REPORT ON OBJECTIVES FISCAL YEAR 2016
 

Office of the 

Investor

 Advocate 

U.S. SECURITIES AND EXCHANGE COMMISSION
 
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, as 

codified under Section 4(g) of the Securities 

Exchange Act of 1934, 15 U.S.C. § 78d(g). 
OFFICE OF THE INVESTOR ADVOCATE 

REPORT ON OBJECTIVES
 

FISCAL YEAR 2016 

The Office of the Investor Advocate (sometimes referred to herein as the “Office” or “we” or 

“our”) was established pursuant to Section 915 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (the “Dodd-Frank Act”), as codified under Section 4(g) of 

the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78d(g). Exchange Act 

Section 4(g)(2)(A)(ii) provides that the Investor Advocate be appointed by the Chair of the U.S. 

Securities and Exchange Commission (the “Commission” or the “SEC”) in consultation with the 

other Commissioners and that the Investor Advocate report directly to the Chair.1 On February 

24, 2014, SEC Chair Mary Jo White appointed Rick A. Fleming as the Commission’s first 

Investor Advocate. 

Exchange Act Section 4(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.2 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.3 The instant report is the Investor Advocate’s second annual Report on 

Objectives. It contains a summary of the Investor Advocate’s primary objectives for Fiscal Year 

2016, beginning October 1, 2015. 

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

activities of the Investor Advocate during the immediately preceding fiscal year.4 Among other 

things, the report must include information on steps the Investor Advocate has taken to improve 

the responsiveness of the Commission 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 that was taken to address those problems, 

and recommendations for administrative and legislative actions to resolve problems encountered by investors.5 The next Report on Activities will be filed by December 31, 2015, and will 

describe the activities of the Office of the Investor Advocate during Fiscal Year 2015, covering the 

period from October 1, 2014 through September 30, 2015. 

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

is provided directly to Congress without any prior review or comment from the Commission, any Commissioner, any other officer or employee of the Commission, or the Office of Management and Budget. Accordingly, the Report expresses solely the views of the Investor Advocate. It does not necessarily reflect the 

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

responsibility for the Report and all analyses, findings, and conclusions contained herein. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | i

 

CONTENTS
 

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

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

Assisting Retail Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
 

Identifying Areas in Which Investors Would Benefit from Regulatory Changes . . . . . . . 3
 

Identifying Problems with Financial Service Providers and Investment Products . . . . . . 4
 

Analyzing the Potential Impact on Investors of Proposed Rules and Regulations . . . . . . 4
 

Proposing Appropriate Changes to the Commission and to Congress . . . . . . . . . . . . 4
 

Supporting the Investor Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
 

POLICY AGENDA FOR FISCAL YEAR 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Equity Market Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 

Municipal Market Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 

Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
 

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
 

Millennials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
 

Retirement Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
 

Shareholder Rights and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . 20
 

Financial Reporting and Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
 

OMBUDSMAN’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
 

Appointment of SEC Ombudsman and Foundational Activities . . . . . . . . . . . . . . 25
 

Assisting Retail Investors and Other Interested Persons . . . . . . . . . . . . . . . . . . . . 26
 

Standards of Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
 

Inquiry Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
 

Inquiry Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
 

Recommendations and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
 

SUMMARY OF IAC RECOMMENDATIONS AND SEC RESPONSES . . . . . . . . . . . . . . . . 29
 

Shortening the Trade Settlement Cycle in U .S . Financial Markets . . . . . . . . . . . . . . . 30
 

Impartiality in the Disclosure of Preliminary Voting Results . . . . . . . . . . . . . . . . . . 30
 

The Accredited Investor Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
 

Crowdfunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
 

Decimalization and Tick Sizes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
 

Legislation to Fund Investment Adviser Examinations . . . . . . . . . . . . . . . . . . . . . 32
 

Broker-Dealer Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
 

Universal Proxy Ballots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
 

Data Tagging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
 

Target Date Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
 

General Solicitation and Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
 

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | iii
In short, our job is to help ensure that the needs of
 

investors are considered as decisions are being made
 

within the Commission, at SROs, and in Congress.
 
MESSAGE FROM THE
 

INVESTOR ADVOCATE
 

The Office of the Investor Advocate was 

created at the Securities and Exchange 

Commission on February 24, 2014. The 

three core functions of the Office include the 

work of an Ombudsman, the support of the SEC’s 

Investor Advisory Committee, and the pursuit of 

policies that are beneficial for investors. As a small 

team, we expend great effort to provide valuable 

service in all three areas, and we will continue to 

enhance those services in Fiscal Year 2016. 

The Commission’s first Ombudsman, Tracey L. 

McNeil, began her duties on September 22, 2014. 

In her initial months in this new role, Ms. McNeil 

has begun helping investors resolve problems 

they have with the Commission or self-regulatory 

organizations. Much of her time has also been 

spent developing systems and laying the necessary 

groundwork to receive, process, and track inquiries 

from investors. Once those systems are operational, Ms. McNeil will engage in outreach to raise 

public awareness of this new service for investors. 

In June 2015, an attorney was hired to assist 

the Ombudsman in establishing procedures and 

processing inquiries. 

The Investor Advocate is a statutory member of the 

Investor Advisory Committee (the “Committee” or 

“IAC”), and I participate in the work and deliberations of the Committee. My Office also provides 

the necessary staff support to the Committee. 

