REPORT ON ACTIVITIES FISCAL YEAR 2018

Office of the 

Investor

Advocate

U.S. SECURITIES AND EXCHANGE COMMISSION

REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | i

OFFICE OF THE INVESTOR ADVOCATE

REPORT ON ACTIVITIES

FISCAL YEAR 2018

Section 4(g)(6) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78d(g)(6), 

requires the Investor Advocate to file two reports per year with the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of 

Representatives.1 A Report on Objectives is due not later than June 30 of each year, and its purpose 

is to set forth the objectives of the Investor Advocate for the following fiscal year.2 On June 29, 

2017, the Office of the Investor Advocate (Office) filed a Report on Objectives for Fiscal Year 2018, 

which identified five policy areas that the Office would focus on during the year.3

In addition to the Report on Objectives, a Report on Activities is due no later than December 31 

of each year.4 The Report on Activities shall describe the activities of the Investor Advocate during 

the immediately preceding fiscal year. Among other things, the report must include information on 

steps the Investor Advocate has taken to improve the responsiveness of the Securities and Exchange 

Commission (Commission or SEC) and self-regulatory organizations (SROs) to investor concerns, 

a summary of the most serious problems encountered by investors during the reporting period, 

identification of Commission or SRO action taken to address those problems, and recommendations 

for administrative and legislative actions to resolve problems encountered by investors.5

This Report on Activities for Fiscal Year 2018 describes our work in the five policy areas that we 

announced in our Report on Objectives for Fiscal Year 2018. In each of those areas, we have strived 

to understand the needs of American investors and the implications of policy choices. In a variety 

of ways, as more fully described below, we have identified proposed policy decisions that are likely 

to harm investors, have made recommendations for regulatory changes that will ease or resolve 

the problems encountered by investors, and have taken steps to improve the responsiveness of the 

Commission and SROs to investor concerns. The reporting period for this Report on Activities runs 

from October 1, 2017 to September 30, 2018 (Reporting Period).

This Report on Activities also discusses the efforts of the SEC Ombudsman to address the concerns 

expressed by investors during the course of Fiscal Year 2018. Exchange Act Section 4(g)(8)(D) 

requires the Ombudsman to submit a semi-annual report to the Investor Advocate for inclusion in 

reports to Congress and, accordingly, the Ombudsman Report is included herein. 

In addition to the mandatory items in this Report, we include discussion of two other matters. 

As we have done in the past, we report on the recommendations made to the Commission by 

the Investor Advisory Committee, as well as the status of the Commission’s responses to those 

recommendations. And, for the first time in this Report, we describe in more detail our activities 

related to investor testing. 
ii | OFFICE OF THE INVESTOR ADVOCATE

Functions of the Investor Advocate Reporting Obligation

According to Exchange Act Section 4(g) According to Exchange Act Section 4(g)

(4), 15 U.S.C. § 78d(g)(4), the Investor (6)(B), 15 U.S.C. § 78d(g)(6)(B), the Investor

Advocate shall: Advocate shall submit to Congress, not later 

(A) assist retail investors in resolving

significant problems such investors

may have with the Commission or

with SROs;

than December 31 of each year, a report on 

the activities of the Investor Advocate during 

the immediately preceding fiscal year. This 

“Report on Activities” must include 

the following:

(B) identify areas in which investors

would benefit from changes in the

regulations of the Commission or the

(I) appropriate statistical information and

full and substantive analysis;

rules of SROs; (II) information on steps that the Investor

(C) identify problems that investors have

with financial service providers and

investment products;

Advocate has taken during the

reporting period to improve investor

services and the responsiveness of

the Commission and SROs to

(D) analyze the potential impact on investor concerns;

investors of proposed regulations of

the Commission and rules of SROs;

and

(III) a summary of the most serious

problems encountered by investors

during the reporting period;

(E) to the extent practicable, propose

to the Commission changes in

the regulations or orders of the

(IV) an inventory of the items described in

subclause (III) that includes—

Commission and to Congress any (aa) identification of any action taken

legislative, administrative, or personnel by the Commission or the SRO 

changes that may be appropriate to and the result of such action;

mitigate problems identified and to

promote the interests of investors. (bb) the length of time that each item 

has remained on such inventory; 

and 

(cc) for items on which no action

has been taken, the reasons for

inaction, and an identification of

any official who is responsible for

such action;

(V) recommendations for such

administrative and legislative actions as

may be appropriate to resolve problems

encountered by investors; and

(VI) any other information, as determined

appropriate by the Investor Advocate.

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

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

any Commissioner, any other officer or employee of the Commission outside of the Office of the Investor 

Advocate, or the Office of Management and Budget. This Report on Activities expresses solely the views of 

the Investor Advocate. It does not necessarily reflect the views of the Commission, the Commissioners, or staff 

of the Commission, and the Commission disclaims responsibility for this Report on Activities and all analyses, 

findings, and conclusions contained herein.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | iii

CONTENTS

MESSAGE FROM THE INVESTOR ADVOCATE .

REPORT ON ACTIVITIES AND RECOMMENDATIONS

RELATING TO THE FISCAL YEAR 2018 POLICY AGENDA  

Public Company Disclosure. 

Equity Market Structure. 

Municipal Market Reform  

Accounting and Auditing. 

Standards of Conduct for Broker-Dealers and Investment Advisers. 

PROBLEMATIC INVESTMENT PRODUCTS AND PRACTICES. 

Initial Coin Offerings. 

Broker Migration and Misconduct  .

Outdated Transfer Agent Regulations  .

Increasing Use of Margin Debt.  

INVENTORY OF INVESTOR ADVOCATE RECOMMENDATIONS AND 

SEC OR SRO RESPONSES  .

OMBUDSMAN’S REPORT. 

Service By The Numbers  

Service Behind The Numbers   

Streamlined Communications With Retail Investors . 

Standards of Practice . 

Outreach Activities. 

Outlook For Fiscal Year 2019.  

REPORT ON INVESTOR TESTING. 

SUMMARY OF IAC RECOMMENDATIONS AND SEC RESPONSES.  

END NOTES. 
“By utilizing tools such as 

surveys and focus groups, we can 

overcome the difficult challenge of 

motivating individual investors to 

provide meaningful comment on 

proposed rule changes involving 

highly technical matters.”
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 1

MESSAGE FROM THE

INVESTOR ADVOCATE

I

n our fourth full year of existence, the Office of 

the Investor Advocate at the U.S. Securities and 

Exchange Commission continued to break new 

ground. As the Investor Advocate, I am very proud 

of the high-quality work that my dedicated staff has 

carried out on behalf of American investors. 

Of particular note, during the past fiscal year we 

continued to build up the research function of 

our Office. We have described our investor testing 

program, known as POSITIER, in previous reports 

to Congress, but for the first time we include in this 

Report on Activities a report from Dr. Brian Scholl, 

the leader of this initiative. His report provides more 

details about the work we have done so far, and 

more important, it provides a sense of our vision for 

this initiative and the ways we believe it can enhance 

the policymaking process at the Commission.

Our enabling statute, Section 4(g) of the Exchange 

Act, does not mention the term “investor testing,” 

but it makes clear that our Office is expected 

to engage in high-quality research in support of 

our advocacy role. For example, we are required 

to analyze the potential impact on investors of 

proposed changes to rules, identify areas in which 

investors would benefit from changes to existing 

rules, and identify problems that investors have 

with financial service providers and investment 

products. Our semi-annual reports to Congress, 

which describe our work in these areas, are to 

include “appropriate statistical information and full 

and substantive analysis.” Moreover, to conduct 

this type of work we are authorized (in consultation 

with the Chairman) to hire “research staff” with 

technical skills—not just “independent counsel” 

with advocacy skills—to carry out the functions of 

the Office.

As discussed in the Report on Investor Testing 

below, we believe our investor research not only 

fulfills our statutory duties, but it can benefit the 

entire Commission by 

providing a new source of 

objective data to help the 

Commission make datadriven policy decisions. 

By utilizing tools such as 

surveys and focus groups, 

we can overcome the 

difficult challenge of 

motivating individual 

investors to provide 

meaningful comment 

on proposed rule changes involving highly 

technical matters. But, for this research to fulfill 

our Office’s purposes, it is important that we 

maintain a measure of independence so that we 

can guard against the all too natural temptation of 

policymakers to design testing so that it tends to 

justify a predetermined course of action. Ideally, 

we should seek input from Commissioners and 

rulemaking teams so that our research projects are 

useful for their purposes, but we should also retain 

control of the research design and implementation 

so that they meet our statutory objectives. This 

involves a delicate balance because, while Section 

4(g) guards our independence of thought in our 

advocacy role, it does not give us independent 

funding for investor testing or staffing.
2 | OFFICE OF THE INVESTOR ADVOCATE

With a hiring freeze in place at the SEC, Fiscal Year 

2018 proved to be a very challenging year for our 

Office to continue on a steady path of obtaining the 

resources we need to accomplish all the parts of our 

mission. When the Office of the Investor Advocate 

was established in 2014, we began by building 

a legal and policy team to track the numerous 

rulemakings at the Commission and self-regulatory 

organizations (SROs) and to advocate for investors 

in the rulemaking process. This elite team, while 

small, is comparable to the staff in a Commissioner’s 

office, which is the staffing level I envisioned for 

this function. The Ombudsman, on the other 

hand, has only one full-time employee, along with 

two contractors, to support her work of assisting 

investors who have complaints about the SEC or 

an SRO. While this had been adequate to address 

the initial workload, as the Office has become more 

widely known and the volume of inquiries has 

multiplied, the staffing level has not kept pace. 

Even more challenging, though, is our critical 

shortage of staffing in our investor testing program, 

where Dr. Scholl has done the extraordinary work 

discussed in this Report with very little assistance. 

Due to the hiring freeze during all of Fiscal Year 

2018, our efforts to devote additional resources 

to the Ombudsman and research functions were 

hindered, which has delayed our ability to build 

out these critical programs as Congress intended 

when it created the Office of the Investor Advocate.

Fortunately, Chairman Jay Clayton continues to 

demonstrate support for our efforts to build up 

our Office. Despite the budgetary challenges in 

Fiscal Year 2018, we expect to receive approval 

for modest growth in 2019, and we hope to 

obtain additional resources in the future. We 

believe these are worthwhile investments because 

our work has the potential to transform the way 

the Commission evaluates how its decisions will 

help or harm investors.

In our advocacy role, we have enjoyed considerable 

success during Fiscal Year 2018. Often, our job 

requires us to oppose aspects of rulemakings that 

may negatively impact investors, but we also try to 

support reforms that will benefit investors, knowing that those changes are likely to be opposed by 

other stakeholders. As described in more detail 

in the section entitled “Report on Activities and 

Recommendations Relating to the Fiscal Year 2018 

Policy Agenda,” we saw a number of these types 

of positive developments for investors during Fiscal 

Year 2018. For example, the Commission adopted 

rules to require greater disclosure by alternative 

trading systems (known as “dark pools”) and 

approved the PCAOB’s proposed enhancements to 

the auditor’s report. More recently, this trend has 

continued with the adoption of changes to Rule 606 

to enhance the disclosures that broker-dealers must 

make to institutional investors.

As we have done in the past, we ventured beyond 

our nation’s capital during Fiscal Year 2018 to meet 

with Main Street investors in person and listen 

to their concerns. In addition to fifteen speaking 

engagements at a variety of events around the 

country, we conducted three-day “investor outreach 

tours” in Boston and Denver. During these tours, 

we engaged with numerous investors to get a better 

sense of how SEC rulemakings may affect them. In 

particular, we explored the ways investors use SECmandated disclosures to make investment decisions.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 3

Finally, we decided to take our investor outreach 

efforts a step further this year by encouraging the 

SEC Commissioners to participate in an outreach 

event outside of Washington, D.C. We envisioned 

an event in which Commissioners and staff would 

spend time speaking with investors and hearing 

from them, as opposed to speaking to them. To 

our delight, the Chairman and Commissioners all 

supported the idea, and the Office of the Investor 

Advocate worked in tandem with the SEC’s Atlanta 

Regional Office to organize the event. In particular, 

Stephen Deane, Investor Engagement Advisor in the 

Office of the Investor Advocate, and Richard Best, 

the Director of the Atlanta Regional Office, spent 

numerous hours tending to all the details for the 

event. Their efforts, along with the contributions of 

many other staff, came to fruition on June 13, 2018

when the full Commission conducted a first-of-itskind Investor Town Hall in Atlanta, Georgia. In 

addition, the SEC’s Investor Advisory Committee 

convened a meeting at the same location the following day, marking the first time the Committee has 

met outside of Washington, D.C.

It is a great privilege to serve American investors 

as their advocate, and I am deeply indebted to the 

men and women in my Office who assist me in 

this task. Their tireless efforts are reflected in the 

pages that follow, and I am pleased to provide this 

glimpse into the work they perform day by day. As 

always, I would welcome the opportunity to answer 

questions or provide additional information to 

Members of Congress.

Sincerely,

Rick A. Fleming

Investor Advocate

REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 5

REPORT ON ACTIVITIES AND 

RECOMMENDATIONS

RELATING TO THE FISCAL YEAR 2018 

POLICY AGENDA

On June 29, 2017, the Office of the 

Investor Advocate filed a Report on 

Objectives for Fiscal Year 2018.6 The 

Report identified five key policy areas that would 

be the primary focus of the Office during Fiscal 

Year 2018:7

 public company disclosure, equity 

market structure, municipal market reform, 

accounting and auditing, and fiduciary duty. This 

Report on Activities describes our activities and 

recommendations within each of those policy areas 

during Fiscal Year 2018.

PUBLIC COMPANY DISCLOSURE

As described in our prior reports, the Commission 

has undertaken a multi-year, comprehensive

Disclosure Effectiveness Initiative to review and 

modernize public company reporting requirements 

in Regulation S-K and Regulation S-X. Over the 

course of Fiscal Year 2018, our Office closely 

followed developments in this area. 

On June 28, 2018, the Commission adopted 

amendments to the “smaller reporting company” 

definition in order to permit more companies 

to qualify for a set of scaled-back disclosure 

requirements thought to be less burdensome.8

 The 

definition features a size threshold, as measured 

by public float and revenues.9 Our view generally, 

as expressed in a speech on November 19, 2016, 

was that there should have been more analysis of 

the differences between small and large companies, 

and how those differences inform what disclosure 

requirements would be appropriate.10 Such an 

analysis would be focused on firm-level traits and 

corresponding information needs of investors. The 

rulemaking went in a different direction, assessing 

the informational needs of investors not directly 

but rather by inference from market indicators 

associated with information environment, liquidity 

and growth during timeframes involving other 

changes in disclosure regulation.11 For example, 

as one measure of the information environment 

for investors, the economic analysis looked at 

average institutional ownership statistics for a set 

of companies providing scaled-back disclosures 

as compared to the same statistics for a control 

group.12 We would have liked to see more institutional investors interviewed and asked about the 

decision-usefulness of the disclosures in question. 

On June 28, 2018, the Commission also adopted 

amendments requiring the use of the Inline XBRL 

format for the submission of public company 

financial statement information.13 Inline XBRL 

has the potential to benefit investors and other 

market participants while decreasing, over time, 

the cost of preparing information for submission 

to the Commission. This was a rulemaking which 

we encouraged from the beginning because it is an 

advance in the Commission’s long-term initiative 

to make all filing data not just human-readable but 

also machine-readable, and thereby easier to access 

and use.14
6 | OFFICE OF THE INVESTOR ADVOCATE

On July 18, 2018, the Commission adopted 

amendments to Securities Act Rule 701(e) that were 

mandated by the Economic Growth, Regulatory 

Relief, and Consumer Protection Act.15 Rule 701 

is a registration exemption for offers and sales of 

securities pursuant to certain compensatory benefit 

plans and contracts related to compensation. 

The amendment provides that companies issuing 

$10 million or less on an annual basis, up from 

$5 million, no longer need to provide certain 

information (notably, financial statements). Unfortunately, without this information, there may be 

virtually no information about a non-public issuer 

available at all. However, given that this was 

a congressionally mandated rulemaking, we did 

not object to the adoption of the amendments. 

At the same time, the Commission published a 

concept release and request for comment on possible 

ways to modernize rules related to compensatory 

arrangements, including Securities Act Rule 701.16

We believe some updates to these rules may be 

beneficial given the significant evolution in both the 

types of compensatory offerings and the composition 

of the workforce since the Commission last substantively amended the applicable rules in 1999.

On July 24, 2018, the Commission proposed 

amendments to Regulation S-X intended to simplify 

and streamline the financial disclosure requirements 

applicable to registered debt offerings.17 A major 

premise of the rulemaking is that reducing disclosure 

burdens should encourage issuers to conduct 

registered offerings in lieu of private Rule 144A 

offerings, or to add guarantees where under current 

circumstances they do not.18 Registered offerings 

come with greater investor protections, not the 

least of which is the ability of investors to bring 

certain statutory claims in securities litigation that 

they cannot bring in the private offering context. 

However, the proposed rules entail, in part, 

removing certain disclosures from the scope of an 

audit, which would appear to diminish the ability 

of investors to recover from an auditor in the event 

of securities litigation. The proposition that issuers 

should be able to choose from a set of disclosure 

and audit options based on investor demand19 seems 

questionable in the context of a long-running bull 

market and one in which institutional asset managers 

purchase increasingly for index-linked strategies. 

Ultimately, if investors have limited market power to 

demand robust disclosure, measuring the economic 

effect of a reduction in disclosure may not be as 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 7

straightforward as measuring transaction statistics 

(as the economic analysis in the proposing release 

suggests).20 There may be some other diminution in 

welfare that is more difficult to measure but no less 

important. We are trying to obtain more investor 

input on this rulemaking. 

Lastly, on August 17, 2018, the Commission 

adopted amendments to financial disclosure 

requirements principally in Regulation S-X 

that had become duplicative, overlapping, or 

outdated in light of other Commission disclosure 

requirements, U.S. Generally Accepted Accounting 

Principles (GAAP), or changes in the information 

environment.21 The Commission also referred 

certain disclosure requirements that overlapped 

with, but required information incremental to, 

GAAP to the Financial Accounting Standards 

Board for potential incorporation into GAAP. This 

rulemaking, like many of the aforementioned ones, 

was intended to simplify and update disclosure 

requirements and reduce compliance burdens for 

companies without significantly altering the total 

mix of information available to investors. After an 

in-depth review of this highly technical proposal, 

we viewed it as largely benign from an investor’s 

perspective because it did not impede investors’ 

access to material information. 

EQUITY MARKET STRUCTURE

In Fiscal Year 2018, the Office worked with 

Commission staff and relevant SROs to encourage 

equity market structure reforms designed to enhance market resilience, efficiency, transparency, 

and fairness. We continued to analyze proposed 

rules, including significant Commission proposals 

concerning alternative trading venue regulation and 

the disclosure of broker order handling activity, to 

examine their potential impact on investors. We 

spent considerable time and effort advocating in 

formal and informal ways for improvements that 

would benefit and protect investors.

In July 2018, the Commission adopted significant 

amendments to Regulation ATS to enhance the 

operational transparency of venues that trade 

listed equity securities.22 Our Office had previously 

submitted a letter to the Commission in support of 

the proposed amendments.23 We are pleased that the 

Commission has finalized this proposal and brought 

greater transparency into the equity market. In our 

letter, we had also suggested a modest expansion 

of certain aspects of the proposal in order to enhance the operational transparency of venues that 

trade fixed income securities, including those that 

solely trade government securities.24 Although the 

Commission did not act on our suggestion at this 

time, it has committed to review the regulatory 

framework for fixed income electronic trading 

venues.25 We will encourage the Commission to 

consider amendments to Regulation ATS that 

benefit investors in municipal securities and 

corporate bonds. 

Several efforts continue to be under way to improve 

Regulation NMS.26 After the Reporting Period, in 

November 2018, the Commission adopted rules 

that, for the first time, require broker-dealers to 

disclose the handling of institutional orders to 

customers under existing Rule 606 of Regulation 

NMS.27 This should provide customers with better 

information to evaluate the quality of execution for 

the orders they place.28 We evaluated the proposal, 

including questions surrounding the proposed 

definition of institutional order and its impact on 

the ability of institutional customers to obtain 

information about all their orders, and we are 

pleased that the Commission finalized this proposal. 

Similarly, in March 2018, the Commission proposed a rule to conduct a transaction fee pilot for 

NMS stocks.29 The pilot would subject the stock 

exchanges to new temporary pricing restrictions 

across various test groups and thereby reduce 

or eliminate the use of so-called “maker-taker” 

fee-and-rebate pricing for transactions in those 

securities.30 We have evaluated the proposed pilot 

and believe that it can potentially answer questions 

concerning broker-dealer conflicts of interest in 

order routing behavior. Accordingly, the Investor 

Advocate, as a voting member of the Investor 

Advisory Committee, supported a recommendation 
8 | OFFICE OF THE INVESTOR ADVOCATE

to the Commission to move forward with the 

pilot,31 and we have continued to support the 

proposed pilot during our informal interactions 

with Commissioners and staff.

In addition to reviewing Commission rulemakings, 

the Office of the Investor Advocate is responsible 

for analyzing the potential impact on investors of 

proposed rules of SROs.32 In furtherance of this 

objective, the Office has analyzed the potential 

impact of various SRO proposals related to equity 

market structure. For example, in February 2018, 

the Chicago Stock Exchange, Inc. (CHX) proposed 

a new pilot to create a 350-microsecond speedbump 

for all orders submitted to the exchange, except 

for those from a special class of market makers 

that would be able to bypass the speedbump.33 

Although the speedbump in this proposal was 

similar to a rule adopted by Investor Exchange 

LLC (IEX), our analysis indicated that the significant discriminatory advantage provided to one 

class of market makers would be unfair, and we 

therefore recommended that the Commission not 

allow the pilot to proceed.34 Ultimately, CHX 

withdrew the proposal and the Commission set 

aside its consideration of the matter.35

During the Reporting Period, there were numerous 

other SRO rule proposals that we monitored 

closely. As examples, we have reviewed proposed 

fee amendments to the NMS plans governing reporting to the consolidated tape,36 an application by 

NASDAQ to permit issuer choice to consolidate 

liquidity by suspending Unlisted Trading Privileges,37

and a proposed rule change by IEX to create a 

Long-Term Shareholders Exchange.38

We continue to monitor progress on the implementation of the Commission’s Consolidated Audit 

Trail, which is intended to enhance, centralize, and 

generally update the regulatory data infrastructure 

available to market regulators.39 In our view, this 

is a development of monumental importance 

because, once implemented, regulators will have 

ready access to all trade and order data, facilitating 

more prompt and complete analysis of market 

events such as the May 6, 2010 “Flash Crash” that 

saw U.S. equity and futures markets experience 

a sudden breakdown of orderly trading. The 

data also will make it easier for the Commission 

and other regulators to detect practices such as 

front-running, churning, and insider trading, so 

the new system has the potential to eliminate 

or significantly curtail abuses that have plagued 

investors for decades. Of course, it is imperative 

that the trading data be guarded from cyber 

intrusions that would cause harm to investors and 

the markets, but we encourage policymakers to 

not lose sight of the enormous potential benefits of 

the Consolidated Audit Trail. 

The Office also monitored the Commission’s Tick 

Size Pilot through September 2018, which required, 

for a two-year period, the national securities 

exchanges and FINRA to widen the minimum 

quoting and trading increments—or “tick sizes”—

for stocks of some smaller companies.40 We were 

skeptical about the underlying hypothesis that 

wider tick sizes would enhance the market quality 

of smaller stocks enough to outweigh the additional 

costs borne by investors,41 and the pilot data 

recently submitted by the SROs, combined with 

data to be collected for the next several months, 

should allow the Commission to assess whether 

this hypothesis was correct.

In addition to analyzing active SEC and SRO 

rulemakings, we also monitor the Commission’s 

Equity Market Structure Roundtables,42 with an eye 

toward championing ideas and concepts that appear 

most likely to enhance equity market structure for 

the benefit of investors. For example, in September 

2018, the Commission hosted a roundtable on 

regulatory approaches to combating retail investor 

fraud.43 We support these roundtables, as they 

have provided staff with views from a broad range 

of market participants, and we hope that the 

discussion will lead toward regulatory actions that 

will enhance the ability of regulators and market 

intermediaries to combat retail fraud.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 9

Finally, we have monitored enforcement 

cases involving abusive market practices. For 

example, we are pleased that recent SEC and 

FINRA enforcement actions have sanctioned 

misconduct by alternative trading systems known 

as “dark pools.” However, these actions tend 

to focus on black-and-white allegations such as 

misrepresentations, rather than more gray areas 

such as a broker’s obligation to achieve the “best 

execution” of customer orders. In our outreach to 

investors, we have heard particular concerns that 

troubling practices may proliferate if regulators 

do not bring cases that specifically address best 

execution. We continue to evaluate these concerns.

MUNICIPAL MARKET REFORM

Throughout Fiscal Year 2018, the Office of the 

Investor Advocate reviewed proposed rules, rule 

amendments, and requests for comment relating to 

the regulation of the fixed income markets and, in 

particular, municipal securities markets. The Office 

reviewed seventeen such proposals, making it a 

priority to consider the impact on retail investors 

of each proposed rule and rule amendment.44

Two proposals required significant staff attention 

during the Reporting Period: (1) the Commission’s 

Proposed Amendments to Exchange Act Rule 

15c2-12 and (2) Municipal Securities Rulemaking 

Board (MSRB) Regulatory Notice 2018-15, 

Request for Comment on Draft Amendments to 

MSRB Rules on Primary Offering Practices. 

