement request should mirror those provided 

to customers [–] a six-year period of eligibility with 

expansion for good cause”). See also Letter from 

AdvisorLaw, https://www.sec.gov/comments/sr-finra2022-024/srfinra2022024-20137306-307869.pdf

(“The amount of time that passes after allegations are 

cast have absolutely nothing to do with whether the 

allegations are ‘factually impossible, clearly erroneous, 

or false, [n]or whether the associated person was not 

involved in the alleged misconduct’”).

243 See Letter from Seth A. Miller, General Counsel, 

President, Advocacy & Administration, Cambridge 

Investment Research, Inc. to Vanessa Countryman, 

Secretary, SEC, at 2 (Sept. 6, 2022), https://www.sec.

gov/comments/sr-finra-2022-024/srfinra2022024-

20138303-308362.pdf.

244 See e.g., Letter from Frederick Dawson, Raymond 

James Financial Services, https://www.sec.gov/

comments/sr-finra-2022-024/srfinra2022024-

308140.htm (noting he recently received a grant 

of expungement for an aged complaint, as he 

only recently became aware of the availability 

of expungement proceedings); Letter from Trish 

Howe, CFP, https://www.sec.gov/comments/sr-finra2022-024/srfinra2022024-308131.htm (requesting an 

expungement process for convictions that occurred 

greater than 15 years ago or complaints later 

withdrawn by clients).

245 See Notice 17-42, supra note 215, at 6.

246 See 85 Fed. Reg. 62,142, supra note 216, at 62,161. 

Additionally, FINRA 2020-30 provided that where 

there was no customer arbitration or civil litigation, a 

six-year limit from the date of entry of complaint into 

CRD would apply.

247 See SEC Form 19-b, File No. SR-FINRA 2022-24 

(Sept. 27, 2022), https://www.finra.org/sites/default/

files/2022-09/sr-finra-2022-024-extension1.pdf.
7 8 | OFFICE OF THE INVESTOR ADVOCATE

248 For a more detailed discussion of the 2022 Law School 

Investor Advocacy Clinic Summit, see Report on 

Objectives, Fiscal Year 2023, supra note 8, at 

30-32.

249 Exchange Act § 39(a), 15 U.S.C. § 78pp(a). 

250 Id.

251 Exchange Act § 39(a)(2)(B), 15 U.S.C. § 78pp(a)(2)(B). 

252 Exchange Act § 39(g), 15 U.S.C. § 78pp(g). 

253 Exchange Act § 39(h), 15 U.S.C. § 78pp(h). 

254 According to Exchange Act Section 4(g)(6)(B)(ii), 15 

U.S.C. § 78d(g)(6)(B)(ii), a Report on Activities must 

include several enumerated items, and it may include 

“any other information, as determined appropriate by 

the Investor Advocate.”

255 17 C.F.R. §§ 200.735-3(b)(2)(i), 230122 (2014); 

Exchange Act § 24(b), 15 U.S.C. § 78x; 5 U.S.C. 

§ 552a(i)(1); SECR18-2, Section 8.5 (Nonpublic 

Information) (July 31, 2005). 

256 SEC, Recommendation of the Investor Advisory 

Committee Regarding Individual Retirement Accounts 

(Dec. 2, 2021), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/20211202-irarecommendation.pdf. 

257 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the 

Investor-as-Owner Subcommittee on Special Purpose 

Acquisition Companies (Sept. 9, 2021), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

draft-recommendation-of-the-iap-and-iaosubcommittees-on-spacs-082621.pdf.

258 See Special Purpose Acquisition Companies, Shell 

Companies, and Projections, Securities Act Release No. 

33-11048 (Mar. 30, 2022) (proposing release).

259 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the 

Investor-as-Owner Subcommittee on Rule 10b5-1 Plans 

(Sept. 9, 2021), https://www.sec.gov/spotlight/investoradvisory-committee-2012/draft-recommendation-ofthe-iao-subcommittee-on-10b5-1-plans-082621.pdf. 

260 See Rule 10b5-1 and Insider Trading, Securities Act 

Release No. 33-11013, 87 Fed. Reg. 8,686 (Jan. 13, 

2022) (proposing release).

261 SEC, Recommendation of the Investor Advisory 

Committee Regarding Minority and Underserved 

Inclusion in Investment and Financial Services (Mar. 

11, 2021), https://www.sec.gov/spotlight/investoradvisory-committee-2012/20210311-minority-andunderserved-inclusion-recommendation.pdf. 

262 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the Market 

Structure Subcommittee on Credit Rating Agencies 

(Mar. 11, 2021), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/20210311-creditrating-agencies-recommendation.pdf. 