This involves many tasks, including the drafting 

of meeting minutes, processing the appointments 

of new members, assisting with travel arrangements and reimbursements, scheduling and setting 

up meeting rooms, publishing meeting notices 

and agendas, and helping to arrange briefings by 

Commission staff. 

We will continue to devote significant resources to 

support the work of the IAC in Fiscal Year 2016. In 

addition, I will personally work to raise awareness 

of IAC recommendations among Commission 

staff and the Commissioners. Each of the 

IAC’s recommendations 

to date is summarized 

in this Report, and the 

Commission is required 

by Exchange Act 

Section 39 to respond 

“promptly” to each 

recommendation. In 

Fiscal Year 2016, I will 

endeavor to improve the 

timeliness of Commission 

responses to IAC recommendations. 

In addition to the work of the Ombudsman and 

our support of the IAC, a substantial portion of 

our energies are devoted to the policymaking 

process. In short, our job is to help ensure that the 

needs of investors are considered as decisions are 

being made within the Commission, at SROs, and 

in Congress. 

In Fiscal Year 2016, the Office will begin reviewing 

every significant rulemaking that the Commission 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 1
 

and SROs propose. We will examine the impacts 

on investors and, when needed, advocate for 

changes that will benefit investors. However, 

given the broad scope of policy issues impacting 

investors, as well as the limited resources of our 

office, we will again focus more intently on a 

manageable number of issues in which we can 

develop expertise and provide a stronger voice for 

investors. 

In the current fiscal year, we are primarily focused 

on the six core policy areas that were set forth in 

the Report on Objectives filed in June 2014. We 

are completing our work in three of those areas 

(investor flight, elder fraud, and cybersecurity), 

and the remaining three areas involve multi-year 

projects that will remain on our agenda for Fiscal 

Year 2016. Accordingly, we will continue our focus 

on equity market structure, municipal market 

reforms, and ways to improve the effectiveness of 

disclosure. 

With the addition of another attorney to the policy 

side of the Office in June 2015, we will be able to 

expand our agenda somewhat in Fiscal Year 2016. 

Thus, as described more fully in this Report, we 

will begin to focus on some additional challenging 

topics: a fiduciary duty for broker-dealers, the 

investing and behavioral characteristics of the 

Millennial generation, the readiness of Americans 

for retirement, shareholder rights and corporate 

governance, and financial reporting and auditing. 

Of course, other issues are important, too, but I 

believe we can be most effective in advocating for 

investors if we concentrate our finite resources 

on a limited number of issues. By maintaining a 

disciplined focus, we will be able to develop the 

requisite level of expertise that will enable us to 

provide meaningful input to policymakers and 

successfully advance policies that benefit investors. 

We will also achieve a greater impact for investors 

if we are able to engage in the policymaking 

process at the Commission early on, while concepts 

are still developing, instead of being placed in the 

position of critiquing fully formulated proposals. I 

am pleased to report that, with the support of SEC 

Chair Mary Jo White, our views are beginning to 

be considered earlier in rulemakings that fall within 

our policy agenda. We look forward to providing a 

strong, reasoned voice for investors as future rules 

are developed. 

In closing, I want to acknowledge the support 

of the Commissioners and my colleagues on the 

Commission staff. They are providing my Office 

with the tools and access we need to be successful 

over the long term, with an appropriate level of 

independence as envisioned by Congress when it 

created the Office. 

I am pleased to submit this Report on Objectives 

for Fiscal Year 2016 on behalf of the Office of the 

Investor Advocate, and I would be happy to answer 

any questions from Members of Congress. 

Sincerely, 

Rick A. Fleming 

Investor Advocate 

2 | OFFICE OF THE INVESTOR ADVOCATE 
OBJECTIVES OF THE
 

INVESTOR ADVOCATE
 

As set forth in Exchange Act Section 4(g) 

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

Advocate is required to perform the 

following functions: 

(A)	 assist retail investors in resolving significant 

problems such investors may have with the 

Commission or with SROs; 

(B)	 identify areas in which investors would benefit from changes in the regulations of the 

Commission or the rules of SROs; 

(C)	 identify problems that investors have with 

financial service providers and investment 

products; 

(D)	 analyze the potential impact on investors 

of proposed regulations of the Commission 

and rules of SROs; and 

(E)	 to the extent practicable, propose to the 

Commission changes in the regulations or 

orders of the Commission and to Congress 

any legislative, administrative, or personnel 

changes that may be appropriate to mitigate 

problems identified and to promote the 

interests of investors . 

ASSISTING RETAIL INVESTORS 

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

Advocate to assist retail investors in resolving 

significant problems such investors may have 

with the Commission or with SROs.6 To help 

accomplish that objective, the Investor Advocate 

has appointed an Ombudsman to, among other 

things, act as a liaison between the Commission 

and any retail investor in resolving problems that 

retail investors may have with the Commission or 

with SROs.7 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” (the “Ombudsman’s Report”).8 As 

required by statute, the Ombudsman’s Report is 

included within this Report on Objectives.9 

IDENTIFYING AREAS IN WHICH 

INVESTORS WOULD BENEFIT FROM 

REGULATORY CHANGES 

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

Investor Advocate to identify areas in which 

investors would benefit from changes in the 

regulations of the Commission or the rules of 

SROs.10 This is a broad mandate that authorizes 

the Investor Advocate to examine the entire 

regulatory scheme, including existing rules and 

regulations, to identify those areas that could be 

improved for the benefit of investors. For example, 

the Investor Advocate may look at the rules and 

regulations governing existing equity market 

structure to determine whether any changes would 

benefit investors. Similarly, the Investor Advocate 

may review current municipal market practices to 

evaluate whether any regulatory changes might 

benefit investors. These and similar other concerns 

are discussed in greater detail below in the section 

entitled Policy Agenda for Fiscal Year 2016. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 3
 