Proposed Amendment’s to Municipal 

Securities Disclosure Rule 15c2-12

Throughout Fiscal Year 2018, the Office actively 

engaged with Commissioners, Commission staff, 

and the MSRB regarding enhancements to municipal securities disclosure. On March 1, 2017, 

the Commission published for public comment 

Proposed Amendments to Municipal Securities 

Disclosure Rule 15c2-1245 under the Exchange 

Act.46 The proposal sought to amend the list of 

event notices that a broker, dealer, or municipal 

securities dealer acting as an underwriter in a 

primary offering of municipal securities must 

provide to the MSRB for public dissemination. 

These additional event notices would include 

incurrence of a material financial obligation (such as 

a bank loan) or related event (such as a default) that 

could materially affect the rights of the bondholders. 

It is important that investors have complete and 

accurate information when making investment 

decisions. The availability of secondary market 

disclosure to all municipal securities market 

participants enables investors to, among other 

things, evaluate the creditworthiness of an issuer 

of bonds.47 Information relating to financial 

obligations, debt obligations, and bank loans 

are critical to the understanding of solvency, 

viability, and financial health of a municipal 

entity—each of which plays an important role 

in investment decisions.

For these reasons, the Office of the Investor 

Advocate supported the Commission’s proposed 

amendments to enhance municipal securities 

disclosure under Exchange Act Rule 15c2-12. In 

fact, this Office has previously highlighted the 

lack of, and untimeliness of, municipal securities 

disclosure as a potentially problematic area for 

municipal market participants.48 Specifically, in our 

Report on Activities for Fiscal Year 2015, the Office 

highlighted the lack of bank loan disclosures as an 

area of concern for municipal market participants, 

and in our Report on Objectives for Fiscal Year 2017 

we discussed the adverse effects on retail investors 

from the lack of bank loan disclosures or the delay 

in such disclosures.49

On August 20, 2018, the Commission adopted 

the proposed amendments to Exchange Act 

Rule 15c2-12. The Commission stated, and we 

agree, “[t]he amendments add transparency to 

the municipal securities market by increasing the 

amount of information that is publicly disclosed 

about material financial obligations incurred by 

issuers and obligated persons.”50 The information 

disclosed may provide investors with insight into 
10 | OFFICE OF THE INVESTOR ADVOCATE

a municipal entity’s financial position and may 

facilitate a better pricing and trading of securities, 

as well as enhance liquidity before purchasing a 

municipal security, and on an on-going basis.51

The amendments to Exchange Act Rule 15c2-12 

became effective on October 30, 2018.52

MSRB Regulatory Notice 2018-15

On September 17, 2018, the Office of the Investor 

Advocate filed a public comment letter in response 

to MSRB Regulatory Notice 2018-15, Request 

for Comment on Draft Amendments to MSRB 

Rules on Primary Offering Practices (Regulatory 

Notice 2018-15).53 In pertinent part, Regulatory 

Notice 2018-15 sought comment on two issues 

of particular interest to the Office of the Investor 

Advocate: (1) whether to auto-populate into Form 

G-32 certain information that is submitted to 

Depository Trust Company’s (DTC) New Issue 

Information Dissemination Service (NIIDS) but 

is not currently required to be provided on Form 

G-32;54 and (2) whether to require additional 

information on Form G-32 that is not currently 

provided to NIIDS.55

Among other things, the MSRB proposed adding 

initial minimum denomination information to 

Form G-32, which would be auto-populated with 

information underwriters already entered into 

NIIDS.56 The Office of the Investor Advocate’s 

Report on Objectives for Fiscal Year 2018 highlighted our concern that municipal securities 

are being sold in amounts below the minimum 

denomination.57 We believe the proposed change is a 

step in the right direction because it would improve 

the ability of investors and their representatives to 

locate the minimum denomination for a bond, and 

we supported the proposed amendments to add 

minimum denomination information to Form G-32. 

We also expressed our hope that the MSRB would 

take additional steps to address the sale of bonds 

below the minimum denomination.58

In addition to monitoring rule proposals, 

amendments, and requests for comment, staff 

continued to monitor the implementation of past 

Commission and SRO rulemakings. On May 14, 

2018, for example, the MSRB and FINRA rules 

relating to confirmation disclosure and prevailing 

market price took effect.59 These rules require the 

disclosure of mark-ups and mark-downs to retail 

investors when they buy or sell bonds. As described 

in prior reports from our Office, these rules incorporated many suggestions made by the Office of 

the Investor Advocate and generally followed the 

Office’s recommended course of action.60 The Office 

monitored the lead-up to the rule’s effective date by, 

among other things, reviewing the MSRB’s New 

and Updated FAQs on Confirmation Disclosure and 

Prevailing Market Price published on March 19, 2018.61

ACCOUNTING AND AUDITING

During the Reporting Period, we focused on 

developments involving a range of accounting 

and auditing issues, including FASB’s Definition 

of Materiality, non-GAAP financial measures, 

and internal control over financial reporting. We 

monitored activities at accounting and auditing 

standard setters, and we engaged internally and 

externally with investors and other stakeholders. 

FASB’s Definition of Materiality 

This Reporting Period, FASB resolved a contentious 

issue regarding its definition of materiality by adopting an approach that we had recommended. As 

reported in our FY 2017 Report on Activities, this 

Office had submitted a comment letter to FASB in 

which we proposed that the standard setter take a 

different approach to achieve its goal.62

That goal was to align FASB’s definition of 

materiality with that of the courts, the SEC, 

and the PCAOB. FASB believed that its definition 

of materiality, as stated in Concepts Statement 

No. 8, was “inconsistent with the legal concept 

of materiality in the United States,” as defined by 

the U.S. Supreme Court. To achieve its goal of 

alignment, FASB proposed to strike its definition 

and instead say, in effect, that materiality is 

whatever the courts say it is. That proposal, 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 11

however, sparked strong criticism from investors, 

who feared that accounting decisions would be 

turned over to attorneys and that the level and 

transparency of financial reporting would 

be reduced.

We recognized both the investors’ concerns 

and FASB’s goal of harmonizing its definition. 

Therefore, we recommended that, rather than 

moving forward with its proposal, FASB return 

to an earlier definition of materiality as expressed 

in Concepts Statement No. 2,63 which Concepts 

Statement No. 8 had superseded. In addition, 

we recommended that FASB reference the SEC’s 

Staff Accounting Bulletin No. 99,64 which itself 

references the Supreme Court definition of 

materiality. In August 2018, FASB did indeed 

reinstate the definition in Concepts Statement 

No. 2 and explained: 

Some stakeholders suggested that the 

definition in Concepts Statement 2 would 

be a better definition. After considering the 

feedback, the Board decided to replace the 

current definition of materiality in this chapter 

with the superseded definition in Concepts 

Statement 2. The definition of materiality that 

is in Concepts Statement 2 is quoted in SEC 

Staff Accounting Bulletin No. 99, Materiality. 

SAB 99 notes that the definition that is in 

Concepts Statement 2 is in substance identical 

to the definition of the U.S. Supreme Court, 

which in turn results in the definition in this 

chapter being in substance identical to the 

definition in the auditing standards of the 

AICPA and the PCAOB.65

We commend FASB for its deliberative and 

transparent decision-making process, which 

included soliciting public comments and holding 

a roundtable on the topic. More generally, we 

strongly support the independence of FASB, which 

is essential for FASB to succeed in its mission to set 

accounting standards for the benefit of investors.66

Its independence is also essential for FASB to instill 

public confidence in our financial markets and thus 

to facilitate capital formation.

Non-GAAP Financial Measures 

In our Report on Objectives for Fiscal Year 2018, 

we observed that a number of investors had given 

us a two-part message on non-GAAP financial 

measures (NGFMs) and key operating metrics: on 

the one hand, investors found value in those metrics, 

but, on the other hand, some of these same investors 

objected to what they viewed as inconsistent and 

changing disclosures of measures that companies 

had not adequately defined. These investors called 

for greater standardization to enable them to 

compare disclosures across companies and at the 

same company over time. Our Report on Objectives 

applauded the attention that Commission staff has 

paid in recent years to problems involving NGFMs, 

and we urged continuing vigilance.

During the Reporting Period, we continued to hear 

investor concerns about NGFMs, and we relayed 

those concerns to colleagues at the Commission. 

In grappling with this issue, we have recognized 

the challenges to achieving greater standardization 

through further rulemaking. That is because NGFM 

standards may be most meaningful at the industry 

level, whereas accounting standards generally 

seek to be universally applicable across industries, 

thus enabling investors and other stakeholders to 

compare financial disclosures across companies and 

across industries. Moreover, universal standards 

can more readily be applied by companies whose 

businesses straddle more than one industry. In 

analyzing policy issues raised by the misuse or 

overuse of NGFMs, it is also worth distinguishing 

non-GAAP financial measures from non-financial 

metrics and Key Performance Indicators, such as the 

number of subscribers.

Although the SEC has not initiated a rulemaking 

in this area during Fiscal Year 2018, we believe 

its attention to these issues has been heightened. 

For example, SEC Chief Accountant Wesley 

Bricker has emphasized the important role of 
12 | OFFICE OF THE INVESTOR ADVOCATE

audit committees in overseeing a company’s use of 

NGFMs. In a speech in May 2018, he encouraged 

audit committees “to understand how management 

evaluates performance, whether the metrics are 

consistently prepared and presented from period to 

period, and the related disclosure policies.”67

Internal Control over Financial 

Reporting (ICFR)

In our FY 2018 Report on Objectives, we 

emphasized the importance of a company’s 

internal control over financial reporting (ICFR). 

Effective controls, we noted, confer critical 

benefits on investors and companies alike: 

controls help to reduce the risks of material 

errors or fraud, enhance information flows, and 

contribute to better internal accountability. We 

also highlighted the role of independent auditor 

attestations of internal controls in promoting 

confidence in U.S. capital markets and in 

helping to lower a company’s cost of capital. 

During the Reporting Period, the Commission 

adopted changes to the definition of a “smaller 

reporting company.”68 In the process, the Commission declined to change the definition of an 

“accelerated filer,” which triggers a requirement 

that companies provide investors with an auditor’s 

assessment of the company’s ICFR. However, 

Chairman Clayton directed the staff to formulate 

recommendations for a potential future rulemaking 

to reduce the number of companies that qualify 

as accelerated filers and thereby alleviate the 

compliance cost of auditor attestation.69

In 2013, the U.S. Government Accountability 

Office published an extensive study examining the 

impact of the existing exemption from the auditorattestation requirement on the quality of financial 

reporting by small public companies and on investors.70 It found that companies that obtained an 

auditor attestation generally had fewer financial 

restatements than those that did not. These findings, 

together with additional economic literature, led 

the Council of Institutional Investors and the 

Center for Audit Quality to express their strong 

opposition to any further weakening of the auditorattestation requirement.71 We continue to believe 

that a reduction of auditor attestation requirements, 

though advanced in the name of capital formation, 

could have the opposite effect, and we will continue 

to monitor any further developments in this area.

Internal and External Engagement 

Finally, we engaged both internally and externally 

on accounting and auditing issues. Externally, we 

attended meetings of the PCAOB and its advisory 

groups and followed developments at both the 

PCAOB and FASB. In addition, we engaged 

in communication with institutional and retail 

investors to understand the types of financial 

information they need and how they use it.

Internally, we sought out opportunities for staff-level 

engagement with colleagues in other divisions and 

offices, including the Office of the Chief Accountant 

(OCA). This deepened our understanding of current 

developments in accounting and auditing, while also 

allowing us to distill and share our impressions from 

our investor outreach visits. Over the summer of 

2018, one member of our staff gave two interactive 

presentations to a subset of the staff of OCA on 

types of investors, their diverse strategies, and their 

needs and perspectives relating to financial reporting. 

STANDARDS OF CONDUCT FOR 

BROKER-DEALERS AND 

INVESTMENT ADVISERS

In our Report on Objectives for Fiscal Year 2018, 

published on June 29, 2017, we stated that we 

would encourage the Commission to pursue a 

thoughtful approach to the complex issue of the 

standards of conduct for financial professionals 

who provide advice to investors “so that the SEC 

can create stronger protections for investors while 

avoiding unintended consequences.”72 Since then, 

there have been some significant developments in 

this area.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 13

SEC Rulemaking

On April 18, 2018, the Commission voted to 

propose a package of rulemakings and interpretations intended to improve the quality and 

transparency of relationships that retail investors 

have with investment advisers and broker-dealers 

while preserving access to different types of advice 

relationships and investment products.73 Specifically, 

the regulatory package includes the following 

proposals: (1) a new rule called “Regulation Best 

Interest;” (2) an interpretation reaffirming and, in 

some cases, clarifying the Commission’s view of 

the fiduciary duty that investment advisers owe to 

their clients; and (3) a new short-form disclosure 

document called a customer or client relationship 

summary, as well as a restriction on the use of the 

terms “adviser” or “advisor” by certain brokerdealers and their associated persons as part of their 

firm names or professional titles.74

Proposed Regulation Best Interest would require a 

broker-dealer to act in the best interest of a retail 

customer when making a recommendation of 

any securities transaction or investment strategy 

involving securities to a retail customer, without 

putting the financial or other interest of the brokerdealer ahead of the interests of the retail customer.75

Under proposed Regulation Best Interest, a brokerdealer would discharge this duty by complying with 

each of the following three specific obligations:

§	A disclosure obligation, which would require the 

broker-dealer to disclose to the retail customer 

the key facts about the relationship, including 

material conflicts of interest.

§	A care obligation, which would require the 

broker-dealer, in making a recommendation, 

to exercise reasonable diligence, care, skill, 

and prudence, to (i) understand the potential 

risks and rewards associated with the 

recommendation, and have a reasonable basis 

to believe that the recommendation could be in 

the best interest of at least some retail customers; 

(ii) have a reasonable basis to believe that the 

recommendation is in the retail customer’s 

best interest; and (iii) have a reasonable basis 

to believe that a series of recommended 

transactions is not excessive and is in the retail 

customer’s best interest.

§	A conflict of interest obligation, which would 

require the broker-dealer to establish, maintain, 

and enforce policies and procedures reasonably 

designed to identify and then, at a minimum, 

to disclose and mitigate (or eliminate), material 

conflicts of interest arising from financial 

incentives; and to at least disclose other material 

conflicts of interest.76

The proposed investment adviser interpretation 

would reaffirm and clarify certain aspects of the 

fiduciary duty that an investment adviser owes to 

its clients.77 The aim of the proposed interpretation 

is to provide greater clarity to investment advisers 

and their clients regarding advisers’ legal obligations 

toward their clients.78

The proposed short-form disclosure document 

known as the customer or client relationship 

summary—Form CRS—would be a standardized 

disclosure of no more than four pages that would 

highlight key differences in the principal types of 

services offered by an investment adviser or brokerdealer, the legal standards of conduct that apply 

to each, the fees a client or customer might pay, 

and certain conflicts of interest that may exist.79

This proposed rule, if adopted, would require 

investment advisers and broker-dealers, and their 

respective associated persons, to provide retail 

investors with a relationship summary.80 Proposed 

Form CRS is intended to furnish retail investors 

with simple, easy-to-understand information 

about the nature of their relationship with their 

investment professional and would supplement 

other more detailed disclosures.81

The proposed restriction on certain broker-dealers 

and their associated persons from using the terms 

“adviser” or “advisor” as part of their name or title 
14 | OFFICE OF THE INVESTOR ADVOCATE

in communications with investors and prospective 

investors is meant to allay investor confusion 

regarding investment professionals’ registration 

status.82 The rule, if adopted, would require 

investment advisers and broker-dealers, as well 

as their associated persons, to be direct and clear 

about their registration status in communications 

with investors and prospective investors.

Given the significance of this rulemaking package, 

we have expended substantial effort to provide the 

Commission with the relevant data to assist it in 

making evidence-based decisions. For example, we 

have been researching whether investors understand 

the distinctions among different types of investment 

professionals, how effectively investors navigate the 

market for financial advice, investor perceptions 

of financial conflicts of interest, and the types 

of conduct investors expect from an investment 

professional who is required to act in an investor’s 

best interest.83

On October 12, 2018, the Commission published 

a research report prepared by staff of our Office 

in conjunction with the RAND Corporation 

(RAND).84 This “Retail Investment Advice Study” 

consisted of a literature review, focus group 

interviews, and a quantitative survey. The focus 

group portion of the Retail Investment Advice 

Study found, among other things, that participants’ 

understanding of the types of financial services and 

professionals was low.85 Similarly, the quantitative 

survey portion of the Retail Investment Advice 

Study found, among other things, that there 

was some degree of confusion, or ambiguity, 

in the marketplace for investment advice and, 

consequently, potentially significant matching and 

search frictions for investors.86 These and other 

findings are discussed in greater detail in the section 

below entitled “Report on Investor Testing.”

On November 7, 2018, the Commission published 

additional research from RAND, focusing on 

proposed Form CRS.87 This “Investor Testing of 

Form CRS Relationship Summary” involved oneon-one interviews with individual testing subjects 

as well as surveys with a pool of respondents to 

explore, among other things, the optimal length and 

content of the proposed Form CRS.88

FINRA Regulatory Notice 18-13, 

Quantitative Suitability

FINRA Regulatory Notice 18-13 requested 

comment on FINRA’s proposal to amend FINRA’s 

Rule 2111, which imposes general suitability 

obligations on all broker recommendations for 

particular transactions and investment strategies.89

Among other things, Rule 2111 prohibits a broker 

from engaging in excessive trading in a customer 

account (a practice also known as “churning”). 

Currently, to demonstrate that a broker has violated 

this quantitative suitability obligation, FINRA must 

prove: (1) that the broker exercised control over the 

customer’s account; (2) that the transactions were 

recommended by the broker; and (3) that the level 

of trading was excessive and unsuitable in light 

of the customer’s investment profile.90 FINRA has 

proposed to remove the requirement that it prove 

the broker exercised control over the account. 

On June 19, 2018, we submitted a comment 

letter to FINRA in support of its proposal.91 We 

felt compelled to respond to FINRA’s request 

for comment on the proposal because of our 

strong interest in potential rule changes involving 

FINRA’s supervision of broker-dealer conduct, and 

particularly “the rules that promote fair dealing and 

ethical sales practices, because they play such a key 

role in protecting retail investors.”92 As we stated 

in our comment letter, we believe FINRA would be 

well-served by the rule change, which would allow 

it to better protect the interests of retail investors by 

holding brokers responsible for recommendations 

that result in excessive trading. Moreover, the 

proposed rule change will serve as a deterrent to 

future misconduct.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 15

PROBLEMATIC INVESTMENT 

PRODUCTS AND PRACTICES

Among other statutory duties, the Investor 

Advocate is required to identify problems 

that investors have with financial service 

providers and investment products. Exchange 

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

Advocate, within the annual Report on Activities, 

shall provide a summary of the most serious 

problems encountered by investors during the 

preceding fiscal year. The statute also requires the 

Investor Advocate to make recommendations for 

such administrative and legislative actions as may be 

appropriate to resolve those problems.93

To determine the most serious problems related to 

financial service providers and investment products, 

staff of the Office of the Investor Advocate reviewed 

information from the following sources:

§	Investor Alerts, Tips, and Bulletins issued by the 

SEC, FINRA, and the North American Securities 

Administrators Association, Inc. (NASAA) 

during Fiscal Year 2018;

§	SEC enforcement actions and FINRA 

disciplinary actions during the Reporting Period;

§	NASAA’s Annual Report,94 2018 Enforcement 

Report,95 and Top Investor Threats;96

§	The SEC’s Office of Compliance Inspections 

and Examinations’ Examination Priorities 

for 2018;97

§	SEC and SRO staff reports providing 

guidance and interpretations relating to 

investment products; 

§	Discussions and correspondence with SRO 

staff, including an October 19, 2018, letter 

from Lynnette Kelly, Executive Director, 

MSRB, highlighting municipal market 

practices that may have an adverse impact 

on retail investors;98 and

§	Discussions with the SEC Retail Strategy 

Task Force.99
16 | OFFICE OF THE INVESTOR ADVOCATE

The table below lists certain potentially problematic 

products or practices during Fiscal Year 2018 as 

reported by these sources. Although not exhaustive, the 

lists reflect some of the concerns of these organizations. 

Details regarding these products and practices are 

available on these organizations’ websites.

SEC100 NASAA101

 Initial Coin Offerings, Cryptocurrency, and Blockchain

 Scams and Schemes Relating to Impersonation 

of a “Regulator”, Natural Disasters, and 

Paid-to-Click Scams

 Investment Fees and Expenses 

 Celebrity Endorsements 

 Cybersecurity 

 Online Security Relating to Investment Accounts

 Suitability of Wrap Fee Programs 

 Microcap Stocks

 Implementation of Fixed Income Order Execution 

 Risks Associated with Master Limited Partnerships

 Risks Associated with Using Credit Cards to Purchase 

an Investment or Fund an Account

 Self-Directed IRAs and Risks of Fraud

 Marijuana Investments and Fraud

 Unregistered or Unscrupulous Gate Keepers, Third 

Party Providers, and Marketers 

 Initial Coin Offerings

 Emerging Financial Technologies such as 

Cryptocurrency Trading

 Scams and Schemes Relating to Natural Disasters

 Investing in “Unicorns”104 

 Online Binary Option Schemes

 Real Estate Related Investments

 Oil/Gas Investments

 Ponzi Schemes

 Promissory Notes

FINRA102 MSRB103

 Initial Coin Offerings

 Cryptocurrency-Related Stock Scams

 Scams and Schemes Including Regulator Imposter 

Scams and Stock Fraud in Wake of Natural Disasters

 Trading on Margin 

 Data Aggregation Risks

 Municipal Market Practices such as Pennying,105

and Prearranged Trading in Connection with 

Primary Offerings

 Macroeconomic Environment, such as potential risks 

to retail investors from rising interest rate environment

 Municipal Market Disclosure Practices 

In addition, on September 26, 2018, the 

Commission’s Division of Trading and Markets 

hosted a Roundtable on Combating Retail Investor 

Fraud.106 The roundtable consisted of three 

panels: a discussion on types of fraudulent and 

manipulative schemes currently targeting retail 

investors; a discussion on enhancing the ability 

of broker-dealers to combat retail investor fraud; 

and a discussion on additional ways to combat 

retail investor fraud.107 During the roundtable, 

panelists identified numerous areas of concern 

for retail investors, including initial coin offerings 

and cryptocurrencies, currency trading, pump 

and dump schemes, microcap stocks, high-fee 

products, non-traded real estate investment 

trusts (REITs), variable annuities, unregistered 

investments (specifically unregistered promissory 

notes), unregistered financial professionals, pre-IPO 

offerings, and cannabis investments.

Each of the products and practices listed above 

presented problems for investors during the 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 17

Reporting Period. Based on our review of the 

resources described above and consultations 

with knowledgeable professionals, however, we 

will highlight four areas of concern: initial coin 

offerings; broker “cockroaching”; outdated transfer 

agent regulations; and the increasing use of margin 

debt. Other issues have been highlighted in our 

previous reports, including binary options,108 public 

non-traded REITS,109 municipal market disclosure 

practices,110 sales practices involving variable 

annuities,111 scams and schemes related to natural 

disasters,112 and municipal bond positions that are 

below minimum denomination.113

INITIAL COIN OFFERINGS

Cryptocurrencies, initial coin offerings (ICOs), 

and related products and technologies, while still 

relatively novel, have proliferated in the last couple 

of years and seem to have captured the popular 

imagination. In 2016, ICOs reportedly raised in 

the aggregate less than $100 million; in 2017, the 

amount was roughly $4 billion; and in just the first 

two quarters of 2018, it was over $16.7 billion.114

New financial products and technologies, like 

those associated with ICOs, often give rise to scams 

because these innovations can be used improperly 

to exploit unwitting investors with the promise of 

high returns in a rapidly developing market. 

Cryptocurrencies purport to be digital assets of 

inherent value (comparable, for instance, to cash or 

gold) that are designed to enable purchases, sales, 

and other financial transactions.115 Coinciding 

with the emergence of cryptocurrencies, some 

companies and individuals are using ICOs to raise 

capital for businesses and projects. Such offerings 

typically involve the opportunity for individual 

investors to exchange currency, such as U.S. dollars 

or cryptocurrencies, for a digital asset labeled as a 

coin or token with associated rights and interests.116

Promoters may inform potential purchasers that 

the capital raised from the offerings will be used to 

fund development of a digital platform, software, 

or other project and that the virtual coins or 

tokens may be used to access the platform, use the 

software, or otherwise participate in the project. 

Some promoters and initial sellers may lead buyers 

of the virtual coins or tokens to expect a return 

on their investment or to participate in a share of 

the returns provided by the project. After they are 

issued, the virtual coins or tokens may be resold to 

others in a secondary market on virtual currency 

exchanges or other platforms.117

Although there may be legitimate cryptocurrency 

investment opportunities,118 there are troubling 

signs of widespread fraud as well. In October 2018, 

EY (formerly known as Ernst & Young) studied 

110 projects that had collected 87 percent of all 

ICO proceeds in 2017 to analyze the projects’ 

progress and investment returns.119 The firm found 

that 86 percent were below their listing price and 

30 percent had already lost substantially all value.120

An earlier report by the same firm noted high risks 

of fraud and theft, including theft from hacking. 

Although in theory blockchain-based transactions 

are supposed to be irreversible, and the records 

durable, in fact there have been coding errors and 

other vulnerabilities associated with blockchain. As 

of December 2017, more than 10 percent of ICO 

proceeds had been lost as a result of hacks.121

ICOs present special challenges for law enforcement. 

The lack of a centralized authority for a platform 

or system means that law enforcement agencies like 

the SEC must infer information about anonymous 

participants from other sources. Some participants 

may even be located overseas. Traditional financial 

institutions, such as banks, often are not involved 

with ICOs or virtual currency transactions, which 

makes it more difficult to trace funding.122

We are encouraged by the ways in which the 

Commission is addressing the ICO phenomenon. 

