REPORT ON OBJECTIVES

FISCAL YEAR 2022

U.S. SECURITIES AND EXCHANGE COMMISSION

Office of the 

Investor 

Advocate
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | i

OFFICE OF THE INVESTOR ADVOCATE

REPORT ON OBJECTIVES

FISCAL YEAR 2022

Section 4(g) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78d(g), 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 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 The 

instant report contains a summary of the Investor Advocate’s primary objectives for Fiscal Year 

2022, beginning October 1, 2021.

A Report on Activities is due no later than December 31 of each year, and it describes the 

activities of the Investor Advocate during the preceding fiscal year.3 For Fiscal Year 2022, the 

activities and accomplishments of the Office will be reported not later than December 31, 2022.

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

Report is provided directly to Congress without any prior review or comment from the Commission, any 

Commissioner, any other Officer or employee of the Commission, or the Office of Management and Budget. 

Thus, the Report 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 the Report and all analyses, findings, and conclusions contained herein.

REPORT ON OBJECTIVES: FISCAL YEAR 2022 | iii

CONTENTS

MESSAGE FROM THE INVESTOR ADVOCATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

OBJECTIVES OF THE INVESTOR ADVOCATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

POLICY AGENDA FOR FISCAL YEAR 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Environmental, Social, and Governance (ESG) Disclosure. . . . . . . . . . . . . . . . . . . . . . 5

Rule 10b5-1 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Capital-Raising Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Equity Market Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Novel Exchange-Traded Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Registered Fund Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Cryptocurrency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Broker Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Financial Exploitation of Senior Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

OMBUDSMAN’S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Service by the Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Service Behind the Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Streamlined Communications with Retail Investors. . . . . . . . . . . . . . . . . . . . . . . . . .25

Ombudsmen Roles and Standards of Practice. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Areas of Interest and Importance to Retail Investors. . . . . . . . . . . . . . . . . . . . . . . . 30

Ombudsman Outreach and Engagement Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . 34

Objectives and Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

SUMMARY OF INVESTOR ADVISORY COMMITTEE 

RECOMMENDATIONS AND SEC RESPONSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 1

MESSAGE FROM THE

INVESTOR ADVOCATE

I

n recent months, some dramatic shifts have 

occurred in the securities markets. Commissionfree online trading has surged, social media 

has revolutionized communication amongst retail 

investors, and companies increasingly have utilized 

non-traditional methods to raise capital in the 

public markets through direct listings and special 

purpose acquisition companies (SPACs). 

For the Office of the Investor Advocate, our work 

plans must take into account this new environment 

as we look ahead to the new fiscal year. As 

discussed in this Report on Objectives, we will 

explore each of these recent trends to understand 

how retail investors may benefit from them and 

how the regulatory structure could be improved in 

light of the changing dynamics of the markets.

Other aspects of our work reflect longer-term 

projects. For example, we continue to search 

for ways to help improve disclosures to retail 

investors. Many aspects of the securities laws 

require disclosure of information to investors, but 

much work remains to be done to understand 

how investors process that information and use 

it to make decisions. We are ramping up our 

efforts to discover ways to make disclosures more 

understandable to investors and, importantly, to 

make those disclosures more likely to be read in 

an environment where consumers have become 

accustomed to clicking through disclosures without 

reading them. 

In addition, our objectives for the upcoming 

fiscal year reflect some of the priorities of the new 

leadership of the Commission. We expect, for 

example, that the Commission will be focused 

on various aspects of environmental, social, 

and governance (ESG) 

disclosure. We will 

conduct outreach to 

investors and use the 

research tools at our 

disposal to help determine 

what policies are in the 

best interest of investors. 

These and other important 

topics are described below 

in our Policy Agenda for 

Fiscal Year 2022. 

Beyond our research and policy work, though, 

is one of the most critical aspects of our Office’s 

mission. SEC Ombudsman Tracey McNeil and her 

team provide direct assistance to retail investors 

who are often confused, frustrated, and seeking 

help to resolve difficult problems. In the upcoming 

year, they will continue their work—most often 

behind the scenes and unheralded—to serve 

investors throughout America. A summary of 

Ombudsman McNeil’s plans and activities is set 

forth below in the Ombudsman’s Report.
2 | OFFICE OF THE INVESTOR ADVOCATE

Finally, we will continue to provide support 

services for the SEC’s Investor Advisory 

Committee in Fiscal Year 2022. This involves 

many tasks, such as processing the appointments 

of new members, organizing their quarterly 

meetings, publishing meeting notices and 

agendas, coordinating the panelists, assisting with 

travel arrangements and reimbursements, and 

drafting the meeting minutes. A summary of the 

recommendations made by the Investor Advisory 

Committee is included in this report.

In this, my 15th report to Congress, I am 

reminded again of the depth and breadth of work 

performed by the small team in the Office of 

the Investor Advocate. I am deeply grateful for 

these women and men who each play such a vital 

role in our work. On their behalf, I am pleased 

to submit this report on our objectives for the 

upcoming year, and I would be happy to answer 

any questions from Members of Congress. 

Respectfully Submitted,

Rick A. Fleming

Investor Advocate 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 3

As set forth in Exchange Act Section 4(g)

(4), 15 U.S.C. § 78d(g)(4), the Investor 

Advocate is required to perform the 

following functions:

(A) assist retail investors in resolving 

significant problems such investors 

may have with the Commission or with 

self-regulatory organizations (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.

Assisting Retail Investors

Exchange Act Section 4(g)(4)(A) directs the 

Investor Advocate to assist retail investors in 

resolving significant problems such investors may 

have with the Commission or with SROs.4 To help 

accomplish that objective, the Investor Advocate 

has appointed an Ombudsman to, among other 

things, act as a liaison between the Commission 

and any retail investor in resolving problems that 

retail investors may have with the Commission or 

with SROs.5 As required by statute, a semi-annual 

report from the Ombudsman is included within this 

Report on Objectives.6

Identifying Areas in Which Investors Would 

Benefit from Regulatory Changes

Exchange Act Section 4(g)(4)(B) requires the 

Investor Advocate to identify areas in which 

investors would benefit from changes in the 

regulations of the Commission or the rules of 

SROs.7 This is a broad mandate that authorizes the 

Investor Advocate to examine the entire regulatory 

scheme, including existing rules and regulations, 

to identify those areas that could be improved for 

the benefit of investors. For example, the Investor 

Advocate may look at the rules and regulations 

governing existing equity market structure to 

determine whether any regulatory changes would 

benefit investors. These and other concerns are 

discussed in greater detail below in the section 

entitled Policy Agenda for Fiscal Year 2022.

OBJECTIVES OF THE 

INVESTOR ADVOCATE
4 | OFFICE OF THE INVESTOR ADVOCATE

Identifying Problems with Financial Service 

Providers and Investment Products

Exchange Act Section 4(g)(4)(C) requires the 

Investor Advocate to identify problems that 

investors have with financial service providers 

and investment products.8 The Investor 

Advocate continues to monitor investor inquiries 

and complaints, SEC and SRO staff reports, 

enforcement actions, and other data to determine 

which financial service providers and investment 

products may be problematic. As required by 

Exchange Act Section 4(g)(6), these problems will 

be described in the Reports on Activities to be filed 

in December of each year.

Analyzing the Potential Impact on Investors 

of Proposed Rules and Regulations

Exchange Act Section 4(g)(4)(D) directs the 

Investor Advocate to analyze the potential 

impact on investors of proposed regulations of 

the Commission and proposed rules of SROs.9

As required, in Fiscal Year 2022 the Office 

will review all significant rulemakings of the 

Commission and SROs, and we will communicate 

with investors and their representatives to 

determine the potential impact of proposed rules. 

In addition, we will study investor behavior and 

utilize a variety of research methods to examine 

the efficacy of policy proposals. For example, we 

will study the effectiveness of various disclosures 

that are provided to retail investors. We include 

descriptions of our research projects and related 

findings in our Reports on Activities, published 

every December.

Proposing Appropriate Changes 

to the Commission and to Congress

Exchange Act Section 4(g)(4)(E) provides that, 

to the extent practicable, the Investor Advocate 

may 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.10 As we study the issues in 

our Policy Agenda for Fiscal Year 2022, as set forth 

below, we will likely make recommendations to the 

Commission and Congress for changes that will 

promote the interests of investors.

Supporting the Investor 

Advisory Committee

Exchange Act Section 39 establishes the Investor 

Advisory Committee (IAC).11 As discussed in 

greater detail below in the section entitled 

Summary of Investor Advisory Committee 

Recommendations and SEC Responses, the 

purpose of the Committee is to advise and consult 

with the Commission on regulatory priorities, 

issues impacting investors, initiatives to protect 

investors, and related matters. The Investor 

Advocate is a member of the IAC,12 and the Office 

will continue to provide staff and operational 

support to the IAC during Fiscal Year 2022.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 5

As described above, the statutory mandate 

for the Office of the Investor Advocate 

is broad, and much of our time is 

consumed with the review of rulemakings that 

flow through the Commission and SROs. We 

monitor all rulemakings, but we prioritize certain 

issues so that we can develop expertise in those 

areas and maximize our impact for investors with 

the resources we have available. After discussions 

with numerous knowledgeable parties, both 

inside and outside the Commission, and after 

due consideration, the Investor Advocate has 

determined that the Office will focus upon the 

following issues during Fiscal Year 2022:

§	Environmental, Social, and Governance (ESG) 

Disclosure

§	Rule 10b5-1 Plans

§	Capital-Raising Alternatives

§	Equity Market Structure

§	Novel Exchange-Traded Funds

§	Registered Fund Disclosure

§	Cryptocurrency

§	Broker Conduct

§	Financial Exploitation of Senior Investors

As in past years, other issues are likely to arise that 

will require the attention of the Office.

ENVIRONMENTAL, SOCIAL, AND 

GOVERNANCE (ESG) DISCLOSURE

In recent remarks, SEC Chair Gary Gensler 

announced that proposing rules regarding climate 

change and human capital risks will be among his 

top priorities and “an early focus” of his tenure.13

His interest follows increasing demand from 

investors for Commission focus on ESG factors. 

Last year, for example, the Investor Advisory 

Committee called on the Commission to 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.14 Similarly, the Asset Management 

Advisory Committee (AMAC), in its preliminary 

recommendations to the Commission in November 

2020, recognized a need for mandatory disclosure 

standards; however, the AMAC specifically 

declined to recommend any change in the 

disclosure laws, suggesting instead the issuance of 

clear standards tailored by industry and overseen 

by an independent standard-setting entity.15

In Fiscal Year 2022, we will help to ensure that 

as the Commission takes up this complicated 

issue, investors’ interests remain at the forefront 

POLICY AGENDA FOR 

FISCAL YEAR 2022
6 | OFFICE OF THE INVESTOR ADVOCATE

of the discussion. In our opinion, investors would 

benefit from a careful balance of prescriptive and 

principles-based ESG disclosure requirements. 

Principles-based measures are more flexible and can 

generate decision-useful information for investors 

that is most relevant within the context of a 

particular business. On the other hand, principlesbased requirements tend to generate disclosures 

that can be difficult to compare across a variety 

of companies. Accordingly, we favor prescriptive 

requirements to promote comparability wherever 

possible, particularly with respect to disclosure 

requirements for objectively-determinable facts.

On climate risk in particular, the staff already has 

at least one tool available to assess disclosures, i.e., 

the Commission Guidance Regarding Disclosure 

Related to Climate Change issued February 8, 2010 

(Climate Change Guidance).16 The Climate Change 

Guidance was intended to clarify what companies 

should have been doing all along: making 

disclosures about the effects of climate-related 

legislation, regulation, and international accords, 

as well as other developments concerning climate 

change, if material to their businesses. 

Since the issuance of the Climate Change Guidance, 

however, some have criticized the Commission for 

what they view as inconsistent efforts to ensure 

issuers’ compliance.17 Recently, the Division of 

Enforcement launched a task force to oversee 

division efforts to proactively identify ESG-related 

misconduct,18 and the Division of Examinations 

highlighted a greater focus on climate-related 

risks in its 2021 examination priorities.19 We 

will monitor these efforts in parallel with our 

work on rulemaking proposals, as whatever the 

law requires, investors benefit from consistent 

enforcement.

RULE 10B5-1 PLANS

Another area of corporate disclosure that will 

receive our attention in Fiscal Year 2022 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 

trader 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 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 executives 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 plans and made 

initial trades based on material nonpublic 

information already in their possession, or 

canceled or revised plans based on newly-acquired 

information.23 In a June 7, 2021 speech, Chair 

Gensler noted that in his view, “these plans have 

led to real cracks in our insider trading regime.”24

Aside from misuse of 10b5-1 plans, the market’s 

lack of transparency into plan details may operate 

to the disadvantage of retail investors. Under 

the rule, for example, plans may provide that 

if company shares hit a predetermined price 

level, company executives will automatically sell 

previously-determined portions of their shares.25

These potentially large sales may then limit or 

depress share value after positive news,26 which 

purchasing investors have no ability to predict.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 7

In our view, adjustments to Rule 10b5-1 may be 

in order. Over the next year, we will study the rule 

itself and its application to assess whether, among 

other things, trading pursuant to these plans 

should be paused for a set “cooling off” period or 

companies or their executives should be required to 

disclose plan details. In April 2021, Commissioner 

Allison Lee (then Acting Chair) instructed 

Commission staff to review the rule and develop 

recommendations for possible revisions.27 On June 

10, 2021, the IAC hosted a panel discussion on 

the topic.28 Our colleagues inside the Commission 

have been analyzing this issue closely, and we 

look forward to working with them to enhance 

protections for public shareholders.

CAPITAL-RAISING ALTERNATIVES

Entities seeking to raise money from investors 

must decide which capital-raising method best 

suits the companies’ economic goals. During 

Fiscal Year 2022, we will study whether novel 

capital-raising methods result in adequate 

disclosures for investors or implicate other 

investor-protection considerations.

In our December 2020 Report on Activities, we 

noted concern regarding the shift of capital-raising 

from public markets to private markets, where 

investors do not benefit from the same robust 

disclosure regime required of public companies 

under the Securities Act of 1933.29 This concern 

remains, but in recent months the public markets 

have experienced a resurgence of interest by 

companies seeking to raise capital, often by utilizing 

non-traditional methods such as direct listings30

and special purpose acquisition company (SPAC) 

transactions.31 Affording companies more than a 

binary choice between the private market and a 

traditional initial public offering (IPO) promises 

expanded opportunities for investors and may lower 

issuers’ cost of capital. Yet, we worry that even in 

the public market, investors may not understand 

the full implications of the capital-raising strategy a 

company chooses to implement. For example, those 

raising capital may be selecting a path to investors by 

asking which method best enables them to limit their 

liability to those investors.

In 2020 and 2021, record numbers of companies 

chose SPACs as their preferred capital-raising 

approach.32 A SPAC is a company with no 

operations that offers securities for cash and places 

substantially all the offering proceeds into a trust or 

escrow account for future use in the acquisition of 

one or more private operating companies. Following 

its initial public offering, the SPAC identifies 

acquisition candidates and attempts to complete an 

acquisition, after which the combined company will 

continue operations as a public company.33

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 December 2020, the 

Division of Corporation Finance issued guidance 

directing SPACs to make such disclosures (and others), 

but staff guidance lacks the force of law.34

A benefit for companies undergoing a SPAC 

transaction is the speed at which they can become 

public companies. Retail investors may also benefit 

by having greater access to investments in earlier-stage 

companies with potentially high growth. This haste, 

however, also increases the risk that investors may 

invest in companies with serious internal controls 

weaknesses. A private company may spend years 

preparing to go public through a traditional IPO, 

allowing time to ensure it has proper infrastructure 

and expertise to handle the additional regulatory 

responsibilities of a public company. Through a 
8 | OFFICE OF THE INVESTOR ADVOCATE

SPAC merger, a private company may make that 

transition in just a few months. In March 2021, 

the Acting Director of the Commission’s Office 

of the Chief Accountant, Paul Munter, issued 

a public statement warning private companies 

considering SPAC transactions to first “evaluate 

the status of various functions, including people, 

processes, and technology, that will need to be in 

place to meet SEC filing, audit, tax, governance, 

and investor relations needs post-merger.”35

His statement included suggested areas of 

consideration, which companies should carefully 

study before undergoing a SPAC merger, but retail 

investors often will have little visibility into those 

preparations when making investment decisions.

Limitations on projections and other forwardlooking statements present another potential 

difference between protections afforded traditional 

IPO investors and those who invest in SPACs. 

The Private Securities Litigation Reform Act 

(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. Some 

companies may opt to go public through SPAC 

transactions in part because of the assumption 

the PSLRA limits investors’ ability to pursue legal 

claims on overly optimistic projections. John 

Coates, the Division of Corporation Finance’s 

Acting Director, highlighted this issue in an April 

2021 public statement.36 Similarly, the fact that 

SPAC transactions do not involve underwriters, 

which must operate within their own regulatory 

obligations37 and reputational risk considerations, 

may lead some companies to believe that going 

public through a SPAC transaction will allow them 

to engage in more aggressive marketing.

We will work with the Division of Corporation 

Finance, the Office of the Chief Accountant, and 

others to assess whether SPAC investors would 

benefit from additional guidance, regulatory 

changes, or clarification on the scope of the PSLRA 

or other laws.