IDENTIFYING PROBLEMS WITH 

FINANCIAL SERVICE PROVIDERS AND 

INVESTMENT PRODUCTS 

PROPOSING APPROPRIATE CHANGES 

TO THE COMMISSION AND TO 

CONGRESS 

Exchange Act Section 4(g)(4)(C) requires the Exchange Act Section 4(g)(4)(E) provides that, 

Investor Advocate to identify problems that to the extent practicable, the Investor Advocate 

investors have with financial service providers may propose to the Commission changes in the 

and investment products.11 The Investor regulations or orders of the Commission and 

Advocate continues to monitor investor inquiries to Congress any legislative, administrative, or 

and complaints, SEC and SRO staff reports, personnel changes that may be appropriate to 

enforcement actions, and other data to determine mitigate problems identified and to promote the 

which financial service providers and investment interests of investors.13 As we study the issues in 

products may be problematic. As required by our Policy Agenda for Fiscal Year 2016, as set forth 

Exchange Act Section 4(g)(6), these problems will below, we will likely make recommendations to the 

be described in the Reports on Activities to be filed Commission and Congress for changes that will 

in December of each year. mitigate problems encountered by investors. 

ANALYZING THE POTENTIAL IMPACT 

ON INVESTORS OF PROPOSED RULES 

AND REGULATIONS 

SUPPORTING THE INVESTOR 

ADVISORY COMMITTEE 

Exchange Act Section 39, as amended by Section 

Exchange Act Section 4(g)(4)(D) directs the 911 of the Dodd-Frank Act, establishes the Investor 

Investor Advocate to analyze the potential impact Advisory Committee.14 As discussed in greater 

on investors of proposed regulations of the detail below in the section entitled Summary of 

Commission and proposed rules of SROs.12 As IAC Recommendations and SEC Responses, the 

a matter of routine, the Office now reviews all purpose of the Committee is to advise and consult 

significant rulemakings of the Commission and with the Commission on regulatory priorities, 

SROs. It also communicates with investors and issues impacting investors, initiatives to protect 

their representatives to determine the potential investors, and related matters. By statute, the 

impact on investors of proposed rules. Investor Advocate is a member of the IAC.15 In 

addition, the Office continues to provide staff and 

operational support to the IAC. 

4 | OFFICE OF THE INVESTOR ADVOCATE 
POLICY AGENDA FOR
 

FISCAL YEAR 2016
 

The statutory mandate for the Office of 

the Investor Advocate is broad, but our 

resources are limited. Because we will be 

unable to examine every possible issue in depth in 

Fiscal Year 2016, it will be necessary to narrow our 

focus to a manageable number of issues so that we 

can advise policymakers effectively and achieve the 

greatest impact for investors. 

After discussions with numerous knowledgeable 

individuals, both inside and outside the Commission, 

and after due consideration, the Investor Advocate 

has determined that the Office will focus on the 

following issues during Fiscal Year 2016: 

§	Equity Market Structure 

§	Municipal Market Reform 

§	Fiduciary Duty 

§	Disclosure Effectiveness 

§	Millennials 

§	Retirement Readiness 

§	Shareholder Rights and Corporate Governance 

§	Financial Reporting and Auditing 

Some of the items listed above may appear 

familiar because they were on the policy agenda 

for the previous fiscal year. They remain on the 

agenda for Fiscal Year 2016 because they warrant 

continued consideration in light of their magnitude. 

Undoubtedly, other issues will arise that require 

the attention of the Office, but the aforementioned 

issues will remain on our policy agenda. 

EQUITY MARKET STRUCTURE 

As noted in last year’s Report on Objectives, 

the secondary market for U.S.-listed equities 

has become dispersed and complex, partly as 

a result of the decades-long transition from a 

market structure dominated by manual trading 

to a market structure characterized primarily by 

automated trading.16 The evolution of technologies 

for generating, routing, and executing orders has 

enhanced the speed, capacity, and sophistication of 

the trading functions that are available to market 

participants.17 Additionally, trading volume has 

become dispersed among many trading centers that 

compete for order flow in the same stocks, and 

trading centers are offering a wide range of services 

designed to attract different types of market participants with varying trading needs.18 

Regulatory actions have also contributed to 

changes in equity market structure—for example, 

Regulation NMS (adopted in 2005),19 Regulation 

ATS (adopted in 1998),20 the Order Handling 

Rules (adopted in 1996),21 and certain enforcement 

actions. In particular, the equity market has evolved 

significantly since the adoption of Regulation NMS, 

which was intended to modernize and strengthen 

the regulatory structure of the U.S. equity 

markets.22 Regulation NMS was also intended to 

“protect investors, promote fair competition, and 

enhance market efficiency.”23 The Commission is 

evaluating these regulations as part of its comprehensive review of equity market structure, and 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 5
 

 

several SROs have also joined the public discussion 

regarding reforms that might benefit investors and 

other market participants. 