In numerous speeches and public statements, 

Chairman Clayton has stressed that those seeking 

to raise capital to fund an enterprise, which many 

in the ICO space have sought to do, are obligated 

to consider whether they are engaging in an offer or 

sale of securities, which places the activity squarely 
18 | OFFICE OF THE INVESTOR ADVOCATE

in the SEC’s jurisdiction.123 In this context, he has 

emphasized that gatekeepers and others, including 

securities lawyers, accountants and consultants, 

have responsibilities under our securities laws.124

The Division of Enforcement has marshaled 

resources and sought to bring cases that deliver 

broad messages and have an impact beyond the 

individual circumstances.125 Additionally, the 

Office of Investor Education and Advocacy has 

published investor alerts, bulletins, and statements 

on cryptocurrency-related investments and ICOs.126

For our part, we will continue to monitor this 

rapidly evolving space with an eye toward the 

effectiveness of our regulatory framework.

BROKER MIGRATION 

AND MISCONDUCT

Brokers who have committed securities violations 

or are the subject of multiple arbitration claims 

may find it difficult to find future employment in 

reputable firms. The migration of these brokers 

from one high-risk firm to another, also known as 

“cockroaching,” has long been a persistent problem 

in the securities industry.127 These brokers leave one 

firm to resume operations at the next. Frequently, 

they do so alongside groups of migrating brokers 

with similarly checkered disciplinary records.128

In 2013, the Wall Street Journal highlighted “the 

pattern of brokers moving from one problem 

firm to another.”129 As part of its investigation, 

the Journal found empirical links between the 

practice of broker migration and customer risk: 

“On average, a broker who left at least two firms 

that were eventually expelled and who joined 

another firm had more than eight times as many 

arbitration claims and other required disclosures 

as the industry average.”130

The risk to customers is exacerbated by the 

propensity of recidivist brokers to congregate with 

other bad brokers.In fact, certain brokerages appear 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 19

to act as beacons for bad brokers.131 Rather than 

turning over a new leaf, migrating brokers often 

continue their business as usual.132 As a result, 

some encounter additional disciplinary issues with 

their new firms.133 If the brokers are subsequently 

terminated or the firms are expelled or otherwise 

forced to close their doors due to financial hardship, 

which may be precipitated by broker malfeasance, 

the migration begins anew.134

Four out of the past five years, FINRA has 

identified high-risk firms and brokers and 

broker migration as regulatory and examination 

priorities.135 In 2013, FINRA launched a special 

oversight program targeting high-risk brokers.136

As an example of this oversight, FINRA barred 

10 employees of broker-dealer Global Arena 

Capital Corp. from the securities industry in 2015 

after an on-site examination found numerous 

abuses.137 Seven of the barred employees were 

surveilled as they migrated to Global Arena from 

HFP Capital Markets LLC, a firm expelled from 

FINRA membership in 2014.138 At the time, FINRA 

noted that the sanctions were part of its “continued 

focus on tracking groups of brokers that move 

from one risky firm to another.”139

Roving bad brokers are a minority of the broker 

population but they can do tremendous damage.140

A 2017 study of all financial advisors registered 

with FINRA from 2005 to 2015 shows that almost 

8 percent of registered advisers had committed 

misconduct and, of that group, 27 percent were 

recidivists with two or more disclosures.141 The 

study also supports the notion that bad brokers may 

congregate, 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.”142

Notably, recent reports show that troubled brokers 

often target seniors to take advantage of their 

presumed lack of financial sophistication.143 These 

brokers will often peddle risky, high-commission 

private placement investments to unsuspecting 

senior customers.144 This practice is of particular 

concern because of the disproportionate rate at 

which private placement brokers are disciplined.145 

According to a study, 12 percent of brokers selling 

private placements had three or more instances of 

misconduct, compared to an industry average of 

roughly 2 percent.146 

FINRA has recently taken some initial steps to 

tighten restrictions on broker migration. In February 

2018, FINRA requested comment on proposed 

amendments to limit the ability of individuals to 

switch firms to avoid payment of arbitration awards 

while staying in business.147 In April 2018, FINRA 

requested comment on a proposal to require each 

member firm to seek a materiality consultation with 

FINRA if it intends to hire a broker with a history 

of certain “specified risk events” or the broker seeks 

to become an owner, control person or principal 

of the firm.148 These proposed amendments are 

positive, if incremental, measures to prevent the 

harm caused when bad brokers relocate.

There are other recent and proposed FINRA 

amendments that are relevant but not limited in 

applicability to migrating brokers. For example, 

recent amendments modified sanctioning guidelines 

to provide for more severe punishment when 

broker backgrounds include prior misconduct.149

Also, FINRA has requested comment on a 

proposed rule amendment to require firms to 

adopt heightened supervisory procedures for 

brokers during the period that an appeal of a 

disciplinary matter is pending or during which a 

statutory disqualification eligibility request is under 

review.150 Another proposal would mandate that 

firms include disclosure on BrokerCheck if they 

are subject to FINRA’s taping rules, which provide 

that firms must record conversations between their 

registered representatives and customers if the 

percentage of risky brokers in the firm exceeds a 

specified threshold.151
20 | OFFICE OF THE INVESTOR ADVOCATE

Brokers identified by FINRA as high-risk and 

the models used to make those determinations 

are not publicly disclosed;152 therefore additional 

regulatory efforts are critical to protect the investing 

public from the threat posed by broker migration. 

We encourage the continued investigation of 

new methods to keep investors safe from risky 

migrating brokers and the firms that house them in 

sometimes dangerous concentrations. As part of its 

examination of these issues, we urge FINRA to take 

this opportunity to further consider the potential 

benefits to retail investors of expanding public 

access to the data sets, models, and rankings FINRA 

uses to assess broker risk. The availability of this 

information to the public would allow investors, 

industry groups, and other interested parties to build 

their own models to independently appraise the risk 

posed by brokers to the communities they serve. 

OUTDATED TRANSFER 

AGENT REGULATIONS 

As we stated in our June Report on Objectives 

for Fiscal Year 2019,153 OIAD is following issues 

related to transfer agents, transfer agent rules, and 

the critical role transfer agents play as gatekeepers. 

Transfer agents issue and cancel stock certificates to 

reflect changes in ownership, act as an intermediary 

for the company, and handle lost, destroyed, or 

stolen certificates, among other key functions.154

Additionally, transfer agents play an important 

role in monitoring the restrictive legends and “stop 

transfer” orders that distinguish restricted securities 

from freely-tradable securities.155 The failure of a 

transfer agent to promptly, accurately, and safely 

perform its duties can, among other things, hinder 

the successful completion of secondary trades, 

disenfranchise investors, and expose issuers, 

investors, securities intermediaries, and the securities 

markets as a whole to significant financial loss.156

As previously noted, in September 2018, the 

Division of Trading and Markets hosted a 

Roundtable on Combating Retail Investor Fraud,157

during which the participants discussed transfer 

agents, among other topics. Specifically, the 

roundtable focused on the role transfer agents 

play in removing restrictive legends.158 The improper or inappropriate removal of a restrictive 

legend can result in the illegal distribution of 

a security, which could potentially harm retail 

investors.159 Distribution of unregistered securities 

is particularly problematic in the microcap 

market,160 where there may be limited publicly 

available information and increased risk for 

fraud.161 Often, less sophisticated investors may 

be the victims of microcap fraud.162

As discussed in our Report on Objectives for 

Fiscal Year 2019, transfer agents are positioned 

to play important gatekeeper functions to help 

prevent fraud.163 We were encouraged to see the 

topic of transfer agents on the roundtable agenda, 

elevating the Commission’s awareness of the 

important role transfer agents play in preventing 

fraud affecting retail investors.164 We believe the 

regulations governing transfer agents, adopted 

in 1977 and rarely amended since,165 are in need 

of modernization, and we will be urging the 

Commission to make these reforms a priority. 

INCREASING USE OF MARGIN DEBT

Given the recent market volatility, it is important for 

investors to understand some of the risks associated 

with margin debt and margin accounts. Over the 

past year, margin debt has attracted media coverage 

as the debt level has risen steadily.166 Investors 

should be aware that margin accounts can be risky 

and may not be appropriate for everyone.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 21

A margin account is a type of brokerage account 

in which the broker-dealer lends the investor 

cash, using the account as collateral, to purchase 

securities.167 When securities are bought on margin, 

both the amount borrowed and interest must be 

repaid, even if money is lost on the investment.168

If the securities used as collateral in the account 

decrease in price, the firm can issue a margin call,169

which requires the investor to provide the broker 

with additional cash or securities.170

For example, consider an investor who purchases 

a stock for $50, and the price of the stock subsequently rises to $75.171 If the investor bought the 

stock in a cash account and paid for it in full, the 

investor would earn 50 percent on the investment 

(the $25 gain is 50 percent of the initial investment 

of $50).172 However, if the stock was bought on 

margin—paying $25 in cash, and borrowing 

$25 from the broker—a 100 percent return is 

earned on the money invested ($25 gain is 100 

percent of the initial investment of $25),173 less 

the interest on the $25 that was borrowed.174

The downside to using margin is that, if the stock 

price decreases, substantial losses can mount 

quickly.175 As an illustration, suppose the stock 

bought for $50 falls to $25. If the stock was fully 

paid for, 50 percent of the money was lost ($25 loss 

is 50 percent of the initial investment of $50).176

However, if the stock was bought on margin, the 

loss will be 100 percent ($25 loss is 100 percent of 

the initial $25 investment), plus the interest owed 

on the loan.177 Additional risks of margin accounts 

include the possibility of: losing more money than 

initially invested; an investor’s obligation to deposit 

additional cash or securities into their account on 

short notice to cover market losses; the brokerage 

firm selling some or all of the investor’s securities 

to pay off the margin loan without first consulting 

the investor; the investor’s inability to choose which 

securities the brokerage firm sells in the account to 

cover the margin loan; the brokerage firm increasing 

the margin requirements at any time without providing the investor advanced notice; and the investor 

not being entitled to an extension of time on a 

margin call.178

In the past year, both the SEC and FINRA issued 

bulletins on margin debt and the importance of 

investors understanding the possible risks of trading 

on margin.179 These alerts provide suggestions for 

investors to help protect themselves with respect to 

margin debt and margin accounts. Such guidance is 

timely in light of recent market volatility. Although 

we do not believe changes to regulations governing 

margin debt and trading are necessary at this time, 

we think that continued efforts to educate the 

public about the risks involved are essential. We 

also believe that continued regulatory vigilance is 

warranted because some financial professionals may 

have pecuniary incentives to inflate assets under 

management and promote transaction activity by 

encouraging investors to trade on margin.
22 | OFFICE OF THE INVESTOR ADVOCATE

INVENTORY OF INVESTOR 

ADVOCATE RECOMMENDATIONS 

AND SEC OR SRO RESPONSES

Pursuant to Exchange Act Section 4(g)

(4), the Office of the Investor Advocate is 

required to identify areas in which investors 

would benefit from changes in the regulations of 

the Commission or the rules of self-regulatory 

organizations. To the extent practicable, we also are 

expected to 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.180

We engage in advocacy for investors in various 

ways. Most often, our written advocacy is in the 

form of a comment letter that is included in the 

public comment file. Our expectation is that our 

comments will be given due weight and that our 

recommendations will be addressed in a substantive 

way within the order or release in which a proposed amendment is approved or disapproved. 

However, we also have the authority to submit 

more formal recommendations directly to the 

Commission. Exchange Act Section 4(g)(7) requires 

the Commission to establish procedures requiring 

a formal response to all such recommendations 

not later than three months after the date of such 

submission.181 Of course, while the Commission 

must respond to the Investor Advocate’s recommendations, it is under no obligation to agree with or 

act upon the recommendations.

Exchange Act Section 4(g)(6) requires us to 

provide, within our Reports on Activities, 

an inventory of the most serious problems 

encountered by investors during the report 

period. The inventory must identify: any action 

taken by the Commission or SRO and the result 

of such action; the length of time that each item 

has remained on the inventory; and for items on 

which no action has been taken, the reasons for 

inaction, and an identification of any official 

who is responsible for such action.

To satisfy Section 4(g)(6), we provide the 

following inventory of comment letters and 

formal recommendations in which we call for 

action by the Commission or an SRO.182 We 

are very selective in choosing the issues to 

address in comments or recommendations 

and, accordingly, we believe these issues are 

among the most serious potential problems for 

investors. These matters are discussed in greater 

detail in the preceding sections of this Report. 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 23

Nature and Date 

of Submission

Recommendation of 

Investor Advocate

Action Taken by 

Commission or SRO

Reason for Inaction, 

If Applicable, and 

Responsible Official

Comment Letter, 

dated August 15, 

2016, to PCAOB183

Supported proposal for the auditor’s 

report to include discussion of critical 

audit matters, auditor tenure, and 

additional improvements.

On June 1, 2017, PCAOB 

adopted the new 

standard, subject to 

SEC approval. The SEC 

approved the rule on 

October 23, 2017.

Action Complete

Comment Letter, 

dated September 

9, 2016, to 

Commission184

Supported proposal to require greater 

disclosure by ATSs that transact 

in NMS stocks, and encouraged 

Commission to make current Form 

ATS public for ATSs that transact in 

fixed income securities, including 

government securities.

On July 18, 2018, the 

Commission approved 

the proposed rule 

changes and committed 

to review the regulatory 

framework for fixed 

income electronic 

trading platforms.

Action Complete

Comment Letter, 

dated July 11, 2017, 

to FASB.185

Recommended new guidance on 

materiality based upon SAB 99 and 

CON 2 in lieu of proposed standard.

On August 28, 2018, 

FASB approved changes 

as recommended.186

Action Complete

Comment Letter, 

dated February 15, 

2018, to FINRA.187

Encouraged improvements to 

existing process for the expungement 

of broker records from CRD. 

Pending at end of 

Reporting Period.

Formal 

Recommendation, 

dated February 

27, 2018, to the 

Commission188

Recommended reversing the Order 

granting approval of the Chicago 

Stock Exchange’s proposal to adopt 

an asymmetric trading delay on a 

pilot basis.

On July 25, 2018, 

CHX withdrew the 

proposed rule change. 

On October 2, 2018, the 

Commission set aside the 

original Order approving 

the proposal. 189

Action Complete

Comment Letter, 

dated June 19, 2018, 

to FINRA.190

Supported proposed improvements 

to broker’s quantitative suitability 

obligations for customer 

recommendations.

Pending at end of 

Reporting Period.

Comment Letter, 

dated September 17, 

2018, to MSRB.191

Encouraged auto-population of 

minimum denomination information 

into Form G-32 and the creation of 

additional required data fields on 

Form G-32.

Pending at end of 

Reporting Period

In the past, the Commission and SROs have 

taken actions that were responsive to earlier 

recommendations related to enhanced disclosure 

of markups, MSRB board qualifications, expedited 

suspension proceedings to curb disruptive 

trading behavior, and other matters. Those 

recommendations were discussed in previous 

Reports on Activities. 

REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 25

OMBUDSMAN’S REPORT

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

15 U.S.C. § 78d(g)(8), the Ombudsman 

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

the Commission and any retail investor in resolving 

problems that retail investors may have with the 

Commission or with self-regulatory organizations; 

(ii) review and make recommendations regarding 

policies and procedures to encourage persons 

to present questions to the Investor Advocate 

regarding compliance with the securities laws; 

and (iii) establish safeguards to maintain the 

confidentiality of communications between 

investors and the Ombudsman.192

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).193 The 

Ombudsman’s Report must be included in the semiannual 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 will 

describe the Ombudsman’s activities during the first 

six months of the current fiscal year and provide 

the Ombudsman’s objectives and outlook for the 

following full fiscal year. The Ombudsman’s Report 

included in the Investor Advocate’s December 31 

Report on Activities will provide a look back on the 

Ombudsman’s activities during the full preceding 

fiscal year. Accordingly, this report provides a look 

back on the Ombudsman’s activities for the full 

fiscal year period from October 1, 2017 through 

September 30, 2018 (Reporting Period). 

SERVICE BY THE NUMBERS

The Ombudsman194 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.

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, 
26 | OFFICE OF THE INVESTOR ADVOCATE

make binding decisions or legal determinations for 

the SEC, or overturn decisions of existing dispute 

resolution or appellate bodies.

The following graphic illustrates the standard 

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 staff, 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 staff 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 staff 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 informed that your 

matter was referred 

to another SEC division 

or office for further 

assistance or 

resolution.

We update 

your OMMS matter 

record accordingly. This 

provides the Ombudsman 

with easy access to your 

matter information 

should you have 

additional questions 

or concerns.

When You Contact the Ombudsman
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 27

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 ultimate resolution or referral, and 

we monitor the amount of staff engagement and 

resources that were utilized to respond to the 

inquiry. We maintain this information to identify 

and respond to problems raised, analyze inquiry 

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. The initial contact—a new, discrete inquiry 

received by or referred to the Ombudsman—is the 

contact that establishes the matter. When a matter 

is established, the Ombudsman reviews the facts, 

circumstances, and concerns raised, and assesses 

the staff engagement and resources that may be 

required to respond to, refer, or resolve the matter. 

The matter established by the initial contact may 

generate subsequent contacts—related inquiries 

and communications to or from the Ombudsman 

staff deriving from the matter. These contacts 

often require further staff attention to answer 

additional questions, explain or clarify proposed 

resolution options, 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

During the Reporting Period, retail investors, 

industry professionals, concerned citizens, and other 

interested persons contacted the Ombudsman for 

assistance on 449 new matters covering 11 primary 

issue categories: 

SEC Questions / Complaints (152)

Non-SEC / Other Matters (125)

Allegations of Securities Law Violations / Fraud (51)

Investment Products / Retirement Accounts (32)

SEC Investigations / Litigation / Enforcement Actions (21)

Securities Ownership (19)

Securities Laws / Rules / Regulations / Procedures (19)

Company Disclosures and Information (14)

Atypical Matters (10)

FINRA Arbitration / Rules / Procedures (3)

SRO Rules / Procedures (3)

1% 1%

34%

11%

7%

5%

4%

4%

3% 2%

28%

Matters by Primary Issue Category 

October 1, 2017–September 30, 2018

The 449 new matters received during the Reporting 

Period represent a 99 percent increase over the 

226 new matters received during the prior 

reporting period, Fiscal Year 2017. In addition to 

the 449 new matters, we fielded 1,045 contacts 

covering eleven primary issue categories during 

the Reporting Period, for a total of 1,494 contacts. 

Of the 1,045 contacts fielded, 254 contacts 

(24 percent) related to matters outside of the 

SEC’s purview received during prior reporting 

periods, where persistent investor communications 

to support the allegations raised in those matters 

yielded a disproportionate number of contacts. 
28 | OFFICE OF THE INVESTOR ADVOCATE

The chart that follows displays the distribution of 

the 1,494 total contacts by primary issue category:

38%

7%

11%

6%

6%

3% 3% 2%

23%

Contacts by Primary Issue Category 

October 1, 2017–September 30, 2018

Non-SEC / Other Matters (562)

SEC Questions / Complaints (347)

Allegations of Securities Law Violations / Fraud (158)

SEC Investigations / Litigation / Enforcement Actions (105)

Investment Products / Retirement Accounts (87)

Securities Laws / Rules / Regulations / Procedures (83)

Securities Ownership (49)

Company Disclosures and Information (45)

Atypical Matters (34)

FINRA Arbitration / Rules / Procedures (18)

SRO Rules / Procedures (6)

1% 0.4%

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 to manage effectively. 

The data also informs resource allocation considerations related to proposed program development, 

training, and outreach efforts. By tracking the 

distribution of matters and contacts across primary 

issue categories, the data helps the Ombudsman 

identify potential areas of concern or interest and 

enables the Ombudsman to act as an early warning 

system, as necessary, to alert agency leaders about 

the number and potential impact of particular issues 

and concerns raised by retail investors and others.

SERVICE BEHIND THE NUMBERS 

While the matter and contact data quantify the 

volume and categories of inquiries the Ombudsman receives, the data does not capture the full 

value of the service the Ombudsman provides to 

the investing public. Among the most common 

problems and concerns investors bring to the 

Ombudsman are those where the investors 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. In these situations, 

investors generally assume their preferred outcome 

is a viable option and expect that the Ombudsman 

is permitted to do whatever is necessary to reach 

that outcome. 

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 serves a valuable resource function, but the 

investor retains responsibility for choosing how to 

proceed based on the resources the Ombudsman 

presents. Investors who believe they are entitled 

to a particular result and want the Ombudsman 

to provide it can be challenging to assist. At times, 

they resist the Ombudsman’s efforts to engage in a 

productive dialogue and conclude that any outcome, 

other than the particular outcome they want, is 

untenable and unacceptable.

The vignettes that follow are provided to give 

a sense of the variety of issues we address. 

Together, they offer a closer look at the how the 

Ombudsman’s time, effort, and commitment 

provide a meaningful service to investors and 

other interested persons, and illustrate the value 

of the day-to-day work more effectively than the 

data alone.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 29

After a breakout session at the SEC Town Hall in Atlanta, Georgia, an investor asked the Ombudsman about a matter 

he submitted to the SEC many months prior. He described the matter and his concerns, and the Ombudsman informed 

him that, while she could not promise any particular outcome, she would look into the matter and solicit the assistance 

of other SEC colleagues to provide him with additional information. The Ombudsman also took the opportunity to 

introduce the investor to the Chairman and other senior SEC staff in attendance. After returning to headquarters, the 

Ombudsman liaised with colleagues in several SEC divisions and offices who ultimately scheduled a conference call 

with the investor to discuss his matter and concerns in detail. In a follow up email, the investor expressed his appreciation for the SEC Town Hall and for the Ombudsman’s personal attention to his matter, which he felt exemplified the 

agency’s commitment to Main Street investors.

An elderly investor was referred to the Ombudsman for assistance replacing lost stock certificates. Ombudsman staff 

provided the investor with additional information on how to replace the certificates and recommended that he call the 

SEC Office of Investor Education and Advocacy as well. The investor appreciated the information and conversed with 

Ombudsman staff for approximately 30 minutes about his investments over the years and his age-related mobility 

issues. At the end of the call, the investor stated that he truly appreciated having someone to talk to about his concerns 

and thanked our staff for listening.

An individual contacted the Ombudsman with questions about securities she received through a relative’s estate. Due 

to the nature of her questions, we advised her to retain private legal counsel. Despite this, she repeatedly contacted us 

to discuss her issues and attempt to persuade us to act as her legal counsel. She ultimately sent a very emotional and 

heartfelt email to us pleading for help and legal representation, and she expressed her concerns about her ability to 

afford private counsel that would be willing to represent her. We again explained to her that SEC staff could not act 

as her private counsel, and we also gave her the contact information for several low-cost and no-cost legal resources, 

including law school investor advocacy clinics in her state. She was very grateful for our time and attention and for the 

additional resources we offered to help her resolve her matter. 

A small business owner contacted the Ombudsman to complain about a request for proposal and related communications she received from the SEC Office of Acquisitions. Upon looking into her complaint, the Ombudsman realized that 

the business owner was contacted by someone impersonating SEC staff, and confirmed with the Office of Acquisitions 

that the request for proposal was a fraud. The Ombudsman subsequently contacted the business owner to advise her 

not to respond to the fraudulent proposal. The Ombudsman also gave the business owner contact information for staff 

in the Office of Acquisitions to whom she could direct any questions or concerns about the SEC contracting process.

The Ombudsman hosted a Federal Financial Ombudsmen Working Group meeting at SEC headquarters, where 

among several topics discussed, the Ombudsman discussed her work with law school investor advocacy clinics. Following the meeting, a few ombudsmen colleagues from other agencies contacted the Ombudsman for suggestions on how 

they could develop similar collaborations with law schools clinics relating to the work of their agencies. The Ombudsman 

put her colleagues in touch with several law school clinic directors and recommended other helpful resources.

The Ombudsman received several inquiries from investors outside of the U.S. relating to communications purportedly sent from, or sponsored by, government agencies or legitimate securities industry participants. In each instance, 

the details of the complaint bore the hallmark of an advance fee fraud, a common fraudulent scheme aimed at non-U.S. 

investors, where investors are directed to provide personal information and pay a fee in advance as a condition to 

purchase shares or receive investment proceeds. After the investor pays the advance fee as directed, the soliciting 

person or entity usually breaks off contact, the proposed transaction or settlement does not take place, and the investor 

is never paid and never recovers the advance fees. In each instance, the Ombudsman recommended that the investors 

not respond to the communications, and provided the investors with additional information and resources to help them 

recognize and avoid these types of scams.
30 | OFFICE OF THE INVESTOR ADVOCATE

Ultimately, our interactions with investors provide 

insight into the information investors rely upon and 

the assistance they want when making investment 

decisions. When our interactions with investors 

highlight a 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 investment decisions.

STREAMLINED COMMUNICATIONS 

WITH RETAIL INVESTORS

This Reporting Period marked the first full fiscal 

year using the Ombudsman Matter Management 

System (OMMS), an electronic platform for 

receiving inquiries and analyzing matter and 

contact information, while ensuring all necessary 

data management, confidentiality, and reporting 

requirements are met. The OMMS Form, a webbased form permitting the submission of investor 

inquiries, complaints, and documents directly 

to the Ombudsman, was made available to the 

public in September 2017 via the www.sec.gov/

ombudsman webpage. The OMMS Form guides 

the user 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 users to upload 

and submit related documents for staff review. The 

OMMS Form is instructive and user-friendly and 

compatible for use on mobile devices, with features 

such as radio buttons, drop-down menu responses, 

pop-up explanation bubbles, webpage links, and 

fillable narrative text fields. The OMMS Form also 

incorporates response recognition functionality that 

pre-populates specific fields and prompts the user to 

provide additional information as necessary. 

When an OMMS Form is submitted, OMMS 

creates a matter record that allows the Ombudsman 

to review the matter details, track all related 

contacts and correspondence, and communicate 

with the investor via the OMMS platform. The 

Ombudsman and staff also create OMMS matter 

records for inquiries received by telephone, email, 

or other means. Once a matter record is created, 

OMMS allows the Ombudsman and staff to view 

the matter and related contacts by person, primary 

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

and analyze data and customize reports for a deeper 

dive into the issues raised. 