Additionally, we recognize that despite their recent 

popularity, SPACs may not enjoy long-term favor 

from retail investors. Recent scholarship highlighted 

at the Investor Advisory Committee’s March 

2021 meeting suggests that in many cases, SPAC 

share prices drop significantly after the business 

combination, leaving investors holding shares at 

that point with sometimes substantial losses.38 If 

that pattern holds true over time, investors and 

companies alike may sour on this model of capital 

formation. Indeed, media reports suggest that such 

disenchantment may already be occurring.39

Nonetheless, whether or not SPACs enjoy long-term 

popularity, they represent an evolution in the process 

of going public and present an opportunity for 

the Commission to consider how to assess future 

evolutions. We will study the SPAC phenomenon to 

determine whether additional regulatory refinements 

may be necessary to prepare for future innovations 

in the capital markets.

EQUITY MARKET STRUCTURE

As noted in our prior Reports on Objectives, the 

Commission has been engaged in a multi-year 

effort to improve the environment for modern 

trading.40 We have supported a number of regulatory 

proposals that were recently adopted, including 

amendments to Rule 15c2-11 that address a specific 

type of stale quotations in “over-the-counter” (OTC) 

securities not listed on the exchanges,41 as well as 

efforts to modernize the overall infrastructure for 

the collection, consolidation, and dissemination of 

market data for National Market System (NMS) 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 9

stocks.42 Retail investors may benefit from the 

improved content and competitive infrastructure 

for quotation and trading data, either directly or 

as participants in mutual funds and pension funds. 

We will monitor the implementation and impact of 

both rules in Fiscal Year 2022.

We will continue to encourage the Commission to 

finalize on-going initiatives to enhance the capital 

markets and benefit investors. For example, in 

October 2020, the Commission published for 

public comment a proposal to modernize the 

governance of NMS plans that produce public 

consolidated equity market data and disseminate 

trade and quote data from trading venues.43 We 

support the adoption of this NMS Plan, as it 

should improve the representation of retail and 

institutional investors in the decision-making 

process. We also support the full implementation 

of the Commission’s Consolidated Audit Trail, 

or CAT. This system, years in the making and 

years behind schedule, is intended to enhance, 

centralize, and generally update the regulatory data 

infrastructure available to market regulators.44

Promising progress is being made; in October 

2020, the Commission sought public comment on 

amendments to enhance data security for the CAT 

database45 and also began “Phase 2a” of collecting 

core equity reports to the database.

During Fiscal Year 2022, we intend to continue our 

engagement on numerous other relevant initiatives 

that we hope the Commission will be able to move 

forward with in the near future, including:

§	Shortening 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. The successful industry 

transition from T+3 in September 2017 now 

provides an opportunity to further reduce 

risk in the financial system for the benefit of all 

market participants, including retail investors. 

This not only would respond to the Investor 

Advisory Committee’s 2015 long-standing 

recommendation on the matter,46 but it also 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.

§	Pilot programs for thinly-traded securities to 

explore the effects of restricting unlisted trading 

privileges (UTP). UTP permits all exchanges 

to act as separate trading venues for any listed 

security.47 Some have argued that concentrating 

trading on the primary listing exchange would 

improve liquidity by making it easier for buyers 

and sellers to find each other in the smaller 

segment of the equity market. A pilot program to 

explore this idea could also allow for integration 

with other innovative market structure solutions, 

including periodic batch auctions.

§	Enhancements to the rules governing transfer 

agents. As previously discussed in a December 

2015 advanced notice of rulemaking and a 

concept release,48 these enhancements could, 

in part, specify transfer agent obligations with 

respect to the tracking and removal of restrictive 

legends. This could deter the improper or 

inappropriate removal of a legend, and investors 

would be better protected from the harm that 

comes from the illegal public distribution of 

such securities. 

§	Studying and addressing the potential conflicts 

of interest created by exchange fees and rebates 

in connection with broker-dealer order routing 

behavior. Although in June 2020, the U.S. Circuit 

Court of Appeals for the District of Columbia 

struck down the Commission’s intended 

Transaction Fee Pilot regarding NMS stocks, 

which would have collected experimental data on 

this subject,49 we continue to believe it is worth 

studying, and we support efforts to evaluate the 

issue in light of the Court’s instructive guidance. 
10 | OFFICE OF THE INVESTOR ADVOCATE

In addition, we would support efforts to 

evaluate the impact of “payment for order 

flow” by market makers when broker-dealers 

make off-exchange order routing decisions.

§	Enhance transparency in short selling as well 

as the opaque network of stock lending and 

borrowing that facilitates the practice. The 

period of volatile stock trading in January 

2021, in several cases involving companies with 

significant short interest, raised a number of 

policy questions. Having a repository of data 

in this space could improve the Commission’s 

ability to monitor this area of the market in real 

time. Further, additional guidance concerning 

what constitutes a broker-dealer’s reasonable 

basis for the “locate” requirement for heavily 

shorted companies should be considered.

In addition to evaluating rulemaking by the 

Commission during Fiscal Year 2022, we will 

continue to examine the hundreds of rule proposals 

that are filed with the Commission by the SROs. 

Typically, a number of these filings involve market 

structure issues that impact investors. For example, 

in April 2021, the Commission approved a 

proposal by the CBOE BYX Exchange, Inc. (BYX) 

for intra-day, periodic auctions for all securities 

traded on the exchange.50 We did not oppose this 

proposal but would have preferred a narrower 

initial approach that was more targeted to thinlytraded securities with less risk of creating systemic 

latency in a bifurcated market. In Fiscal Year 

2022, we will monitor the implementation of the 

proposal, with the hope that it will lessen costs 

associated with the speed “arms race” in the equity 

market without causing significant unintended 

consequences. We will also consider whether this 

novel batch auction process, now Commissionapproved, could be adopted by a primary listing 

exchange with an eye towards improving liquidity 

for thinly-traded securities.

NOVEL EXCHANGE-TRADED FUNDS

In September 2019, the Commission adopted a 

new rule and form amendments designed to 

establish a modernized, clear, and consistent ETF 

regulatory framework (ETF Rule).51 We welcomed 

the adoption of the ETF Rule at the time, noting 

that it included important investor protection 

safeguards, such as requiring an ETF to provide 

full daily portfolio transparency on its website,52

as well as a condition expressly excluding leveraged 

and inverse ETFs from the rule’s scope.53 Separately, 

however, the Commission has also provided special 

relief to several industry participants, allowing 

ETFs that do not provide full daily portfolio 

transparency (non-transparent ETFs) to enter the 

ETF marketplace. Additionally, in late 2020, the 

Commission amended the ETF Rule to bring 

many leveraged and inverse ETFs within the ETF 

Rule’s ambit. Each of these developments raises 

potential investor protection concerns and warrants 

our continued attention and engagement in Fiscal 

Year 2022.

First, we will maintain a focus on non-transparent 

ETFs. Pursuant to special relief that the Commission 

granted to Precidian ETFs Trust (Precidian),54

non-transparent ETFs began trading on an exchange 

for the first time in April 2020.55 This development 

represented a significant departure from the way 

that ETFs have typically functioned. A traditional 

ETF with full daily portfolio transparency can rely 

on financial institutions to directly identify and 

act on arbitrage opportunities when the market 

value of the ETF’s shares are over- or under-valued 

relative to the ETF’s portfolio holdings. In contrast, 

non-transparent ETFs utilizing the Precidian model 

provide confidential information concerning 

the securities that the ETF would exchange for 

its shares only to agents working on behalf of 

financial institutions. The agents then facilitate the 

transactions expected to keep the market value 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 11

of the ETF’s shares in line with the value of the 

ETF’s holdings.56 Not long after granting special 

relief to Precidian’s non-transparent ETF model, 

the Commission granted special relief allowing 

for the introduction of several other types of 

non-transparent ETF models.57 The details of these 

models vary slightly amongst each other. Generally, 

however, each provides daily information regarding 

a “proxy portfolio” in lieu of providing full daily 

portfolio transparency. The proxy portfolios are 

intended to give financial institutions enough 

information to engage in transactions that mimic 

the traditional ETF arbitrage mechanism. The first 

of these second-generation non-transparent ETFs 

launched in June 2020.58 Though early data is 

encouraging, it is not yet clear whether any of these 

novel variations on the traditional ETF arbitrage 

mechanism will function as anticipated 

or whether investors in these funds will be 

kept fully informed of the risks associated 

with transacting in non-transparent ETFs.59

As non-transparent ETFs continue to build an 

operating track record, we look forward to 

working with Commission staff to assess whether 

they are functioning as intended and evaluate the 

unique risks they may present to investors.

Second, we will continue to monitor developments 

related to leveraged and inverse ETFs. These ETFs 

were brought within the scope of the ETF Rule as 

part of the Commission’s adoption of a rule relating 

to funds’ use of derivatives (Derivatives Rule) on 

October 28, 2020.60 Although the Commission 

ceased granting special relief to would-be sponsors 

of leveraged and inverse ETFs in 2009, sponsors 

may now form and operate these ETFs pursuant to 

the amended ETF Rule, akin to traditional “plainvanilla” ETFs.61 Unfortunately, because many 

existing leveraged and inverse ETFs (those with 

greater than 200% or -200% leverage) “generally 

could not satisfy the limit on fund leverage risk in 

[the Derivatives Rule],” these ETFs were simply 

exempted from the Derivatives Rule’s leverage 

limitations.62 We find this development worrisome 

because the Commission has long acknowledged 

the unique investor protection concerns that 

leveraged/inverse investment vehicles present,63

numerous enforcement cases at the Commission 

and the Financial Industry Regulatory Authority 

(FINRA) have shown that investment professionals 

themselves often lack a basic understanding of 

these complex products,64 and media outlets have 

documented the confusion and harm these products 

cause.65 When initially proposed, the Derivatives 

Rule would have included other safeguards, such 

as a requirement that broker-dealers and 

investment advisers “exercise due diligence on 

retail investors before approving retail investor 

accounts to invest in ‘leveraged/inverse investment 

vehicles,’” but unfortunately this requirement 

was dropped from the final Derivatives Rule.66

Although the Derivatives Rule adopting release 

states that the Commission “believe[s] that it is 

important to continue to consider these funds in 

light of investor protection concerns,”67 the release 

indicates that those concerns would be better 

addressed as part of a broader staff review of 

complex investment products.68

While we believe that exempting highly leveraged 

and inverse ETFs from the Derivatives Rule’s limit 

on fund leverage risk will harm investors, we are 

encouraged that a broader review of complex 

investments is underway. We hope that the review 

will result in a fresh acknowledgement of the 

well-known investor protection concerns associated 

with inverse and leveraged ETFs and, to the extent 

these products remain exempt from the leverage 

limits applicable to all other ETFs, we believe the 

Commission should consider alternative safeguards 

to mitigate those concerns.
12 | OFFICE OF THE INVESTOR ADVOCATE

REGISTERED FUND DISCLOSURE

In Fiscal Year 2022, we will also continue our 

focus on the effectiveness of disclosure provided to 

investors in SEC-registered funds. As we have noted 

in reports for previous fiscal years, 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 attempts to provide registered 

fund investors with clear, concise disclosure 

regarding funds’ investment strategies, risks, costs, 

and other attributes. With these considerations 

in mind, the Commission issued a significant 

proposal on August 5, 2020 to update and tailor 

mutual fund and ETF disclosures to retail investors’ 

needs (Tailored Shareholder Reports Proposal).69

This proposal would, if adopted as proposed: 

require streamlined reports to shareholders 

that would include, among other things, fund 

expenses, performance, illustrations of holdings, 

and material fund changes; significantly revise the 

content of these items to better align disclosures 

with developments in the markets and investor 

expectations; encourage funds to use graphic 

or text features—such as tables, bullet lists, and 

question-and-answer formats—to promote effective 

communication; and promote a layered and 

comprehensive disclosure framework by continuing 

to make available online certain information that 

is currently required in shareholder reports but 

may be less relevant to retail shareholders generally. 

The proposed framework would provide an 

alternative approach to keeping investors informed 

about their on-going fund investments. Instead of 

receiving both prospectus updates and shareholder 

reports, which today can be lengthy and complex, 

existing investors would receive the streamlined 

shareholder report.70

This initiative follows on the heels of other 

Commission efforts to improve fund disclosure in 

recent years. On June 5, 2018, the Commission issued 

a request for comment seeking input from individual 

investors and other interested parties on enhancing 

disclosures by mutual funds, ETFs, and other types of 

investment funds to improve the investor experience 

and to help investors make more informed investment 

decisions (the Investor Experience RFC).71 Responses 

to the Investor Experience RFC have since aided 

rulemaking efforts within the Commission’s Division 

of Investment Management, including the Tailored 

Shareholder Reports Proposal, as well as the recent 

adoption of a new rule and related form and rule 

amendments to simplify and streamline disclosures 

for investors about variable annuities and variable life 

insurance contracts.72

Additionally, on May 21, 2020, the Investor Advisory 

Committee approved a Recommendation on 

Disclosure Effectiveness,73 acknowledging that the 

Commission faces a daunting challenge in developing 

effective disclosures. The Committee noted that 

investors have a wide range of choices and that “the 

factors to consider in an effort to identify the best 

or most appropriate option can be numerous and 

difficult to analyze.” The Committee encouraged 

the Commission to utilize more scientific methods, 

including iterative research and testing to refine 

proposed disclosures, and made a number of other 

recommendations to enhance the effectiveness of 

disclosures for retail investors. 

Meanwhile, the Office of the Investor Advocate 

is pursuing such efforts by utilizing surveys, focus 

groups, and other methods to gain insight into 

investor behavior and provide data regarding 

disclosure-related policy choices. We expect these 

efforts to produce valuable information in the 

upcoming reporting period and beyond, and to help 

inform initiatives such as the Tailored Shareholder 

Reports Proposal. We look forward to working 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 13

with our colleagues to continuously improve and 

enhance the information provided to registered 

fund investors.

CRYPTOCURRENCY

The emergence of cryptocurrency as an asset class is 

creating new opportunities for investors, and there 

is significant demand for investments in various 

crypto assets. The value of the total cryptocurrency 

market has surged to more $2 trillion in the past 

year, up from about $260 billion.74 Similarly, 

trading volume in crypto assets has risen as more 

investors have been able to access crypto markets 

through a range of trading platforms.75

We see much promise in the underlying distributed 

ledger technology, or blockchain, which has the 

potential to transform the infrastructure of our 

markets by making it easier, for example, to track 

the ownership of specific shares of a company. 

This could unleash efficiencies in clearance and 

settlement, share voting, and communication 

with shareholders, among other innovations. 

More broadly, as Commissioner Hester Peirce has 

observed, given “its ability to reach people without 

intermediaries and its ease of storage, transport, 

and access, crypto can be an important part of the 

survival story of people living under the threat of 

harm by their families, people in their communities, 

or repressive governments.”76

At the same time, the proliferation of crypto assets 

has created new challenges for investor protection. 

While crypto assets may be appropriate for certain 

investors seeking to include uncorrelated assets in 

a diversified investment portfolio, investors also 

are exposed to unique risks. For instance, because 

crypto assets are traded on unregulated exchanges, 

there is no government oversight of the trading 

rules to ensure that purchasers receive the best 

price for the assets. These trading platforms could 

unfairly discriminate between their users, and some 

investors may not receive fair access when placing 

orders on the platform. The platforms could have 

significant undisclosed conflicts of interest, and 

there is no reason to believe that the exchange-like 

functions—offering order books with updated bid 

and ask pricing and data about executions on the 

system—have the same integrity as that provided 

by the regulated national securities exchanges. 

Lack of regulation of cryptocurrency exchanges 

can result in broad harm, as exemplified by recent 

events in the Republic of Turkey. Media reports 

have highlighted the predicament of Turkish 

investors and present a cautionary tale regarding 

the risks related to crypto assets and the failure 

of cryptocurrency exchanges.77 Turkey has a high 

adoption rate of digital assets, and Turkish citizens 

have some of the highest per capita bitcoin usage 

in the world.78 In 2020, for instance, Turkey had 

approximately 2.4 million users of cryptocurrency, 

with bitcoin being the most popular crypto 

asset (before the Turkish government banned 

cryptocurrency payments on April 30, 2021).79

According to a 2018 ING international survey, 

around 18 percent of Turkish respondents reported 

owning cryptocurrency, compared to about eight 

percent in the United States.80 The widespread 

adoption of crypto assets among Turkish investors, 

however, has resulted in major losses stemming 

from the collapse of two cryptocurrency exchanges 

in Turkey within the span of a week.81 By some 

accounts, losses from the collapse of just one of 

those exchanges could reach $2 billion.82 While the 

actual causes of those exchange failures have yet 

to be pinpointed definitively, Turkish government 

officials have cited regulatory gaps as a contributing 

factor.83 Now, not only has Turkey’s Central Bank 

banned cryptocurrencies as a form of payment, it 

has also forbidden payment and electronic money 

institutions from mediating money transfers to 

cryptocurrency platforms.84 Moreover, additional 

regulation is “in the pipeline” as the Central Bank 

of Turkey has promised even greater regulation of 

Turkish cryptocurrency exchanges.85
14 | OFFICE OF THE INVESTOR ADVOCATE

In addition to unregulated exchanges, another 

enduring area of concern is cryptocurrency custody. 