In May 2015, the Commission’s recently formed 

Equity Market Structure Advisory Committee (the 

“EMSAC”) met for the first time to discuss and 

debate the structure and operations of the U.S. 

equities market. Under its charter, the EMSAC 

will provide advice and recommendations to the 

Commission specifically related to equity market 

structure issues.24 The EMSAC is currently considering the implications of Rule 611 of Regulation 

NMS, also known as the “Order Protection Rule” 

or the “Trade-Through Rule,”25 and has publicly 

indicated an interest in evaluating the complex 

interaction between Rule 611 and other parts of 

Regulation NMS, including order execution and 

routing information under Rules 605 and 606, 

access fees under Rule 610, and one cent minimum 

pricing under Rule 612.26 

Several SROs have also publicly proposed reforms 

to Regulation NMS that could potentially provide 

benefits to investors. In December 2014, Intercontinental Exchange, Inc., as parent company 

of three exchanges, proposed a ‘grand bargain’ 

to reduce the maximum exchange access fees 

under Rule 610 from 30 cents to 5 cents per 100 

shares in return for a “trade at” rule that would 

give more precedence to exchanges displaying the 

best orders under Rule 611.27 In January 2015, 

BATS Global Markets, Inc. (“BATS”), as parent 

company of four exchanges, filed a Petition for 

Rulemaking (“Petition”) with the Commission to 

amend Regulation NMS in ways it believes would 

enhance the quality of the U.S. equity markets to 

the benefit of long term investors.28 In its Petition, 

BATS proposed to reduce access fees, enhance 

transparency by requiring brokers to better disclose 

their execution quality, and reduce fragmentation 

by denying small trading centers certain advantages 

currently afforded by Regulation NMS. Related 

to the public discourse on access fees, in February 

2015, the Nasdaq Stock Market LLC (“Nasdaq”) 

implemented an experimental pricing schedule 

to lower access fees for 14 securities trading on 

its market.29 Nasdaq began providing statistical 

reports on the effects of the experiment in March 

2015 and has committed to continue making such 

data publicly available.30 

As noted in BATS’s Petition, enhancements 

to Regulation ATS are also under discussion. 

Currently, around 35% of market volume in NYSE 

and Nasdaq-listed stocks is executed in dark alternative trading systems and broker-dealer platforms, 

rather than on lit venues.31 These venues are not 

required to disclose their rules of operation to 

their customers or the public, and they typically 

only provide limited information about how they 

operate.32 Greater information about the operation 

of these venues could allow sophisticated investors 

to better compare the trading venues and determine 

which venues and order routing products meet 

their trading needs. 

Other market participants, including asset 

managers, have also voiced opinions and suggestions for how they believe the market could be 

adjusted to better serve investors. For example, in 

testimony before the Senate Banking Committee, 

the Global Head of Trading for Invesco Ltd., Kevin 

Cronin, called for fairer dissemination of market 

data to all market participants, the elimination of 

maker-taker pricing, and other reforms.33 

In May 2015, the Commission approved a 

proposal by the national securities exchanges 

and the Financial Industry Regulatory Authority 

(“FINRA”) for a two year pilot program that 

would widen the minimum quoting and trading 

increments—or “tick sizes”—for stocks of some 

smaller companies.34 The Commission intends to 

use the pilot, which is scheduled to begin on May 

6, 2016, to assess whether wider tick sizes enhance 

the market quality of these stocks for the benefit 

of issuers and investors. Data generated during the 

pilot will be released publicly on an aggregated 

basis, and the exchanges and FINRA will submit 

6 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

 

their initial assessment on the pilot’s impact later 

that year. 

In Fiscal Year 2016, we will monitor public 

comments, review data, and otherwise assess the 

various ongoing initiatives involving equity market 

structure. For example, we will review recommendations generated by the EMSAC, and we will look 

for ways to ensure that the EMSAC appropriately 

considers the views and needs of individual and 

institutional investors during its work. We will also 

evaluate how individual and institutional investors 

may be affected by various regulatory proposals, 

including the Petition for Rulemaking currently 

before the Commission. Finally, we will monitor 

public commentary on the approved tick-size pilot 

program and prepare to review the data produced 

in the following fiscal year. 

In addition to monitoring on-going initiatives, 

we will undertake our own analysis of potential 

market structure reforms. We will consider 

numerous questions, including the following: 

§	What are the negative impacts on investors from 

the current equity market structure? 

§	Compared to the status quo, how might the 

various proposals better serve investors? 

§	How could we improve liquidity and price 

discovery? 

§	Can current market complexity be significantly 

addressed through more fulsome disclosure of 

ATS operations, trading venue routing, and 

the quality of execution services, or are more 

prescriptive measures needed? 

§	Could a “trade at” rule serve investors by 

further encouraging the display of limit orders 

on exchanges, or are the varying needs of 

investors better served with some level of 

fragmentation, including among dark pools? 

§	Do intermediaries’ existing conflicts of interest 

harm investors, and how could we address that 

concern? 

§	Could lowering exchange access fees and rebates 

improve market quality for investors? 