During the Reporting Period, the Ombudsman 

continued to work extensively with the SEC’s 

Office of Information Technology (OIT) and 

a technology contractor to refine and improve 

OMMS functionality and capabilities for both the 

Ombudsman staff and for persons submitting the 

OMMS Form. During this Reporting Period, we 

received 154 new matters via the OMMS Form, 

representing 34 percent of the 449 new matters 

received this Reporting Period. 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 OIT and the technology 

contractor to enhance the OMMS user experience. 

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. 

STANDARDS OF PRACTICE

Any retail investor with an issue or concern 

related to the SEC or an SRO organization subject 

to SEC oversight may contact the Ombudsman. 

The Ombudsman is available to identify existing 

SEC options and resources to address issues or 

concerns, and to explore informal, objective steps 

to address issues or concerns that may fall outside 

of the agency’s existing inquiry and complaint 

processes. Similar to ombudsmen at other federal 

agencies, the Ombudsman follows three core 

standards of practice:
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 31

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 

Chairman of the SEC. 

However, the Office of the 

Investor Advocate and the 

Ombudsman are designed 

to remain somewhat 

independent from the rest of 

the SEC. Through the reports 

to Congress 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.

The Ombudsman’s Challenge

The SEC’s mission is to “protect investors, 

maintain fair, orderly, and efficient markets, and 

facilitate capital formation.”195 At the core 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 these situations, 

investors frequently assume the purpose for SEC 

investigations and enforcement actions is to protect 

investors by getting their money back. 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 an investor’s particular 

legal interest or to recover money a particular 

investor may have lost. Rather, the SEC is tasked 

with enforcing the federal securities laws to serve 

the broad interests of all citizens by maintaining fair, 

orderly, and efficient capital markets.

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.
32 | OFFICE OF THE INVESTOR ADVOCATE

With these limitations in mind, the Ombudsman 

routinely explains to investors that they have 

the ability to protect their interests and preserve 

their legal rights in ways that the Ombudsman 

cannot. For example, an investor may choose to 

file an arbitration or mediation complaint with 

FINRA to address a broker dispute, or hire private 

legal counsel to advise the investor on the best 

ways to protect the investor’s rights or reach a 

particular outcome. Investors who do not have 

the means to hire legal counsel may choose to 

request representation through no-cost legal clinics 

sponsored by various law schools. 

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 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 

engage with those who represent investors, 

including law school investor advocacy clinics, 

to gain a deeper understanding of potential 

legal and structural barriers encountered by 

investors. We look for ways in which processes 

or regulations of the SEC or SROs could be 

improved for the benefit of investors, and we 

advocate for those types of reforms. 

To retail investors, FINRA is perhaps the most 

well-known SRO196 under SEC oversight. FINRA 

operates BrokerCheck197 and a dispute resolution 

forum,198 both of which are commonly used by 

retail investors. As discussed in prior reports, the 

Ombudsman regularly monitors FINRA’s activities, especially FINRA’s dispute resolution forum, 

because of its direct impact on retail investors. 

Three of these areas of interest and importance 

to retail investors are discussed below. A fourth 

area of concern, related to broker migration and 

misconduct (known as “cockroaching”) was 

discussed in the section of this Report entitled 

Problematic Investment Products and Practices.

AREAS OF INTEREST AND 

IMPORTANCE TO RETAIL INVESTORS

Unpaid Arbitration Awards

The arbitration process is often challenging and 

costly for retail investors to navigate. For those 

who are successful, there is still no guarantee that 

hard-earned judgments will ever be paid.199 This 

long-standing problem has festered for years.200

If a broker or firm is found liable for misconduct 

but unable or unwilling to pay the award, the 

customer is doubly aggrieved. That is, the customer 

is damaged by the initial broker misconduct and 

again by the broker’s subsequent failure to meet its 

obligation to recompense. 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 33

Source: FINRA, Discussion Paper – FINRA Perspectives on Customer Recovery (Feb. 2018), available at 

http://www.finra.org/sites/default/files/finra_perspectives_on_customer_recovery.pdf.

Number of Unpaid Customer Arbitration Awards by Year

0

50

100

150

200

250

300

2012 2013 2014

Year Award Issued

Total 

Unpaid 

Awards

Total 

Awards

Number of Awards

2015 2016

76

62

44 42 44

255

212

177 190

158

Source: FINRA, Discussion Paper – FINRA Perspectives on Customer Recovery (Feb. 2018), available at 

http://www.finra.org/sites/default/files/finra_perspectives_on_customer_recovery.pdf.

Dollar Amount of Unpaid Customer Arbitration Awards by Year

0

50

100

150

200

250

2012 2013 2014

Year Award Issued

Unpaid customer arbitration awards against firms primarily involve smaller-sized firms.

Total 

Unpaid 

Award 

Amount

$51M

$109M

$181M

$66M

$203M

$119M

$75M

$26M

$14M

$33M

Total 

Award

Amount

Dollar Amount of Awards (Millions)

2015 2016

According to a recent 

FINRA study, 268 awards 

in an aggregate amount of 

$199 million were unpaid 

from 2012 through 2016.201

As shown, the awards were 

unpaid for 22 percent to 

30 percent of the cases in 

which monetary relief was 

awarded each year.202

Viewed differently, the dollar 

amount of unpaid customer 

awards for the period from 

2012 to 2016 has ranged 

from roughly 12 percent 

to 50 percent of the total 

arbitration awards each year.203

A supplemental third-party 

study of 2017 FINRA data 

shows that “36 percent of the 

investors who won their cases 

collected nothing, and 28 cents 

of each dollar awarded have 

gone unpaid.”204

While FINRA has incentivized 

respondents to pay awards 

within 30 days of receipt by 

suspending them if they do 

not, statistics suggest that these 

measures are insufficient to 

quell the problem.205 FINRA has

acknowledged this inadequacy and outlined 

several proposals related to unpaid arbitration 

awards. These proposals include removing certain 

restrictions on claimants proceeding against an 

inactive associated person,206 providing additional 

information to alert the public to associated 

persons who have unpaid claims,207 and adding 

additional safeguards to prevent broker migration 

and payment avoidance by firms.208
34 | OFFICE OF THE INVESTOR ADVOCATE

Other approaches outlined in FINRA’s recent study 

require congressional legislation or SEC rulemaking 

initiatives. Some of these options include raising 

capital requirements for members to ensure that 

they have resources to pay arbitration claims209 or 

requiring firms to carry insurance to cover unpaid 

awards.210 FINRA also raises the possibility of 

stricter requirements for firms to disclose unpaid 

awards,211 expanding the statutory disqualification 

definition to encompass firms and individuals that 

have unpaid awards,212 and changing existing laws 

to preclude discharge of unpaid arbitration claims 

in bankruptcy.213

Satisfaction of unpaid claims by new or existing 

investor protection funds is another option 

suggested by various parties.214 One possible 

source of funds could be the Securities Investor 

Protection Corporation’s (SIPC) fund. The SIPC 

fund, established in 1970, provides that if a member 

brokerage goes out of business, an investor’s cash 

and securities may be protected in an amount up to 

$500,000, subject to a $250,000 cash limit.215 The 

SIPC fund currently has assets of $2.5 billion and a 

credit line with the U.S. Treasury of $2.5 billion.216

Expanding the fund’s mandate to backstop unpaid 

arbitration claims would protect investors who are 

wronged by deadbeat brokers or firms. 

Others have advanced the idea of a new reserve 

funded by FINRA fines against its members, by 

FINRA profits, or by an assessment against all 

FINRA members.217 While FINRA notes that such 

a dedicated fund could be established by Congress, 

the SEC, or FINRA rulemaking with SEC approval, it contends that “Congress or the SEC should 

be involved in any decision to create a second 

brokerage industry fund for unpaid arbitration 

awards, especially to the extent it would cover 

claims that Congress has determined should not 

be covered by SIPC.”218 Moreover, opponents of 

fund relief have expressed concern that recovery 

funds are artificial safety nets that may encourage, 

rather than deter, bad behavior by brokers.219

The Ombudsman believes that each of the proposals 

described above merit serious consideration. As 

such, we encourage the relevant legislative and 

regulatory bodies to solicit actively the input of 

small retail investors, unpaid claimants, national 

organizations representing the rights of retail 

investors, and other stakeholders. The long and 

vexing history of unpaid arbitration claims is full 

of claimants who were never made whole. Time is 

of the essence for American investors. 

FINRA Arbitrator Selection Process

Recent scholarship suggests that some arbitrators 

routinely grant awards that are higher than the 

average, while others routinely grant awards that 

are lower than the average.220 This differential may 

present arbitrage opportunities that advantage firms. 

Under the FINRA process, arbitration cases are 

decided by one or three arbitrators based upon a 

claim threshold of $100,000.221 For claims up to 

$100,000, the parties receive a list of ten chairqualified public arbitrators, of which each separately 

represented party may strike up to four names.222

For claims above $100,000, FINRA provides a list 

of potential arbitrators in each of the following 

three categories: 10 chair-qualified public arbitrators, 

10 non-public arbitrators and 15 public arbitrators.223

Each separately represented party may strike up to 

four of the 10 chair-qualified arbitrators, up to 10 of 

the 10 non-public arbitrators, and up to six of the 

15 public arbitrators.224 Parties in both large and 

small claim arbitrations are permitted to rank the 

remaining arbitrators on their list(s) in order 

of preference.225 

The ability to exclude and rank arbitrators may 

tip the scales in a proceeding if parties are able to 

identify and increase the likelihood of empaneling 

an arbitrator that is statistically more likely to 

provide higher awards (if you are an investor) or 

lower awards (if you are a firm). Although this 

appears, on its face, to be a potential advantage 

for either party, we believe FINRA should closely 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 35

scrutinize whether firms that participate more 

frequently in the arbitration process are unfairly 

benefitted by informational asymmetries which 

allow them to select industry-favorable panels. 

Investors may also be hindered by the lack of 

diversity among the pool of arbitrators available to 

investors. A 2014 study found that approximately 

80 percent of the arbitrators in the FINRA pool 

were men and 40 percent were over the age of 

70.226 Since the study was released, FINRA has 

announced increased efforts to improve the 

representation of women and minorities in its 

arbitrator pool.227 As a result, a higher percentage 

of arbitrator applicants in 2017 were women and 

minorities.228 However, given the deep roots of the 

problem, a severe deficit remains. 

The Ombudsman intends to monitor research 

related to arbitrator selection. We encourage retail 

investors and others with information about the 

process, and possible inequities within it, to contact 

our Office.

Representation of Investors in 

FINRA Arbitration

Broker-dealers typically require customers, when 

they open accounts, to consent to arbitration as a 

forum for resolving any disputes that may arise. 

Thus, despite the award collection and arbitrator 

selection issues outlined above, arbitration is the 

most utilized forum for the resolution of disputes 

between retail investors and brokers.229

Arbitration is often viewed as a simpler alternative 

to litigation. However, successful securities arbitration is not a simple, do-it-yourself process. Retail 

investors—especially pro se investors who face 

sophisticated opposing counsel representing brokerdealer firms—risk derailment in a forum that has 

become increasingly complex. Claimants tend to 

achieve much higher success rates when they are 

represented by legal counsel.230 Unfortunately, 

many investors do not have the financial resources 

to afford legal representation and, if the amount 

in dispute is small relative to the complexity of 

the case, even contingency arrangements will not 

provide adequate incentives to encourage private 

legal counsel to handle the matter. As a result, 

most retail investors with modest incomes or 

small claims are predisposed to below average 

arbitration results when they represent themselves 

in arbitration disputes.231

Given that the disputed dollar amount in an arbitration may be a small investor’s life savings, it is 

concerning that many retail investors are essentially 

compelled to participate in the arbitration forum 

without the benefit of counsel. This is why we 

support the work of law school investor advocacy clinics, which serve a vital function for retail 

investors by helping to level the often uneven 

playing field of arbitration by representing clients 

with small claim amounts. The clinics also work 

to educate retail investors on investment products 

and protect them against scams. 

Unfortunately, there are simply not enough investor 

advocacy clinics.232 The clinics often do not have the 

funding and staffing resources necessary to service 

all of the retail investors in need.233 Moreover, 

client eligibility is driven, in part, by local court 

rules, student practice rules, and ethical rules.234

As a result of these rules, clients may need to be 

residents of the state in which the clinic operates, 

which limits a clinic’s ability to assist clients outside 

of its jurisdiction.235 These rules effectively create 

representational gaps, particularly in middle 

America where few clinics are located.236

As discussed more fully in the Report on Objectives 

for Fiscal Year 2019, the investor advocacy clinics 

were started in response to concerns expressed to 

then SEC Chairman Arthur Levitt by small investors 

at SEC town hall meetings.237 In 1997, Chairman 

Levitt announced the start of pilot securities 
36 | OFFICE OF THE INVESTOR ADVOCATE

arbitration clinics at two New York-area law 

schools to assist investors with small claims who 

had difficulty obtaining legal representation.238

Over the next fifteen years, additional clinics were 

launched across the country. Many were funded 

by state securities fraud enforcement cases239 and 

state securities commissions.240 From 2009 to 

2012, FINRA’s Investor Education Foundation 

(Foundation) provided another source of funding 

in the form of grants of $250,000 each to eight 

law schools.241

Since 2012, no Foundation funds have been 

awarded to clinics.242 While the initial funding 

grants were adequate to launch the clinics, 

additional funds were needed in order for the 

clinics to sustain their operations. Several clinics 

were unable to secure this funding and were 

forced to shut down. Given the small number 

of clinics in operation, the unwinding of any 

clinic is a profound loss for retail investors. 

At present, 17 investor advocacy clinics exist 

across the United States (in California, District 

of Columbia, Florida, Georgia, Illinois, Nevada, 

New Jersey, New York, and Pennsylvania).243 The 

vast majority of these 17 clinics are located in the 

Northeast, creating a scarcity of much-needed 

resources for investors with small claims who live 

in other parts of the country.244

FINRA’s Dispute Resolution Task Force has 

expressed that while it was not inclined to secondguess the Foundation’s policy of limiting funding 

to “new or expanded projects with reasonable 

prospects for post-grant sustainability,”245 continued 

funding of investor advocacy clinics would be an 

appropriate use of FINRA fines and penalties.246

The Ombudsman concurs. 

In March 2018, the SEC Investor Advisory 

Committee (IAC) recommended that the 

Commission explore short-term and long-term 

solutions to the funding crisis confronting law 

school investor advocacy clinics.247 In the shortterm, the IAC recommended the SEC work with 

FINRA to provide continued funding of existing 

clinics, potentially through the use of fines and 

penalties levied by FINRA. As a more permanent 

solution to persistent funding issues, the IAC 

encouraged the SEC to request legislation from 

Congress to consider permanently funding law 

school investor advocacy clinics, possibly via a 

matching grant program through the SEC Investor 

Protection Fund. The grant program could be 

modeled after a similar program initiated by the 

IRS Office of the Taxpayer Advocate. The IRS 

program, which is designed to address the needs of 

unrepresented taxpayers, ensures the sustainability 

of low income taxpayer clinics by requiring qualifying organizations to match IRS grants dollar 

for dollar up to a maximum grant of $100,000. 

The Committee noted that a similar SEC program 

would ensure the sustainability and long-term 

efficacy of existing clinics and “create capacity for 

new clinics in high need areas.”248

Our Office highlighted the IAC recommendation 

in the Report on Objectives for Fiscal Year 2019.249

The Ombudsman remains committed to protecting 

retail investors, and believes investor advocacy 

clinics play a crucial role on the front lines of 

investor protection. Moreover, the Ombudsman 

feels there should be widespread support for 

the work of these clinics and the need to find 

predictable and dependable sources of funding. 

Given the breadth of services investor advocacy 

clinics provide to vulnerable retail investors, the 

Ombudsman fully supported, and continues to 

support, the recommendation made by the IAC.250 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 37

OUTREACH ACTIVITIES

During the Reporting Period, the Ombudsman 

continued to seek out opportunities to increase 

awareness and elevate the visibility of the services 

we provide to retail investors. These activities 

included participation in the following ombudsman and securities industry events, professional 

conferences, and outreach efforts:

§	Coalition of Federal Ombudsmen 

Annual Conference;

§	American Bar Association Section of Dispute 

Resolution—Ombuds Subcommittee; 

§	Federal Financial Ombudsmen Working Group 

quarterly meetings;

§	Northeast Ombudsmen Working Group 

quarterly meetings;

§	Investor Advocacy Project, Investor Education 

Roadshow program visit, Seton Hall University 

School of Law;

§	Panelist, Fordham Journal of Corporate & 

Financial Law Symposium, “What Would We 

Do Without Them: Whistleblowers in the Era 

of Sarbanes-Oxley and Dodd-Frank,” Fordham 

University School of Law;

§	Panelist, “The Role of Ombudsmen in Dispute 

Resolution,” Securities Arbitration Clinic, St. 

John’s University School of Law;

§	Panelist, SEC Regulatory Updates, 

ALI Life Insurance Company Products 2017 

CLE program;

§	Panelist, Roundtable on Financial Responsibility 

in Communities of Color, Corporate Law and 

Governance Initiative, George Washington 

University School of Law; 

§	Moderator, “The Role and Impact of Chief 

Diversity Officers,” Corporate Law and 

Governance Initiative, George Washington 

University School of Law;

§	International Ombudsman Association 2018 

Annual Conference; 

§	Panelist, “Securities Arbitration: Where We Are 

and Where We’re Headed,” North American 

Securities Administrators Association 2018 

Spring Meeting;

§	Securities Arbitration Clinics’ 2018 Roundtable;

§	International Network of Financial Services 

Ombudsmen Schemes 2018 Conference; and

§	In-person visits with law school securities 

arbitration and investor advocacy clinics, both 

on-site and at the SEC.

Law School Clinic Outreach Program

As discussed in prior reports, the Ombudsman, 

working directly with the Investor Advocate and 

other staff, developed the Law School Clinic 

Outreach Program (LSCOP) to connect with law 

schools with securities arbitration and investor 

advocacy clinics, and to benefit law student clinic 

participants and the investing public. Several law 

schools across the country run securities arbitration 

and investor advocacy clinics that provide legal 

representation to retail investors who are unable to 

hire legal counsel to handle their claims.251 Not only 

do clinics provide legal advice and representation 

during the arbitration process, they also help 

retail investors by informing them about various 

financial products, saving and investing wisely, and 

avoiding scams—particularly those aimed at specific 

communities such as immigrants, veterans, and 

senior investors. 

The primary goal of LSCOP is to provide an 

opportunity for clinic faculty and students to hear 

directly from and work with Office staff through 

on-site visits and collaborative policy assignments 

and discussions. As participants on the front lines 

of investor protection, the faculty and students 

provide an important conduit of information to 

our Office with respect to “real world” concerns 

of Main Street investors. Thus, the clinics create an 

additional path for retail investors and law students 
38 | OFFICE OF THE INVESTOR ADVOCATE

to provide the Ombudsman and the Investor Advocate with direct feedback on SEC rulemakings 

and policy. 

Throughout the Reporting Period, the Ombudsman 

continued to develop relationships with the law 

school clinics. The Office’s major LSCOP initiatives 

fell into two categories during the Reporting Period: 

on-site visits by the Ombudsman and clinic visits 

hosted at SEC Headquarters. During the Reporting 

Period, the Ombudsman conducted on-site visits 

with three investor advocacy clinics. In October 

2017, the Ombudsman and Office staff attended 

an Investor Education Roadshow in Teaneck, 

New Jersey, sponsored by Seton Hall University 

School of Law’s Investor Advocacy Project. The 

opportunity to observe first-hand clinic investor 

education enabled the Ombudsman to gain a better 

understanding of direct clinic outreach efforts. 

Also during the Reporting Period, the Ombudsman 

conducted an on-site visit to the University of 

Miami School of Law Investor Rights Clinic 

in October 2017 and to the newly-established 

UNLV William S. Boyd School of Law’s Investor 

Protection Clinic, which opened its doors in 

January 2018. As with prior on-site visits, the 

students at each destination raised extremely 

insightful questions and provided input aimed at 

ameliorating common problems experienced by 

clinic clients. In addition, the Ombudsman and 

staff were able to solicit their perspectives and 

policy feedback on retail investor concerns.252

The relationships developed during on-site visits 

by the Ombudsman also provided other benefits 

for retail investors. In June 2018, because of the 

Ombudsman’s existing relationship with the Georgia 

State University College of Law Investor Advocacy 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 39

Clinic, the Ombudsman helped connect the clinic 

and the Commission. Subsequently, the Commission, 

in co-sponsorship with the Georgia State University 

College of Law, hosted the first SEC Town Hall held 

outside of the Washington, D.C. area to be attended 

by all five commissioners.253 At this event, investors 

in Atlanta, Georgia had the opportunity to talk 

directly to SEC commissioners and senior SEC staff 

about key topics of importance.254

The Ombudsman and Office of the Investor 

Advocate also hosted clinic directors and students 

for visits to SEC Headquarters during the Reporting 

Period. The first visit was held in October 2017 for 

clinic directors and students from five law schools; 

the second was held in March 2018 for clinic 

directors and students from seven law schools; 

and the third was held in September 2018 for the 

clinic director and students from one law school. 

Each visit was scheduled to coincide with a public 

meeting of the Investor Advisory Committee (IAC) 

to allow the clinic directors and students to attend 

the meeting. 

Of note, at the October 2017 IAC meeting, two 

clinic directors and one law student presented 

formal remarks to the IAC relating to the scope 

of clinic advocacy efforts and the critical need 

for ongoing funding, and engaged in a dynamic 

discussion with the IAC following their remarks. At 

the March 2018 IAC meeting, the IAC recognized 

the important work clinics do in protecting retail 

investors and made a formal recommendation to 

the Commission to improve funding sources for 

investor advocacy clinics, as discussed above.255 At 

the September 2018 IAC meeting, attendees were 

able to hear firsthand the discussions by the IAC 

and panels of experts on timely issues and research 

directly affecting retail investors.256

In addition to attending the IAC meetings, the clinic 

directors and students visiting SEC Headquarters 

during the Reporting Period were also afforded the 

opportunity to engage in interactive discussions 

with the Investor Advocate, the Ombudsman, 

and SEC leadership, including Chairman Clayton, 

Commissioner Stein, Commissioner Piwowar, 

Commissioner Peirce, Commissioner Jackson, 

Division of Investment Management Director 

Blass, Division of Enforcement Associate Director 

Hodgman, and other senior staff. These discussions 

generated great dialogue about the work of law 

school clinics and the challenges they face, including 

securing ongoing sources of funding. 

In June 2018, the Ombudsman traveled to the 

Securities Arbitration Clinic’s 2018 Roundtable held 

at Fordham University School of Law in New York. 

As at past gatherings, this roundtable provided 

the Ombudsman the opportunity to meet and 

engage with clinic directors and hear about their 

current work, including cases involving problematic 

products and practices affecting retail investors. 

During this Reporting Period, a few law schools and 

faculty again expressed interest in starting investor 

advocacy clinics at their institutions. Although 

our Office does not assist with establishing clinics, 

the Ombudsman did serve as a liaison, providing 

appropriate resources and connections related to 

establishing investor advocacy clinics to several 

law school administrators and faculty, as well as to 

industry professionals interested in supporting the 

growth of clinics across the country. 

OUTLOOK FOR FISCAL YEAR 2019

During the Reporting Period, OMMS proved 

to be a highly effective method for fielding 

investor questions and complaints, reviewing 

related documents, and maintaining important 

information. In addition, the full transition from 

manual recordkeeping systems to the OMMS 

platform created significant efficiencies, which 

allowed the Ombudsman and her small team to 

track and analyze matter and contact data in a 

more streamlined fashion while continuing to offer 

personalized, thoughtful service to retail investors. 

In Fiscal Year 2019, the Ombudsman will continue 

to reallocate staff resources and responsibilities 

as necessary to accommodate additional work 
40 | OFFICE OF THE INVESTOR ADVOCATE

volume and outreach efforts. These outreach efforts 

include investor-focused speaking engagements, 

expanded use of social and traditional media to 

share information with the investing public, and 

more involvement in ombudsmen and securities 

industry conferences and events.

The Ombudsman will also continue to build on 

the success of the Law School Clinic Outreach 

Program and seek out additional opportunities to 

establish channels of communication with retail 

investors, including through the law school clinics. 

The LSCOP engagement strategy will continue to 

include visits by the Ombudsman to the clinics and 

clinic visits to the SEC to facilitate the exchange 

of ideas relating to the potential impact of SEC 

policy considerations on their clients. We will also 

explore the feasibility of hosting an LSCOP summit 

for law school clinic faculty and students at SEC 

Headquarters. We recognize the importance of 

convening the different clinics to collaborate and 

exchange ideas with each other and with us about 

how to best serve retail investors. In addition, a 

summit would create valuable opportunities for the 

clinic directors and students to meet with a wider 

agency audience to discuss their efforts on behalf 

of retail investors. These interactions would also 

provide the Office and the agency with an excellent 

opportunity to enhance our recruitment efforts by 

demonstrating the value we place on diversity and 

inclusion and highlighting the wide variety of career 

paths and staff that come together to enable the 

agency to fulfill its mission.

In Fiscal Year 2019, we are also preparing to roll out 

new initiatives to increase the public’s understanding 

of the Office and the agency. These initiatives will 

incorporate greater use of technology and create 

directed efforts to embrace a wide array of investors 

and communities. We believe these efforts will foster 

more active and informed participation by retail 

investors in SEC policy discussions.

The Ombudsman is committed to working with 

retail investors, industry groups, ombudsmen at 

other agencies and institutions, and law school 

investor advocacy clinics. Through ongoing 

engagement with stakeholders, the Ombudsman 

hopes to generate innovative and impactful ways to 

understand and respond to the needs and concerns 

of retail investors, and looks forward to providing 

updates on our progress in the next report. 