Custody is arguably the most important component 

of cryptocurrency infrastructure because it involves 

the management of the cryptographic private 

keys used by crypto-asset owners to execute 

transactions.86 On a given blockchain network, it 

is the holder of a cryptographic “private key” who 

controls the specific crypto-assets recorded on the 

blockchain.87 The cryptographic private key is used 

to unlock a “public key” wallet address, which 

in turn is used to execute transactions and move 

assets (or tokens) on the network.88 The role of the 

cryptocurrency custodian is to maintain ownership 

rights for those private key holders based on 

internal custody systems of record.89 Therefore, 

it is imperative for a cryptocurrency custodian 

to safeguard digital assets by ensuring that 

investors’ private keys are maintained securely.90

To accomplish this, a cryptocurrency custodian 

can store the crypto assets in any variety of ways, 

for example: (1) online—a method known as “hot 

storage;” (2) offline—a method known as “cold 

storage;” (3) by employing a multiple approval 

approach, known as “multi-signature;” or (4) by 

using “smart contract wallets.”91

According to a recent report by a major accounting 

firm, cryptocurrency “hacks” have caused 

approximately $9.8 billion in losses since 2011.92

These losses are global in scope, impacting 

investors in countries as disparate as Japan, Italy, 

Slovenia, Germany, and South Korea, among 

others.93 But hacking is not the only threat to 

cryptocurrency infrastructure. According to 

the Federal Trade Commission, U.S. consumers 

have reported losing more than $80 million to 

cryptocurrency investment scams during the fourth 

quarter of 2020 and the first quarter of 2021.94

Issues related to cryptocurrency investing have 

a substantial history at the Commission. In June 

2021, for example, the Division of Investment 

Management (IM) issued a public “Staff Statement 

on Funds Registered under the Investment 

Company Act Investing in the Bitcoin Futures 

Market” (Staff Statement on Bitcoin Futures).95

Among other things, that statement acknowledged 

that the “Bitcoin futures market...has not 

presented the custody challenges associated with 

some cryptocurrency-based investing because the 

futures are cash-settled.”96 Nonetheless, the Staff 

Statement on Bitcoin Futures signaled that IM 

staff, in coordination with staff from the Division 

of Economic Risk and Analysis and the Division 

of Examinations, would monitor closely “the 

impact of mutual funds’ investment in Bitcoin 

futures on investor protection, capital formation, 

and the fairness and efficiency of markets.”97

Then, based upon the experience of mutual funds 

investing in this market, staff indicated that 

they would consider whether the Bitcoin futures 

market could accommodate ETFs. According 

to the Staff Statement on Bitcoin Futures, ETFs 

require different considerations because “unlike 

mutual funds, [ETFs] cannot prevent additional 

investor assets from coming into the ETF if the ETF 

becomes too large or dominant in the market, or if 

the liquidity in the market starts to wane.”98

The Staff Statement on Bitcoin Futures references 

the IM staff’s January 18, 2018, letter addressed 

jointly to the Investment Company Institute and 

the Securities Industry and Financial Markets 

Association on the subject of “Engaging on 

Fund Innovation and Cryptocurrency-related 

Holdings” (Cryptocurrency Holdings Letter).The 

Cryptocurrency Holdings Letter observed that the 

growth in cryptocurrency-related products has 

attracted significant attention and acknowledged 

that certain sponsors were interested in offering 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 15

registered funds that would hold these new 

digital products.99 The Cryptocurrency Holdings 

Letter also noted, however, “that there are a 

number of significant investor protection issues 

that need to be examined before sponsors begin 

offering these funds to retail investors.”100 The 

letter identified five issues requiring further 

consideration: valuation, liquidity, custody, 

arbitrage (for ETFs), and potential manipulation 

or other risks.101 Regarding custody, in particular, 

the Cryptocurrency Holdings Letter raised the 

following questions:

§	To the extent a fund plans to hold cryptocurrency directly, how would it satisfy the 

custody requirements of the 1940 Act and 

relevant rules?

§	How would a fund intend to validate existence, 

exclusive ownership and software functionality 

of private cryptocurrency keys and other 

ownership records?

§	To what extent would cybersecurity threats 

or the potential for hacks on digital wallets 

impact the safekeeping of fund assets under 

the 1940 Act?

§	To the extent a fund plans to hold cryptocurrency-related derivatives that are physically 

settled, under what circumstances could the 

fund have to hold cryptocurrency directly?

§	If the fund may take delivery of cryptocurrencies 

in settlement, what plans would it have 

in place to provide for the custody of the 

cryptocurrency?

Relatedly, on March 12, 2019, IM staff issued a 

letter to the Investment Adviser Association on 

“Engaging on Non-DVP Custodial Practices and 

Digital Assets” (2019 Staff Letter).102 Among 

other things, the 2019 Staff Letter addressed the 

custody of digital assets vis-à-vis the custody rule 

under the Investment Advisers Act of 1940. The 

2019 Staff Letter questioned whether and how 

characteristics peculiar to digital assets might affect 

compliance with the custody rule: for example, 

the use of distributed ledger technology (DLT) to 

record ownership, the use of public and private 

cryptographic key pairings to transfer digital assets, 

the “immutability” of blockchain, the inability 

to restore or recover digital assets when lost, the 

generally anonymous nature of DLT transactions, 

and the challenges posed to auditors in examining 

DLT and digital assets. To gain more clarity on 

these issues, the 2019 Staff Letter posed a series of 

questions on which it sought input and engagement 

from interested parties.

On December 23, 2020, the Commission issued 

a statement and request for comment regarding 

the custody of digital asset securities by brokerdealers.103 In that release, the Commission indicated 

that it expects broker-dealers to perform the full 

set of their traditional functions with respect to 

digital asset securities—including maintaining 

custody of those assets in a manner that addresses 

their unique attributes and minimizes risk to 

investors and other market participants.104 The 

Commission recognized that the “manner in which 

digital assets, including digital asset securities, 

are issued, held, or transferred may create greater 

risk that a broker-dealer maintaining custody of 

this type of asset, as well as the broker-dealer’s 

customers, counterparties, and other creditors, 

could suffer financial harm.”105 The Commission 

cited as examples of potential harm those 

circumstances in which the broker-dealer could 

be victimized by fraud or theft, could lose a 

private key necessary to transfer a client’s digital 

assets, or could transfer a client’s digital assets 

to an unintended address without the ability to 

reverse a fraudulent or mistaken transaction.106

The Commission also raised the possibility of 

malicious activity that could render the brokerdealer unable to transfer a customer’s digital 

assets.107 The Commission released its statement 

in part to carve out a five-year safe harbor “to 

provide market participants with an opportunity to 
16 | OFFICE OF THE INVESTOR ADVOCATE

develop practices and processes that will enhance 

their ability to demonstrate possession or control 

over digital asset securities” so long as certain 

enumerated conditions are met, and also to provide 

the Commission with experience to inform further 

action in this area.108

More recently, at a May 6, 2021 hearing before 

the House Committee on Financial Services, Chair 

Gensler testified that the cryptocurrency sector 

“could benefit from greater investor protection” 

and that it is “only Congress that can really address 

it.”109 Chair Gensler testified further that “trading 

in these crypto assets [does] not have a regulatory 

framework” and “right now there’s not a market 

regulator around these crypto exchanges, and 

thus there’s really not protection against fraud or 

manipulation” in that space.110

Currently, there are several applications for ETFs 

with crypto asset-focused investment strategy 

(cryptocurrency ETFs) pending before the 

Commission.111 In our view, the most important 

obstacles to the launch of well-regulated 

cryptocurrency ETFs are the custody issues 

discussed above and the lack of regulation of 

crypto asset trading platforms. While some 

traditional mutual funds are currently allocating a 

small percentage of their assets to bitcoin futures, as 

noted above, the Staff Statement on Bitcoin Futures 

indicates that the ETF structure may present 

challenges not present in the traditional mutual 

fund space.112 These challenges are amplified to 

the extent these ETFs intend to engage in direct 

investment in crypto assets rather than investments 

in futures.113 In our view, the issues raised by the 

Cryptocurrency Holdings Letter remain relevant, 

and we anticipate that satisfactory answers to those 

questions would be critical to any eventual SEC 

approval of a cryptocurrency ETF application in 

the future. In Fiscal Year 2022, we will continue 

to monitor developments involving crypto assets, 

including the pending ETF applications, with 

a view toward helping investors gain access to 

new investment opportunities while maintaining 

appropriate investor protections.

BROKER CONDUCT

For the past two years, we have highlighted two 

items relevant to broker-dealer conduct as it 

relates to retail investors: (1) the Commission’s 

new “best interest” standard of conduct for 

recommendations;114 and (2) the persistent problem 

of broker migration and misconduct.115

With Regulation Best Interest (Reg BI) implemented 

on June 30, 2020, we continue to monitor how 

the Commission and FINRA use the new tools 

to address unethical or abusive conduct in the 

brokerage business. As our Office said at the time 

of adoption, the elimination of sales contests, the 

enhanced disclosures of conflicts of interest, and 

many other adjustments in the rule should improve 

the outcome for retail investors compared to the 

old suitability standard. However, Reg BI must be 

enforced rigorously enough to ensure that broker 

behavior matches customers’ expectations when 

receiving investment advice from their brokers. 

With more and more online-only broker-dealers 

facilitating retail investor trading through 

phone-based applications, it is important for the 

Commission to consider how these platforms fit 

within Reg BI. These platforms typically offer 

customers zero-commission trades, with revenues 

to the firm coming from the market participants 

who accept the trades in an arrangement known as 

“payment for order flow.” In a sense, because the 

investor is paying little or nothing to the brokerdealer, the investor becomes the product of the 

broker-dealer in addition to being its customer. This 

creates a new dynamic that raises many important 

policy questions.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 17

In Fiscal Year 2022, we intend to advocate 

for the Commission and FINRA to consider 

whether the design of these apps—the content, 

context and manner of presentation of potential 

stock investments, tailored to customers via an 

algorithm or artificial intelligence—can constitute 

a recommendation under Reg BI. This would 

require the broker-dealer to consider each 

recommendation in light of the particular 

customer’s overall investment profile and may 

require heightened screening before customers are 

given access to margin, options trading, and other 

products or strategies that involve heightened 

risk. If Reg BI, as adopted, is not able to address 

this growing segment of the marketplace, we will 

advocate for enhancements to the rule.

As to broker migration and misconduct, studies 

show a strong correlation between the frequency 

with which a broker moves between firms and the 

risk posed by that broker to his or her customers.116

Research has also identified a propensity for roving 

bad brokers to congregate at high-risk firms with 

other brokers of similar character (sometimes 

referred to as “cockroaching”).117

In December 2020, FINRA proposed new Rule 

4111 (Restricted Firm Obligations) targeting 

firms with a disproportionate history of broker 

and other misconduct relative to their similarlysized peers. The new rule would impose, in certain 

instances, conditions or restrictions on member 

operations, including requirements for deposits 

of cash or qualified securities that could not be 

withdrawn without FINRA’s prior written consent, 

if a firm exceeds a certain threshold calculation 

of broker or other misconduct.118 We reviewed the 

comments received, analyzed the data behind the 

rule, and encouraged the Commission to favorably 

consider the rule. In Fiscal Year 2022, we anticipate 

monitoring the successful implementation of 

this rule.

Generally, we will continue to encourage 

FINRA to crack down on broker migration and 

misconduct. Effective regulation of bad actors, 

both individuals and firms, is critical to the safety 

of retail investors. For example, in December 2020, 

we were pleased that the Commission approved 

a separate FINRA proposal to address another 

set of risks presented by individual brokers with a 

significant history of misconduct.119

Issues related to broker conduct, including during 

the arbitration process, are the frequent subject 

of complaints that investors bring to the attention 

of SEC Ombudsman Tracey McNeil. Thus, other 

important issues involving broker conduct are 

included below in the Ombudsman’s Report. 

Ombudsman McNeil and her staff will continue to 

dialogue with FINRA during Fiscal Year 2022 to 

address these issues.

FINANCIAL EXPLOITATION OF 

SENIOR INVESTORS

Currently pending before the U.S. Senate 

Committee on Banking, Housing, and Urban 

Development is a bill entitled “National Senior 

Investor Initiative Act of 2021,” which passed the 

U.S. House of Representatives on April 20, 2021.120

The bill is a bipartisan piece of House legislation 

that, if enacted, would establish a “Senior Investor 

Taskforce” within the Commission that would 

report on topics relating to investors who are over 

65 years of age, including a review of industry 

trends and serious issues impacting those investors. 

The Taskforce would also make recommendations 

for legislative or regulatory actions to address 

problems encountered by senior investors. 
18 | OFFICE OF THE INVESTOR ADVOCATE

The Taskforce would include staff from the 

Commission’s Division of Enforcement, the 

Division of Examinations, and the Office of 

Investor Education and Advocacy. The bill directs 

the Taskforce to perform the following functions:

A. identify challenges that senior investors 

encounter, including problems associated with 

financial exploitation and cognitive decline;

B. identify areas in which senior investors would 

benefit from changes in the regulations of the 

Commission or the rules of SROs;

C. coordinate, as appropriate, with other Offices 

within the Commission, other taskforces that 

may be established within the Commission, 

SROs, and the Elder Justice Coordinating 

Council; and

D. consult, as appropriate, with State securities and 

law enforcement authorities, State insurance 

regulators, and other Federal agencies.

The Taskforce, in coordination with the Office 

of the Investor Advocate and SROs, and where 

appropriate, in consultation with State securities 

and law enforcement authorities, State insurance 

regulators, and Federal agencies, would be 

required to issue a report every two years to both 

the Senate Banking Committee and the Senate 

Special Committee on Aging, as well as to the 

House Financial Services Committee. In addition, 

the bill would require the General Accountability 

Office to submit the results of a study of financial 

exploitation of senior citizens (GAO Study) to 

both Congress and the Taskforce two years after 

the date of enactment. Generally, the GAO Study 

would include information about the economic 

costs of the financial exploitation of senior citizens, 

the frequency of senior financial exploitation 

and correlated or contributing factors, and 

policy responses and reporting of senior financial 

exploitation.

We support the creation of the Taskforce and 

its important mission, and we look forward 

to contributing relevant research to this effort 

as appropriate. More generally, we have long 

advocated for investor protection for vulnerable 

investors, including seniors, as reflected in our 

previous reports to Congress. We agree with 

Commissioner Elad Roisman, who has stated 

that with respect to “America’s older investors, 

the need for protection is indeed a priority” and 

that senior financial exploitation, while oftentimes 

instantaneous, “can have financial, emotional, 

psychological effects that devastate victims for far 

longer.”121 We intend to work with Commissioner 

Roisman and others at the Commission to better 

understand and support senior investors.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 19

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.122

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).123 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 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 Ombudsman124

during the full preceding fiscal year. 

Accordingly, this Ombudsman’s 

Report provides a look back on 

the Ombudsman’s activities for 

the six-month period of 

October 1, 2020 through 

March 31, 2021 (Reporting 

Period), and discusses the 

Ombudsman’s objectives and 

outlook for Fiscal Year 2022, 

beginning October 1, 2021.

SERVICE BY THE NUMBERS

The Ombudsman assists retail investors— 

sometimes referred to as individual investors or 

Main Street investors—and other persons with 

concerns or complaints about the SEC or SROs 

the SEC oversees. The assistance the Ombudsman 

provides includes, but is not limited to: 

§	listening to inquiries, concerns, complaints, and 

related issues;

§	helping persons explore available SEC options 

and resources;

§	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

§	acting as an alternate channel of communication 

between retail investors and the SEC.

OMBUDSMAN’S REPORT
20 | OFFICE OF THE INVESTOR ADVOCATE

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. 

At times, individuals request the Ombudsman’s 

assistance with things the Ombudsman does 

not do. For example, individuals may ask us to 

provide financial or legal advice, participate in a 

formal investigation, make binding decisions or legal 

determinations for the SEC, or overturn decisions of 

existing dispute resolution or appellate bodies. 

The following graphic illustrates the general lifecycle 

of what happens when investors or other interested 

persons contact the Ombudsman for assistance:

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.

What Happens When You Contact the Ombudsman
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 21

To respond to inquiries effectively and efficiently, 

the Ombudsman monitors the volume of inquiries 

and the staff resources devoted to addressing 

the particular concerns raised. The Ombudsman 

tracks all inquiries received by, or referred to, the 

Ombudsman, 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 the Ombudsman 

identify systemic or problematic issues, analyze 

matter volume and trends, and provide data-driven 

support for recommendations presented by the 

Ombudsman to the Investor Advocate for review 

and consideration. 

Inquiry volume is counted 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, the 

Ombudsman 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. 

Once a matter is created, it may generate 

subsequent contacts—related inquiries and 

communications to or from the Ombudsman staff 

deriving from the matter. These contacts often 

require further attention to answer additional 

investor questions, explain or clarify proposed 

resolution options, discuss issues with appropriate 

SEC or SRO staff, or respond to challenging or 

persistent communications from an investor. This 

system of counting matters and contacts helps the 

Ombudsman quickly assess volume and resource 

issues related to each matter.