Like others at the Commission, the Office of the 

Investor Advocate is sensitive to the fact that 

market structure issues are complex and require 

a broad understanding of statutory requirements, 

economic principles, and practical trading considerations.35 We are also mindful of the Commission’s 

three-part mission to protect investors, maintain 

fair, orderly, and efficient markets, and facilitate 

capital formation. However, while we recognize 

that competing interests must be balanced for 

markets to work efficiently, in the coming year we 

will continue to focus on one overriding concern as 

we examine equity market structure issues: whether 

the equity market today is fair for investors large 

and small. This is an indispensable foundation for 

vibrant markets and robust capital formation. 

MUNICIPAL MARKET REFORM 

According to Federal Reserve Board estimates, 

the value of outstanding municipal bonds totaled 

approximately $3.65 trillion at the end of the 

fourth quarter of 2014.36 Roughly 42 percent of 

municipal securities were held directly by individual 

investors as of December 31, 2014, and another 28 

percent were owned indirectly by retail investors 

through mutual funds, money market funds, or 

closed end funds and exchange-traded funds.37 

Municipal securities can be an important part of 

investors’ retirement plans and a valuable source of 

funds for local projects that affect investors’ quality 

of life in their communities. 

On July 31, 2012, the Commission issued a 

Report on the Municipal Securities Market (the 

“Municipal Market Report”), which included 

several recommendations to be considered for 

improvement of the municipal securities market.38 

In part, the Municipal Market Report discussed 

and made recommendations relating to price 

transparency, transaction costs, and dealer pricing 

obligations to customers.39 

According to the Municipal Market Report, the 

relative illiquidity and lack of price transparency in 

municipal securities has inhibited the efficiency of 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 7
 

 

 

 

 

 

the municipal securities market.40 While municipal 

bond dealers generally have access to a variety of 

sources of municipal securities pricing information, 

retail investors have access to relatively little pricing 

information.41 Although some municipal securities 

pricing information is available on publicly accessible websites, retail investors may not be aware of 

the websites or may not be able to effectively use 

them because they lack the necessary expertise.42 

The Municipal Market Report concluded that 

“the wider availability of more robust pricing 

information should facilitate the ability of market 

professionals and their customers to determine the 

best price for a security and where to obtain it.” 

The Municipal Market Report made a variety of 

recommendations to improve price transparency, 

fair pricing, and best execution obligations.43 

The Office of the Investor Advocate supports the 

adoption of these types of reforms and continues to 

explore and encourage developments in these areas. 

For example, the Municipal Market Report 

recommended that the Municipal Securities 

Rulemaking Board (“MSRB”) “consider a rule 

that would require municipal bond dealers to seek 

‘best execution’ of customer orders for municipal 

securities.”44 On August 6, 2013, the MSRB 

issued a concept release seeking comments on this 

recommendation,45 and the MSRB subsequently 

proposed a best execution rule. 46 On December 

5, 2014, the SEC issued an order approving the 

proposed amendments, and the rule changes are set 

to become effective on December 7, 2015.47 

Once effective, the MSRB’s best execution rule 

will require municipal securities dealers to use 

“reasonable diligence” in seeking to obtain for 

their retail customers the most favorable terms 

reasonably available under prevailing market 

conditions.48 

The Municipal Market Report also recommended 

that the MSRB disclose markup or markdown 

information to customers.49 MSRB rules already 

require municipal bond dealers acting as agents 

to disclose on the transaction confirmation the 

amount of any remuneration received from the 

customer. 50 However, there is no comparable 

requirement if the municipal securities dealer 

is acting as a principal (by selling securities out 

of its own inventory).51 The Municipal Market 

Report concluded that because municipal bond 

dealers execute almost all customer transactions in 

a principal capacity, customers receive very little 

confirmation disclosure of their dealer’s compensation.52 Thus, the Municipal Market Report 

recommended the MSRB “consider requiring 

municipal bond dealers to disclose to customers, on 

confirmations for riskless principal transactions, the 

amount of any markup or markdown.”53 

In 2014, the MSRB announced that it would 

develop a proposal regarding disclosure of information by dealers to retail customers to help 

them independently assess the prices they were 

receiving.54 On November 17, 2014, the MSRB 

and FINRA released companion proposals to 

require disclosure of pricing reference information 

on customer confirmations for transactions in fixed 

income securities.55 Under both proposals, dealers 

in retail-sized fixed income transactions would be 

required to disclose on a customer confirmation 

the price of certain same-day principal trades in the 

same security and the difference between that price 

and the customer’s price.56 

We recognize the efforts put forth by the MSRB, 

FINRA, and the SEC in addressing the municipal 

market shortcomings highlighted in the Municipal 

Market Report, including best execution and 

pricing reference. In Fiscal Year 2016, we will 

continue to work with others at the Commission 

and the relevant SROs to encourage additional 

reforms designed to benefit investors in the 

municipal securities markets. In particular, we will 

explore ways to improve pretrade price transparency and the accounting practices of issuers. 

8 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

 

To the extent that legislation is required to improve 

disclosures and practices in this market, we will 

make recommendations to Congress as appropriate. 