263 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the Investor 

as Owner Subcommittee on Accounting and Financial 

Reporting Disclosure (May 5, 2020), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

accounting-and-financial-disclosure.pdf. 

264 See Coronavirus (COVID-19) — Disclosure 

Considerations Regarding Operations, Liquidity, and 

Capital Resources, CF Disclosure Guidance Topic No. 

9A (June 23, 2020), https://www.sec.gov/corpfin/covid19-disclosure-considerations. 

265 See Julie Steinberg, FASB to Explore Greater Disclosure 

of Supply-Chain Financing, Wall St. J. (Oct. 22, 2020), 

https://www.wsj.com/articles/fasb-to-explore-greaterdisclosure-of-supply-chain-financing-11603361147. 

266 See Management’s Discussion and Analysis, Selected 

Financial Data, and Supplementary Financial 

Information, Securities Act Rel. No. 10890 

(approved Nov. 19, 2020), https://www.sec.gov/rules/

final/2020/33-10890.pdf.

267 See FASB, Exposure Draft, Disclosure of Supplier 

Finance Program Obligations (Dec. 20, 2021) https://

www.fasb.org/page/getarticle?uid=fasb_Media_

Advisory_12-20-21_Body_0228221200. 

268 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation of the Investor 

as Owner Subcommittee on ESG Disclosure (May 14, 

2020), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/esg-disclosure.pdf. 

269 Statement from Allison Herren Lee, Acting Chair, 

SEC, Statement on the Review of Climate-Related 

Disclosure (Feb. 24, 2021), https://www.sec.gov/news/

public-statement/lee-statement-review-climate-relateddisclosure. 
REPORT ON ACTIVITIES: FISCAL YEAR 2022 | 7 9

270 Press Release, SEC, Division of Examinations 

Announces 2021 Examination Priorities (Mar. 3, 

2021), https://www.sec.gov/news/press-release/2021-39. 

271 Press Release, SEC, SEC Announces Enforcement Task 

Force Focused on Climate and ESG Issues (Mar. 4, 

2021), https://www.sec.gov/news/press-release/2021-42. 

272 Statement from Allison Herren Lee, Acting Chair, SEC, 

Public Input Welcomed on Climate Change Disclosures 

(Mar. 15, 2021), https://www.sec.gov/news/publicstatement/lee-climate-change-disclosures. 

273 See The Enhancement and Standardization of ClimateRelated Disclosures for Investors, Securities Act Release 

No. 33-11042, 87 Fed. Reg. 21,334, (Mar. 21, 2022) 

(proposing release).

274 See Enhanced Disclosures by Certain Investment 

Advisers and Investment Companies about 

Environmental, Social, and Governance Investment 

Practices, Investment Adviser Act Release No. 6034, 

Investment Company Act Release No. 34594, 17 

C.F.R. pts. 200, 230, 232, 239, 249, 274, 279 (May 

25, 2022), https://www.sec.gov/rules/proposed/2022/

ia-6034.pdf. 

275 SEC, Recommendation of the Investor Advisory 

Committee Regarding Recommendation on Disclosure 

Effectiveness (May 21, 2020), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/disclosureeffectiveness.pdf. 

276 See Tailored Shareholder Reports Adopting Release, 

supra note 100.

277 SEC, Recommendation of the Investor Advisory 

Committee Regarding SEC Guidance and Rule 

Proposals on Proxy Advisors and Shareholder 

Proposals (Jan. 24, 2020), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/

sec-guidance-and-rule-proposals-on-proxy-advisorsandshareholder-proposals.pdf. 

278 See Exemptions from the Proxy Rules for Proxy Voting 

Advice, Exchange Act Rel. No. 89372, 85 Fed. Reg. 

55,082 (Sept. 3, 2020) (adopting release); see also

Amendments to Exemptions from the Proxy Rules for 

Proxy Voting Advice, Exchange Act Rel. No. 87457, 84 

Fed. Reg. 66,518 (Dec. 4, 2019) (proposing release).

279 See Procedural Requirements and Resubmission 

Thresholds Under Exchange Act Rule 14a-8, Exchange 

Act Rel. No. 89964, 85 Fed. Reg. 70,240 (Nov. 4, 

2020). 

280 Statement from Gary Gensler, Chairman, SEC, 

Statement on the Application of the Proxy Rules to 

Proxy Voting Advice (June 1, 2021), https://www.sec.

gov/news/public-statement/gensler-proxy-2021-06-01. 

281 SEC, Div. of Corp. Fin., Statement on Compliance with 

the Commission’s 2019 Interpretation and Guidance 

Regarding the Applicability of the Proxy Rules to Proxy 

Voting Advice and Amended Rules 14a-1(1), 14a-2(b), 

14a-9 (June 1, 2021), https://www.sec.gov/news/publicstatement/corp-fin-proxy-rules-2021-06-01. 