Tracey L. McNeil

Ombudsman
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 41

REPORT ON 

INVESTOR TESTING

I

n the Office of the Investor Advocate, we believe 

we will be most effective in our mission to 

support investors when our advocacy is based 

on the best available evidence. Generally, we view 

regulations that are appropriately attuned to the 

needs of investors as contributing to the long-term 

stability of financial markets and capital formation. 

Investors (owners of securities)—and more broadly 

households (that either own or do not own 

securities)—are the ultimate beneficiaries of the 

SEC’s regulatory apparatus. Yet, when the Office 

was established in 2014, there was no systematic 

mechanism in place for the agency to regularly 

obtain information from and about investors that 

was grounded in fundamental principles of social 

science research. For the most part, the agency 

relied upon the notice and comment process 

mandated by the Administrative Procedure Act—

a process that tends to elicit far more comment 

from regulated entities than the general public and 

consequentially may distort the Commission’s view 

of investor issues. 

To address this data vacuum, the Office of the 

Investor Advocate developed a research initiative 

that would become POSITIER (Policy-Oriented 

Stakeholder and Investor Testing for Innovative 

and Effective Regulation). POSITIER was designed 

to integrate and build on evidence- and datadriven policy and performance management 

initiatives that have received broad support over 

the years, and it incorporates lessons learned from 

successful evidence programs across government 

and industry.257 It provides a framework for 

using and building government data capacities 

to develop regulatory policies that truly improve 

outcomes for stakeholders while minimizing the 

costs to all parties. 

POSITIER is unique among regulatory agencies. 

Because of limited resources, it was necessary to 

construct an architecture 

that was innovative and 

agile, cost-effective, and 

one that would allow for 

growth as new resources 

became available. Most 

important, the data had 

to adhere to the highest 

feasible standards of data 

quality. POSITIER thus 

offers a broad range of 

high-quality standing 

research capacities that can 

be deployed rapidly for data collection. 

With these tools, we seek to provide evidence to 

help inform the Commission’s policymaking efforts. 

Our research is geared toward a policy purpose 

because it is intended to help us achieve our Office’s 

statutory mandates, which include examining the 

impact on investors of proposed changes to SEC 

or SRO rules and identifying changes to existing 

rules that would benefit investors. POSITIER has 

delivered immediate results and has the potential to 

become a major component of the Commission’s 

policy-oriented evidence generation process.
42 | OFFICE OF THE INVESTOR ADVOCATE

POSITIER currently has a number of active research 

streams: retail disclosure effectiveness, financial 

advice, and investor participation. To date, our 

efforts have focused principally on understanding 

the conditions and behaviors of investing and 

non-investing households—the retail market. We 

strive to serve the interests of all investors, including 

institutional investors such as portfolio managers 

and pension funds, but we have chosen to focus 

initially on households because we believe that is an 

area of particular data scarcity in the Commission’s 

policymaking process. 

Work Process

The tools POSITIER deploys are sophisticated, 

with a mix of quantitative and qualitative methods. 

POSITIER attempts to use a set of research tools 

that is appropriate for each particular situation 

and seeks to leverage, to the extent possible, 

existing research and data on the particular topic. 

Initially, a major focus has been the conduct of 

online surveys of households and individuals. We 

utilize third parties to field high-quality, nationally 

representative, probability-based online surveys, 

and we do not bring any personally identifiable 

information (PII) from these surveys into the 

Commission. In addition to surveys, we have made 

considerable use of qualitative research methods—

in particular, in-depth interviews and focus groups. 

Such qualitative methods help us to develop deeper 

insights into what the quantitative data may be 

telling us and enable us to design better quantitative 

data collection projects. 

Our philosophy on survey data collection is specific: 

we tend not to favor opinion polls, especially when 

the topics in which we are interested are highly 

complex and not easily understood by investors.258

We generally look for better ways of understanding 

an issue. Instead of asking investors their opinions, 

we ask them about objective facts, or we build 

tests into the survey instrument to determine how 

investors will react under certain conditions; for 

example, we can test ways to improve the relevance 

and accessibility of decision-relevant information. 

Even though we conduct a number of surveys, 

POSITIER should not be viewed as a survey 

product or a survey initiative. POSITIER is a testing 

initiative—seeing how something actually works 

in practice using the best available social science 

research and tools. For some research questions, 

surveys and qualitative methods are appropriate, 

while for other issues they may not be the right 

approach. We are always looking to innovate and 

can utilize other research methods that are better 

suited for future projects. In particular, we are 

interested in using administrative data sources, as 

anticipated by the Evidence-Based Policymaking 

Commission Act of 2016.259 In many instances, 

administrative data can be more informative about 

circumstances than survey or other methods. 

However, significant barriers still exist to using this 

data for policy formulation purposes.260 

QUALITATIVE RESEARCH

DATA

SURVEY

ADMINISTRATIVE DATA

Enhance Data Collection Capacity
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 43

QUALITATIVE RESEARCH

SURVEY

ADMINISTRATIVE DATA

Investor Testing: Multi-Mode Multi-Purpose Data Collection

Testing

(Design of Regulations)

Identifying and Tracking

Investor Issues

Impact Evaluation

(Organizational Effectiveness) 

Ex-Ante Testing 

Framework

Contemporaneous Ex-Post Testing 

Framework

The overall vision of the POSITIER architecture 

is to have a diverse arsenal of data collection and 

analysis tools available in order to contribute 

rapidly to ex-ante testing of potential regulatory 

changes, ongoing tracking and identification 

of investor issues, and ex-post evaluation and 

outcomes data in order to promote better 

organizational management. 

An example may help to illustrate our approach. 

The marketplace for mutual funds offers much 

potential for retail investors, but there are many 

pitfalls. Generally, investors are expected to 

understand and navigate a complex set of decision 

variables in order to meet their financial goals 

over time. The lack of basic financial literacy is a 

recognized impediment for households wishing to 

achieve desirable financial outcomes.261 However, 

much of the academic literature on financial literacy 

correlates low financial literacy to big picture 

outcomes, such as investors’ level of assets or 

contributions to a retirement account. 

In contrast, in the context of the Commission’s 

policy environment, we have a more specific interest 

in understanding the extent to which investors 

understand key features of the products regulated 

by the SEC. As such, instead of general literacy 

questions, we may want to ask questions specifically 

targeted to investment products geared for the retail 

market. Specifically, we could focus on whether 

investors have the knowledge that can help them to 

navigate the complexities of the mutual fund market 

and make appropriate choices. After all, choosing 

the wrong mutual fund can leave an investor worse 

off than if they had simply put their money into a 

savings account. 

To better understand investor knowledge about 

the mutual fund market, we can use some simple 

techniques. For example, we can ask investors a 

battery of technical questions about mutual funds 

that vary in their level of difficulty, such as whether 

it is possible to lose money in a mutual fund or 

questions about fees. Using a general population 
44 | OFFICE OF THE INVESTOR ADVOCATE

household survey, we can obtain results for 

households that own mutual funds, as well as 

those that do not own mutual funds. 

Data of this nature can help us discern the extent 

of the knowledge problem and the extent of any 

knowledge gap between mutual fund owners and 

non-owners. However, such data alone do not 

reveal much about the reasons behind such a gap. Is 

it that limited knowledge is a barrier to ownership? 

Or do investors learn about their investments after 

they have purchased the assets? Understanding 

these questions requires slightly different data and 

alternative means of investigation, and that is the 

heart of POSITIER as an initiative. The answers to 

those research questions matter for how we might 

design a policy to deal with the problem of limited 

information—if the issue is a lack of knowledge 

causing limited participation, we might choose to 

target literacy interventions to households that do 

not own mutual funds, but if owners learn about 

investments by owning them, then it may be that 

literacy interventions are unlikely to be effective 

in encouraging participation.262 POSITIER is an 

initiative that is set up not only to establish baseline facts, but also to dig deeper so that we can 

develop actionable policies to address the problem 

effectively. Furthermore, when a policy is developed 

we can concurrently design a plan for evaluating 

that policy’s effectiveness over time. 

Recent Achievements 

In March 2017, we launched POSITIER with 

an Evidence Summit on the topic of Disclosure 

Effectiveness while the Commission was under the 

stewardship of Acting Chairman Michael Piwowar. 

During the Summit, leading academics in the 

fields of economics, decision science, psychology, 

marketing, and law presented leading-edge thinking 

and debated key issues related to retail disclosure. 

Approximately two hundred individuals attended 

in person, and portions of the Summit were viewed 

via webcast by more than 12,000 estimated viewers 

across the globe. We favor launching our most 

serious research endeavors with an evidence summit. 

In light of the significant challenges we face, including budget constraints and the fact that we have 

only a single full-time staff member devoted to 

POSITIER, we are very proud of the work we have 

accomplished so far. Working with colleagues in 

the SEC’s Office of Acquisitions, we have greatly 

reduced the timeframe required for contracting. 

Once contracted, we estimate the approach 

pioneered within the POSITIER framework 

has compressed the government’s typical data 

collection time by at least 95 percent. As a result, 

since we started collecting data in June of 2017, 

we have been able to conduct five qualitative 

studies and 13 surveys—a total of about 14.8 

million quantitative data elements and nearly 

20,000 individual nationally representative survey 

questionnaires completed by respondents across 

extremely diverse economic, demographic and 

geographic populations. 

Some of this work has been small-scale and was in 

the nature of beta testing. Yet, a large portion of 

the data was recently included in our first public 

report that was released in October 2018. This 

report, entitled “The Retail Market for Investment 

Advice,” documented new facts about the retail 

market, investor understanding of key issues, and 

usage of investment advice.263 It is our intention to 

make additional data public once we validate the 

quality of the data. 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 45

At the same time, we need to proceed at a measured 

pace given our limited resources. The online surveys 

that we have typically deployed due to budget 

constraints have certain drawbacks for the study 

of many phenomena in which the Commission is 

interested. Other types of data collection are more 

expensive and time-consuming efforts, but we 

believe they are warranted in order to understand 

the ways that very complex issues may impact 

individual investors. In most cases, the resource 

commitment required to undertake such highercost research is likely to be a fraction of the costs 

that would be incurred by industry and investors if 

regulatory policy were not appropriately tuned to 

their needs.

Research on the Market for 

Investment Advice

One way in which investors (or non-investors) 

might navigate complex financial instruments 

such as mutual funds and ever-changing financial 

markets is to seek the advice of a financial professional who understands the technical features 

of assets in which an investor is interested. Yet, 

this is not a sure-fire solution to the investor’s 

problem. After all, a financial professional can have 

limitations in their own capability,264 they may be 

dishonest,265 or they may have conflicts of interest 

that mean that their advice is not a great match 

for the investor.266 As such, the investor’s problem 

may shift from being able to determine if particular 

investments are good for them to being able to 

determine if a particular financial professional is 

good for them. These are among the concerns that 

have created interest in increased regulation of the 

market for professional advice, and in fact, the 

Commission proposed a set of regulations in early 

2018 as a response to some of these concerns.267

To gather data that could be relevant for the 

rulemaking, OIAD utilized POSITIER for a 

study of the retail market for investment advice. 

With the invaluable assistance of our colleagues 

across the agency, including in the Division of 

Trading and Markets, the Division of Investment 

Management, the Division of Economic Risk and 

Analysis (DERA), the Office of Investor Education 

and Advocacy, and the Office of Compliance, 

Inspections, and Examinations, among others, 

we compiled a set of research questions for the 

project. In October 2018, the results were released 

in a major study, entitled “The Retail Market for 

Investment Advice,” for which I served as coPrincipal Investigator along with Angela Hung of 

the RAND Corporation.268 The study documents 

a rich collection of new and important facts about 

the market for retail advice as well as the assets 

investors own and their knowledge and perceptions 

of key terms and key aspects of the marketplace. We 

highlight three interesting findings below and in the 

accompanying infographic, but encourage interested 

readers to examine the full study.269

First, while many individuals have some financial 

assets, most investors do not currently receive 

financial advice regarding investments. This is a 

difficult question to ask in a survey so we tried to 

triangulate answers in a number of ways. In our 

data, 38.7 percent of investors reported currently 

using a financial professional for advice about 

investment strategies, specific financial investments, 

or the types of accounts to open. When we tried 

to discern why individuals do not consult a 

professional, search costs (how difficult it is to 

find and screen a professional) were among the 

factors that seemed important. 
46 | OFFICE OF THE INVESTOR ADVOCATE

Investment Advice—Key Survey Results

of investors reported using a financial 

professional for advice about: 

• Investment strategies 

• Specific financial investments

• Types of accounts to open

<40%

Broker Investment Adviser Dual-Hatted

3.8% 3.6%

48.9%

The overwhelming majority of professional advice-users consult a 

dual-hatted professional (professional is both broker and investment adviser)

Current investment advice consumers believe that financial professionals 

acting in an investor’s “best interest” would be required to:

Monitor their accounts 

on an ongoing basis 86%

Help them choose the lowest cost 

products, all else being equal 73%

Avoid taking higher compensation for 

selling one product when a similar 

but less costly one is available 61%

% incorrect % correct

Respondents for which the true legal 

registration status of their financial professional, 

who were themselves able to correctly/incorrectly 

self-identify the professional’s registration status.

150 had advisor not reported

Named advisor not found in 68 cases

A second fact relates to the legal registration status 

of SEC-regulated financial professionals: namely, 

that dual registrants dominate the marketplace.

It is important for investors to understand the 

legal registration status of a professional—i.e. 

“broker,” “investment adviser” or both (known 

as dually registered or “dual-hatted”)270—in 

order to properly assess the advice they are 

provided.271 The legal registration status helps 

to define the conflicts of interest that may be 

affecting a financial professional as they provide 

advice, and it is the major delineation status within 

current regulations of the professional types. Data 

provided by DERA suggests that brokers and 

“dual-hatted” professionals are about equal in 

prevalence in employment levels at retail-facing 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 47

firms.272 While that may be accurate, our study 

paints a quite different picture when we look at it 

from the perspective of investors. We verified that 

the overwhelming majority of advice-consumers 

use a professional that is dual-hatted. In fact, we 

found very few investors working with a professional that is exclusively a broker.273 Perhaps 

more important, we found little evidence that 

investors were able to accurately identify the legal 

registration status of financial professional with 

whom they were working. 

These facts could have interesting policy 

implications. One possibility is that the legal 

distinctions that have been so fundamental to the 

Commission’s regulatory conceptualizations of 

the issue are simply not very meaningful in the 

retail marketplace for professional financial advice 

because few individuals use professionals that 

are exclusively an investment adviser or broker. 

With dual-hatted professionals, the key issue is 

the specific relationship that the professional has 

with their customer. Does the same professional 

sometimes operate with a particular client as a 

broker and other times as an investment advisor? 

(And if so, is it clear to clients at which time the 

profession wears each particular hat?) Do these 

professionals generally operate as an investment 

adviser with the client, retain a brokerage license 

just because it is easy for them to do so, but they 

do not ever operate in a brokerage capacity? Or 

does the brokerage registration allow them to 

provide additional services to clients even though 

they always operate under a fiduciary standard 

with the client? We continue not to know very 

much about these “dual-hatted” relationships 

even though they seem to be much more prevalent 

than any other type of relationship that investors 

have with a professional. Nonetheless, their strong 

prevalence in terms of the number of adviceproviding relationships suggests some rethinking of 

the regulatory approach to the retail marketplace 

for financial advice may be warranted. 

A third fact of interest is that, at least in our data, 

the public seems to believe that a requirement to 

act in a customer’s “best interest” is an extremely 

strong standard of ethical conduct. Some of this 

could possibly be attributed to naivete about the 

investment marketplace, but some may relate to 

how the term “best interest” is interpreted in the 

vernacular. Such discrepancies between definitions 

contained in arcane legal and regulatory guidelines 

on one hand, and the vernacular usage of those 

terms on the other, are critically important for 

understanding the effect that regulatory terminology 

signals are sending to retail investors who may 

not have the time, education, nor research skills 

required to parse legal nuances in order to 

understand how the information should affect 

their decision-making process. 

To understand investor understanding of the term 

“best interest,” we asked respondents “What 

do you think it means if a financial professional 

is required to act in your “best interest?” We 

offered respondents eight attributes to which they 

could respond yes, no, or I don’t know. Panel 3 

of the infographic on the previous page summarizes 

three of the responses we want to highlight for the 

individuals that reported currently using a financial 

professional for investment advice. Current advice 

users overwhelmingly believed (86 percent) that 

a professional required to act in their best interest 

monitors their accounts on an ongoing basis. This 

is somewhat of a concern because the best interest 

standard, as proposed, will apply to broker-dealers 

who are not required to provide this service as part 

of their typical offerings. The next two questions 

relate to cost and conflicts of interest. Seventythree percent of current advice users believed that 

a professional acting in their best interest “will 

help me to choose the lowest cost products, all 

else being equal.” Sixty-one percent indicated 

that the professional would “avoid taking higher 

compensation for selling me a product when a 

similar but less costly product is available.” 
48 | OFFICE OF THE INVESTOR ADVOCATE

If the change in standards as adopted actually 

achieves results that match investor expectations, 

investors will benefit. But, if the standard falls 

short, the term “best interest” may actually 

confuse and mislead investors. Investors could 

also be confused about the distinction between 

the new standard and a fiduciary standard, which 

is often described to investors using terms like 

“best interest.” To underscore this concern, one 

striking and unexpected feature of the data is that 

when we limit the sample from all respondents 

to more experienced individuals—investors or 

persons that currently get advice from a financial 

professional—the level of expectation associated 

with best interest actually climbs appreciably. In 

our view, if the standard as adopted does not match 

reasonable investor expectations, it becomes all the 

more important for the Commission to find effective 

means to educate investors so that their expectations 

can be adjusted to match the standard. 

These data highlight the importance of understanding exactly where investors are on a 

particular issue so that regulatory policy can 

be designed and communicated appropriately 

to the benefit of investors. Furthermore, efforts 

to implement policies that are well-intentioned, 

but not sufficiently grounded in empirical evidence, may actually backfire and harm investors 

more than they help them. 

The research undertaking in this situation was 

intended to be formative in nature to simply assess 

the state of the marketplace rather than testing 

specific policy innovations. The research was 

designed and conducted when the rule proposals 

were at a fairly preliminary stage. Nevertheless, 

it provides some interesting insights. It also 

demonstrates an aspect of the rapid deployment 

approach that POSITIER brings: on this project, 

researchers produced a draft report of findings 

mere months after the project funds became 

available, whereas a project of this nature typically takes agencies years to complete.

Looking Forward

POSITIER is a highly ambitious, exciting, and 

innovative new outcomes-focused approach to 

policy. We have developed a framework for better 

attuning rulemaking so that investors can be 

better-served and the costs to industry minimized. 

We view POSITIER as a more effective approach 

to regulation, and we believe it has the potential 

to transform the way the Commission carries 

out its mission for the benefit of investors and 

industry alike. We also are hopeful that POSITIER 

will eventually provide outcome-oriented metrics 

to the SEC that will provide potential tools for 

organizational management. 

We have made great strides in developing survey 

instruments and understanding some key cognitive 

and conceptual barriers for investors. Looking 

ahead to the next year, we will continue to make 

progress on our current topical research streams 

and stand ready to support the Commission in other 

efforts where they deem that evidence could help to 

guide their work. 

Brian Scholl, Ph.D.

Principal Economic Advisor and Senior Economist

Office of the Investor Advocate
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 49

SUMMARY OF IAC 

RECOMMENDATIONS AND 

SEC RESPONSES

Congress established the Investor Advisory 

Committee 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.274 The 

Committee 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.275

Exchange Act Section 39 authorizes the Committee 

to submit findings and recommendations for 

review and consideration by the Commission.276

The statute also requires the SEC “promptly” to 

issue a public statement assessing each finding or 

recommendation of the Committee and disclosing 

the action, if any, the Commission intends to take 

with respect to the finding or recommendation.277

While the Commission must respond to the IAC’s 

recommendations, it is under no obligation to 

agree with or act upon the recommendations.278

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.279

In the past, the Commission has taken action that 

was responsive to the IAC’s recommendations 

related to target date mutual funds,280 general 

solicitation and advertising in private offerings,281

crowdfunding282 a shortened trade settlement 

cycle,283 electronic delivery of investment company 

shareholder reports,284 and increasing the number 

investment adviser examinations.285 This Report 

covers all other recommendations the IAC has made 

since its inception. For more detailed summaries, 

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.286

Therefore, any such initiatives are not reflected 

in this Report.
50 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Proposed Regulation 

Best Interest, 

Form CRS, and IA 

Fiduciary Guidance287

For a related 

recommendation, 

see “Broker-Dealer 

Fiduciary Duty” below.

Nov. 7, 2018 Clarify the standards of 

conduct for broker-dealers 

and investment advisers 

with regard to the obligation 

to act in customers’ best 

interests; expand the 

best interest obligation 

to cover rollovers and 

recommendations regarding 

account types; explicitly 

characterize the best interest 

standard as a fiduciary duty; 

conduct usability testing 

of the proposed Form CRS 

and, if necessary, revise the 

proposed disclosures.

Pending. 

Transaction Fee Pilot 

for NMS Stocks288

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.

Pending.

Select Enhancements 

to Protect Retail 

Investors in 

Municipal and 

Corporate Bonds289

June 14, 2018 Adopt proposed 

amendments to Rule 15c2-12 

related to disclosure of bank 

debt and other obligations; 

update interpretive 

guidance; continue to work 

with MSRB on improved 

functionality for EMMA; 

undertake a comprehensive 

study of the corporate 

bond market and produce 

a follow-up report similar 

to the 2012 Report on the 

Municipal Securities Market.

On Aug. 20, 2018, the SEC adopted 

amendments to Rule 15c2-12 to enhance 

transparency in the municipal securities 

market, including disclosure of bank debt 

and other material financial obligations 

of the issuer that could impact an issuer’s 

liquidity, overall creditworthiness, or an 

existing security holder’s rights.290

Financial Support 

for Law School 

Clinics that Support 

Investors291

March 8, 2018 Explore ways to improve 

external funding sources 

to the law school investor 

advocacy clinics. Work with 

FINRA and other potential 

partners, and request 

legislation from Congress to 

consider permanent funding.

Pending. 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 51

Topic Date IAC Recommendation SEC Response

Dual Class and 

Other Entrenching 

Governance 

Structures in 

Public Companies292

March 8, 2018 The SEC Division of 

Corporation Finance should 

encourage companies to 

improve the disclosure 

of risks related to such 

structures and commence 

a pilot program to monitor 

shareholder disputes and 

to determine if enhanced 

disclosure requirements 

are necessary.

Pending. This topic was discussed 

on Nov. 15, 2018, at an SEC public 

roundtable on the proxy process.

Enhance Information 

for Bond Market 

Investors293

June 7, 2016 Provide post-trade price 

transparency, including 

markups or markdowns, in 

municipal, corporate and 

agency bonds and, over 

the longer term, provide 

pre-trade price transparency 

as well.

On November 17, 2016, the SEC approved 

rules requiring disclosure of mark-ups 

and markdowns on most municipal and 

corporate bond transactions, calculated 

from the bond’s prevailing market price.294

The SEC’s Fixed Income Market Structure 

Advisory Committee is exploring ways to 

improve pre-trade price transparency.295

Mutual Fund 

Cost Disclosure296

April 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 4, 2018, the SEC issued 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 solicits investor feedback 

on fund fees and expenses, and it 

includes other questions related to the 

IAC recommendation (e.g., dollar vs. 

percentage disclosure, disclosure within 

account statements, etc.). The public 

comment period closed on Oct. 31, 2018.297

Empowering Elders 

and Other Investors: 

Background Checks298 

July 16, 2015 Develop a disciplinary 

database to allow easy 

searches to determine 

whether a person or firm 

has been sanctioned for 

securities law violations. 

Reduce the complexity of 

background searches.

On May 2, 2018, the SEC launched a new 

online search tool that enables investors to 

research whether the person trying to sell 

them investments has a judgment or order 

entered against them in an enforcement 

action. The new tool is called SEC Action 

Lookup for Individuals (SALI).299

Accredited Investor 

Definition300

Oct. 9, 2014 Consider enabling 

individuals to qualify 

as accredited investors 

based on their financial 

sophistication.

On December 18, 2015, the SEC issued 

a staff report that discussed, among 

other alternatives, using sophistication 

as an element of the accredited investor 

definition.301
52 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Impartiality in 

the Disclosure of 

Preliminary 

Voting Results302

Oct. 9, 2014 Ensure impartiality in the 

disclosure of preliminary 

proxy voting results.

Pending. 

Decimalization and 

Tick Sizes303

Jan. 31, 2014 Oppose any test or pilot 

programs to increase the 

minimum quoting and 

trading increments 

(“tick sizes”) in the 

securities markets.

The 2-year pilot program ended on Sept. 

28, 2018.304 The exchanges and FINRA 

submitted a joint assessment of the impact 

of the Tick Pilot on July 3, 2018, and a 

revised report on Aug. 2, 2018.305

Broker-Dealer 

Fiduciary Duty306

Nov. 22, 2013 Establish a fiduciary duty 

for broker-dealers when 

they provide personalized 

investment advice to retail 

investors.

On April 18, 2018, the SEC voted to propose 

Regulation Best Interest, under which a 

broker-dealer would be required to act 

in the best interest of a retail customer 

when making a recommendation of 

any securities transaction or investment 

strategy involving securities to a retail 

customer. On Nov. 27, 2018, the IAC issued 

a related recommendation: see “Proposed 

Regulation Best Interest, Form CRS, and IA 

Fiduciary Guidance” above.

Universal Proxy 

Ballots307

July 25, 2013 Allow universal ballots in 

connection with short slate 

director nominations.

On October 26, 2016, the SEC 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. The comment period closed 

on January 9, 2017.308 This topic was 

discussed on Nov. 15, 2018, at an SEC public 

roundtable on the proxy process.