FIDUCIARY DUTY 

Many individual investors rely on broker-dealers 

and investment advisers for investment advice to 

help them manage their investments and meet their 

financial goals.57 Generally, these investors expect 

that the investment advice they receive is provided 

in their best interest.58 Some investors may not be 

aware, however, that broker-dealers and investment 

advisers are subject to different standards 

under federal law when providing advice about 

securities.59 Indeed, many investors are confused 

about the different standards of care that apply 

to investment advisers and broker-dealers with 

respect to the investment advice they provide.60 

This apparent confusion has stoked concern among 

regulators and lawmakers in recent years.61 

While the regulatory regimes for investment 

advisers and broker-dealers are both designed to 

protect investors, they do so in different ways.62 

Generally, this is because the legal standards of 

conduct for broker-dealers and investment advisers 

developed out of differing and complex histories.63 

While both sets of standards evolved in large 

part from the general antifraud provisions of the 

respective federal securities laws, they were applied 

differently to the two industries.64 The standard for 

broker-dealers is rooted in specific Commission and 

FINRA rules that are supplemented by interpretive 

guidance.65 In contrast, the investment adviser 

standard evolved primarily through Commission 

and staff interpretive pronouncements under the 

antifraud provisions of the Investment Advisers Act 

of 1940 (the “Advisers Act”), and through case law 

and enforcement actions.66 

Under the Advisers Act, an investment adviser is a 

fiduciary whose duty is to serve the best interests of 

its clients.67 The fiduciary standard applies to the 

totality of an investment adviser’s relationship with 

its clients and prospective clients, and it imposes 

upon an investment adviser the “affirmative duty 

of ‘utmost good faith, and full and fair disclosure 

of all material facts,’ as well as an affirmative 

obligation to ‘employ reasonable care to avoid 

misleading’” its clients and prospective clients.68 

The fiduciary standard encompasses the duties of 

loyalty and care.69 The duty of loyalty requires 

an investment adviser to serve the best interests 

of its clients, which includes an obligation not to 

subordinate a client’s interests to its own.70 The 

duty of care requires an investment adviser to 

“make a reasonable investigation to determine that 

it is not basing its recommendations on materially 

inaccurate or misleading information.”71 In 

practical terms, the fiduciary standard requires an 

adviser with a material conflict of interest to either 

eliminate that conflict or fully disclose to its clients 

all material facts relating to the conflict.72 

Broker-dealers operate under a different regulatory 

regime than investment advisers. For example, 

broker-dealers that conduct business with the 

public generally must become members of 

FINRA.73 In addition, under the antifraud provisions of the federal securities laws and SRO 

rules, including SRO rules governing “just and 

equitable principles of trade and high standards of 

commercial honor,” broker-dealers are required to 

deal fairly with their customers.74 Although brokerdealers generally are not subject to a fiduciary duty 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 9
 

under the federal securities laws, courts nonetheless 

have found broker-dealers to have a fiduciary duty 

under certain circumstances.75 Moreover, brokerdealers are subject to statutory, Commission, and 

SRO requirements designed to promote business 

conduct that protects customers from abusive 

practices, including practices that may be unethical 

but not necessarily fraudulent.76 The three ways 

that the federal securities laws and rules, as well 

as SRO rules, address broker-dealer conflicts 

are through express prohibition, mitigation, or 

disclosure.77 

As part of their duty of fair dealing, broker-dealers 

have an obligation of “suitability,” which generally 

requires a broker-dealer to make recommendations that are consistent with the interests of 

each customer.78 In other words, broker-dealers 

should recommend only those investments that are 

suitable for a customer in light of the customer’s 

risk tolerance, liquidity needs, investment horizon, 

and other factors that are specific to the individual 

customer.79 Broker-dealers also are required, under 

certain circumstances, to disclose material conflicts 

of interest to their customers—in some cases, at 

the time the transaction is completed80—and the 

federal securities laws and FINRA rules prohibit 

broker-dealers from participating in certain transactions involving particularly acute potential conflicts 

of interest.81 

The Section 913 Study 

Section 913 of the Dodd-Frank Act required the 

Commission to conduct a study analyzing the 

obligations of brokers, dealers, and investment 

advisers.82 Among other things, Section 913 

directed the Commission to evaluate: (1) the effectiveness of existing legal or regulatory standards 

of care (imposed by the Commission, a national 

securities association, and other federal or state 

authorities) for providing personalized investment 

advice and recommendations about securities to 

retail customers; and (2) whether there are legal 

or regulatory gaps, shortcomings, or overlaps in 

legal or regulatory standards in the protection 

of retail customers relating to the standards of 

care for providing personalized investment advice 

about securities to retail customers that should be 

addressed by rule or statute.83 

On January 21, 2011, SEC staff issued the required 

Study on Investment Advisers and Broker-Dealers 

(the “Study”).84 It contained a number of recommendations designed to increase investor protection 

and reduce investor confusion. In addressing the 

standard-of-care criteria enumerated above, the 

Study recommended, among other things, that the 

Commission promulgate rules to provide that: 

[T]he standard of conduct for all brokers, 

dealers, and investment advisers, when 

providing personalized investment advice 

about securities to retail customers (and 

such other customers as the Commission 

may by rule provide), shall be to act in 

the best interest of the customer without 

regard to the financial or other interest of 

the broker, dealer, or investment adviser 

providing the advice.85 

In other words, the Study recommended that 

the Commission implement a uniform fiduciary 

standard for broker-dealers and investment 

advisers. The Study urged the Commission 

to consider “rulemakings that would apply 

expressly and uniformly to both broker-dealers 

and investment advisers, when providing personalized investment advice about securities to retail 

customers, a fiduciary standard no less stringent 

than currently applied under” certain provisions of 

the Advisers Act (emphasis added).86 

The Study acknowledged, however, that Section 913 

prevents the Commission from applying a fiduciary 

standard in a way that would undermine certain 

business practices of broker-dealers. Thus, any rule 

adopted by the Commission must accommodate 

the receipt of commission-based compensation (or 

other standard compensation) and allow brokerdealers to sell only proprietary or a limited range 