Data across Primary Issue Categories

The Primary Issue Categories used below are 

broad descriptive labels that reflect the submitter’s 

description or characterization of their complaint, 

based upon the information the submitter 

provided.125 During the Reporting Period, retail 

investors, industry professionals, concerned 

citizens, and other interested persons contacted 

the Ombudsman for assistance on 1,202 matters 

covering 11 primary issue categories:

Matters by Primary Issue Category

October 1, 2020–March 31, 2021

0.7% 1.2%

1.4% 0.5%

0.2%

Allegations of Securities Law Violations / Fraud (462)

Investment Products / Retirement Accounts (283)

Non-SEC / Other Matters (144)

SEC Questions / Complaints (121)

SEC Investigations / Litigation / Enforcement Actions (107)

Atypical Matters (37)

Securities Laws / Rules / Regulations / Procedures (17)

Company Disclosures and Information (15)

FINRA Complaints / Questions / Procedures (8)

Securities Ownership (6)

SRO Rules / Procedures (2)

38.4%

12.0%

8.9%

10.1%

3.1%

23.5%
22 | OFFICE OF THE INVESTOR ADVOCATE

In addition to the 1,202 matters received, we 

fielded 1,379 contacts covering 11 primary issue 

categories during the Reporting Period, for a total 

of 2,581 contacts. The chart that follows displays 

the distribution of the 2,581 total contacts by 

primary issue category:

Contacts by Primary Issue Category

October 1, 2020–March 31, 2021

0.7% 1.1%

1.3% 0.7%

0.1%

26.7%

10.3%

9.7%

26.0%

Investment Products / Retirement Accounts (689)

Allegations of Securities Law Violations / Fraud (672)

Non-SEC / Other Matters (366)

SEC Questions / Complaints (265)

SEC Investigations / Litigation / Enforcement Actions (250)

Atypical Matters (237)

Securities Laws / Rules / Regulations / Procedures (34)

Company Disclosures and Information (29)

Securities Ownership (18)

FINRA Complaints / Questions / Procedures (18)

SRO Rules / Procedures (3)

14.2%

9.2%

How the Numbers Inform Our Efforts

The Ombudsman 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 matters and 

contacts across primary issue categories, the data 

also helps the Ombudsman identify potential areas 

of concern or interest and enables the Ombudsman 

to act as an early warning system, as necessary, 

on the potential impact of particular issues and 

concerns raised by retail investors and others. 

SERVICE BEHIND THE NUMBERS 

While the matter and contact numbers capture the 

volume and categories of inquiries the Ombudsman 

receives, the numbers do not capture the full value 

of the services the Ombudsman 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 approach as 

we examine policies, regulations, and rulemakings. 

Among the most common problems and concerns 

brought to the Ombudsman are those from 

investors who are unfamiliar with the existing 

channels established to resolve the particular 

concerns they raise, unsure which resolution 

channel to use, or unable to get the specific 

outcome they want through the resolution channels 

available. Typically, investors who are unfamiliar 

with or unsure of the available resolution channels 

will thoughtfully consider the advantages and 

disadvantages of the resolution options the 

Ombudsman presents, and establish their expectations based upon the potential outcome each 

option offers. For these investors, the Ombudsman 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 23

serves a valuable resource function, but the investor 

retains responsibility for choosing how to proceed 

based on the resources the Ombudsman presents. 

Investors who want a particular outcome or 

believe that the Ombudsman is permitted to do 

whatever they request can be more challenging 

to assist. The Ombudsman routinely receives 

requests from investors who want the Ombudsman 

to, for example, automatically grant them SEC 

whistleblower status and provide monetary awards, 

reveal confidential information relating to SEC 

investigations, stop a publicly traded company 

from taking certain corporate actions, prosecute a 

particular broker or investment adviser, overturn 

an arbitration decision, or terminate specific 

SEC or SRO personnel. At times, they resist the 

Ombudsman’s efforts to engage in a productive 

dialogue and conclude that the only acceptable 

outcome is the particular outcome they want. 

The vignettes that follow are simplified, composite 

matter descriptions with certain details generalized, 

modified, or removed to avoid the disclosure of 

nonpublic or confidential information. These 

vignettes are included to help the reader better 

understand the context of the investor experience 

when an investor contacts the Ombudsman and 

to provide the reader with a sense of the variety of 

issues we receive from retail investors, better than 

the number of matters and contacts alone.

During the Reporting Period, the Ombudsman fielded matters relating to the FINRA arbitration process, 

including questions about arbitrator conduct, process concerns that may negatively impact arbitration 

outcomes, and the inability to appeal an arbitration award within the FINRA dispute resolution forum. While 

the volume of these matters was relatively low, the questions presented and challenges faced by these retail 

investors sparked important policy and research considerations. The Ombudsman and Investor Advocate 

intend to take a closer look at particular issues relating to the retail investor experience in the FINRA arbitration forum in Fiscal Year 2022.

In early 2021, several online trading platforms used by retail investors halted the purchase of certain stocks 

that were surging in popularity, which led to an outpouring of complaints to the Ombudsman. A number of 

these complaints came from first-time investors who opened accounts and purchased stocks on margin to 

take advantage of perceived rising prices. When the platforms halted trading, these investors were forced to 

close their positions at lower prices. Many investors directed their frustration at the SEC for allowing these 

platforms to halt the purchase of certain stocks, and more broadly, for purportedly allowing hedge funds to 

manipulate the markets to the detriment of retail investors.

SEC enforcement action press releases sparked complaints from investors reacting to the press releases 

themselves, and from investors reacting to related commentary on social media. Depending on the complaint and any specific requests for feedback or resolution, courtesy replies were issued as appropriate to 

provide general information about the SEC investigation and enforcement action process and links to related 

resources on the SEC.gov website.
24 | OFFICE OF THE INVESTOR ADVOCATE

Investors and others contacted the Ombudsman with questions and issues outside of the scope of SEC 

regulation, concerning, for example, certain foreign currency exchanges, home mortgages and loans, and 

retail banking products. The Ombudsman also received questions about healthcare issues and nursing 

homes, which are issues more appropriate for a long-term care ombudsman to address. When appropriate, 

the Ombudsman staff issued courtesy replies, answered general questions about the role of the SEC, and 

provided publicly available contact information for Federal agencies and other resources that may be better 

suited to address their concerns.

Several retail investors contacted the Ombudsman with questions about old physical stock certificates.

These investors often wanted to ascertain the value of, or receive updated documentation for, stock they 

or their relatives owned. The Ombudsman staff provided these investors with resources on the SEC’s 

Investor.gov website that detail how to prove stock ownership and how to replace a physical stock certificate 

that is lost, stolen, or damaged. The Ombudsman staff also informed these investors that they could contact 

the SEC Office of Investor Education and Advocacy for additional guidance and assistance if needed.

The Ombudsman routinely received communications from investors who were very upset about their 

investment decisions, the perceived impact of SEC policies and regulations, and other topics they felt warranted immediate, decisive action by the agency. In some instances, investors threatened violence against 

the SEC or harm to themselves. In each case, the Ombudsman staff promptly notified the SEC Office of 

Security Services and provided all of the information we received relating to the investor and their complaint. The Ombudsman is grateful that the Office of Security Services was always available, receptive, and 

responsive in these situations.

Investors unsure about the appropriate SEC division or office to contact continued to reach out to the 

Ombudsman for assistance. For example, investors contacted the Ombudsman for information on the status 

of Fair Fund distributions, for assistance with contacting unresponsive brokers, and for instructions on how 

to submit comments on proposed SEC rulemakings. For these matters, the Ombudsman staff generally 

directed the investors to resources and information on SEC.gov or to staff in the appropriate SEC division or 

office for further assistance. For investors with questions about the application or interpretation of specific 

SEC rules, the Ombudsman staff provided contact information for the rulemaking division responsible for 

interpreting the rule in question.

Many investors and others expressed concerns that they submitted questions to, or requested information from, the SEC and never received a reply. Some insisted that they received specific guidance from SEC 

staff, and although they were very certain about the guidance itself, they were uncertain about the SEC staff 

person who provided the guidance. In these instances, the Ombudsman attempted to provide resources to 

assist the investor and facilitate communication with appropriate SEC staff. Depending on the information 

provided, the Ombudsman staff was often able to identify errors, clarify miscommunications, and help the 

investor locate the appropriate division, office, and at times, agency to address their concerns. Investors 

were generally appreciative, and several thanked the Ombudsman staff for understanding their concerns and 

providing informative and timely responses.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 25

Our interactions with investors provide insight 

into the information they rely upon and believe 

to be important when making investment decisions, 

and their understanding about the role of the SEC 

in their investment decisions. The tailored information and responses the Ombudsman provides 

to investors are unique and require a high degree 

of securities law analysis and expertise, conflict 

resolution skills, diplomacy, and judgment. Even 

when the information or response communicated 

to an investor appears simple, the threshold 

questions and considerations required to understand the inquiry and to identify next steps, SEC 

staff resources, and potential policy implications 

necessitate having staff with a level of securities law 

knowledge typically gained through several years 

of prior experience. 

When our interactions with investors highlight 

their lack of information or gaps in their understanding, we attempt to deliver personalized, 

straightforward service by communicating the 

information necessary to help investors better 

understand the solutions the SEC can provide, by 

liaising with the appropriate persons and entities, 

and by empowering and equipping investors to 

make well-informed decisions.

STREAMLINED COMMUNICATIONS 

WITH RETAIL INVESTORS

The Ombudsman Matter Management System 

(OMMS) is an electronic platform for receiving 

inquiries, as well as tracking and analyzing matter 

and contact information, while ensuring all 

necessary data management, confidentiality, and 

reporting requirements are met. 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 

tailored 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. For any persons who do not wish, 

or are unable, to use the OMMS Form, they may 

still contact the Ombudsman by email, telephone, 

fax, and mail. When an OMMS matter record is 

created, the Ombudsman can review the matter 

details and communicate with the investor via 

the OMMS platform. OMMS also allows 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. 

Questions about online trading platforms 

contributed to an increase in matter submissions 

during this six month Reporting Period. Of the 

1,202 matters received, 704 matters (58.6 percent) 

were submitted via the OMMS Form. As a 

comparison, of the 1,647 matters received during 

Fiscal Year 2020, 715 matters (43.4 percent) were 

submitted via the OMMS Form. During FY 2018, 

the first full fiscal year the OMMS Form was 

available to the public, of the 449 matters received, 

164 matters (36.5 percent) were submitted via the 

OMMS Form. 

The Ombudsman will continue to encourage 

persons to submit their inquiries via the OMMS 

Form, closely monitor questions and suggestions 

relating to the OMMS Form, and work with the 

Office of Information Technology, the technology 

contractor, and the Office of Public Affairs, with 

the goal of enhancing the OMMS user experience 

and the Ombudsman-related information and 

resources available to the public.
26 | OFFICE OF THE INVESTOR ADVOCATE

OMBUDSMEN ROLES AND 

STANDARDS OF PRACTICE

The broad role and function of the Ombudsman, 

including helping retail investors identify existing 

SEC options and resources to help resolve their 

concerns, and assisting retail investors with 

informally addressing issues that may fall outside 

of the SEC’s existing inquiry and complaint 

processes, is somewhat similar to the broad roles 

and functions of ombudsmen at the other federal 

financial regulatory agencies. To exchange ideas, 

discuss best practices, and facilitate ongoing 

communication, the Ombudsman participates in 

scheduled quarterly meetings and interim meetings 

as needed with the ombudsmen at other federal 

financial regulatory agencies. When an investor 

contacts the Ombudsman with questions or 

concerns under the purview of another federal 

financial regulatory agency, the Ombudsman often 

facilitates communication with the appropriate 

ombudsman counterpart to direct the investor to 

staff at that agency best suited to address the matter.

Ombudsmen at the Federal Financial Regulatory Agencies

.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 27

FEDERAL RESERVE BOARD (FRB)

Ombudsman@frb.gov | (800) 337-0429

www.federalreserve.gov/aboutthefed/ombudsman.htm

The Ombudsman’s Office facilitates the fair and timely resolution of complaints related 

to the Federal Reserve System’s regulatory activities. The Ombudsman serves as an 

independent, confidential resource for individuals and institutions that are affected by the 

Federal Reserve System’s regulatory and supervisory actions.

OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)

OCCOmbudsman@occ.treas.gov | (202) 649-6800

www.occ.gov/about/who-we-are/organizations/office-of-enterprise-governance-andthe-ombudsman/index-office-of-enterprise-governance-and-the-ombudsman.html

The OCC Ombudsman, who reports directly to the Comptroller of the Currency and 

operates outside of bank supervision, ensures that bankers have access to the appeals 

process and that appeals are reviewed fairly according to existing standards. The OCC 

appeals process for national banks and federal savings associations (collectively, banks) 

provides an independent, fair, and binding means of resolving disputes arising during the 

supervisory process; helps ensure the most sound supervision decisions possible; and 

promotes open, continuous communication between banks and the OCC.

NATIONAL CREDIT UNION ADMINISTRATION (NCUA)

ombudsman@ncua.gov | (703) 518-1175

www.ncua.gov/about/open-government/ombudsman

NCUA’s Ombudsman reviews consumer complaints and recommends possible solutions.

The issues generally result from process concerns. As a consumer, you may choose to 

bring your concern to the Ombudsman after attempting to obtain resolution from the 

NCUA Consumer Assistance Center.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC)

Ombudsman@sec.gov | (877) 732-2001

www.sec.gov/ombudsman

The SEC Ombudsman is a confidential, impartial, and independent resource who 

serves as a liaison to help retail investors—sometimes referred to as individual investors 

or Main Street investors—resolve problems they may have with the SEC or with the 

self-regulatory organizations the SEC oversees. The SEC 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 SEC Ombudsman.
28 | OFFICE OF THE INVESTOR ADVOCATE

Confidentiality Impartiality Independence

The Ombudsman has 

established safeguards 

to protect confidentiality, 

including the use of OMMS, 

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 Chair 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.

Similar to other ombudsmen at the federal financial regulatory agencies, the Ombudsman follows three 

core standards of practice:
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 29

The Ombudsman’s Challenge

The mission statement of the SEC is to “protect 

investors, maintain fair, orderly, and efficient 

markets, and facilitate capital formation.” At 

the center of many complaints the Ombudsman 

receives is a misunderstanding about the SEC’s 

relationship and obligations to individual investors 

because of the “protect investors” language 

in the mission statement. In these situations, 

investors frequently assume the purpose of SEC 

investigations and enforcement actions is to 

address their specific allegations or protect their 

specific, individual interests. While the SEC’s 

enforcement actions may at times align with the 

personal interests of harmed investors, the SEC 

does not pursue investigations and enforcement 

actions solely to represent a specific investor’s 

particular legal interests or to recover money a 

particular investor may have lost. Rather, the SEC 

advocates for—or supports—the collective interests 

of all investors and the public by maintaining fair, 

orderly, and efficient capital markets through the 

enforcement of the federal securities laws. 

A primary question we encounter is, then, what can 

the Ombudsman do for investors who have been 

harmed by violations of the federal securities laws? 

In appropriate circumstances, the Ombudsman 

may be able to present options to investors or 

foster communications between the investor and 

SEC or SRO staff. However, the Ombudsman is 

not authorized to do many things that investors 

request, including:

§	deciding 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; 

§	intervening on behalf of, or representing the 

interest of, an investor in a formal dispute or 

investigation process; 

§	providing advice on how the federal securities 

laws may impact their particular investments or 

legal options; or 

§	changing formal outcomes, including decisions 

about whether to investigate an allegation of 

wrongdoing, settle an enforcement action, or 

create a Fair Fund.

With these limitations in mind, when investors 

contact the Ombudsman with these, and similar 

requests, the Ombudsman staff routinely explains 

to investors that they have the ability to pursue 

other options, protect their interests, and preserve 

their legal rights in ways that the Ombudsman 

cannot. When appropriate, the Ombudsman may 

issue a courtesy reply to briefly explain the role of 

the Ombudsman and the SEC, summarize pertinent 

information in a way that can be easily understood 

by the investor, and inform the investor about 

additional resources and options available to help 

address their question or concern. For example, a 

courtesy reply may include links to information about 

particular securities law topics, other SEC or SRO 

resolution channels or processes, or legal services 

provided by law school investor advocacy clinics. 

While the Ombudsman staff cannot represent the 

interests of investors in private disputes, we do serve 

these investors by providing information that will 

assist them in making better informed choices for 

themselves.

Assisting Investors through Advocacy

Even when we cannot help investors achieve the 

specific results they desire, the concerns we hear 

from investors help to shape the policy agenda of 

the Office of the Investor Advocate. We also stay 

current on policy issues that affect retail investors 

through our engagement with investor advocacy 

groups such as the North American Securities 

Administrators Association (NASAA), the Public 
30 | OFFICE OF THE INVESTOR ADVOCATE

Investors Arbitration Bar Association (PIABA), 

and law school investor advocacy clinics that 

provide legal counseling and representation 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, such as FINRA. These difficulties might 

arise, for example, from the misconduct of industry 

professionals, or from the unintended consequences 

of certain rules and policies imposed by SROs.

As discussed in prior reports, the Ombudsman 

closely follows FINRA’s rulemaking and dispute 

resolution forum activities that may have a 

direct and significant impact on retail investors. 