Data Tagging309 July 25, 2013 Promote the use of 

machine-readable data 

tagging formats for data 

filed with the SEC.

The SEC has addressed data tagging in a 

number of rulemaking projects.310 During 

the Reporting Period, the SEC proposed 

amendments requiring that operating 

companies and funds tag all of the 

information on the cover pages of Form 

10-K, Form 10-Q, Form 8-K, Form 20-F, and 

Form 40-F.311 In addition, the SEC adopted 

amendments that require operating 

companies and funds to use Inline XBRL for 

certain information312 and proposed a new 

rule for ETFs that requires Inline XBRL.313

Lastly, the SEC proposed a new Form 

CRS Relationship Summary, which would 

require broker-dealers and investment 

advisers to file their relationship summaries 

electronically in a text-searchable format.314
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 53

END NOTES

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

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

3 See SEC, Office of the Investor Advocate, Report on 

Objectives, Fiscal Year 2018 (June 29, 2017) [hereinafter 

Report on Objectives, Fiscal Year 2018], https://www.sec.

gov/advocate/reportspubs/annual-reports/sec-office-investoradvocate-report-on-objectives-fy2018.pdf. 

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

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

on Activities to include an “inventory” of the most serious 

problems encountered by investors during the Reporting 

Period. The inventory must identify any action taken by the 

Commission or an SRO to resolve each problem, the length 

of time that each item has remained on our inventory and, 

for items on which no action has been taken, the reasons 

for inaction and an identification of any official who is 

responsible for such action. Because the Office of the 

Investor Advocate is new, this Report on Activities is the 

first to describe problems, recommendations, and resulting 

actions. Therefore, we do not set forth a separate inventory 

of pre-existing items.

6 Report on Objectives, Fiscal Year 2018, supra note 3. 

7 The Office of the Investor Advocate was established 

pursuant to Section 915 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 2010 (DoddFrank Act). On February 24, 2014, SEC Chair Mary Jo 

White appointed Rick A. Fleming as the Commission’s first 

Investor Advocate.

8 See Amendments to Smaller Reporting Company 

Definition, Securities Act Release No. 10513, 83 Fed. Reg. 

31,992 (July 10, 2018) [hereinafter Amendments to Smaller 

Reporting Company Definition]. 

9 The new smaller reporting company definition enables a 

company with less than $250 million of public float to 

provide scaled-back disclosures, as compared to the $75 

million threshold under the prior definition. The final 

rules also expand the definition to include companies with 

less than $100 million in annual revenues if they also have 

either no public float or a public float that is less than $700 

million. This reflects a change from the revenue test in 

the prior definition, which allowed companies to provide 

scaled-back disclosure only if they had no public float and 

less than $50 million in annual revenues. 

10 See Rick A. Fleming, Investor Advocate, SEC, Speech at 

NASAA Corporation Finance Training, Moving Forward 

with the Commission’s Disclosure Effectiveness Initiative, 

Houston, TX (Nov. 19, 2016), https://www.sec.gov/ news/

speech/moving-forward-with-the-disclosureeffectivenessinitiative.html. 

11 See Amendments to Smaller Reporting Company 

Definition, supra note 8, at Section IV.B.3.b.

12 See id. 

13 See Inline XBRL Filing of Tagged Data, Securities Act 

Release No. 10514, 83 Fed. Reg. 40,846 (Aug. 16, 2018). 

14 See Rick A. Fleming, Investor Advocate, SEC, Remarks 

Before XBRL US Investor Forum 2016: Finding Value 

with Smart Data: Improving Disclosure with Smart 

Data (Oct. 24, 2016), https://www.sec.gov/news/speech/ 

improving-disclosure-with-smart-data.html. 

15 See Exempt Offerings Pursuant to Compensatory 

Arrangements, Securities Act Release No. 10520, 83 Fed. 

Reg. 34,940 (July 24, 2018).

16 See Concept Release on Compensatory Securities Offerings 

and Sales, Securities Act Release No. 10521, 83 Fed. Reg. 

34,958 (July 24, 2018).

17 See Financial Disclosures About Guarantors and Issuers 

of Guaranteed Securities and Affiliates Whose Securities 

Collateralize a Registrant’s Securities, Securities Act Release 

No. 10526, 83 Fed. Reg. 49,630 (Oct. 2, 2018). The 

proposed amendments pertain to the financial disclosure 

requirements in Rule 3-10 of Regulation S-X for guarantors 

and issuers of guaranteed securities registered or being 

registered, and also to the financial disclosure requirements 

in Rule 3-16 of Regulation S-X for affiliates whose securities 

collateralize securities registered or being registered.

18 See id. at Section IV.A.

19 See id. at Section III.C.2.d. (describing the advantages of the 

“proposed optionality” in the rule amendments).

20 See id. at Section VII.C.

21 See Disclosure Update and Simplification, Securities Act 

Release No. 10532, 83 Fed. Reg. 50,148 (Oct. 4, 2018).

22 See Regulation of NMS Stock Alternative Trading Systems, 

Exchange Act Release No. 83663, 83 Fed. Reg. 38,768 

(published Aug. 7, 2018).

23 See Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: File No. S7-23-15, Regulation of NMS Stock 

Alternative Trading Systems (Sept. 9, 2016), https://

www.sec.gov/about/offices/investorad/investor-advocatecomment-letter-regulation-ats.pdf [hereinafter Fleming, 

Letter on Regulation of NMS Stock ATS]. 

24 See id.

25 See Regulation of NMS Stock Alternative Trading Systems, 

supra note 22, at 38,783.

26 Regulation NMS, Exchange Act Release No. 51808, 70 

Fed. Reg. 37,495 (adopted June 29, 2005). 

27 See Disclosure of Order Handling Information, Exchange 

Act Release No. 84528, 83 Fed. Reg. 58,338 (adopted 

Nov. 2, 2018). 

28 See id.

29 See Transaction Fee Pilot for NMS Stocks, Exchange Act 

Release No. 82873, 83 Fed. Reg. 13,008 (proposed 

Mar. 14, 2018).

30 See id. at 13,026.

31 See 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/recommendationtransaction-fee-pilot-for-nms-stocks.pdf. 

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

33 See, e.g., CHX; Order Instituting Proceedings To Determine 

Whether To Approve or Disapprove a Proposed Rule 

Change To Adopt the CHX Liquidity Enhancing Access 

Delay, Exchange Act Release No. 80740, 82 Fed. Reg. 

24,412 (published May 26, 2017).

34 See Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: File No. SR-CHX-2017-04, (Feb. 27, 2018), 

https://www.sec.gov/comments/sr-chx-2017-04/chx201704-

3169295-161957.pdf.
54 | OFFICE OF THE INVESTOR ADVOCATE

35 See Order Setting Aside the Order by Delegated Authority 

Approving SR-CHX-2017-04, Exchange Act Release 

No. 84337, 83 Fed. Reg. 50,720 (Oct. 9, 2018), https://

www.federalregister.gov/d/2018-21761. 

36 See, e.g., Joint Industry Plan, Order of Summary 

Abrogation of the Forty-Second Amendment to the 

Joint Self-Regulatory Organization Plan Governing the 

Collection, Consolidation and Dissemination of Quotation 

and Transaction Information for Nasdaq-Listed Securities 

Traded on Exchanges on an Unlisted Trading Privileges 

Basis, Exchange Act Release No. 83149, 83 Fed. Reg. 

20,129 (published May 7, 2018).

37 See Nasdaq Inc., Application to Permit Issuer Choice 

to Consolidate Liquidity By Suspending Unlisted 

Trading Privileges (Apr. 25, 2018), https://www.sec.gov/

comments/265-31/26531-3515735-162293.pdf.

38 See, e.g., Order Scheduling Filing of Statements on Review 

in the Matter of the Investors Exchange LLC, for an 

Order Granting the Approval of Proposed Rule Change 

To Establish a New Optional Listing Category on the 

Exchange, “LTSE Listings on IEX”, Securities Exchange 

Act Release No. 83678 (July 20, 2018), 83 Fed. Reg. 

35,300 (July 25, 2018), https://www.federalregister.

gov/d/2018-15926. 

39 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.

40 See Joint Industry Plans, Order Approving the National 

Market System Plan to Implement a Tick Size Pilot 

Program by BATS Exchange, Inc., BATS Y-Exchange, 

Inc., Chicago Stock Exchange, Inc., EDGA Exchange, 

Inc., EDGX Exchange, Inc., Financial Industry Regulatory 

Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ 

OMX PHLX LLC, The Nasdaq Stock Market LLC, New 

York Stock Exchange LLC, NYSE MKT LLC, and NYSE 

Arca, Inc., as Modified by the Commission, for a Two-Year 

Period, Exchange Act Release No. 74892, 80 Fed. Reg. 

27,513 (published May 13, 2015); see also Commission 

Statement on the Expiration of the Tick Size Pilot (Sept. 10, 

2018), https://www.sec.gov/news/public-statement/tm-deraexpiration-tick-size-pilot. 

41 See Assessment of the Plan to Implement a Tick Size 

Pilot Program (July 3, 2018), https://www.sec.gov/files/

TICK%20PILOT%20ASSESSMENT%20FINAL%20

Aug%202.pdf. 

42 See, e.g., SEC, Press Release, SEC Staff to Host Roundtable 

on Market Structure for Thinly-Traded Securities, 2018-

65 (Apr. 13, 2018), https://www.sec.gov/news/pressrelease/2018-65.

43 See SEC, Press Release, SEC Staff to Host Roundtable 

on Regulatory Approaches to Combating Retail Investor 

Fraud, 2018-200 (Sept. 18, 2018), https://www.sec.gov/

news/press-release/2018-200 [hereinafter Press Release, 

Retail Investor Fraud Roundtable]. 

44 The Office of the Investor Advocate considers a proposed 

rule or rule amendment with comment periods expiring 

between October 1, 2017 and September 30, 2018, to be 

included in its FY 2018 rulemaking review. In Fiscal Year 

2018, fifteen proposed rule or rule amendments have been 

closed and two proposals remain open, action pending. 

45 In pertinent part, under Rule 15c2-12, a dealer that acts as 

an underwriter in a primary offering of municipal securities 

with an aggregate principal amount of $1,000,000 or more 

is prohibited from purchasing or selling municipal securities 

in connection with an offering unless the participating 

underwriter reasonably determines, among other things, 

that an issuer of municipal securities or obligated person 

has undertaken in a written agreement or contract to 

provide the MSRB in a timely manner not in excess of 

10 business days after the occurrence of the event, notice 

of certain events listed in Rule 15c2-12. Underwriters 

comply with this requirement by requiring that issuers of 

municipal securities and obligated persons undertake in a 

written agreement or contract to provide event notices to 

the MSRB consistent with Rule 15c2-12. Rule 15c2-12 also 

prohibits any dealer from recommending the purchase or 

sale of a municipal security unless the dealer has procedures 

in place that provide reasonable assurance that it will 

receive prompt notice of events. Dealers typically comply 

with this by having procedures in place that, among other 

things, require registered representatives who recommend 

municipal securities to customers in secondary markets to 

have access to the MSRB’s Electronic Municipal Market 

Access (EMMA) system. Proposed Amendments to 

Municipal Securities Disclosure, Securities Exchange Act 

Release No. 80130 (Mar. 1, 2017), 82 Fed. Reg. 13,928 at 

13,929 (proposed Mar. 15, 2017), https://www.gpo.gov/

fdsys/pkg/FR-2017-03-15/pdf/2017-04323.pdf

46 Proposed Amendments to Municipal Securities Disclosure, 

Exchange Act Release No. 80130 (Mar. 1, 2017), 82 Fed. 

Reg. 13,928 at 13,935 (proposed Mar. 15, 2017), https://

www.gpo.gov/fdsys/pkg/FR-2017-03-15/pdf/2017-04323.

pdf [hereinafter Proposed Amendments to Municipal 

Securities Disclosures]. 

47 Municipal Securities Disclosure, Exchange Act Release No. 

34-34961, 59 Fed. Reg. 59,590 at 59,591 (Nov. 17, 1994) 

(codified at 17 CFR pt. 240).

48 See SEC, Office of the Investor Advocate, Report on 

Activities, Fiscal Year 2015 (Dec. 23, 2015) at 7, 16, https://

www.sec.gov/advocate/reportspubs/annual-reports/secinvestor-advocate-report-on-activities-2015.pdf. 

49 Id.; SEC, Office of the Investor Advocate, Report on 

Objectives, Fiscal Year 2017, at 11, 13 (June 30, 2016), 

https://www.sec.gov/advocate/reportspubs/annual-reports/

sec-office-investor-advocate-report-on-objectives-fy2017.pdf.

50 Amendments to Municipal Securities Disclosure, Exchange 

Act Release No. 34-83885, 83 Fed. Reg. 44,700 at 

44,701(Aug. 31, 2018), https://www.gpo.gov/fdsys/pkg/FR2018-08-31/pdf/2018-18279.pdf [hereinafter Amendments 

to Municipal Securities Disclosure]. 

51 Proposed Amendments to Municipal Securities Disclosure, 

supra note 46, at 13,935; see also Municipal Market Bank 

Loan Disclosure Task Force, Considerations Regarding 

Voluntary Secondary Market Disclosure About Bank 

Loans (May 1, 2013), at 7, http://www.nfma.org/assets/

documents/position.stmt/wp.direct.bank.loan.5.13.pdf

(issuers typically do not prepare official statements or 

other offering documents for bank loans, which may leave 

secondary market participants without current information 

that is relevant to a timely assessment of a bank loan’s
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 55

impact on the issuer’s credit position and any additional 

risk (e.g., liquidity, refinancing)).

52 Amendments to Municipal Securities Disclosure, 

supra note 50.

53 Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: MSRB Regulatory Notice 2018-15, Request 

for Comment on Draft Amendments to MSRB Rules on 

Primary Offering Practices (Sept. 17, 2018), https://www.

msrb.org/RFC/2018-15/SEC.pdf [hereinafter Comment 

Letter, Regulatory Notice 2018-15]. 

54 MSRB, Notice 2018-15, Request for Comment on Draft 

Amendments to MSRB Rules on Primary Offering Practices 

(July 19, 2018), http://www.msrb.org/~/media/Files/

Regulatory-Notices/RFCs/2018-15.ashx??n=1 [hereinafter 

MSRB, Regulatory Notice 2018-15].

55 Id. at 9.

56 Id. at 12-15. 

57 See Report on Objectives, Fiscal Year 2018, supra note 3.

58 Comment Letter, Regulatory Notice 2018-15, supra 

note 53. In Regulatory Notice 2018-15, the MSRB also 

proposed including eight additional data fields to Form 

G-32 that could not auto-populate from any information 

already entered by underwriters in NIIDS, including a 

“yes” or “no” indicator as to whether the minimum 

denomination is subject to change. We argued that the 

use of a “yes” or “no” indicator to signal whether the 

minimum denomination is subject to change does not go far 

enough to help ensure that current, accurate information 

is easily accessible to investors. Without an ongoing 

obligation to update minimum denomination information 

over the life of the security, the investor is expected to not 

only bear the burden of deciphering the relevancy of events 

that could trigger changes in minimum denomination but 

to locate this important information. In our comment 

letter, we encouraged the MSRB to consider facilitating 

a requirement for ongoing disclosure of minimum 

denomination information over the life of the security. 

59 FINRA, Regulatory Notice 17-08, Pricing Disclosure in 

Fixed Income Markets (Feb. 2017), http://www.finra.

org/sites/default/files/notice_doc_file_ref/RegulatoryNotice-17-08.pdf; MSRB, Regulatory Notice 2016-28, 

New Disclosure Requirements Under MSRB Rule G-15 and 

Prevailing Market Price Guidance Pursuant to Rule G-30 

Effective May 14, 2018 (Nov. 29, 2016), http://msrb.org/~/

media/Files/Regulatory-Notices/Announcements/2016-28.

ashx?n=1. 

60 See Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: Recommendation of the Investor Advocate, 

File Nos. SR-FINRA-2016-032; SR-MSRB-2016-12 at 

Appendix A, 9-10 (Nov. 7, 2016), https://www.sec.gov/

comments/sr-finra-2016-032/finra2016032-10.pdf. For a 

summary of our comment letters, see SEC, Office of the 

Investor Advocate, Report on Activities, Fiscal Year 2016

(Dec. 21, 2016), https://www.sec.gov/advocate/

reportspubs/annual-reports/sec-investor-advocate-reporton-activities-2016.pdf [hereinafter Report on Activities, 

Fiscal Year 2016]. See also Comment Letter, Rick A. 

Fleming, Investor Advocate, SEC, RE: MSRB Notice 2015-

16, RE: FINRA Notice 15-36 (Dec. 11, 2015), https://www.

sec.gov/about/offices/investorad/comment-letter-msrb-finrainvestor-advocate-121115.pdf.

61 MSRB, MSRB Notice 2018-05, MSRB Provides New and 

Updated FAQs on Confirmation Disclosure and Prevailing 

Market Price (Mar. 19, 2018), http://www.msrb.org/~/

media/Files/Regulatory-Notices/Announcements/2018-05.

ashx?n=1. 

62 Comment Letter, Rick A. Fleming, Investor Advocate, SEC, 

RE: File Reference No. 2015-300, Proposed Amendments 

by the Financial Accounting Standards Board (FASB) to 

Concepts Statement No. 8, Conceptual Framework for 

Financial Reporting, (July 11, 2017), http://www.fasb.org/

cs/BlobServer?blobkey=id&blobnocache=true&blobwhere

=1175835179218&blobheader=application%2Fpdf&

blobheadername2=ContentLength&blobheadername1=Co

ntent-Disposition&blobheadervalue2=565918&blobheade

rvalue1=filename%3DDISFR-C.ED.0056.SEC_OFFICE_

INVESTOR_ADVOCATE_RICK_A._FLEMING.pdf&blo

bcol=urldata&blobtable=MungoBlobs.

63 Statement of Financial Accounting Concepts No. 2, 

Qualitative Characteristics of Accounting Information (As 

Issued), Fin. Accounting Standards Bd. 29 (May 1980

http://www.fasb.org/jsp/FASB/Document_C/DocumentPage

?cid=1218220132599&acceptedDisclaimer=true.

64 SEC Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45,150 

(Aug. 12, 1999).

65 Amendments to Statement of Financial Accounting 

Concepts No. 8, Conceptual Framework for Financial 

Reporting, Chapter 3: Qualitative Characteristics of Useful 

Financial Information, Fin. Accounting Standards Bd

5, BC3.18B (Aug. 2018) [hereinafter Amendments to 

Statement of Financial Accounting Concepts No. 8].

66 FASB’s mission is “to establish and improve financial 

accounting and reporting standards to provide useful 

information to investors and other users of financial reports 

and educate stakeholders on how to most effectively 

understand and implement those standards.” See FASB, 

About Us, About the FASB, https://www.fasb.org/jsp/FASB/

Page/SectionPage&cid=1176154526495 (last visited Nov. 

26, 2018).

67 Wesley Bricker, Chief Accountant, SEC, Remarks before 

the 2018 Baruch College Financial Reporting Conference: 

Working Together to Advance Financial Reporting, 

(May 3, 2018), https://www.sec.gov/news/speech/speechbricker-040318.

68 See Amendments to Smaller Reporting Company 

Definition, Securities Act Release No. 10513, 83 Fed. Reg. 

31,992 (July 10, 2018). 

69 See SEC, Press Release, SEC Expands the Scope of Smaller 

Public Companies that Qualify for Scaled Disclosures, 

2018-116 (June 28, 2018), available at https://www.sec.

gov/news/press-release/2018-116.

70 See U.S. Gov’t Accountability Office, GAO-13-582, Report 

to Congressional Committees, Internal Controls, SEC 

Should Consider Requiring Companies to Disclose Whether 

They Obtained an Auditor Attestation (July 2013), http://

www.gao.gov/assets/660/655710.pdf. 

71 See Letter from Center for Audit Quality and Counsel of 

Institutional Investors (Aug. 30, 2016), SEC File No. S7-12-
56 | OFFICE OF THE INVESTOR ADVOCATE

16, https://www.sec.gov/comments/s7-12-16/s71216-17.pdf; 

see also Letter from Center for Audit Quality and Counsel 

of Institutional Investors (May 6, 2014), https://www.

thecaq.org/caq-and-cii-oppose-any-legislation-eroding-soxsection-404b-or-revising-definition-accelerated-filer. 

72 Report on Objectives, Fiscal Year 2018, supra note 3, at 11.

73 SEC, Press Release, SEC Proposes to Enhance Protections 

and Preserve Choice for Retail Investors in Their 

Relationships With Investment Professionals, 2018-68 (Apr. 

18, 2018), https://www.sec.gov/news/press-release/2018-68. 

74 Id.

75 See Regulation Best Interest, Exchange Act Release No. 

83062, 83 Fed. Reg. 21,574 (proposed May 9, 2018) 

[hereinafter Regulation Best Interest]. 

76 SEC, Press Release and Fact Sheet, SEC Proposes to 

Enhance Protections and Preserve Choice for Retail 

Investors in Their Relationships With Investment 

Professionals, 2018-68 (Apr. 18, 2018), https://www.sec.

gov/news/press-release/2018-68 [hereinafter Proposal 

to Enhance Protections and Preserve Choice for Retail 

Investors Fact Sheet]; see also id. 

77 See Proposed Commission Interpretation Regarding 

Standard of Conduct for Investment Advisers; Request for 

Comment on Enhancing Investment Adviser Regulation, 

Exchange Act Release No. 4889, 83 Fed. Reg. 21,203 

(proposed May 9, 2018) [hereinafter Proposed Commission 

Interpretation Regarding Standard of Conduct for 

Investment Advisers, Enhancing Investment Adviser 

Regulation]; Proposal to Enhance Protections and Preserve 

Choice for Retail Investors Fact Sheet, supra note 76. 

78 See Proposed Commission Interpretation Regarding 

Standard of Conduct for Investment Advisers, Enhancing 

Investment Adviser Regulation, supra note 77 Proposal 

to Enhance Protections and Preserve Choice for Retail 

Investors Fact Sheet, supra note 76. 

79 See Form CRS Relationship Summary; Amendments 

to Form ADV; Required Disclosures in Retail 

Communications and Restrictions on the Use of Certain 

Names or Titles, Exchange Act Release No. 83063, 

Investment Advisers Act Release No. 4888, 83 Fed. Reg. 

21,416 (proposed May 9, 2018) [hereinafter Form CRS 

Relationship Summary]; Proposal to Enhance Protections 

and Preserve Choice for Retail Investors Fact Sheet, supra

note 76. 

80 See Form CRS Relationship Summary, supra note 79; 

Proposal to Enhance Protections and Preserve Choice for 

Retail Investors Fact Sheet, supra note 76. 

81 See Form CRS Relationship Summary, supra note 79; 

Proposal to Enhance Protections and Preserve Choice for 

Retail Investors Fact Sheet, supra note 76. 

82 See Form CRS Relationship Summary, supra note 79; 

Proposal to Enhance Protections and Preserve Choice for 

Retail Investors Fact Sheet, supra note 76.

83 Jay Clayton, Chairman, SEC, Public Statement: Statement 

on Public Engagement Regarding Standards of Conduct for 

Investment Professional Rulemaking (Apr. 24, 2018), https://

www.sec.gov/news/public-statement/public-engagementstandards-conduct-investment-professionals-rulemaking. 

84 Brian Scholl, Ph.D. & Angela Hung, Ph.D., SEC, Office of 

the Investor Advocate, The Retail Market for Investment 

Advice (Oct. 12, 2018), https://www.sec.gov/comments/s7-

07-18/s70718-4513005-176009.pdf.

85 Id. at 78. 

86 Id. at 79. 

87 Angela A. Hung et al., Investor Testing of Form CRS 

Relationship Summary (Nov. 7, 2018), https://www.sec.

gov/about/offices/investorad/investor-testing-form-crsrelationship-summary.pdf.

88 Id.

89 FINRA, Regulatory Notice 18-13, Quantitative 

Suitability (Apr. 20, 2018), http://www.finra.org/industry/

notices/18-13.

90 See generally FINRA Rule 2111 (2012).

91 Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: FINRA Regulatory Notice 18-13, Quantitative 

Suitability (June 19, 2018), https://www.sec.gov/about/

offices/investorad/letter-from-sec-investor-advocate-finraregulatory-notice-18-13.pdf.

92 Id.

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

(B)(ii)(V).

94 NASAA, NASAA 2016-2017 Year In Review, Serving & 

Protecting Investors (Sept. 2017), http://www.nasaa.org/

newsroom/nasaa-annual-report/ [hereinafter NASAA, 

Annual Report]. 

95 NASAA, NASAA Enforcement Report: 2018 Report 

Based on 2017 Data (Sept. 2018), http://www.nasaa.org/

wp-content/uploads/2018/10/2018-Enforcement-ReportBased-on-2017-Data-FINAL.pdf [hereinafter NASAA 

Enforcement Report]. 

96 NASAA, Top Investor Threats, http://www.nasaa.org/topinvestor-threats/ (last visited Oct. 11, 2018).

97 SEC, Office of Compliance Inspections and Examinations, 

Examination Priorities for 2017 (Jan. 12, 2017), https://

www.sec.gov/about/offices/ocie/national-examinationprogram-priorities-2017.pdf. 

98 Letter from Lynnette Kelly, Exec. Dir., MSRB, to Rick A. 

Fleming, Investor Advocate, SEC, RE: Response to Investor 

Advocate Request Highlighting Municipal Market Practices

(Oct. 19, 2018), http://www.msrb.org/Market-Topics/~/me

dia/1BD671EB464F406282968143A8A65274.ashx? (last 

visited Nov. 13, 2018). 