10 | OFFICE OF THE INVESTOR ADVOCATE 
of products.87 In addition, the Commission cannot 

impose a duty of care or loyalty that continues after 

the broker-dealer has stopped providing personalized investment advice to a retail customer.88 

Mindful of these considerations, the Study made 

several related fiduciary duty recommendations 

that would “suggest a path toward implementing a 

uniform fiduciary standard for investment advisers 

and broker-dealers when providing personalized 

investment advice about securities to retail 

customers.”89 These recommendations addressed 

the standard of conduct, the duty of loyalty, 

principal trading, the duty of care, personalized 

investment advice about securities, and investor 

education with respect to a uniform fiduciary 

standard.90 

The Study argued that the uniform fiduciary 

standard and related disclosure requirements might 

offer potential benefits, including: heightened 

investor protection; heightened investor awareness; 

a flexible standard that could accommodate 

different existing business models and fee structures; preservation of investor choice; no likely 

decrease in investors’ access to existing products 

or services or service providers; that investment 

advisers and broker-dealers would continue to 

be subject to all of their existing duties under 

applicable law; and the requirement that investors 

receive investment advice that is given in their best 

interest, under a uniform standard, regardless of 

the regulatory label (broker-dealer or investment 

adviser) of the professional providing the 

investment advice. 91 

SEC Request for Data 

On March 1, 2013, the Commission issued 

a request for data and other information, in 

particular quantitative data and economic analysis, 

relating to the benefits and costs that could result 

from various alternative approaches regarding 

the standards of conduct and other obligations 

of broker-dealers and investment advisers.92 The 

Commission sought this information to inform its 

consideration of alternative standards of conduct 

for broker-dealers and investment advisers when 

providing personalized investment advice about 

securities to retail customers, as well as to inform 

its consideration of “potential harmonization” of 

certain other aspects of the regulation of brokerdealers and investment advisers.93 

Investor Advisory Committee 

Recommendations 

On November 22, 2013, the Investor Advisory 

Committee adopted a set of recommendations 

encouraging the SEC to establish a fiduciary duty 

for broker-dealers when they provide personalized 

investment advice to retail investors.94 The IAC’s 

preferred approach to accomplishing this objective 

would involve narrowing the exclusion for brokerdealers within the definition of “investment 

adviser” under the Advisers Act.95 In effect, this 

would require anyone who provides personalized 

investment advice to become registered as an 

investment adviser and satisfy the fiduciary duty of 

an adviser. 

As an alternative, the IAC recommended the 

adoption of a rule under Section 913 of the 

Dodd-Frank Act to require broker-dealers to act 

in the best interests of their retail customers when 

providing personalized investment advice, with 

sufficient flexibility to permit certain sale-related 

conflicts of interest that are fully disclosed and 

appropriately managed.96 In addition, the IAC 

recommended the adoption of a uniform, plain 

English disclosure document to be provided to 

customers and potential customers of brokerdealers and investment advisers.97 The document 

would disclose information about the nature of 

services offered, fees and compensation, conflicts of 

interest, and the disciplinary record of the brokerdealer or investment adviser.98 

DOL Fiduciary Rule Re-Proposal 

On April 14, 2015, the U.S. Department of Labor 

(“DOL”) re-proposed a regulation to define and 

clarify who would be a fiduciary of an employee 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 11
 

 

 

 

benefit plan under the Employee Retirement 

Income Security Act of 1974 (“ERISA”) as a 

result of providing investment advice to the plan 

or its participants or beneficiaries (the “2015 

Proposal”).99 The 2015 Proposal would also 

apply to the fiduciary of a plan under the Internal 

Revenue Code, including an individual retirement 

account (“IRA”).100 

If adopted, the 2015 Proposal would affect “a 

wider array of advice relationships than the existing 

ERISA and [Internal Revenue] Code regulations, which would be replaced.”101 It would 

apply the fiduciary standard to any person who 

provides investment advice or recommendations 

to an employee benefit plan, plan fiduciary, plan 

participant or beneficiary, IRA, or IRA owner 

under both ERISA and the Internal Revenue Code. 

A consequence of the 2015 Proposal, then, would 

be to expand the number and categories of persons 

who would be considered fiduciaries under ERISA 

to encompass many broker-dealers, individual 

investment professionals, and pension consultants 

not previously subject to ERISA. 