We also look for ways to improve SEC or SRO 

processes and regulations for the collective benefit 

of investors, and we advocate for those types of 

reforms. Selected areas of interest and importance 

to retail investors, including various matters 

relating to FINRA’s dispute resolution forum, are 

discussed below.

AREAS OF INTEREST AND 

IMPORTANCE TO RETAIL INVESTORS

Discovery Abuse and Retail Investor 

Arbitration Outcomes

In 2020, breaking past annual records, retail 

investors opened more than 10 million new 

brokerage accounts.127 While online trading 

and no-cost brokerages may have stimulated 

this activity,128 these same factors may also 

subject these new retail investors to the potential 

misconduct of financial professionals.

Due to the inclusion of pre-dispute mandatory 

arbitration clauses in almost all brokerage 

account agreements,129 harmed investors who seek 

recourse against their financial professionals are 

contractually required to arbitrate their claims in 

FINRA’s dispute resolution forum.130 To justify the 

mandatory nature of securities industry arbitration, 

proponents often assert that arbitration is “faster, 

cheaper and less complex” than litigation.131

However, the parties’ ability to resolve their 

differences in an efficient, cost-effective manner 

depends, in part, on the appropriate functioning of 

the FINRA arbitration discovery process. 

The role of discovery—the exchange of documents 

and evidence between the parties prior to the 

arbitration hearing—is critical to retail investors’ 

ability to prove their claims and recover damages 

arising from a financial professional’s misconduct. 

The FINRA Code of Arbitration Procedure for 

Customer Disputes requires that the parties to 

an arbitration, i.e., the investor (claimant) and 

the financial professional (respondent), “must 

cooperate to the fullest extent practicable in 

the exchange of documents and information to 

expedite the arbitration.”132 However, a party’s 

failure to comply with their discovery obligations 

could derail the discovery process and jeopardize 

the outcome of an arbitration. As noted in FINRA’s 

2021 Dispute Resolution Services Arbitrator’s 

Guide, “[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.”133 For instance, if 

an investor alleges her broker executed high-risk 

trades in her account after she verbally instructed 

him not to do so, and the broker possesses evidence 

of the investor’s verbal instructions but does not 

produce it, the investor might be unable to support 

her claim and the broker might prevail in the 

arbitration. 

In a typical arbitration, brokers and other 

financial professionals possess information 

and documentation that could provide an 

informational advantage over retail investors. 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 31

As in the example above, if brokers strategically 

withhold documents to maintain this informational 

advantage, retail investors may be deprived of 

key information and evidence needed to support 

their claims. Consequently, retail investors may 

face disproportionately negative outcomes, such 

as dismissal or withdrawal of their claims, or only 

nominal recovery of damages. In such situations, 

retail investors not only suffer the damages arising 

from broker misconduct, but they also bear the 

costs of FINRA’s dispute resolution forum fees as 

well as their own attorney fees.

Significantly, however, brokers’ strategic discovery 

abuse is likely most harmful to retail investors 

who have the least financial resources and who 

are unable to retain legal representation. Law 

school securities arbitration clinics do not have 

the capacity to provide legal counsel to every 

harmed investor, and attorneys are often reluctant 

to represent investors who cannot pay for 

representation on an hourly basis or who have 

low dollar value claims. In many instances, these 

low dollar value claims represent significant losses 

to the retail investors who bring them. Retail 

investors who proceed to arbitration without legal 

representation are often less able to navigate the 

FINRA Code of Arbitration Procedure, less aware 

of the critical role of the discovery process, and less 

aware how to pursue discovery when faced with 

brokers’ obfuscation. Consequently, retail investors 

with the least financial resources often face the 

greatest difficulties, obtain the least discovery, 

and potentially obtain the worst outcomes in 

arbitration.

If FINRA dispute resolution remains the primary 

venue through which harmed retail investors 

may seek recourse for the misconduct of financial 

professionals, ensuring the integrity and fairness of 

the forum is critically important for retail investor 

protection. Moreover, if financial professionals’ 

strategic discovery abuse places retail investors at 

an informational disadvantage at the outset of an 

arbitration, that disadvantage will likely persist 

throughout the arbitration process. Discovery 

abuse likely has a waterfall effect on retail investors 

and how they fare in arbitration hearings. It may 

also have the interim effect of dissuading retail 

investors from pursuing arbitration altogether, or 

from seeing the process through to an evidentiary 

hearing.

Given the potentially significant implications of 

discovery abuse on arbitral outcomes for retail 

investors, we believe it would be beneficial to 

examine data relating to retail investors and the 

impact of discovery abuse on the cost, duration 

and disposition of FINRA customer arbitration 

cases. The data may help evaluate whether and to 

what extent arbitration is, in fact, faster, cheaper, 

and less complex than litigation, and whether the 

arbitration process is a beneficial alternative to 

litigation for retail investors. The data may also 

shed light on what, if any, practical changes to the 

discovery process and FINRA’s dispute resolution 

forum should be considered to ensure that retail 

investors have adequate access to the evidence and 

information they need to support their claims and 

obtain fairer outcomes. We intend to undertake 

such an examination in Fiscal Year 2022.

Proposed Amendments to FINRA’s 

Expungement Rules

On September 22, 2020, FINRA proposed 

a series of substantive modifications to the 

existing rules that govern the expungement 

of customer dispute information from the 

Central Registration Depository (CRD) and 

BrokerCheck.134 As background, registered 

securities firms, brokers and regulatory authorities 

routinely submit customer dispute information to 

the CRD, including information about brokers’ 

and associated persons’ administrative, regulatory, 
32 | OFFICE OF THE INVESTOR ADVOCATE

or criminal histories, as well as customer disputes, 

arbitration claims and court filings. FINRA makes 

much of the information in CRD available to 

the public through its BrokerCheck website. The 

information in CRD and BrokerCheck is useful to 

retail investors, regulators, employers, and others 

seeking to make informed decisions on a range of 

issues, including whether to hire or enter into a 

brokerage relationship with an associated person, 

or whether to take disciplinary action against an 

associated person. Frequently, the Commission 

encourages investors to review the background 

of financial professionals by accessing the records 

on BrokerCheck.135

FINRA aimed to establish a regulatory framework 

that would strike an appropriate balance between 

the public’s need to access customer dispute 

information and associated persons’ need to 

safeguard their professional reputations.136

Recognizing that not all allegations against 

brokers have merit, FINRA Rule 2080137 grants 

associated persons the ability to expunge certain 

customer dispute information from the CRD 

and BrokerCheck where: (1) the claim, allegation 

or information is factually impossible or clearly 

erroneous; (2) the registered person was not 

involved in the alleged investment-related sales 

practice violation, forgery, theft, misappropriation 

or conversion of funds; or (3) the claim, allegation 

or information is false.138 FINRA Rule 12805 also 

establishes procedural rules that an arbitration 

panel must follow during an expungement 

proceeding.

Over time, however, FINRA’s regulatory 

framework for expungement has increasingly 

become the subject of scrutiny due, in part, to the 

lack of customer participation in expungement 

hearings, and associated persons’ repeated requests 

to expunge customer dispute information after 

prior requests to expunge that information were 

denied.139 Moreover, recent studies by PIABA 

showed that the high frequency with which 

arbitrators recommended expungement did not 

seemingly align with the “factually impossible 

or clearly erroneous” standards for granting 

expungement set forth under Rule 2080.140

In response to related criticisms, FINRA published 

Regulatory Notice 17-42 in December 2017,141

in which it recommended changes to the existing 

expungement rules and solicited feedback on 

those recommended changes. FINRA received 70 

comment letters both in support of and objecting to 

the recommendations in Regulatory Notice 17-42. 

The SEC Investor Advocate and the Ombudsman 

commented that the recommendations were a “first 

step in a larger review,” but encouraged FINRA to 

continue working to “help expungement become 

the extraordinary remedy it was meant to be.”142

On September 22, 2020, FINRA filed FINRA 

2020-030 with the SEC, in which it proposed 

numerous amendments to the existing 

expungement rules.143 Several of the proposed 

amendments resembled the recommendations in 

Notice 17-42. For example, FINRA 2020-030 

would require associated persons that file 

expungement requests outside of a customer 

arbitration for the sole purpose of requesting 

expungement to file a claim against their 

member firm. For these so-called “straight-in” 

expungement requests, associated persons would 

have two years after the underlying customer 

case closed to file their expungement requests. 

The proposed amendments would also establish 

a roster of arbitrators with enhanced training 

and experience, from which a three-person panel 

would be randomly selected to decide straight-in 

expungement requests and expungement requests 

brought during a customer arbitration that settled 

prior to hearing.144
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 33

Notably, under FINRA 2020-030, if an associated 

person sought expungement of customer dispute 

information arising from a customer’s statement of 

claim, the associated person would be required to 

either request expungement during the customer 

arbitration, or forfeit the opportunity to seek 

expungement of the same customer dispute 

information in any subsequent proceeding. 

The proposed rules would also impose certain 

requirements regarding the contents of and notice 

to customers regarding expungement requests. 

In addition, FINRA 2020-030 would require 

FINRA to notify state regulators within 30 days of 

receiving a complete expungement request, to help 

ensure that state securities regulators are timely 

notified of such requests.145

The SEC received eight comments in response to 

the proposals in FINRA 2020-030, some critical of 

the fact that FINRA 2020-030 had softened several 

aspects of the recommendations in Notice 17-42. 

Unlike the recommendation in Notice 17-42, 

FINRA 2020-30 would not require arbitrators to 

make an additional finding that the information 

to be expunged had “no investor protection 

or regulatory value” before recommending 

expungement. Furthermore, in contrast to the 

recommendation in Notice 17-42 that arbitrators’ 

expungement recommendations be unanimous, 

FINRA 2020-30 would only require majority 

agreement for an arbitration panel to recommend 

expungement. FINRA 2020-30 would also 

permit a single arbitrator to make expungement 

decisions arising from simplified arbitration cases. 

Commenters also voiced broader concerns about 

the lack of customer participation in expungement 

hearings, the inability for state regulators to 

intervene in expungement recommendations, 

and the quasi-regulatory function being served 

by private arbitrators that make expungement 

recommendations.146

FINRA submitted its response to comments 

on December 18, 2020, and rebutted these 

criticisms.147 However, FINRA also filed Partial 

Amendment No. 1 to the Proposal, which altered 

the original filing by requiring the Director of 

FINRA Dispute Resolution to provide additional 

notice to customers regarding the timing of 

prehearing conferences for expungement hearings 

and requiring that associated persons serve 

customers with their statements of claim for 

expungement and answers within a specified 

period of time.148 Subsequently, nine additional 

comment letters were submitted, the majority of 

which again rejected the proposed amendments 

in FINRA 2020-030 as insufficient reforms to the 

current expungement process. Several commenters 

requested that the SEC hold a public hearing on the 

proposed amendments.149

On April 9, 2021, FINRA submitted its second 

response to commenters,150 and separately filed 

Partial Amendment No. 2, in which it proposed 

to require the Director of Dispute Resolution to 

provide customers with access to all documents 

filed in an underlying arbitration that are relevant 

to an expungement request.151 Notwithstanding 

Partial Amendment No. 2, FINRA rejected 

commenters’ requests for broader reform of the 

expungement system, and expressed the belief 

that “enhancing the current expungement process 

is the appropriate course of action” to address 

commenters’ concerns.152 Nevertheless, FINRA 

stated it would continue to evaluate potential 

ways to further enhance the expungement process, 

would provide information on its website regarding 

expungement to increase transparency, and would 

engage with state securities regulators.153

On May 28, 2021, after consultation with SEC 

staff, FINRA temporarily withdrew FINRA 

2020-030 to consider whether additional 

modifications to the filing were appropriate.154
34 | OFFICE OF THE INVESTOR ADVOCATE

FINRA stated that it “is committed to limiting 

the expungement process so that it operates as 

intended—as an extraordinary remedy, only 

appropriate in limited circumstances when the 

CRD information is clearly inaccurate.”155

Expungement continues to be a heavily-debated 

issue, as it affects the investing public’s ability 

to access potentially material information about 

broker misconduct. Without this information, retail 

investors may be less likely to make well-informed 

decisions about potential or existing relationships 

with financial professionals, and may unknowingly 

place themselves at a heightened risk of falling 

victim to brokers who repeatedly engage in 

misconduct. In our view, accurate records of 

customer dispute information should be readily 

available to retail investors. Thus, we will continue 

to engage with FINRA and other stakeholders to 

advocate for the availability and accuracy of this 

information in the CRD and for improvements to 

the expungement process. 

OMBUDSMAN OUTREACH AND 

ENGAGEMENT EFFORTS

OIAD Law School Clinic Outreach Program

The importance and impact of law school 

investor advocacy clinics have increased 

considerably since 1997, when then-SEC 

Chairman Arthur Levitt, Jr. announced the 

creation of two pilot law school investor advocacy 

clinics to help retail investors with small claim 

amounts obtain quality legal representation.156

Today, there are 12 law school investor advocacy 

clinics across the United States that provide legal 

counseling and representation to retail investors 

involved in securities industry disputes, comment 

on rule proposals, and engage with many more 

investors through community-based presentations 

and informational materials.157

As discussed in prior Ombudsman’s Reports, our 

Law School Clinic Outreach Program (LSCOP) 

was launched in 2016 to complement the 

Office’s statutory mandate and core functions.158

One goal of the LSCOP was, and remains, the 

exchange of information and ideas between the 

law school investor advocacy clinics and SEC 

staff. In their unique roles as counsel to retail 

investors with small claims or limited incomes, 

clinics are uniquely positioned to examine issues 

that confront retail investors from a perspective 

unavailable to SEC staff. The LSCOP allows the 

Office of the Investor Advocate to interact directly 

with the clinics, engage in meaningful policy 

discussions, and gain a better understanding 

of their views on suggested regulatory changes 

and policy initiatives. Our engagement with 

the law school clinics also provides an excellent 

opportunity to inform law students interested 

in securities law and investor protection issues 

about internships, externships, and career 

opportunities at the SEC. Moreover, our outreach 

program aligns with the SEC’s diversity and 

inclusion efforts, creates an additional path to 

attract a diverse pool of potential applicants, and 

demonstrates the SEC’s commitment to a diverse 

and inclusive workplace at all levels of the agency.

What began in 2016 as a series of on-site visits 

to the law school clinics continued with the 

attendance of clinic directors and law students 

at public meetings of the Investor Advisory 

Committee at SEC headquarters in 2017 and 

2018, and subsequently culminated in the first 

SEC Investor Advocacy Clinic Summit at SEC 

headquarters, hosted by the Investor Advocate 

and the Ombudsman in 2019.159 The LSCOP 

continues to provide opportunities for meaningful 

involvement between the law school clinics 

and SEC staff, such as the 2021 SEC Investor 

Advocacy Clinic Summit. 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 35

2021 SEC Investor Advocacy Clinic Summit

On March 25, 2021, the Investor Advocate and 

Ombudsman hosted the second SEC Investor 

Advocacy Clinic Summit (Summit). Law school 

investor advocacy clinics from across the country 

were invited to share their perspectives and engage 

with SEC staff on the some of the most pressing 

issues currently facing retail investors. Given the 

COVID-19 pandemic and the resulting work from 

home status of the agency, the Summit, unlike the 

2019 SEC Investor Advocacy Clinic Summit160 at 

SEC headquarters, was held as a virtual event.161

Pre-Summit Planning 

In the fall of 2020, the Ombudsman and the SEC 

Office of Information Technology (OIT) evaluated 

the feasibility of hosting a virtual summit for a 

large and geographically diverse group of attendees. 

Beginning in September 2020, Ombudsman staff 

contacted law school clinic directors to assess their 

interest in attending a virtual summit, and to gauge 

anticipated student participation. All 12 clinic 

directors favored moving forward with the virtual 

Summit and confirmed that their students would 

participate and attend.162 To minimize the logistical 

challenges of the virtual platform, Ombudsman 

staff worked closely with OIT to ensure that 

the law school clinic attendees, using various 

technologies, would be able to seamlessly connect 

to and participate in the Summit as attendees, 

panelists, and presenters.

The Summit

Before the substantive portion of the Summit 

began, the clinic directors, law students, and SEC 

staff engaged in a pre-Summit virtual networking 

session, where participants were able to interact 

in an informal setting, troubleshoot any technical 

issues, and ask general questions about the Summit. 

During the post-Summit virtual networking session, 

clinic directors, law students, and SEC staff were 

able to continue their earlier discussions, ask more 

in-depth questions about the panel topics and the 

SEC itself, and provide feedback on the Summit.