282 See Proxy Voting Advice, Exchange Act Rel. No. 

93595 (Nov. 17, 2021), https://www.sec.gov/rules/

proposed/2021/34-93595.pdf.

283 See Proxy Voting Advice, Release No. 34-95266 (July 

13, 2022) (adopting release).

284 SEC, Recommendation of the Investor Advisory 

Committee Regarding Exchange Rebate Tier Disclosure 

(Jan. 24, 2020), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/exchange-rebate-tierdisclosure.pdf. 

285 SEC, Recommendation of the Investor Advisory 

Committee: Proxy Plumbing (Sept. 5, 2019), 

https://www.sec.gov/spotlight/investor-advisorycommittee-2012/iac-recommendation-proxy-plumbing.

pdf. 

286 See Press Release, SEC, SEC Reopens Comment Period 

for Universal Proxy (Apr. 16, 2021), https://www.sec.

gov/news/press-release/2021-64. 

287 See Universal Proxy, Exchange Act Release No. 93596; 

Investment Company Act Release No. 34419, https://

www.sec.gov/rules/final/2021/34-93596.pdf. 

288 SEC, Recommendation of the Investor Advisory 

Committee: Structural Changes to the US Capital 

Markets Re Investment Research in a Post-MiFID II 

World (July 25, 2019), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/investment-researchpost-mfid-ii-world.pdf.

289 See SEC, Press Release, SEC Announces Extension 

of Temporary Measure to Facilitate Cross-Border 

Implementation of the European Union’s MiFID II’s 

Research Provisions, (Nov. 4, 2019), at https://www.

sec.gov/news/press-release/2019-229.

290 SEC, Recommendation of the Investor Advisory 

Committee Regarding Human Capital Management 

Disclosure (Mar. 28, 2019), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/humancapital-disclosure-recommendation.pdf. 
8 0 | OFFICE OF THE INVESTOR ADVOCATE

291 See Modernization of Regulation S-K Items 101, 103, 

and 105, Securities Exchange Act Rel. No. 89670, 85 

Fed. Reg. 63,726 (Oct. 8, 2020).

292 SEC, Recommendation of the Investor Advisory 

Committee: Financial Support for Law School Clinics 

that Support Investors (Mar. 8, 2018), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

law-clinics-recommendation.pdf.

293 SEC, Recommendation of the Investor Advisory 

Committee: Dual Class and Other Entrenching 

Governance Structures in Public Companies (Mar. 8, 

2018), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/recommendation-on-dual-class-shares.

pdf.

294 SEC, Recommendation of the Investor Advisory 

Committee: Shortening the Trade Settlement Cycle 

in U.S. Financial Markets, February 12, 2015, 

http://www.sec.gov/spotlight/investor-advisorycommittee-2012/settlement-cycle-recommendationfinal.pdf. 

295 See Proposed Rule, Shortening the Settlement Cycle, 

Exchange Act Release No. 94196 (Feb. 9, 2022), 

87 Fed. Reg. 10,436 (Feb. 24, 2022), https://www.

federalregister.gov/d/2022-03143. 

296 SEC, Recommendation of the Investor Advisory 

Committee: Accredited Investor Definition (Oct. 9, 

2014), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-advisor-accrediteddefinition.pdf. 

297 See Accredited Investor Definition, Securities Act 

Rel. No. 10824, 85 Fed. Reg. 64,234 (Oct. 9, 2020) 

(adopting release). See also Amending the “Accredited 

Investor” Definition, Securities Act Rel. No. 10734, 85 

Fed. Reg. 2,574 (Jan. 15, 2020) (proposing release).

298 SEC, Recommendations of the Investor Advisory 

Committee: Impartiality in the Disclosure of 

Preliminary Voting Results (Oct. 9, 2014), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

impartiality-disclosure-prelim-voting-results.pdf. 

299 SEC, Recommendations of the Investor Advisory 

Committee Regarding SEC Rulemaking to Explore 

Universal Proxy Ballots (July 25, 2013), https://www.

sec.gov/spotlight/investor-advisory-committee-2012/

universal-proxy-recommendation-072613.pdf. 

300 See Universal Proxy, Exchange Act Release No. 79164, 

Investment Company Act Release No. 32339, 81 Fed. 

Reg. 79,122 (Nov. 10, 2016).

301 See Universal Proxy, Exchange Act Rel. No. 

93596 (Nov. 17, 2021), https://www.sec.gov/rules/

final/2021/34-93596.pdf.

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549