99 Throughout FY 2018, OIAD staff has engaged in 

conversations with the Division of Enforcement’s Retail 

Strategy Task Force. During FY 2018, the Division of 

Enforcement continued to target violations that harm retail 

investors including, but not limited to, new and emerging 

issues, such as unregistered or fraudulent digital asset- or 

crypto-related investments or schemes, as well as traditional 

concerns such as offering frauds, Ponzi schemes, pyramid 

schemes, penny stock fraud, undisclosed and excessive fees 

charged in connection with advisory or brokerage services, 

and the role of unregistered or unscrupulous gate keepers 

and third party providers and marketers.

100 This list of problematic products identified by the SEC is 

based on staff analysis of the alerts and bulletins issued 

by the SEC’s Office of Investor Education and Advocacy 

and the SEC’s Office of Compliance Inspections and 

Examinations during FY 2018. See SEC, Office of Investor 

Education and Advocacy, Investor Alerts and Bulletins, 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 57

https://www.sec.gov/investor/alerts (last visited Oct. 11, 

2018); see also SEC, Office of Compliance Inspections and

Examinations, Risk Alerts, https://www.sec.gov/ocie (last 

visited Oct. 11, 2018).

101 See NASAA, Investor Alerts & Tips, http://www.nasaa.org/

category/investor-education/investor-alerts-tips/ (last visited 

Sept. 18, 2017); see also NASAA, Annual Report, supra 

note 94; see also NASAA Enforcement Report, supra note 

95; see also NASAA, Top Investor Threats, supra note 96. 

102 This list of problematic products is based on the alerts and 

bulletins issued by FINRA for investors during FY 2018. 

103 Kelly, supra note 98.

104 The term “Unicorn” has come to refer to a privately held 

company with a supposed valuation on paper of more 

than $1 billion. NASAA, Informed Investor Advisory: 

Unicorns, http://www.nasaa.org/44461/informedinvestor-advisory-unicorns/.

105 Typically, a municipal bond dealer places a retail client’s 

bid-wanted out to the market and compiles the bids 

received to determine the winning bid. In “pennying” or 

as it may also be called, “last look,” the dealer rather than 

execute a trade with the highest bidder, will nominally 

exceed the high bid to the client and buy the bond for the 

dealer’s own trading account. The MSRB has expressed 

concern that it can be harmful to investors over the longterm if the practice discourages broad market participation 

in the bidding process and renders the market less efficient. 

Kelly, supra note 98. 

106 Press Release, Retail Investor Fraud Roundtable, supra

note 43. 

107 SEC, Equity Market Structure Roundtables, September 26, 

2018: Roundtable on Combating Retail Investor Fraud

(Sept. 26, 2018), https://www.sec.gov/spotlight/equitymarket-structure-roundtables. 

108 SEC, Office of the Investor Advocate, Report on Activities, 

Fiscal Year 2014 (Dec. 23, 2014), at 10, https://www.sec.

gov/advocate/reportspubs/sec-investor-advocate-report-onactivities-2014.pdf [hereinafter Report on Activities, Fiscal 

Year 2014]. 

109 Id. at 8.

110 SEC, Office of the Investor Advocate, Report on Activities, 

Fiscal Year 2015 (Dec. 23, 2015), at 16, https://www.sec.

gov/advocate/reportspubs/annual-reports/sec-investoradvocate-report-on-activities-2015.pdf. 

111 Report on Activities, Fiscal Year 2014, supra note 108, at 7.

112 SEC, Office of the Investor Advocate, Report on Activities, 

Fiscal Year 2017 (Dec. 20, 2017), at 13, https://www.sec.

gov/advocate/reportspubs/annual-reports/sec-investoradvocate-report-on-activities-2017.pdf. 

113 Id. at 13-14.

114 See Stephanie Avakian, Co-Director, Div. of Enf’t, SEC, 

Speech, Measuring the Impact of the SEC’s Enforcement 

Program (Sep. 20, 2018), https://www.sec.gov/news/speech/

speech-avakian-092018 [hereinafter Avakian, Measuring 

the Impact of the SEC’s Enforcement Program]. 

115 See Jay Clayton, Chairman, SEC, Public Statement, 

Statement on Cryptocurrencies and Initial Coin Offerings 

(Dec. 11, 2017), https://www.sec.gov/news/publicstatement/statement-clayton-2017-12-11. 

116 See Jay Clayton, Chairman, SEC, Testimony, Chairman’s 

Testimony on Virtual Currencies: The Roles of the SEC and 

CFTC (Feb. 6, 2018), https://www.sec.gov/news/testimony/

testimony-virtual-currencies-oversight-role-us-securitiesand-exchange-commission.

117 See SEC, Investor Bulletin: Initial Coin Offerings (July 25, 

2017), https://www.investor.gov/additional-resources/newsalerts/alerts-bulletins/investor-bulletin-initial-coin-offerings

[hereinafter Investor Bulletin: Initial Coin Offerings]. 

118 To be clear, many people believe that cryptocurrencies, 

ICOs, and products and technologies have great potential 

for a number of e-commerce applications and will lower 

transaction costs, including in our capital markets. 

119 See EY study: Initial Coin Offerings (ICOs), The Class of 

2017—one year later (Oct. 19, 2018), https://assets.ey.com/

content/dam/ey-sites/ey-com/global/news/2018/10/ey-icoresearch-web-oct-17-2018.pdf.

120 See id. 

121 See EY research: initial coin offerings (ICOs) (Dec. 2017), 

https://www.ey.com/Publication/vwLUAssets/ey-researchinitial-coin-offerings-icos/$File/ey-research-initial-coinofferings-icos.pdf. 

122 See Investor Bulletin: Initial Coin Offerings, supra note 117.

123 See, e.g., Jay Clayton, Chairman, SEC, Opening Remarks 

at the Securities Regulation Institute (Jan. 22, 2018), 

https://www.sec.gov/news/speech/speech-clayton-012218

[hereinafter Clayton, Opening Remarks at the Securities 

Regulation Institute]. See also Jay Clayton, Chairman, 

SEC, Remarks on Capital Formation at the Nashville 36|86 

Entrepreneurship Festival (Aug. 29, 2018), https://www.sec.

gov/news/speech/speech-clayton-082918. 

124 See Clayton, Opening Remarks at the Securities Regulation 

Institute, supra note 123. 

125 See Avakian, Measuring the Impact of the SEC’s 

Enforcement Program, supra note 114; see SEC, Div. of 

Enf’t, 2018 Annual Report (Nov. 2, 2018) https://www.sec.

gov/files/enforcement-annual-report-2018.pdf. 

126 See SEC, Spotlight on Initial Coin Offerings and Digital 

Assets, https://www.investor.gov/additional-resources/

specialized-resources/spotlight-initial-coin-offeringsdigital-assets. 

127 Jean Eaglesham and Rob Barry, More Than 5,000 

Stockbrokers From Expelled Firms Still Selling Securities, 

Wall St. J. (Oct. 4, 2013) [hereinafter Eaglesham and

Barry 5,000 Stockbrokers]; see also Ann Hagedorn, 

Floating Party: Boiler-Room Brokers Just Keep 

Resurfacing, Wall St. J. (April 26, 1990) (noting “the

cockroach factor”); see also Luis A. Aguilar, Commissioner, 

SEC, Address at The American Retirement Initiative’s 

Winter 2014 Summit (Feb. 4, 2014), https://www.sec.gov/

news/speech/2014-spch020414laa; see also Benjamin P. 

Edwards, The Dark Side of Self-Regulation, 85 U. Cin. L. 

Rev. 573, 608 (2017).

128 See id.

129 Eaglesham and Barry, 5,000 Stockbrokers, supra note 127. 

130 Id.

131 See id. 

132 See id.

133 See id.

134 See id.

135 FINRA, 2018 Regulatory and Examination Priorities 

Letter (Jan. 8, 2018), http://www.finra.org/industry/2018-

regulatory-and-examination-priorities-letter; FINRA, 2017 
58 | OFFICE OF THE INVESTOR ADVOCATE

Regulatory and Examination Priorities Letter (Jan. 4, 

2017), http://www.finra.org/industry/2017-regulatory-andexamination-priorities-letter; FINRA, 2015 Regulatory and 

Examination Priorities Letter (Jan. 6, 2015), http://www.

finra.org/industry/2015-exam-priorities-letter; FINRA, 

2014 Regulatory and Examination Priorities Letter (Jan. 2, 

2014), http://www.finra.org/industry/2014-exam-prioritiesletter [hereinafter FINRA, 2014 Priorities]. In 2016, FINRA 

did not include high-risk firms and brokers or migration 

among its top regulatory and examination priorities, 

however, it broadly referenced the importance of “firm 

culture.” See FINRA, 2016 Regulatory and Examination 

Priorities Letter (Jan. 5, 2016), http://www.finra.org/

industry/2016-regulatory-and-examination-priorities-letter.

136 See Jean Eaglesham and Rob Barry, FINRA Is Cracking 

Down on “High-Risk” Brokers, Wall St. J. (Nov. 21,

2013), https://www.wsj.com/articles/finra-is-cracking-downon-8216highrisk8217-brokers-1385075688?mod=article_

inline&tesla=y; see also FINRA, 2014 Priorities (stating 

that FINRA launched a “High Risk Broker initiative” in 

2013 to identify brokers with “a pattern of complaints 

and disclosures” that could harm investors, the securities 

industry and the financial markets); see also Scott Patterson 

and Matthias Rieker, New Push to Stamp Out Bad 

Brokers—FINRA, Wall Street’s Self-Regulator, Forms Special 

Enforcement Team; Squashing “Cockroaching,” Wall St.

J. (Jan. 3, 2014); see also Mathias Rieker, FINRA to Crack 

Down on Brokers With High Number of Complaints, Dow 

Jones Newswires (Jan. 2, 2014).

137 See FINRA, Press Release, FINRA Sanctions 10 Former 

Global Arena Representatives as a Result of FINRA 

Crackdown on Broker Migration (Sept. 15, 2015), http://

www.finra.org/newsroom/2015/finra-sanctions-10-formerglobal-arena-representatives-result-finra-crackdown-broker

[hereinafter FINRA, Global Arena Release]; see also Anne 

Prior, FINRA Bars Brokers From Closed Securities Firm, 

Wall St. J. (Sept. 15, 2015), https://www.wsj.com/articles

finra-bars-brokers-from-closed-securities-firm-1442338495; 

see also Jean Eaglesham and Rob Barry, Watchdog Hunt is 

Short on Wolves, Wall St. J. (Mar. 5, 2015) (reporting on

the migratory former brokers of an expelled Long Islandbased firm who encountered disciplinary problems at nine 

times the industry average and were far more likely to work 

for one or more other brokerages expelled by FINRA, yet 

were not barred from the industry), https://www.wsj.com/

articles/watchdogs-hunt-is-short-on-wolves-1425511252. 

138 BrokerCheck, FINRA, https://brokercheck.finra.org/

firm/summary/44351 (last visited Nov. 8, 2018); see also

FINRA, Global Arena Release.

139 See FINRA, Global Arena Release, supra note 137.

140 See Eaglesham and Barry, 5,000 Stockbrokers, supra note 

128 (quoting former Texas state securities commissioner, 

Denise Voigt Crawford).

141 See Mark Egan, et al., The Market for Financial Adviser 

Misconduct 12 (Nat’l Bureau of Econ. Research, Working 

Paper No. 22050, Rev. Sept. 2017), https://www.nber.org/

papers/w22050.pdf (noting that unlike medical malpractice 

which broadly ensnares doctors throughout the industry, 

financial advisor misconduct is “concentrated in around 

8% of the active population”) [hereinafter Egan, The 

Market for Financial Adviser Misconduct]. 

142 Id. at 23.

143 See Jean Eaglesham and Coulter Jones, A Private-Market 

Deal Gone Bad: Sketchy Brokers, Bilked Seniors and a 

Cosmetologist, Wall St. J. (May 7, 2018) [hereinafter

Eaglesham, A Private Market Deal]; Miami Law School, 

Investor Rights Clinic Helps Elderly Couple Recoup 

Financial Investment (Dec.1, 2017) (detailing a broker’s 

scheme to misstate an elderly couple’s net worth in order 

to qualify the couple as accredited investors eligible to 

purchase the private placements he hoped to sell them), 

https://www.law.miami.edu/news/2017/december/

investor-rights-clinic-helps-elderly-couple-recoup-financialinvestment; see also Egan, The Market for Financial Adviser 

Misconduct, supra note 141, at 27 (stating that “counties 

with a smaller share of college graduates and a larger share 

of retirees experience more misconduct and employ more 

advisors with past misconduct records”); see also SEC, 

Litigation Release No. 24287, SEC Charges Ohio Broker 

with Defrauding Senior Customers (Sept. 25, 2018), https://

www.sec.gov/litigation/litreleases/2018/lr24287.htm. 

144 See Jean Eaglesham and Coulter Jones, Regulators Step 

Up Scrutiny of Sales of Private Stakes, Wall St. J

(July 2, 2018); see also Jean Eaglesham and Coulter Jones, 

Private Placements Draw Troubled Brokers, Wall St. J.

(June 25, 2018); see also Emily Zulz, SEC Charges 

Ex-UBS Broker With Bilking 15 Clients, THINKADVISOR 

(Aug. 9, 2018)(alleged use of high pressure tactics to 

convince elderly to invest in private fund), https://www.

thinkadvisor.com/2018/08/09/sec-charges-ex-ubs-brokerwith-bilking-15-clients/.

145 See Eaglesham, A Private Market Deal, supra note 143. 

146 See id.

147 FINRA, Regulatory Notice 18-06, Membership Application 

Program (Feb. 8, 2018), http://www.finra.org/sites/

default/files/notice_doc_file_ref/Regulatory-Notice-18-06.

pdf [hereinafter FINRA, Regulatory Notice 18-06]. The 

proposed amendments would include limitations on the 

ability of firms to transfer assets to avoid satisfaction of 

judgements and the ability of firms to expand by adding 

associated persons with certain pending arbitration 

claims or unpaid arbitration awards or settlements. The 

restrictions under Regulatory Notice 18-06 are generally 

subject to materiality consultations.

148 FINRA, Regulatory Notice 18-16, High Risk Brokers, (Apr. 

30, 2018), http://www.finra.org/sites/default/files/RegulatoryNotice-18-16.pdf [hereinafter FINRA, Regulatory Notice 

18-16]. This proposed amendment was discussed in our 

Report on Activities Fiscal Year 2017 shortly after the 

FINRA board authorized FINRA to amend its rules. See also

FINRA, Regulatory Notice 18-23, Membership Application 

Proceedings at 42 (July 26, 2018) (noting that FINRA 

has refrained from setting additional standards “pending 

further development” related to outstanding proposals in 

Regulatory Notice 18-06 and Regulatory Notice 18-16 

“to strengthen controls on brokers with a history of past 

misconduct and to ensure greater accountability for firms 

that choose to employ high-risk brokers, and to incentivize 

payment of arbitration awards.”).

149 FINRA, Regulatory Notice 18-17, Sanctioning Guidelines 

(May 2, 2018), https://www.finra.org/sites/default/files/

Regulatory-Notice-18-17.pdf.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 59

150 See FINRA, Regulatory Notice 18-06, supra note 147; 

see also FINRA, Regulatory Notice 18-15, Heightened 

Supervision (April 30, 2018) (reiterating existing 

obligations of member firms to supervise associated persons 

with a history of past misconduct).

151 Under FINRA Rule 3170, a firm incurs an obligation to 

adopt significant monitoring measures, including recording 

of certain calls to customers, if the percentage of brokers 

hired from expelled or disciplined firms exceeds a certain 

threshold. See http://finra.complinet.com/en/display/

display_main.html?rbid=2403&element_id=11348. The 

proposed amendment to Rule 8312 would require a firm 

disclose on BrokerCheck its status as a “taping firm.” See

FINRA, Regulatory Notice 18-16, supra note 148.

152 Robert W. Cook, President and CEO, FINRA, Protecting 

Investors From Bad Actors (June 12, 2017), http://

www.finra.org/newsroom/speeches/061217-protectinginvestorsbad-actors (citing fairness and due process 

concerns as reasons FINRA does not publish the names of 

the high-risk firms and brokers identified by the regulator).

153 SEC, Office of the Investor Advocate, Report on Objectives, 

Fiscal Year 2019 (June 29, 2018) at 14-15, https://www.sec.

gov/advocate/reportspubs/annual-reports/sec-office-investoradvocate-report-on-objectives-fy2019.pdf. 

154 SEC, Fast Answers, Transfer Agents (last modified 

Mar. 2, 2012), https://www.sec.gov/fast-answers/

answerstransferagenthtm.html. 

155 SEC, Division of Trading and Markets, Transfer Agents

(last modified Apr. 28, 2016), https://www.sec.gov/

divisions/marketreg/mrtransfer.shtml. 

156 Concept Release, Transfer Agent Regulations, Exchange Act 

Release No. 34-76743, 80 Fed. Reg. 81,948, at 81,949 (Dec. 

31, 2015) [hereinafter Transfer Agent Concept Release]. 

157 SEC, Press Release, SEC Staff to Host Roundtable on 

Regulatory Approaches to Combating Retail Investor 

Fraud, 2018-200 (Sept. 18, 2018), https://www.sec.gov/

news/press-release/2018-200.

158 SEC, Webcast: Retail Investor Fraud Roundtable (Sept. 

26, 2018) (on file with SEC), https://www.sec.gov/video/

webcast-archive-player.shtml?document_id=investor-fraudroundtable-092618 [hereinafter Webcast: Retail Investor 

Fraud Roundtable]. 

159 Id.

160 Transfer Agent Concept Release, supra note 156, at 81,949. 

161 SEC, Investor Publications, Microcap Stock: A Guide for 

Investors (Sept. 18, 2013), https://www.sec.gov/reportspubs/

investor-publications/investorpubsmicrocapstockhtm.html. 

162 SEC, Press Release, SEC Announces Enforcement Initiatives 

to Combat Financial Reporting and Microcap Fraud and 

Enhance Risk Analysis, 2013-121 (July 2, 2013), https://

www.sec.gov/news/press-release/2013-2013-121htm. 

163 See SEC, Office of the Investor Advocate, Report on 

Activities, Fiscal Year 2019 (June 29, 2018) at 14-15, https://

www.sec.gov/advocate/reportspubs/annual-reports/secoffice-investor-advocate-report-on-objectives-fy2019.pdf; 

Webcast: Retail Investor Fraud Roundtable, supra note 158. 

164 See, e.g., Hester M. Peirce, Commissioner, SEC, Lies and 

Statistics: Remarks at the 26th Annual Securities Litigation 

and Regulatory Enforcement Seminar (Oct. 26, 2018), 

https://www.sec.gov/news/speech/peirce-speech-liesstatistics-102618#_ftnref27 (“The enforcement actions 

I see also inspire me to think about areas in which we 

need better rules. To address some of the issues we see in 

the microcap space, for example, the Commission could 

consider a rulemaking to amend the transfer agent rules 

and reporting requirements.”). 

165 Transfer Agent Concept Release, supra note 156; SEC, 

Division of Trading and Markets, Transfer Agents (last 

modified Apr. 28, 2016), https://www.sec.gov/divisions/

marketreg/mrtransfer.shtml (listing Transfer Agent 

rules); see also Luis A. Aguilar, Commissioner, SEC, 

The Importance to the Capital Markets of Updating the 

Rules Regarding Transfer Agents (Dec. 17, 2014), at n.6 

(listing transfer agent rules adopted under the Securities 

and Exchange Act of 1934, including Exchange Act Rules 

17Ac2-1, 17Ac2-2, 17Ac3-1, 17Ad-1 through 7 and Rule 

17f-1 which were originally adopted in 1977; Exchange Act 

Rule 17Ad-8 adopted in 1980; Exchange Act Rule 17f-2 

adopted in 1982; Rules 17Ad-9 through 13 adopted in 

1983; Rule 17Ad-14 adopted in 1984; Rule 17Ad-15 and 

Rule 17Ad-16 adopted in 1992; Rule 17Ad-17 adopted in 

1997; and Rule 17Ad-19 adopted in 2003), https://www.

sec.gov/news/statement/spch121714-2laa.html#_edn6. 

166 See, e.g., Michael Wursthorn and Chelsey Dulaney, 

Investors’ Zeal to Buy Stocks With Debt Leaves Markets 

Vulnerable, Wall St. J. (Feb. 25, 2018), https://www

wsj.com/articles/investors-zeal-to-buy-stocks-with-debtleaves-markets-vulnerable-1519560001 (“Margin debt 

has been on the rise of years and is generally considered 

a gauge of investor confidence. The long-running stock 

rally has helped push debt levels higher since investors 

tend to be more willing to take loans against investments 

that are rising in value.”); Yakob Peterseil and Cecile 

Gutscher, Winning ‘Black Swan’ Investor in 2008 says 

Market’s More Fragile, Bloomberg (Apr. 17, 2018), https:/

www.bloomberg.com/news/articles/2018-04-17/winningblack-swan-investor-in-2008-says-market-s-more-fragile

(“Leverage is up on every single metric, in just about every 

category, and debt has increased.”); FINRA, Margin Debt 

at Record Levels: Know the Risks (Jan. 18, 2018), http://

www.finra.org/investors/highlights/margin-debt-recordlevels-know-risks (In January 2018, FINRA reported that 

“borrowing by investors in November 2017 stood at an 

all-time high of $627.4 billion.”). 

167 SEC, Investor Bulletin: Understanding Margin Accounts 

(May 14, 2018), https://www.sec.gov/oiea/investor-alertsand-bulletins/ib_marginaccount [hereinafter Understanding 

Margin Accounts]. 

168 Margin Debt at Record Levels: Know the Risks, supra 

note 166. 

169 FINRA, Investor Alerts, Updated: Investing with Borrowed 

Funds: No “Margin” For Error (last updated Jan. 18, 

2018), http://www.finra.org/investors/alerts/investingborrowed-funds-no-margin-error. 

170 Id.; Understanding Margin Accounts, supra note 167.

171 Understanding Margin Accounts, supra note 167.

172 Id.

173 Id.

174 Id.

175 Id.

176 Id.

177 Id.
60 | OFFICE OF THE INVESTOR ADVOCATE

178 Id.

179 E.g., FINRA, Investor Alerts, Know What Triggers a 

Margin Call (Nov. 8, 2018), http://www.finra.org/investors/

highlights/know-what-triggers-margin-call; Margin Debt 

at Record Levels: Know the Risks, supra note 166; 

Understanding Margin Accounts, supra note 167; FINRA, 

Investor Alerts, Updated: Investing with Borrowed Funds: 

No “Margin” For Error (last updated Jan. 18, 2018), 

http://www.finra.org/investors/alerts/investing-borrowedfunds-no-margin-error. 

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

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

182 Some of our comment letters respond to Concept Releases 

and set forth our views on certain matters, but a specific 

call for action may be premature. Comment letters of this 

nature are not included in this inventory. See, e.g., Rick A. 

Fleming, Investor Advocate, SEC, Comment Letter RE: 

Solicitation of Comments by the NASDAQ Listing and 

Hearing Review Council about Shareholder Approval 

Rules, (Feb. 12, 2016). Moreover, we are required to 

provide an inventory outlining actions of the SEC or SROs. 

Letters to Congress or other organizations such as NASAA 

are not included in this inventory, but are available at 

https://www.sec.gov/advocate/investor-advocate-commentletters.html. 

183 See Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: PCAOB Rulemaking Docket Matter No. 034, 

The Auditor’s Report on an Audit of Financial Statements 

When the Auditor Expresses an Unqualified Opinion, 

(Aug. 15, 2016), https://www.sec.gov/about/offices/

investorad/comment-investor-advocate-pcaob-auditorreports-8-15-2016.pdf. 

184 See Fleming, Letter on Regulation of NMS Stock ATS, 

supra note 23 and accompanying text.

185 Comment Letter, Rick A. Fleming, Investor Advocate, SEC, 

RE: File Reference No. 2015-300, Proposed Amendments 

by the Financial Accounting Standards Board (FASB) to 

Concepts Statement No. 8, Conceptual Framework for 

Financial Reporting, (July 11, 2017), http://www.fasb.org/

cs/BlobServer?blobkey=id&blobnocache=true&blobwhere

=1175835179218&blobheader=application%2Fpdf&blob

headername2=Content-Length&blobheadername1=

Content-Disposition&blobheadervalue2=565918&blobhea

dervalue1=filename%3DDISFR-C.ED.0056.SEC_OFFICE_

INVESTOR_ADVOCATE_RICK_A._FLEMING.pdf&blo

bcol=urldata&blobtable=MungoBlobs.

186 FASB, Amendments to Statement of Financial Accounting 

Concepts No. 8, supra note 65; see FASB, Press Release, 

FASB Improves the Effectiveness of Disclosures in Notes to 

Financial Statements (Aug. 8, 2018), https://www.fasb.org/

cs/ContentServer?c=FASBContent_C&cid=11761711174

38&d=&pagename=FASB%2FFASBContent_C%2FNew

sPage. 

187 Comment Letter, Rick A. Fleming, Investor Advocate, and 

Tracey L. McNeil, Ombudsman, SEC, RE: Regulatory 

Notice 17-42, Proposed Amendments to the Codes of 

Arbitration Procedure Relating to Requests to Expunge 

Customer Dispute Information (Feb. 15, 2018), https://

www.sec.gov/about/offices/investorad/letter-from-secinvestor-advocate-finra-regulatory-notice-17-42.pdf. 

188 Comment Letter, Rick A. Fleming, Investor Advocate, SEC, 

RE: Recommendation of the Investor Advocate, File No. 

SR-CHX-2017-04 (Feb. 27, 2018), https://www.sec.gov/

comments/sr-chx-2017-04/chx201704-3169295-161957.pdf. 

189 See Order Setting Aside the Order by Delegated Authority 

Approving SR-CHX-2017-04, Exchange Act Release No. 

84337, 83 Fed. Reg. 50,720 (Oct. 9, 2018), https://www.

federalregister.gov/d/2018-21761.