The Summit formally opened with remarks from 

then-Acting SEC Chair Lee, and featured remarks 

and question and answer sessions throughout the 

day with SEC Commissioners Peirce, Roisman, and 

Crenshaw. The Summit also included two panel 

discussions that highlighted recent challenges facing 

retail investors. During the first panel, “The Risks 

of Online Trading for Retail Investors,” panelists 

addressed the rise of online brokerage platforms, 

the specific risks they pose to retail investors, as 

well as the manner in which social media amplifies 

those risks. The panel featured SEC senior staff 

from the Office of the Investor Advocate, the 

Division of Trading and Markets, and the Division 

of Enforcement. During the second panel, “Virtual 

Arbitration Hearings: Costs, Risks and Benefits 

to Retail Investors,”163 panelists explored the 

difficulties and advantages of representing clients 

in remote FINRA arbitrations, as well as a recent 

study164 that suggests virtual hearings might 

disproportionately result in negative outcomes for 

retail investors. The panel, moderated by Professor 

Nicole Iannarone,165 included clinic directors from 

across the country and SEC senior staff from the 

Division of Examinations and the Office of the 

Investor Advocate.
36 | OFFICE OF THE INVESTOR ADVOCATE

A highlight of the Summit was a two-part 

panel entitled “Lessons Learned from 

Harmed Investors,” during which law students 

discussed recent notable cases where the 

students and their professors represented retail 

investors in FINRA arbitrations.166 The law 

students also identified lessons learned from 

similarly situated retail investors, as well as 

takeaways and future considerations for regulators. 

The law students shared their experiences and 

observations on an array of topics, including the 

clinics’ representation of: 

§	A non-party customer in an expungement 

proceeding;

§	A group of retirees defrauded by an unregistered 

investment adviser;

§	Elderly clients whose investment adviser 

invested their money in illiquid and speculative 

real estate investment trusts, or “REITs”;

§	Affinity fraud victims, including clients 

victimized through a fraudulent investment 

club; and

§	A low income client and a client with 

disabilities to whom unsuitable investment 

recommendations were made.

The law student presentations were presented in 

a compelling, thought-provoking manner that 

captured their views on existing regulations and 

posed challenging questions to the SEC staff. 

Moreover, the presentations demonstrated their 

impressive command of the applicable securities 

laws and their equally impressive dedication to 

protecting retail investors. After each presentation, 

the law students fielded questions from a 

panel of SEC staff across various divisions and 

offices. It was an enlightening experience for 

the law students and clinic directors, and for 

SEC staff who were impressed with the depth of 

knowledge, skill, and expertise the law students 

brought to their presentations and to their client 

representation and advocacy efforts.

Summit Feedback and Impact

One benefit of the virtual Summit format was 

an increase in overall participation. All investor 

advocacy clinics and a greater number of students 

were able to attend, as the cost and logistics of 

traveling to SEC headquarters were no longer 

a consideration. Ultimately, over 185 persons 

attended the Summit—including over 125 law 

students and clinic directors, and SEC staff from 

across the agency.

Following the Summit, the Office of the 

Ombudsman received tremendous positive 

feedback from the clinic directors, including the 

excerpts below: 

Your outreach to the clinics was once again 

so enlightening, invigorating and inspiring. 

I sincerely appreciate the kindness you 

extended to us. Your enthusiasm for your 

work is contagious! Thank you so much 

for another great Summit. 

Thank you again for putting on such 

a fantastic program for the students. I 

especially appreciated how much time the 

Commissioners gave to the students and 

how open they were to taking the students’ 

questions. I also liked the format of the 

school presentations, with an opportunity 

for the staff to ask follow up questions. 

My students were engaged and enjoyed the 

experience—and so did I! It is challenging 

during these times, but you and your team 

. . . were amazing. 

My students were thrilled to be a part 

of the on-going discussion about how to 

protect retail investors. We look forward to 

seeing you in person next year! 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 37

The feedback from the law student participants 

was also overwhelmingly positive. One student 

comment in particular perfectly captured the 

feedback:

Another opportunity that allowed me to 

gain a better understanding of securities 

law was the SEC Summit. I do not think 

I can put into words how impactful that 

day was to me. Hearing the commissioners 

and speakers speak and hearing the cases 

that other clinics have is something I will 

never forget.

Given the success of the 2019 and 2021 Summits, 

the Investor Advocate and the Ombudsman look 

forward to hosting future SEC Investor Advocacy 

Clinic Summits—whether virtual, in-person, or 

hybrid—as part of the larger Law School Clinic 

Outreach Program.

Internal Agency Engagement

During the Reporting Period, the Office of the 

Ombudsman increased its efforts to engage 

internally with agency stakeholders. For these 

targeted outreach meetings and presentations, 

we provided an overview of the Ombudsman’s 

statutory mandate and responsibilities, along 

with a high level discussion on how we assist 

retail investors. In addition, we flagged pertinent 

and trending issues, shared our perspectives, 

and explored ways that the Ombudsman could 

assist the work of other divisions and offices 

within the Commission. Through these internal 

engagement efforts, other divisions and offices 

obtained a better understanding of the resources 

and services that we offer, and the Ombudsman 

fortified existing relationships and opened new 

communication lines with appropriate division 

and office contacts.

In addition to these outreach meetings, the 

Ombudsman continues to maintain open 

communications with SEC senior staff to 

address areas of importance to retail investors, 

and to offer insights on policy and regulatory 

initiatives. Going forward, the Ombudsman 

intends to expand these successful engagement 

efforts throughout the SEC, and to the SROs 

overseen by the SEC, on a regular basis to share 

perspectives and to inform policy and regulatory 

considerations to improve the retail investor 

experience. 

OBJECTIVES AND OUTLOOK

The Office of the Ombudsman reached a peak 

staff level of five during this Reporting Period—

the Ombudsman, one senior special counsel, one 

senior counsel, one senior law clerk contractor, 

and one senior paralegal contractor. While 

more staff resources are needed, the increased 

staff from September 2019 through December 

2020 was instrumental in meeting our statutory 

requirements and responding to the rise in 

unanticipated, complex investor issues. The 

increased staff also expanded the Office’s ability 

to focus on research and policy issues, collaborate 

with colleagues across the agency, and address 

the increased volume of retail investor concerns 

exacerbated by the use of social media and online 

brokerage platforms in financial planning and 

investing. Looking ahead, I plan to focus staff 

resources, as feasible, on additional SEC, SRO, 

and retail investor collaboration and engagement. 

In particular, these efforts may include an 

expanded use of virtual opportunities to connect 

with retail investors across the country and to 

solicit their feedback and diverse perspectives on 

issues they deem important. 
38 | OFFICE OF THE INVESTOR ADVOCATE

My interactions with retail investors provide 

valuable insight into how they view my role and 

the role of the SEC as they make investment 

decisions. As Ombudsman, I will continue to 

foster an environment for their voices to be heard 

and their needs to be considered as a vital part of 

the regulatory process and the work of the agency. 

I will also continue to find appropriate ways to 

utilize the feedback and lessons learned through 

my one-one-one interactions with retail investors 

to inform targeted research, regulatory and 

policy recommendations, and engagement efforts 

that will make a meaningful difference to retail 

investors. I look forward to providing updates on 

our activities and progress in these areas in my 

next report. 

Tracey L. McNeil

Ombudsman
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 39

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.167 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.168

Exchange Act Section 39 authorizes the IAC 

to submit findings and recommendations for 

review and consideration by the Commission.169

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.170

While the Commission must respond to the IAC’s 

recommendations, it is under no obligation to agree 

with or act upon the recommendations.171

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.172 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 see our earlier 

reports to Congress. The Commission may be 

pursuing initiatives that are responsive to IAC 

recommendations but have not yet been made 

public. Commission staff—including the staff 

of this Office—are prohibited from disclosing 

nonpublic information.173 Therefore, any such 

initiatives are not reflected in this Report.

SUMMARY OF 

INVESTOR ADVISORY COMMITTEE 

RECOMMENDATIONS AND 

SEC RESPONSES
40 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Minority and 

Underserved 

Inclusion174

March 11, 

2021

Support regulations, legislation, 

programs and other steps that 

increase acquisition of financial 

assets and services by minority 

communities. Through regulatory 

oversight of financial services, 

enable a more hospitable 

environment for minority 

investment. Continue and build 

upon SEC programs that are 

directed toward increasing 

financial literacy and supporting 

minority investment. Help 

registered financial services firms 

expand and improve their ability 

to encourage investment by 

under-represented communities.

Pending.

Credit Rating 

Agencies175

March 11, 

2021

Identify in Office of Credit Rating 

(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 

Disclosure176

May 21, 

2020

Reconsider a 2020 rulemaking 

proposal 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 

(Generally Accepted Accounting 

Principles) 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.

177

On October 21, 2020, the Financial 

Accounting Standards Board (FASB) 

decided to add a project to its technical 

agenda to address the disclosure of 

supplier finance programs involving 

trade payables.

178 On November 19, 

2020, the Commission adopted the 

amendments to Regulation S-K, largely 

as proposed.

179
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 41

Topic Date IAC Recommendation SEC Response

ESG Disclosure180 May 21, 

2020

Commence an effort to update 

issuer reporting requirements 

to include material, decisionuseful disclosure concerning 

environmental, social, and 

governance matters. Consider 

the utility of both principlesbased and prescriptive reporting 

requirements.

On February 24, 2021, Acting Chair 

Lee directed the SEC’s Division of 

Corporation Finance to enhance its 

focus on climate-related disclosure 

in public company filings.

181 On 

March 3, 2021, the SEC’s Division of 

Examinations announced its 2021 

examination priorities, which included a 

greater focus on climate-related risks.

182

On March 4, 2021, the Commission 

announced the creation of a Climate 

and ESG Task Force in its Division of 

Enforcement.

183 On March 15, 2021, 

Acting Chair Lee issued a call for public 

input on climate change disclosures.

184

Disclosure 

Effectiveness185

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 August 5, 2020, the Commission 

proposed comprehensive modifications 

to the mutual fund and exchangetraded fund disclosure framework.

186

The Office of the Investor Advocate is 

conducting investor research that may 

be relevant to this proposal.

SEC Guidance 

and Rule 

Proposals on 

Proxy Advisors 

and Shareholder 

Proposals187

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.

188 On September 23, 

2020, the Commission adopted the 

amendments to Exchange Act Rule 

14a-8 without republishing them for 

further comment.

189

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.190 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.191
42 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Exchange 

Rebate Tier 

Disclosure192

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.

Proxy 

Plumbing193

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.

194

Structural 

Changes to 

the US Capital 

Markets 

Regarding 

Investment 

Research in a 

Post-MiFID II 

World195

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 (Markets in Financial Instruments 

Directive) II through July 3, 2023.

196

Human Capital 

Management 

Disclosure197

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.

198

Transaction Fee 

Pilot for NMS 

Stocks199

Sept. 13, 

2018

Adopt a proposed Transaction 

Fee Pilot with the following 

conditions: (1) include a “no 

rebate” bucket; (2) permit 

companies to opt out of the pilot; 

and (3) consider consolidating 

Test Groups 1 and 2.

On December 19, 2018, Commission 

approved the adoption of new Rule 

610T of Regulation NMS to conduct a 

Transaction Fee Pilot in NMS stocks.

200

On June 16, 2020, following a lawsuit 

filed by several exchanges, the 

transaction fee pilot was struck down in 

the U.S. Circuit Court of Appeals for the 

District of Columbia.

201
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 43

Topic Date IAC Recommendation SEC Response

Financial 

Support for Law 

School Clinics 

that Support 

Investors202

Mar. 8, 2018 Explore ways to improve external 

funding sources to the law school 

investor advocacy clinics. Work 

with FINRA, the North American 

Securities Administrators 

Association (NASAA), and other 

potential partners, and request 

legislation from Congress to 

consider permanent funding.

Pending.

Dual Class 

and Other 

Entrenching 

Governance 

Structures 

in Public 

Companies203

Mar. 8, 2018 Direct Division of Corporate 

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.

Mutual 

Fund Cost 

Disclosure204

Apr. 14, 2016 Enhance investors’ understanding 

of mutual fund costs and the 

impact of those costs on total 

accumulations over time. Provide 

standardized disclosure of actual 

dollar costs on customer account 

statements.

On June 5, 2018, the Commission 

published a request for comment on 

ways to enhance the delivery, design, 

and content of fund disclosures, 

including shareholder reports and 

prospectuses. The request for comment 

solicited investor feedback on fund 

fees and expenses, and it included 

other questions related to the IAC 

recommendation (e.g., dollar vs.

percentage disclosure, disclosure within 

account statements, etc.).

205

On Oct. 30, 2018, the Commission 

proposed amendments to help 

investors make informed investment 

decisions regarding variable annuity 

and variable life insurance contracts.

206

On March 11, 2020, the Commission 

adopted the amendments largely as 

proposed.

207
44 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Accredited 

Investor 

Definition208

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.

209 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 Results210

Oct. 9, 2014 Ensure impartiality in the 

disclosure of preliminary voting 

results.

Pending.

Universal Proxy 

Ballots211

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.212 On April 

16, 2021, the Commission reopened 

the comment period on the proposed 

rules.213
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 45

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

(i).

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

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

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

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

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

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

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

11 Exchange Act § 39, 15 U.S.C. § 78pp.

12 Exchange Act § 39(b)(1)(A), 15 U.S.C. § 78pp(b)(1)(A).

13 Gary Gensler, Chair, SEC, Public Remarks at Eighth 

Annual Conference on Financial Regulation Day 1 

(May 13, 2021), https://www.sec.gov/video/webcastarchive-player.shtml?document_id=financial-marketregulation-051321-1.

14 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.

15 SEC, Summary Draft: Preliminary Recommendations 

of ESG Subcommittee for the AMAC (Nov. 20, 

2020), https://www.sec.gov/files/summary-draftpreliminary-recommendations-of-esg-subcommitteefor-the-amac-12012020.pdf.

16 SEC, Commission Guidance Regarding Disclosure 

Related to Climate Change, Release No. 33-9106, 75 

Fed. Reg. 6290 (Feb. 8, 2010), https://www.sec.gov/

rules/interp/2010/33-9106.pdf.

17 See, e.g., Letter from Jim Coburn, Senior Manager, 

Ceres, Inc. (May 5, 2020), SEC File No. S7-04-20, 

https://www.sec.gov/comments/s7-11-19/s71119-

7239602-217099.pdf.

18 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.

19 Press Release, SEC, SEC Division of Examinations 

Announces 2021 Examination Priorities: Enhanced 

Focus on Climate-Related Risks (Mar. 3, 2021), https://

www.sec.gov/news/press-release/2021-39.

20 17 C.F.R. § 240.10b-5 (2020).

21 17 C.F.R. § 240.10b-5-1 (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. 

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 17 C.F.R. § 240.10b5-1(c)(1)(B)(2) (2020). 

26 See Letter from Elizabeth Warren et al., supra note 23 

(discussing recent research findings). 

27 See Lee, Apr. 14, 2021 Letter, supra note 22. 

28 SEC Investor Advisory Committee, Meeting Agenda 

(June 10, 2021), https://www.sec.gov/spotlight/investoradvisory-committee/iac061021-agenda.htm.

29 SEC, Off. of the Inv. Advoc., Report on Activities, 

Fiscal Year 2020, at 6, https://www.sec.gov/files/

sec-investor-advocate-report-on-activities-2020.pdf.

30 On December 22, 2020, the Commission approved 

a change to the New York Stock Exchange’s listing 

requirements that expanded the scope of direct 

listings, allowing companies to raise capital through 

the issuance of new securities. See Order Setting Aside 

Action by Delegated Authority and Approving a 

Proposed Rule Change, as Modified by Amendment 

No. 2, to Amend Chapter One of the Listed Company 

Manual to Modify the Provisions Relating to Direct 

Listings, Exchange Act Release No. 90768 (Dec. 22, 

2020), File No. SR-NYSE-2019-67. 

31 See Ben Scent, Wall Street’s $100 Billion SPAC Boom 

Upends the League Table, Bloomberg L. (Apr. 1, 2021, 

4:10 PM EDT), https://www.bloomberg.com/news/

articles/2021-04-01/wall-street-s-100-billion-spacboom-is-resetting-the-rankings; John Coates, Acting 

Dir., SEC Div. of Corp. Fin., Public Statement: SPACs, 

IPOs, and Liability Risk Under the Securities Laws 

(Apr. 8, 2021) [hereinafter Coates, Public Statement on 

SPACs], https://www.sec.gov/news/public-statement/

spacs-ipos-liability-risk-under-securities-laws. 
46 | OFFICE OF THE INVESTOR ADVOCATE

32 In 2020 and 2021, the number of companies choosing 

SPACs skyrocketed. Over the course of 2020, 248 

SPACs formed, a 420% increase over 2019’s 59. In 

just the first half of 2021, at least 325 SPACs have 

launched. See SPAC Statistics, SPACInsider, https://

spacinsider.com/stats/ (last visited May 21, 2021).

33 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.

34 Id.

35 Paul Munter, Acting Dir., SEC Off. of the Chief Acct., 

Financial Reporting and Auditing Considerations 

of Companies Merging with SPACs (Mar. 31, 

2021), https://www.sec.gov/news/public-statement/

munter-spac-20200331.

36 Coates, Public Statement on SPACs, supra note 31.

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

Act § 12(a)(2), 15 U.S.C. § 771(a). Pursuant to the 

Commission’s December 22, 2020 rule regarding the 

New York Stock Exchange’s listing requirements, 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.

38 Michael Klausner, Michael Ohlrogge & Emily 

Ruan, A Sober Look at SPACs, 39 Yale J. on

Regul. (forthcoming 2021); SEC, Investor Advisory 

Committee Meeting Webcast (Mar. 11, 2021), 

https://www.sec.gov/video/webcast-archive-player.

shtml?document_id=iac031121.

39 See, e.g., Heather Somerville, For Startup Leaders, 

SPACs Have Lost Their Allure, Wall St. J. (May 

23, 2021, 9:00 AM ET), https://www.wsj.com/

articles/for-startup-leaders-spacs-have-lost-theirallure-11621774800; Amrith Ramkumar, SPAC Selloff 

Bruises Individual Investors, Wall St. J. (May 19, 

2021, 9:32 AM ET), https://www.wsj.com/articles/

spac-selloff-bruises-individual-investors-11621396808.

40 See generally Concept Release on Equity Market 

Structure, Exchange Act Release No. 61358, 75 Fed. 

Reg. 3594 (Jan. 21, 2010).

41 See Publication or Submission of Quotations Without 

Specified Information, Exchange Act Release No. 

89891, 85 Fed. Reg. 68124 (Oct. 27, 2020), https://

www.govinfo.gov/content/pkg/FR-2020-10-27/

pdf/2020-20980.pdf. 

42 See Market Data Infrastructure, Exchange Act Release 

No. 90610, 86 Fed. Reg. 18596 (Apr. 9, 2021), https://

www.federalregister.gov/d/2020-28370. 

43 Joint Industry Plan, Notice of Filing of a National 

Market System Plan Regarding Consolidated Equity 

Market Data, Exchange Act Release No. 90096, 85 

Fed. Reg. 64565 (Oct. 13, 2020), https://www.govinfo.

gov/content/pkg/FR-2020-10-13/pdf/2020-22467.pdf.

44 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.

45 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. 65990 (Oct. 16, 2020), https://

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

pdf/2020-18801.pdf.

46 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. 

47 See Commission Statement on Market Structure 

Innovation for Thinly Traded Securities, Exchange 

Act Release No. 87327, 84 Fed. Reg. 56956 (Oct. 24, 

2019). 

48 See Press Release, SEC, SEC Seeks Public Comment on 

Transfer Agent Rules (Dec. 22, 2015), https://www.sec.

gov/news/pressrelease/2015-288.html. 

49 See NYSE L.L.C. v. SEC, 962 F.3d 541 (D.C. Cir. 

2020). 

50 Cboe BYX Exchange, Inc.; Notice of Filing of 

Amendments No. 3 and No. 4, and Order Granting 

Accelerated Approval of a Proposed Rule Change, 

as Modified by Amendments No. 3 and No. 4, to 

Introduce Periodic Auctions for the Trading of U.S. 

Equity Securities, Exchange Act Release No. 34-91423, 

86 Fed. Reg. 17230 (Apr. 1, 2021), https://www.

federalregister.gov/d/2021-06676.

51 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.

52 Id. at section II.C.

53 Id. at section II.A.3; see also SEC, Off. of the Inv. 

Advoc., Report on Activities, Fiscal Year 2019, 

https://www.sec.gov/advocate/reportspubs/annualreports/sec-investor-advocate-report-on-activities-2019.

pdf. 
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 47

54 See Investment Company Act Release No. 33477 

(May 20, 2019) [hereinafter Precidian Order].

55 See Heather Bell, New Era of Active ETFs Set to 

Begin, ETF.com (Mar. 31, 2020), https://www.etf.

com/sections/features-and-news/new-era-active-setbegin?nopaging=1. 

56 See Precidian Order, supra note 54.

57 See 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).

58 See James Lord, Fidelity Debuts Semi-Transparent 

ETFs with Triple Launch, ETF Strategy (June 8, 

2020), https://www.etfstrategy.com/fidelity-debutssemi-transparent-etfs-with-triplelaunch-95487. 

59 In a November 19, 2019 joint statement, 

Commissioners Robert J. Jackson Jr. and Allison 

Herren Lee observed that non-transparent ETFs “come 

with real risk that, in moments of limited liquidity, 

ordinary investors will face wider spreads and hence 

get prices that do not accurately reflect the value of 

their shares.” Robert J. Jackson Jr. & Allison Herren 

Lee, Comm’rs, SEC, Public Statement: Statement of 

Commissioners Jackson and Lee on Non-Transparent 

Exchange Traded Funds (Nov. 15, 2019), https://

www.sec.gov/news/public-statement/statementjackson-lee-2019-11-15. Commissioners Jackson 

and Lee also expressed concern over the appropriate 

disclosure regime for non-transparent ETFs, stating, “in 

particular, we wonder whether additional disclosure 

of the risks, as well as enhanced board oversight of 

the efficiency of these ETFs, is necessary . . . we are 

only in the early stages of determining the information 

investors need to evaluate the unique risks of 

nontransparent ETFs, including mechanisms to ensure 

accuracy and price efficiency.” See id.

60 See Use of Derivatives by Registered Investment 

Companies and Business Development Companies, 

Investment Company Act Release No. 34084 

[hereinafter Derivatives Rule], https://www.sec.gov/

rules/final/2020/ic-34084.pdf. 

61 See id. at section II.F.6.

62 See id. at section II.F.5.

63 See, e.g., 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-

three-rulemakings (“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.”). We note 

that the Derivatives Rule amends the ETF Rule to 

include leveraged and inverse ETFs within its scope 

before the Commission has addressed the investor 

protection concerns that have been raised regarding 

these products. See Derivatives Rule, supra note 60, at 

section II.D.6. 

64 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.”).

65 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/f607fc5d8b10-4c09-9274-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.”).

66 See Derivatives Rule, supra note 60, at sections II.F.1-2.

67 See id. at section II.F.5.

68 See id. at sections II.F.4 and II.F.5 (“While we believe 

that it is important to continue to consider these funds 

in light of investor protection concerns, and the staff 

review that we discuss above will assess these funds 

in addition to other complex investment products, we 

believe that these concerns would most appropriately 

be addressed holistically as a result of any Commission 

action that may result from the staff review.”).
48 | OFFICE OF THE INVESTOR ADVOCATE

69 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, Securities Act 

Release No. 10814, Exchange Act Release No. 89478, 

Investment Company Act Release No. 33963, 85 

Fed. Reg. 70716 (Nov. 5, 2020) [hereinafter Tailored 

Shareholder Reports Proposing Release], https://www.

federalregister.gov/documents/2020/11/05/2020-17449/

tailored-shareholder-reports-treatment-of-annualprospectus-updates-for-existing-investors-and.

70 See id.

71 Request for Comment on Fund Retail Investor 

Experience and Disclosure, Securities Act Release No. 

10503, Exchange Act Release No. 83376, Investment 

Company Act Release No. 33113 (June 5, 2018).

72 See Updated Disclosure Requirements and Summary 

Prospectus for Variable Annuity and Variable Life 

Insurance Contracts, Securities Act Release No. 

10765, Exchange Act Release No. 88358, Investment 

Company Act Release No. 33814, 85 Fed. Reg. 

25964 (May 1, 2020), https://www.federalregister.

gov/documents/2020/05/01/2020-05526/updateddisclosure-requirements-and-summary-prospectus-forvariable-annuity-and-variable-life.

73 See SEC, Recommendation of the Investor Advisory 

Committee on Disclosure Effectiveness (May 21, 

2020), https://www.sec.gov/spotlight/investoradvisory-committee-2012/disclosure-effectivenessrecommendation.pdf. 

74 See Peter Santilli, Caitlin Ostroff & Paul Vigna, From 

Bitcoin to Dogecoin: What’s Driving Cryptocurrencies’ 

Rise and the Challenges Ahead, Wall St. J. (May 17, 

2021, 5:30 AM ET), https://www.wsj.com/articles/

the-factors-driving-crypto-markets-boom-and-thechallenges-ahead-11621243809. 

75 Id.

76 Hester M. Peirce, Comm’r, SEC, Paper, Plastic, 

Peer-to-Peer: Remarks at the British Blockchain 

Association’s Conference “Success through Synergy: 

Next Generation Leadership for Extraordinary Times” 

(Mar. 15, 2021), https://www.sec.gov/news/speech/

peirce-paper-plastic-peer-to-peer-031521. 

77 See, e.g., Gwen Ackerman, Turkey’s Cryptocurrency 

Boom Turns to Bust, Bloomberg (Apr. 25, 2021, 

2:12 AM PDT), https://www.bloomberg.com/news/

newsletters/2021-04-25/turkey-s-cryptocurrencyboom-turns-to-bust (reporting that two Turkish 

cryptocurrency exchanges collapsed in the span of a 

week). 

78 See Ekin Genc, As Lira Plunges, Bitcoin Interest 

Among Turkey’s Poor Spikes, Decrypt (Mar. 22, 2021), 

https://decrypt.co/62438/lira-plunges-bitcoin-interestturkey-spikes. 

79 Jared Malsin & Caitlin Ostroff, Bitcoin Payments 

to be Banned in Turkey After Confidence Drops 

in Lira, Wall St. J. (Apr. 16, 2021, 6:56 AM ET), 

https://www.wsj.com/articles/bitcoin-payments-tobe-banned-in-turkey-after-confidence-drops-in-lira11618570574#:~:text=Turkey%20will%20ban%20

the%20use,be%20used%20for%20illegal%20

activities. 

80 See ING, International Survey: Cracking the Code on 

Cryptocurrency (June 2018), https://think.ing.com/

uploads/reports/ING_International_Survey_Mobile_

Banking_2018.pdf. 

81 See, e.g., Baris Balci, Turkey’s Crypto Pain Grows 

With Second Exchange Collapse, Bloomberg (Apr. 24, 

2021, 11:38 PM PDT), https://www.bloomberg.com/

news/articles/2021-04-24/turkey-s-cryptocurrencypain-grows-with-second-exchange-collapse; Taylan 

Bilgic & Firat Kozok, Turkish Crypto Exchange Goes 

Bust as Founder Flees Country, Bloomberg (Apr. 22, 

2021, 2:39 AM PDT), https://www.bloomberg.com/

news/articles/2021-04-22/turks-suspect-massive-cryptolosses-as-exchange-ceo-goes-missing. 

82 Bilgic & Kozok, Turkish Crypto Exchange, supra note 

81.

83 See, e.g., id.

84 See Balci, Turkey’s Crypto Pain Grows, supra note 81.

85 Id.

86 See KPMG, Cracking Crypto Custody 7 (2020), https://

advisory.kpmg.us/content/dam/advisory/en/pdfs/2020/

kpmg-cracking-crypto-currency.pdf.

87 Id.

88 Id.

89 Id.

90 See Deloitte, Whitepaper: A Market Overview of 

Custody for Digital Assets 7 (June 2020), https://

www2.deloitte.com/content/dam/Deloitte/xe/

Documents/finance/me_Digital-Custodian-Whitepaper.

pdf.

91 Id.

92 See KPMG, Cracking Crypto Custody 7 (2020), https://

advisory.kpmg.us/content/dam/advisory/en/pdfs/2020/

kpmg-cracking-crypto-currency.pdf.

93 See Steven Russolillo & Eun-Young Jeong, 

Cryptocurrency Exchanges Are Getting Hacked 

Because It’s Easy, Wall St. J. (July 16, 2018).

94 See, e.g., Press Release, FTC, FTC Data Shows Huge 

Spike in Cryptocurrency Investment Scams (May 17, 

2021); Alesander Osipovich, Crypto Frauds Target 

Investors Hoping to Cash In on a Bitcoin Boom, Wall

St. J. (June 7, 2021).
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 49

95 SEC Div. of Inv. Mgmt., Staff Statement on Funds 

Registered Under the Investment Company Act: 

Investing in the Bitcoin Futures Market (May 11, 

2021), https://www.sec.gov/news/public-statement/staffstatement-investing-bitcoin-futures-market.

96 Id.

97 Id.

98 Id.

99 Id.

100 Id.

101 Id.

102 See Karen Barr, President & CEO, Inv. Adviser Ass’n, 

SEC Div. of Inv. Mgmt. Staff Letter: Engaging on 

Non-DVP Custodial Practices and Digital Assets (Mar. 

12, 2019) https://www.sec.gov/investment/non-dvpand-custody-digital-assets-031219-206. 

103 See Custody of Digital Asset Securities by Special 

Purpose Broker-Dealers, Exchange Act Release No. 

90788 (Dec. 23, 2020); 86 Fed. Reg. 11627 (Feb. 26, 

2021).

104 Id.

105 Id.

106 Id.

107 Id.

108 Id.

109 Game Stopped? Who Wins and Loses When Short 

Sellers, Social Media, and Retail Investors Collide, 

Part III: Virtual Hearing Before the H. Comm. on Fin. 

Servs., 117th Cong. (May 6, 2021) (testimony of Gary 

Gensler, Chair, SEC), https://financialservices.house.

gov/calendar/eventsingle.aspx?EventID=407748, at 

39:49-40:26.

110 Id. at 40:45-41:06.

111 See Avi Salzman, Why Some Experts Think a Bitcoin 

ETF Will Be Delayed, Barron’s (May 12, 2021), 

https://www.barrons.com/articles/why-some-expertsthink-a-bitcoin-etf-will-be-delayed-51620853749 (“At 

least six Bitcoin ETF applications have been submitted 

to the Securities and Exchange Commission.”).

112 See supra notes 95-101 and accompanying text.

113 See id.

114 See Rick A. Fleming, Inv. Advoc., SEC, Statement 

Regarding the SEC’s Rulemaking Package for 

Investment Advisers and Broker-Dealers (June 5, 2019), 

https://www.sec.gov/news/public-statement/statementregarding-sec-rulemaking-package-investment-advisersbroker-dealers. 

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

Objectives for Fiscal Year 2020, at 12, https://www.

sec.gov/files/sec-office-investor-advocate-report-onobjectives-fy2020.pdf. 

116 Jean Eaglesham & Rob Barry, More Than 5,000 

Stockbrokers From Expelled Firms Still Selling 

Securities, Wall St. J. (Oct. 4, 2013, 2:02 AM ET), 

https://www.wsj.com/articles/SB1000142405270230

3643304579107442831410708#:~:text=Dwyer%20

is%20one%20of%20more,of%20more%20than%20

550%2C000%20stockbrokers. 

117 See Mark Egan, Gregor Matvos & Amit Seru, The 

Market for Financial Adviser Misconduct, 127 J. Pol. 

Econ. 217, 233 (2019), https://www.journals.uchicago.

edu/doi/pdfplus/10.1086/700735 (noting that “relative 

to other advisors who left the same firm at the same 

time, advisors who engaged in misconduct are hired by 

firms that employ a greater percentage of other advisers 

with past misconduct records”). 

118 Financial Industry Regulatory Authority, Inc.; Notice 

of Filing of a Proposed Rule Change to Adopt FINRA 

Rule 4111 (Restricted Firm Obligations) and FINRA 

Rule 9561 (Procedures for Regulating Activities Under 

Rule 4111), Exchange Act Release No. 90527, 85 Fed. 

Reg. 78540 (Dec. 4, 2020), https://www.govinfo.gov/

content/pkg/FR-2020-12-04/pdf/2020-26594.pdf.

119 See Financial Industry Regulatory Authority, Inc.; 

Order Approving a Proposed Rule Change, as 

Modified by Amendment No. 1, to Address Brokers 

with a Significant History of Misconduct, Exchange 

Act Release No. 90635, 85 Fed. Reg. 81540 (Dec. 16, 

2020), https://www.federalregister.gov/d/2020-27626. 

120 See National Senior Investor Initiative Act of 2021, 

H.R. 1565, 117th Cong. (2021).

121 See Elad L. Roisman, Comm’r, SEC, Remarks at the 

Elder Justice Coordinating Council Fall 2019 Meeting 

(Dec. 3, 2019), https://www.sec.gov/news/speech/

roisman-remarks-elder-justice-coordinating-council-fall2019-meeting. 

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

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

124 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.

125 The Primary Issue Category labels are similar to the 

category labels used by other divisions and offices 

in public reports, where the category labels are 

based upon the submitter’s own characterization or 

description of the issue. See, for example, SEC, Off.
50 | OFFICE OF THE INVESTOR ADVOCATE

of the Whistleblower, Whistleblower Program

2020 Annual Report to Congress, at 28 and related 

footnote 80: “This breakdown reflects the categories 

selected by whistleblowers and, thus, the data 

represents the whistleblower’s own characterization 

of the violation type.” The exceptions in this 

Ombudsman’s Report are the “Non-SEC/Other 

Matters” category label used for matters not under the 

jurisdiction of the SEC, and the “Atypical Matters” 

category label used for matters where the submitter’s 

characterization or description of the issue makes it 

difficult to determine the nature of the complaint.

126 What We Do, SEC, https://www.sec.gov/about/

what-we-do (last visited June 3, 2021).

127 Caitlin McCabe, New Army of Individual Investors 

Flexes Its Muscle, Wall St. J. (Dec. 30, 2020, 7:00 

AM ET), https://www.wsj.com/articles/new-army-ofindividual-investors-flexes-its-muscle-11609329600.

128 See Mark Lush et al., Investing 2020: New Accounts 

and the People Who Opened Them, Consumer

Insights: Money & Investing 2 (Feb. 2021), https://

www.finrafoundation.org/sites/finrafoundation/files/

investing-2020-new-accounts-and-the-people-whoopened-them_1_0.pdf. 