190 Comment Letter, Rick A. Fleming, Investor Advocate, SEC, 

RE: Regulatory Notice 18-13, Quantitative Suitability (June 

19, 2018), https://www.sec.gov/about/offices/investorad/

letter-from-sec-investor-advocate-finra-regulatorynotice-18-13.pdf. 

191 Comment Letter, Rick A. Fleming, Investor Advocate, 

SEC, RE: MSRB Regulatory Notice 2018-15, Request 

for Comment on Draft Amendments to MSRB Rules on 

Primary Offering Practices (Sept. 17, 2018), https://www.

msrb.org/RFC/2018-15/SEC.pdf.

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

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

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

to the Ombudsman, or to the Ombudsman and Office 

of the Investor Advocate staff and contractors directly 

supporting the ombudsman function.

195 What We Do, SEC (June 10, 2013), https://www.sec.gov/

Article/whatwedo.html.

196 There is debate whether FINRA constitutes a selfregulatory organization. In 1996, the SEC censured the 

NASD due to the undue influence by NASDAQ market 

makers over NASD’s operations and regulatory affairs. 

As a consequence, the SEC required NASD to increase 

the role of public members on the NASD board among 

other remedies, which in turn changed the organization 

to one independent of its membership which, in the view 

of one critic, shifted the organization from an SRO to a 

regulator with industry representation. See, e.g., Hester 

Peirce, The Financial Industry Regulatory Authority: Not 

Self-Regulation after All 8-9, 18 (Mercatus Working Paper, 

Jan. 2015). https://www.mercatus.org/system/files/PeirceFINRA.pdf; see David R. Burton, Reforming FINRA, 

The Heritage Found. Backgrounder No. 3181, 2 (Feb

2017), http://www.heritage.org/sites/default/files/2017-02/

BG3181.pdf. 

197 BrokerCheck is a free tool that enables investors to research 

the professional backgrounds of brokers and brokerage 

firms. About BrokerCheck, http://www.finra.org/investors/

about-brokercheck (last visited Nov. 1, 2018).

198 When an investor opens an account at a brokerage firm, 

the agreement almost always includes a mandatory 

pre-dispute arbitration clause that specifies that any legal 

dispute between the investor and the broker will be resolved 

via FINRA dispute resolution. As a result, investors have 

become aware of FINRA’s arbitration and mediation forum.

199 See Jean Eaglesham, Arbitration Awards Go Unpaid, Wal

St. J. (Feb. 25, 2016) (noting “[i]t isn’t easy to win an 

arbitration award against a Wall Street stockbroker. What 

also is hard is getting paid.”).

200 U.S. Gov’t Accountability Office, GAO/

Securities Arbitration: Actions Needed to 

Problem of Unpaid Awards (2000), https://www.
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 61

assets/160/156962.pdf; see also U.S. Gov’t Accountabi

Office, GAO-03-162R, Follow-up Repo

Relating to Securities Arbitration (2003), https:/

gao.gov/assets/100/91805.pdf. 

201 FINRA, Discussion Paper—FINRA Perspectives on Customer 

Recovery, (Feb. 2018) [hereinafter Discussion Paper], http://

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

customer_recovery.pdf; see also FINRA, Statistics on Unpaid 

Customer Awards in FINRA Arbitration (May 2018), https://

www.finra.org/arbitration-and-mediation/statistics-unpaidcustomer-awards-finra-arbitration.

202 See Discussion Paper, supra note 201, at 6; see also PIABA, 

Unpaid Arbitration Awards: The Case For An Investor 

Recovery Pool (March 7, 2018), available at https://piaba.

org/piaba-newsroom/unpaid-awards [hereinafter PIABA].

203 See Discussion Paper, supra note 201, at 7; see also PIABA, 

supra note 202.

204 See PIABA, supra note 202.

205 See Discussion Paper, supra note 201, at 11.

206 See id. at 15.

207 See id. 

208 See id. Broker migration and misconduct (known as 

“cockroaching”) was also discussed in the section of this 

Report entitled Problematic Products and Practices.

209 See Discussion Paper supra note 201, at 16.

210 See id. at 17.

211 See id. at 18.

212 See id. 

213 See id. 

214 See id. at 17; see also PIABA, supra note 202. 

215 See SEC, Fast Answers, Securities Investor Protection 

Corporation (SIPC) (last modified Mar. 27, 2012), https://

www.sec.gov/fast-answers/answerssipchtm.html.

216 The fund is maintained by SIPC member assessments and 

interest on U.S. government securities. See https://www.sipc.

org/about-sipc/the-sipc-fund.

217 See PIABA, supra note 202. 

218 See Discussion Paper, supra note 201, at 17.

219 Ted Knutson, Proposed FINRA Fund to Pay for Unpaid 

Arbitration Award Gets Business/Labor Leaders Sparring, 

Forbes (June 28, 2018), https://www.forbes.com/site

tedknutson/2018/06/28/proposed-finra-fund-to-pay-forunpaid-arbitration-awards-gets-businesslabor-leaderssparring/#33f4781a57af.

220 See Egan, et al, Arbitration with Uninformed Consumers 

(Nat’l Bureau of Econ. Research, Working Paper 25150, 

Oct. 2018), https://www.nber.org/papers/w25150.pdf.

221 FINRA, Arbitrator Selection, https://www.finra.org/

arbitration-and-mediation/arbitrator-selection.

222 See id.

223 See id.

224 See id.

225 See id.

226 PIABA, Study: Industry-Run FINRA Arbitrator Pool 

Lacks Diversity and Fails to Detect, Communicate 

Potential Biases, (Oct. 7, 2014), https://piaba.org/sites/

default/files/newsroom/2014-10/The%20Importance%20

of%20Arbitrator%20Disclosure%20(October%207,%20

2014).pdf.

227 In December 2015, FINRA’s Dispute Resolution Task Force 

set forth 51 recommendations to improve FINRA’s dispute 

resolution forum. The final report included recommendations 

to develop strategies to improve “the depth and diversity” of 

the arbitrator pool and convey inclusiveness to “qualified and 

diverse individuals with a variety of educational backgrounds 

and work experiences.” See FINRA, Final Rep.

Recommendations of the FINRA Disp. Resol

(Dec. 16, 2015), https://www.finra.org/ sites/default/files/FinalDR-taskforce-report.pdf. 

228 FINRA Pushes For Arbitrator Diversity, Barron’s, (Sept

22, 2017), https://www.barrons.com/articles/finra-pushesfor-arbitrator-diversity-1506101664.

229 Jill I. Gross, The Improbable Birth and Conceivable Death 

of the Securities Arbitration Clinic, 15 Cardozo J. Conflict 

Resol. 597, 599 (2014) [hereinafter Gross].

230 See id. at 600.

231 See id. at 600-01.

232 As formal clinic names vary, for purposes of this Report, all 

securities law, securities arbitration, and investor protection 

focused clinics referenced herein are referred to as investor 

advocacy clinics or clinics.

233 SEC, Recommendation of the Investor Advisory 

Committee: Financial Support for Law School Clinics that 

Support Investors 6 (Mar. 8, 2018), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/law-clinicsrecommendation.pdf. 

234 See Gross, supra note 229, at 604-05. 

235 The vast majority of states do not have investor clinics and 

therefore many clients are disqualified. See id.

236 As another aspect of client eligibility, clinics may also give 

preference to senior citizens. For example, the Pittsburgh 

region is considered to have one of the highest aging 

populations in the country and, as a result, has many senior 

citizen clients. Senior citizens and retirees, however, are 

not a clinic’s only clients. Clinic clients also include regular, 

middle-class Americans such as hairdressers, mail carriers, 

welders, schoolteachers, librarians, first-time investors, and 

millennials. See Letter from Nicole G. Iannarone Director, 

Investor Advocacy Clinic, Georgia State University College 

of Law, et al. to FINRA (June 19, 2017), at 2, https://www.

finra.org/sites/default/files/notice_comment_file_ref/SN32117_GSU_comment.pdf [hereinafter Iannarone Letter]. 

237 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.

238 See id.

239 Office of the New York State Attorney General, Press 

Release, Former Telecom Executive Agrees to Turn Over 

IPO Profits (Dec. 4, 2003), https://ag.ny.gov/press-release/

former-telecom-executive-agrees-turn-over-ipo-profits.

240 Press Release, University of Pittsburgh, Pitt Law School to 

Open Securities Arbitration Clinic, (May 2, 2011), http://

www.news.pitt.edu/news/pitt-law-school-open-securitiesarbitration-clinic.

241 See FINRA Investor Education Foundation, Press Release, 

FINRA Foundation Announces $1 Million in Grants 

to Fund Securities Advocacy Clinics (Jan. 28, 2010), 

http://www.finra.org/newsroom/2010/finra-foundationannounces-1-million-grants-fund-securities-advocacy-clinics; 

see also Gross, supra note 229, at 604 (“As a result of these 
62 | OFFICE OF THE INVESTOR ADVOCATE

[FINRA] grants, clinics opened at other law schools such as 

Florida International University, Howard University, Suffolk 

University, and Pepperdine in 2009; at Seton Hall University 

and University of Miami in 2010; and at Georgia State and 

Michigan State University in 2012.”). 

242 See Gross, supra note 229, at 619.

243 There are currently seventeen clinics in operation: seven 

located in New York (Benjamin N. Cardozo School of 

Law, Cornell Law School, Fordham University School of 

Law, New York Law School, Pace University Elisabeth 

Haub School of Law, St. John’s University School of Law, 

Syracuse University College of Law), two in California 

(Pepperdine University School of Law, and University of 

San Francisco School of Law), and one each in the District 

of Columbia (Howard University School of Law), Florida 

(University of Miami School of Law), Georgia (Georgia 

State University College of Law), Illinois (Northwestern 

University Pritzker School of Law), Nevada (UNLV 

William S. Boyd School of Law), New Jersey (Seton Hall 

University School of Law), and Pennsylvania (University 

of Pittsburgh School of Law). In addition, Brooklyn Law 

School maintains an investor advocacy clinic with a unique 

structure, however, it is unclear if the clinic is currently 

active. See SEC, Office of the Investor Advocate, Report 

on Objectives, Fiscal Year 2019, at 26 (June 29, 2018) 

(showing a map of locations of investor advocacy clinics 

as of Mar. 31, 2018), https://www.sec.gov/advocate/

reportspubs/annual-reports/sec-office-investor-advocatereport-on-objectives-fy2019.pdf [hereinafter Report on 

Objectives, Fiscal Year 2019]. 

244 See id.

245 FINRA Dispute Resolution Task Force, Final Report and 

Recommendations of the FINRA Dispute Resolution Task 

Force (Dec. 16, 2015) at 52, http://www.finra.org/sites/

default/files/Final-DR-task-force-report.pdf.

246 See id. 

247 In June 2017, 13 investor advocacy clinic directors 

submitted a joint letter to the SEC containing 

recommendations for clinic funding. The directors 

recommended that fines and penalties levied by FINRA 

would be an appropriate source of continued funding. The 

directors also recommended legislation to secure additional 

or alternative funding from the FINRA Investor Education 

Foundation or a government grant-matching program 

similar to the successful Internal Revenue Service model 

used to fund low-income taxpayer clinics. See Iannarone 

Letter, supra note 236.

248 See id.

249 Report on Objectives, Fiscal Year 2019, supra note 243, 

at 23-29. 

250 Id.

251 Report on Objectives, Fiscal Year 2019, supra note 243, 

at 26.

252 The Investor Advocate, the Ombudsman, and the Office 

are extremely appreciative of the time and effort extended, 

and the comprehensive recommendations made, by the 

clinic faculty and students in helping us make meaningful 

changes to policies affecting retail investors, particularly 

those investors in vulnerable populations.

253 SEC, Investing in America: Commissioners Hear from 

Investors and Share Insights in Atlanta (last modified July 

12, 2018), https://www.sec.gov/page/atlanta-town-hall.

254 SEC, Press Release, Investing in America: SEC 

Commissioners are Heading to Atlanta to Interact with 

Investors, 2018-91 (May 23, 2018), https://www.sec.gov/

news/press-release/2018-91.

255 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/iac030818-lawclinics-recommendation.pdf. 

256 At the September 2018 IAC meeting, committee 

members discussed the implications of passive investing 

on retail investors and how changes to the proxy voting 

infrastructure could improve retail investor participation. 

See Investor Advisory Committee, Agenda for September 

13, 2018, Meeting, https://www.sec.gov/spotlight/investoradvisory-committee-2012/iac091318-agenda.htm (last 

visited Oct. 25, 2018). 

257 Including, for example, Evidence-Based Policymaking 

Commission Act of 2016, the GPRA Modernization 

Act of 2010, and various OMB directives and executive 

orders. Evidence-Based Policymaking Commission Act of 

2016, Pub. L. No. 114-140, 130 Stat. 317 (2016); GPRA 

Modernization Act of 2010, Pub. L. No. 111-352, 124 

Stat. 3866 (2011) (codified at 31 USC § 1101). 

258 From time to time, the Office may use its contracting 

platform to facilitate Commission-sponsored surveys or 

other testing methods that seek investors’ opinions. See, 

e.g., Angela A. Hung, et al, Investor Testing of Form CRS 

Relationship Summary (Nov. 2018), https://www.sec.

gov/about/offices/investorad/investor-testing-form-crsrelationship-summary.pdf. These projects do not bear the 

POSITIER brand and should not be considered POSITIER 

projects.

259 Evidence-Based Policymaking Commission Act of 2016, 

Pub. L. No. 114-140, 130 Stat. 317 (2016). 

260 See, e.g., Office of Mgmt. & Budget, Barriers to U

Administrative Data for Evidence Building (white 

paper submitted for the Commission on Evidence-Based 

Policymaking) (2016), https://obamawhitehouse.archives.

gov/sites/default/files/omb/mgmt-gpra/barriers_to_using_

administrative_data_for_evidence_building.pdf

261 Annamaria Lusardi & Olivia S. Mitchell, The Economic 

Important of Financial Literacy: Theory and Evidence, 

52(1) J. of Econ. Literature, 5-44 (201

262 In fact, on the relevance of financial literacy interventions, 

a recent meta-analysis suggests caution about the effect of 

literacy interventions. Daniel Fernandes, John G. Lynch, 

Jr., & Richard G. Netemeyer, Financial Literacy, Financial 

Education, and Downstream Financial Behaviors, 60 

Mgmt. Sci. 1861 (2014), https://pubsonline.informs.org

doi/abs/10.1287/mnsc.2013.1849. 

263 Scholl & Hung, supra note 84. 

264 Linnainmaa, Melzer and Previtero provide evidence that 

financial advisors may suffer from behavioral biases in 

their own personal portfolios (e.g. chasing returns and 

underdiversifying). See Juhani T. Linnainmaa, Brian Melzer 
REPORT ON ACTIVITIES: FISCAL YEAR 201 8 | 63

& Alessandro Previtero, The Misguided Beliefs of Financial 

Advisors, (last revised May 2018), https://papers.ssrn.com/

sol3/papers.cfm?abstract_id=3101426. Fisch, WilkinsonRyan and Firth conduct an allocation experiment and 

test for knowledge with financial professionals and other 

population groups; while professionals do better than 

non-professionals, a not insubstantial number make poor 

choices. See Jill E. Fisch, Tess Wilkinson-Ryan & Kristin 

Firth, The Knowledge Gap in Workplace Retirement 

Investing and the Role of Professional Advisors, 66 Duk

L.J. 633 (2016).

265 See Stephen G. Dimmock, William C. Gerken, & Nathanial 

P. Graham, Is Fraud Contagious? Coworker Influence on 

Misconduct by Financial Advisors, 73 J. of Fin. 1417 (2018).

266 See Jeremy Burke, Angela Hung, Jack Clift, Steven Garber, 

& Joanne Yoong, Impacts of Conflicts of Interest in the 

Financial Services Industry (Feb. 2015), https://www.rand.

org/content/dam/rand/pubs/working_papers/WR1000/

WR1076/RAND_WR1076.pdf. 

267 See Regulation Best Interest, supra note 75; see Proposed 

Commission Interpretation Regarding Standard of Conduct 

for Investment Advisers, Enhancing Investment Adviser 

Regulation supra note 77; see Form CRS Relationship 

Summary, supra note 79. 

268 Scholl & Hung, supra note 84. 

269 We are happy to provide briefings to congressional staff 

upon request.

270 An individual representative may be a registered 

representative or “broker,” an investment advisor 

representative “investment advisor,” or have both 

registrations “dual-hatted.”

271 See Webcast: Investing in America: Atlanta Town Hall 

Meeting (June 13, 2018), https://www.sec.gov/video/

webcast-archive-player.shtml?document_id=061318-

townhall.

272 Regulation Best Interest, supra note 75, at 21,639 tbl.6. 

273 The DERA data and the POSITIER data are actually 

two different measurements. The DERA data counts the 

number of employees of a certain type at retail financial 

services firms, while ours presents a picture of what 

investors indicate is their primary professional. This 

discrepancy could arise for a number of reasons—for 

example, if brokers that are employed by the firm operate 

in some non-client-facing role. A significant number of 

individuals that use a financial professional did not provide 

information that would allow us to determine the true 

registration status of the professional, and it is possible that 

some number of these are brokers who provide incidental 

advice. However, even in the unlikely event that all of the 

professionals for which we could not identify a type were 

actually brokers, dual-hatted professionals would still 

represent 59 percent of the professionals that our investors 

report as their primary financial professional. 

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

275 Id.

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

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

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

279 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.”

280 SEC, Recommendation of the Investor Advisory 

Committee: Target Date Mutual Funds (Apr. 11, 

2013), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/iac-recommendation-target-date-fund.pdf. 

281 SEC, Recommendations of the Investor Advisory 

Committee Regarding SEC Rulemaking to Lift the Ban 

on General Solicitation and Advertising in Rule 506 

Offerings: Efficiently Balancing Investor Protection, Capital 

Formation and Market Integrity (2012), https://www.sec.

gov/spotlight/investor-advisory-committee-2012/iac-generalsolicitation-advertising-recommendations.pdf. 

282 SEC, Recommendation of the Investor Advisory 

Committee: Crowdfunding Regulations (Apr. 10, 

2014), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-adviser-crowdfundingrecommendation.pdf; SEC, Final Rule, Crowdfunding, 

Securities Act Release No. 9974, 80 FR 71,387 (Nov. 16, 

2015). See Report on Objectives, Fiscal Year 2017, supra 

note 49 for an analysis of how the final rules correspond 

with the IAC recommendations.

283 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/settlementcycle-recommendation-final.pdf. See also Press Release, 

SEC, SEC Adopts T+2 Settlement Cycle for Securities 

Transactions, 2017-68 (Mar. 22, 2017), https://www.sec.

gov/news/press-release/2017-68-0; Securities Transaction 

Settlement Cycle, Exchange Act Release No. 80295, 82 

Fed. Reg. 15,564 (Mar. 29, 2017).

284 SEC, Recommendation of the Investor Advisory 

Committee: Regarding Promotion of Electronic Delivery 

and Development of a Summary Disclosure Document 

for Delivery of Investment Company Shareholder Reports 

(Dec. 7, 2017), https://www.sec.gov/spotlight/investoradvisory-committee-2012/recommendation-promotion-ofelectronic-delivery-and-development.pdf. 

285 See SEC, Recommendation of the Investor Advisory 

Committee: Legislation to Fund Investment Adviser 

Examinations (Nov. 22, 2013), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/investmentadviser-examinations-recommendation-2013.pdf. 

286 17 C.F.R. §§ 200.735-3(b)(2)(i), 230122 (2014); Exchange 

Act § 24(b), 15 U.S.C. § 78x; 5 U.S.C. § 552a(i)(1); SECR18-

2, Section 8.5 (Nonpublic Information) (July 31, 2005). 

287 SEC, Recommendation of the Investor Advisory Committee 

Regarding Proposed Regulation Best Interest, Form CRS, and 

Investment Advisers Act Fiduciary Guidance (Nov. 7, 2018). 

288 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/investoradvisory-committee-2012/recommendation-transaction-feepilot-for-nms-stocks.pdf.

289 SEC, Recommendation of the Investor Advisory 

Committee: Select Enhancements to Protect Retail Investors 

in Municipal and Corporate Bonds (June 14, 2018), https://

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

recommendation-mf-fee-disclosure-041916.pdf. 
64 | OFFICE OF THE INVESTOR ADVOCATE

290 SEC, Amendments to Municipal Securities Disclosure, 

Release No. 34-83885 (Aug. 20, 2018), https://www.sec.

gov/rules/final/2018/34-83885.pdf.

291 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-clinicsrecommendation.pdf.

292 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/iac030818-minutes.pdf.

293 SEC, Recommendation of the Investor Advisory Committee 

to Enhance Information for Bond Market Investors (June 

7, 2016), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/recommendation-enhance-informationbond-market-investors-060716.pdf; see also MSRB, 

Regulatory Notice 2016-28, New Disclosure Requirements 

Under MSRB Rule G-15 and Prevailing Market Price 

Guidance Pursuant to Rule G-30 Effective May 14, 

2018 (Nov. 29, 2016), http://www.msrb.org/~/media/

Files/Regulatory-Notices/Announcements/2016-28.ashx 

[hereinafter MSRB Notice 2016-28]; FINRA, Regulatory 

Notice 17-08, Pricing Disclosure in the Fixed Income 

Markets (Feb. 2017), https://www.finra.org/sites/default/

files/notice_doc_file_ref/Regulatory-Notice-17-08.pdf 

[hereinafter FINRA Notice 17-08].

294 FINRA; Notice of Filing of Amendment No. 1 and Order 

Granting Accelerated Approval of a Proposed Rule 

Change, as Modified by Amendment No. 1, Relating to 

FINRA Rule 2232 (Customer Confirmations) to Require 

Members to Disclose Additional Pricing Information on 

Retail Customer Confirmations Relating to Transactions 

in Certain Fixed Income Securities, Exchange Act Release 

No. 79346, 81 Fed. Reg. 84,637 (Nov. 23, 2016); MSRB, 

Notice of Filing of Amendment No. 1 and Order Granting 

Accelerated Approval of a Proposed Rule Change, as 

Modified by Amendment No. 1, to MSRB Rules G-15 

and G-30 To Require Disclosure of Mark Ups and 

Mark Downs to Retail Customers on Certain Principal 

Transactions and To Provide Guidance on Prevailing 

Market Price, Exchange Act Release No. 79347, 81 Fed. 

Reg. 84, 637 (Nov. 23, 2016). 

295 See agenda of Oct. 24, 2018 meeting of the Fixed Income 

Market Structure Advisory Committee, https://www.sec.

gov/news/press-release/2018-244.

296 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. 

297 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. 26,891 (June 11, 2018). 

298 SEC, Recommendation of the Investor Advisory 

Committee: Empowering Elders and Other Investors 

Re: Background Checks in the Financial Markets (July 

16, 2015), https://www.sec.gov/spotlight/investoradvisory-committee-2012/final_iac_backgroundcheck_

recommendation_071615.pdf. 

299 SEC, Press Release, SEC Launches Additional Investor 

Protection Search Tool, 2018-78 (May 2, 2018), https://

www.sec.gov/news/press-release/2018-78.

300 SEC, Recommendation of the Investor Advisory Committee: 

Accredited Investor Definition (Oct. 9, 2014), https://

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

investment-advisor-accredited-definition.pdf. 

301 Staff of the SEC, Report on the Review of the Definition 

of “Accredited Investor” (Dec. 18, 2015), https://www.sec.

gov/corpfin/reportspubs/special-studies/review-definition-ofaccredited-investor-12-18-2015.pdf.

302 SEC, Recommendation 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/impartialitydisclosure-prelim-voting-results.pdf. 

303 SEC, Recommendation of the Investor Advisory 

Committee Decimalization and Tick Sizes, https://www.sec.

gov/spotlight/investor-advisory-committee-2012/investmentadviser-decimilization-recommendation.pdf. 

304 SEC, Public Statement, Statement on the Expiration of the 

Tick Size Pilot, Div. of Econ. and Risk Analysis and Div. of 

Trading and Markets (Sept. 10, 2018), https://www.sec.gov/

news/public-statement/tm-dera-expiration-tick-size-pilot. 

305 Assessment of the Plan to Implement a Tick Size Pilot 

Program (rev. Aug. 2, 2018), at https://www.sec.gov/files/

TICK%20PILOT%20ASSESSMENT%20FINAL%20

Aug%202.pdf.

306 SEC, Recommendation of the Investor Advisory 

Committee: Broker-Dealer Fiduciary Duty (Nov. 22, 

2013), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/fiduciary-duty-recommendation-2013.pdf. 

307 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/universalproxy-recommendation-072613.pdf. 

308 Universal Proxy, Exchange Act Release No. 79164, 

Investment Company Act Release No. 32339, 81 Fed. Reg. 

79,122 (proposed Nov. 10, 2016).

309 SEC, Recommendations of the Investor Advisory 

Committee Regarding the SEC and the Need for the Cost 

Effective Retrieval of Information by Investors (July 25, 

2013), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/data-tagging-resolution-72513.pdf. 

310 For a list of rulemakings that require data tagging, see 

Report on Activities, Fiscal Year 2016, supra note 60, at 

53-55.

311 FAST Act Modernization and Simplification of Regulation 

S-K, Securities Act Release No. 10425, 82 Fed. Reg. 50,988 

(Nov. 2, 2017).

312 Inline XBRL Filing of Tagged Data, supra note 13. 

313 Exchange Traded Funds, Securities Act Release No. 10515, 

Investment Company Act No. 33140, 83 Fed. Reg. 37,332, 

37,393, n.495 (proposed July 31, 2018), https://www.sec.

gov/rules/proposed/2018/33-10515.pdf.

314 Form CRS Relationship Summary, supra note 79. 

OFFICE OF THE 

INVESTOR ADVOCATE

U.S. Securities and 

Exchange Commission

100 F Street NE

Washington, DC 20549

202.551.3302