129 While virtually all brokerage account agreements 

contain pre-dispute mandatory arbitration clauses that 

require investors to arbitrate claims through the FINRA 

dispute resolution forum, other financial professionals 

also include such clauses in their account agreements. 

130 See SEC Off. of Inv. Educ. & Advoc., Investor Bulletin: 

Broker-Dealer/Customer Arbitration (Dec. 20, 2016), 

https://www.sec.gov/oiea/investor-alerts-bulletins/

ib_arbitration.html.

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

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

sites/default/files/Education/p117487_0_0.pdf. 

132 FINRA Rule 12505.

133 See FINRA, 2021 FINRA Dispute Resolution Services

Arbitrator’s Guide 41 (Feb. 2021), https://www.finra.

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

134 Exchange Act Release No. 90000 (Sept. 25, 2020), 85 

Fed. Reg. 62142 (Oct. 1, 2020) (Notice of Filing of File 

No. SR-FINRA-2020-030) (hereinafter Initial Filing), 

https://www.finra.org/sites/default/files/2020-10/

SR-FINRA-2020-030-federal-register-notice.pdf. 

135 See, e.g., Investor.gov, SEC, https://www.investor.gov/; 

see also Welcome to Investor.gov/CRS, SEC, https://

www.investor.gov/CRS. 

136 Initial Filing, supra note 134, at 62143. 

137 In April 2004, FINRA’s predecessor, the National 

Association of Securities Dealers (NASD), implemented 

NASD Conduct Rule 2130, in which the NASD 

codified standards for granting expungement relief 

to brokers in arbitration proceedings. See NASD, 

Notice to Members 04-16, https://www.finra.org/

rules-guidance/notices/04-16. NASD Rule 2130 was 

incorporated into FINRA’s rulebook as Rule 2080. 

138 See FINRA Rule 2080(b)(1).

139 Initial Filing, supra note 134, at 62143-62144.

140 See, e.g., 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-finra-2020-030/

srfinra2020030-8815751-238026.pdf; see also Pub. 

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

Investors Arbitration Bar Association (Oct. 2013), 

https://piaba.org/system/files/2018-01/REPORT%20

-%20Expungement%20Study%20of%20the%20

Public%20Investors%20Arbitration%20Bar%20

Association.pdf; Pub. Invs. Arb. Bar Ass’n, Update to 

the 2013 Expungement Study of the Public Investors 

Arbitration Bar Association (Oct. 2015), https://piaba.

org/sites/default/files/newsroom/2015-10/Update%20

on%20the%202013%20Expungement%20Study%20

of%20PIABA%20%28October%2020%2C%20

2015%29.pdf. 

141 See FINRA, Regulatory Notice 17-42: Expungement of 

Customer Dispute Information (Dec. 6, 2017), https://

www.finra.org/sites/default/files/notice_doc_file_ref/

Regulatory-Notice-17-42.pdf. 

142 See Letter from Rick A. Fleming, Inv. Advoc., SEC, 

and Tracey L. McNeil, Ombudsman, SEC, to Marcia 

E. Asquith, Off. of the Corp. Sec’y, FINRA, at 2 (Feb. 

15, 2018), https://www.finra.org/sites/default/files/

notice_comment_file_ref/17-42_SEC_comment.pdf. 

143 See Initial Filing, supra note 134.

144 See generally id. at 62145-62156.

145 See id.

146 See, e.g., Letter from Lisa Hopkins, President, NASAA, 

Gen. Couns. & Senior Deputy Comm’r of Sec., W. 

Va., to Vanessa Countryman, Secretary, SEC (Oct. 

22, 2020), https://www.sec.gov/comments/sr-finra2020-030/srfinra2020030.htm; Letter from David P. 

Meyer, President, PIABA, to Brent J. Fields, Secretary, 

SEC (Oct. 23, 2020), https://www.sec.gov/comments/

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

147 See Letter from Mignon McLemore, Assistant Gen. 

Couns., FINRA, to Vanessa Countryman, Secretary, 

SEC (Dec. 18, 2020), https://www.finra.org/sites/

default/files/2020-12/SR-FINRA-2020-030-responseto-comments.pdf.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 51

148 See Partial Amendment No. 1 to FINRA 2020-30 

(Dec. 18, 2020), https://www.finra.org/sites/default/

files/2020-12/sr-finra-2020-030-amendment1.pdf. 

On December 28, 2020, the SEC published a notice 

and order in the Federal Register to solicit comments 

on SR—FINRA—2020-030, as modified by Partial 

Amendment No. 1, and to institute proceedings to 

determine whether to approve or disapprove the 

proposal, as modified by Partial Amendment No. 1. 

See Exchange Act Release No. 90734 (Dec. 18, 2020), 

85 Fed. Reg. 84396 (Dec. 28, 2020) (Order Instituting 

Proceedings to Determine Whether to Approve or 

Disapprove File No. SR-FINRA-2020-030), https://

www.govinfo.gov/content/pkg/FR-2020-12-28/

pdf/2020-28509.pdf. On March 15, 2021, FINRA 

extended the deadline for Commission action on 

SR—FINRA—2020-030 to May 28, 2021. See

Letter from Mignon McLemore, Assoc. Gen. Couns., 

Regul. Practice & Pol’y, Off. of Gen. Couns., FINRA, 

to Lourdes Gonzalez, Assistant Chief Couns., Off. 

of Chief Couns., Div. of Trading and Mkts., SEC 

(Mar. 15, 2021), https://www.finra.org/sites/default/

files/2021-03/SR-FINRA-2020-030-Extension2.pdf. 

149 See, e.g., Letter from Benjamin P. Edwards, Assoc. 

Professor of L., Univ. of Nev., Las Vegas, William S. 

Boyd Sch. of L., to J. Matthew DeLesDernier, Assistant 

Secretary, SEC (Jan. 19, 2021), https://www.sec.gov/

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

Letter from Barbara Roper, Dir. of Inv. Prot., Consumer 

Fed’n of America, to Vanessa A. Countryman, 

Secretary, SEC (Feb. 1, 2021), https://www.sec.gov/

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

Letter from Jason R. Doss, President, and Celiza 

Brangança, Vice-President, The PIABA Found., to J. 

Matthew DeLesDernier, Assistant Secretary, SEC (Jan. 

19, 2021), https://www.sec.gov/comments/sr-finra2020-030/srfinra2020030.htm. 

150 See Letter from Mignon McLemore, Assoc. Gen. 

Couns., Regul. Practice & Pol’y, Off. of Gen. Couns., 

FINRA, to Vanessa Countryman, Secretary, SEC (Apr. 

9, 2021) [hereinafter FINRA Rebuttal Letter], https://

www.finra.org/sites/default/files/2021-04/SR-FINRA2020-030-response-to-comments.pdf.

151 See FINRA, Partial Amendment No. 2 to Rule 

2020-030 (Apr. 9, 2021), at 5-6, https://www.finra.

org/sites/default/files/2021-04/SR-FINRA-2020-030-

Amendment2.pdf. 

152 See FINRA Rebuttal Letter, supra note 150, at 5. 

153 Id. at 5-6. On May 18, 2021, FINRA submitted 

a letter at the request of SEC staff to: (1) explain 

the circumstances under which FINRA would 

waive the requirement pursuant to Rule 2080 to 

be named as a party when associated persons seek 

judicial confirmation of an arbitration award for 

expungement; and (2) clarify the grounds on which 

arbitrators may recommend expungement. See Letter 

from Mignon McLemore, Assoc. Gen. Couns., Regul. 

Practice & Pol’y, Off. of Gen. Couns., FINRA, to 

Vanessa Countryman, Secretary, SEC (May 18, 2021), 

https://www.sec.gov/comments/sr-finra-2020-030/

srfinra2020030-8811356-238001.pdf. 

154 News Release, FINRA, FINRA Statement on 

Temporary Withdrawal of Specialized Arbitrator 

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

org/media-center/newsreleases/2021/finra-statementtemporary-withdrawal-specialized-arbitrator-roster.

155 Id.

156 Press Release, SEC, SEC Announces Pilot Securities 

Arbitration Clinic to Help Small Investors—Levitt 

Responds to Concerns Voiced at Town Meetings, 

97-101 (Nov. 12, 1997), https://www.sec.gov/news/

press/pressarchive/1997/97-101.txt.

157 For more information on the work of law school 

investor advocacy clinics, see Off. of the Inv. Advoc., 

Report on Activities, Fiscal Year 2019, supra note 54, 

at 33-34.

158 For an overview of the Law School Clinic Outreach 

Program (LSCOP), see SEC, Off. of the Inv. Advoc., 

Report on Objectives, Fiscal Year 2021, at 33, https://

www.sec.gov/files/sec-office-investor-advocate-reporton-objectives-fy2021.pdf.

159 For a timeline highlighting the Ombudsman’s formal 

outreach and engagement efforts from the start of the 

LSCOP in October 2016 through June 2019, and a 

discussion of the postponed 2020 Investor Advocacy 

Clinic Summit, see id. at 34-35.

160 See Off. of the Inv. Advoc., Report on Activities, 

Fiscal Year 2019, supra note 54, at 34.

161 Preparation for the 2020 Investor Advocacy Clinic 

Summit was in the final stages during the first week of 

March 2020 when unfortunately, due to information 

relating to the spread of the COVID-19 virus and 

out of an abundance of caution, the Summit was 

postponed. See Off. of the Inv. Advoc., Report on

Objectives, Fiscal Year 2021, supra note 158, at 36.

162 The 12 law school investor advocacy clinics include 

Cardozo School of Law, Cornell University, Fordham 

University, Howard University, University of Miami, 

New York Law School, Northwestern University, Pace 

University, St. John’s University, Seton Hall University, 

University of Nevada Las Vegas, and the University of 

Pittsburgh.
52 | OFFICE OF THE INVESTOR ADVOCATE

163 Due to the COVID-19 pandemic, FINRA has moved 

to virtual arbitration proceedings. See Off. of the Inv. 

Advoc., Report on Activities, Fiscal Year 2019, supra

note 53, at 46. It should be noted that on May 10, 

2021, FINRA announced that in-person arbitration 

hearings will resume in all but seven of their hearing 

locations on July 5, 2021. The remaining hearing 

locations will resume in-person arbitration hearings on 

July 30, 2021. See Coronavirus Impact on Arbitration 

& Mediation Hearing, FINRA, https://www.finra.org/

rules-guidance/key-topics/covid-19/hearings/impact-onarbitration-mediation.

164 See Craig McCann & Chuan Qin, The Impact of 

ZOOM on FINRA Arbitration Hearings, SLCG (Jan. 

22, 2021), https://www.slcg.com/pdf/sampleresults/

Impact%20of%20Zoom%20on%20FINRA%20

Claimants%20Final.pdf.

165 Professor Nicole G. Iannarone is an Assistant Professor 

of Law at the Drexel University Thomas R. Kline 

School of Law. See Nicole Iannarone, Drexel Univ. 

Thomas R. Kline Sch. of L., https://drexel.edu/law/

faculty/fulltime_fac/nicole-iannarone/. Prior to joining 

the Drexel law faculty, Professor Iannarone was a 

member of the faculty at Georgia State University 

College of Law and the director of its Investor 

Advocacy Clinic. The Ombudsman is extremely 

appreciative of the time and effort that Professor 

Iannarone devoted to preparing for, and moderating, 

this very timely and impactful panel discussion.

166 Presenting law school clinics included: University 

of Nevada Las Vegas, University of Miami, Pace 

University, Northwestern University, Fordham 

University, New York Law School, and Cardozo School 

of Law. While other law school clinics did want to 

make presentations, some were not able to given the 

nature of their clinic structure (semester versus full 

academic year) and the limited range of opportunities 

to represent retail investors due to the COVID-19 

pandemic. 

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

168 Id. 

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

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

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

172 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.”

173 17 C.F.R. §§ 200.735-3(b)(2)(i), 230.122 (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). 

174 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. 

175 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/investoradvisory-committee-2012/20210311-credit-ratingagencies-recommendation.pdf. 

176 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. 

177 See Coronavirus (COVID-19)—Disclosure 

Considerations Regarding Operations, Liquidity, and 

Capital Resources, SEC Div. of Corp. Fin. Disclosure 

Guidance Topic No. 9A (June 23, 2020), https://www.

sec.gov/corpfin/covid-19-disclosure-considerations. 

178 See Julie Steinberg, FASB to Explore Greater 

Disclosure of Supply-Chain Financing, Wall St. J.

(Oct. 22, 2020, 6:05 AM ET), https://www.wsj.com/

articles/fasb-to-explore-greater-disclosure-of-supplychain-financing-11603361147. 

179 See Management’s Discussion and Analysis, Selected 

Financial Data, and Supplementary Financial 

Information, Securities Act Release No. 10890 (Nov. 

19, 2020), https://www.sec.gov/rules/final/2020/33-

10890.pdf.

180 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. 

181 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-related-disclosure.

182 Press Release, SEC, Division of Examinations 

Announces 2021 Examination Priorities (Mar. 3, 

2021), https://www.sec.gov/news/press-release/2021-39.

183 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.

184 Allison Herren Lee, Acting Chair, SEC, Public Input 

Welcomed on Climate Change Disclosures (Mar. 15, 

2021), https://www.sec.gov/news/public-statement/

lee-climate-change-disclosures.
REPORT ON OBJECTIVES: FISCAL YEAR 2022 | 53

185 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. 

186 Tailored Shareholder Reports Proposing Release, supra

note 69.

187 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-advisorsand-shareholder-proposals.pdf.

188 See Exemptions from the Proxy Rules for Proxy 

Voting Advice, Release No. 34-89372 (July 22, 2020) 

(adopting release); see also Amendments to Exemptions 

from the Proxy Rules for Proxy Voting Advice, Release 

No. 34-87457, 84 Fed. Reg. 66518 (Dec. 4, 2019) 

(proposing release).

189 See Procedural Requirements and Resubmission 

Thresholds Under Exchange Act Rule 14a-8, Release 

No. 34-89964 (Sept. 23, 2020).

190 Gary Gensler, Chair, 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.

191 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) [hereinafter SEC Staff 

Statement on Proxy Rules], https://www.sec.gov/news/

public-statement/corp-fin-proxy-rules-2021-06-01.

192 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. 

193 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. 

194 See Press Release, SEC, SEC Reopens Comment Period 

for Universal Proxy (Apr. 16, 2021), https://www.sec.

gov/news/press-release/2021-64.

195 SEC, Recommendation of the Investor Advisory 

Committee: Structural Changes to the U.S. 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. 

196 See Press Release, SEC, SEC Announces Extension 

of Temporary Measure to Facilitate Cross-Border 

Implementation of the European Union’s MiFID II’s 

Research Provisions (Nov. 4, 2019), https://www.sec.

gov/news/press-release/2019-229.

197 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. 

198 See Modernization of Regulation S-K Items 101, 103, 

and 105, Exchange Act Release No. 89670, 85 Fed. 

Reg. 63726 (Oct. 8, 2020).

199 SEC, Recommendation of the Investor Advisory 

Committee in Support of the Transaction Fee Pilot 

for NMS Stocks (Sept. 13, 2018), https://www.sec.

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

recommendation-transaction-fee-pilot-for-nms-stocks.

pdf.

200 SEC, Transaction Fee Pilot for NMS Stock, Release No. 

34-84875 (Dec. 19, 2018), https://www.sec.gov/rules/

final/2018/34-84875.pdf.

201 See NYSE L.L.C. v. SEC, 962 F.3d 541 (D.C. Cir. 

2020).

202 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.

203 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.

204 SEC, Recommendation of the Investor Advisory 

Committee Regarding Mutual Fund Cost Disclosure 

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

205 See Request for Comment on Fund Retail Investor 

Experience and Disclosure, Securities Act Release No. 

10503, Exchange Act Release No. 83376, Investment 

Company Act Release No. 33113, 83 Fed. Reg. 26891 

(June 11, 2018).

206 See Updated Disclosure Requirements and Summary 

Prospectus for Variable Annuity and Variable Life 

Insurance Contracts, Securities Act Release No. 

10569, Exchange Act Release No. 84508, Investment 

Company Act Release No. 33286, 83 Fed. Reg. 61730 

(Nov. 30, 2018).
54 | OFFICE OF THE INVESTOR ADVOCATE

207 See Updated Disclosure Requirements and Summary 

Prospectus for Variable Annuity and Variable Life 

Insurance Contracts, Securities Act Release No. 

10765, Exchange Act Release No. 88358, Investment 

Company Act Release No. 33814, 85 Fed. Reg. 25964 

(Mar. 11, 2020).

208 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. 

209 See Accredited Investor Definition, Securities Act 

Release No. 10824, 85 Fed. Reg. 64234 (Oct. 9, 2020) 

(adopting release); see also Amending the “Accredited 

Investor” Definition, Securities Act Release No. 10734, 

85 Fed. Reg. 2574 (Jan. 15, 2020) (proposing release).

210 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. 

211 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. 

212 See Universal Proxy, Exchange Act Release No. 79164, 

Investment Company Act Release No. 32339, 81 Fed. 

Reg. 79122 (Nov. 10, 2016).

213 See SEC Staff Statement on Proxy Rules, supra note 

191.
OFFICE OF THE INVESTOR ADVOCATE

U.S. Securities and Exchange Commission

100 F Street NE

Washington, DC 20549

202.551.3302