Existing Section 3(21)(A) of ERISA currently 

provides that a person is a fiduciary with respect 

to an employee benefit plan to the extent that such 

person (i) exercises any discretionary authority or 

discretionary control with respect to management 

of such plan or exercises any authority or control 

with respect to management or disposition of its 

assets; (ii) renders investment advice for a fee or 

other compensation, direct or indirect, with respect 

to any moneys or other property of such plan, or 

has any authority or responsibility to do so; or (iii) 

has any discretionary authority or discretionary 

responsibility in the administration of such plan.102 

However, a regulation that DOL issued in 1975 

narrowed the scope of the statutory definition of 

fiduciary investment advice by creating a five-part 

test to be satisfied before a person can be treated 

as rendering investment advice for a fee.103 Under 

that regulation, advice from a person who is not 

a fiduciary under another provision of the statute 

will constitute “investment advice” if that person 

(1) renders advice as to the value of securities or 

other property, or makes recommendations as to 

the advisability of investing in, purchasing or selling 

securities or other property (2) on a regular basis 

(3) pursuant to a mutual agreement, arrangement 

or understanding, with the plan or a plan fiduciary, 

(4) that the advice will serve as a primary basis for 

investment decisions with respect to plan assets, 

and (5) that the advice will be individualized, 

based on the particular needs of the plan or IRA.104 

To be considered a fiduciary with respect to any 

particular instance of investment advice under this 

formulation, a person must satisfy every element 

of the five-part test with respect to the particular 

advice recipient or plan at issue.105 

In 2010, DOL proposed a new regulation 

designed to replace the five-part test with a 

different definition of what would constitute 

fiduciary investment advice for a fee (the “2010 

Proposal”).106 The 2010 Proposal also specified 

carve-outs for types of conduct that would not 

result in fiduciary status.107 The 2010 Proposal 

generated numerous comments and engendered 

vigorous debate.108 After considering the comments 

received, and given the significance of that 

rulemaking, DOL determined to spend additional 

time reviewing the proposal and to issue a new 

proposed regulation for comment.109 

The recently re-proposed rule—the 2015 

Proposal—revises the 2010 Proposal but retains 

elements of that proposal’s framework.110 The 

2015 Proposal expands the definition of fiduciary 

investment advice but also specifies a series of 

carve-outs for communications deemed not to be 

fiduciary in nature.111 Under the 2015 Proposal 

definition, a person renders investment advice 

by (1) providing investment recommendations, 

investment management recommendations, 

appraisals of investments, or recommendations of 

persons to provide investment advice or manage 

plan assets, and (2) either (a) acknowledging 

the fiduciary nature of the advice, or (b) acting 

12 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

pursuant to an agreement, arrangement, or understanding with the advice recipient that the advice 

is individualized to, or specifically directed to, the 

recipient for consideration in making investment 

or management decisions regarding plan assets.112 

Whenever such advice is provided for a fee or other 

compensation, direct or indirect, the person giving 

the advice is a fiduciary.113 

The 2015 Proposal also includes several carveouts for persons who do not represent that they 

are acting as ERISA fiduciaries. For example, a 

fiduciary duty would not be triggered by statements 

or recommendations made to a “large plan investor 

with financial expertise” by a counterparty acting 

in an arms-length transaction, the provision of an 

appraisal, fairness opinion, or a statement of value 

to an employee stock ownership plan regarding 

employer securities, or the provision of information and materials that constitute “investment 

education” or “retirement education.”114 

More importantly, the 2015 Proposal introduces 

a new Best Interest Contract Exemption (the “BIC 

Exemption”).115 The proposed BIC Exemption 

would condition relief from ERISA’s prohibited 

transaction rules on the express contractual 

agreement by advisers to employer-sponsored 

benefit plans and IRAs (and the advisers’ employing 

firms) to be governed by ERISA fiduciary 

standards. Thus, the proposed BIC Exemption 

would provide conditional relief for common 

compensation (for example, commissions and 

revenue sharing) that an adviser and the adviser’s 

employing firm might receive in connection with 

investment advice to retail retirement investors.116 

To receive such compensation, the BIC Exemption 

would require the adviser and the firm to: 

[C]ontractually acknowledge fiduciary 

status, commit to adhere to basic 

standards of impartial conduct, adopt 

policies and procedures reasonably 

designed to minimize the harmful impact 

of conflicts of interest, and disclose basic 

information on their conflicts of interest 

and on the cost of their advice. 117 

According to the 2015 Proposal, the BIC 

Exemption is predicated on the adviser and firm’s 

agreement to meet fundamental obligations of fair 

dealing and fiduciary conduct; in other words, to 

give advice that is in the customer’s best interest, 

avoid misleading statements, receive “no more than 

reasonable” compensation, and comply with applicable federal and state laws governing advice.118 

The 2015 proposal states that this “principlesbased approach aligns the adviser’s interest with 

those of the plan participant or IRA owner,” while 

“leaving the adviser and employing firm with the 

flexibility and discretion necessary to determine 

how best to satisfy these basic standards in light of 

the unique attributes of their business.”119 

Chair White’s Recent Statements 

On March 17, 2015, SEC Chair Mary Jo White 

called for the implementation of a uniform 

fiduciary standard for broker-dealers and 

investment advisers under Section 913 of DoddFrank.120 In endorsing a uniform fiduciary 

standard for broker-dealers and investment 

advisers, Chair White stated that such a rulemaking 

should be a principles-based standard rooted in 

the current fiduciary standard for investment 

advisers.121 

At the same time, Chair White acknowledged 

that there were complexities and challenges that 

accompany such a rulemaking.122 In particular, 

Chair White identified three issues surrounding 

such a rulemaking—how to define the standard, 

what would be required under that standard, and 

how to ensure compliance and enforcement of that 

standard.123 

U.S. Supreme Court Decision— 

Tibble v. Edison Int’l 

On May 18, 2015, the U.S. Supreme Court handed 

down a unanimous decision in Tibble v. Edison 

Int’l, 135 S.Ct. 1823 (2015). Although the Court’s 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 13
 

 

holding in Tibble strictly concerned the timeliness 

of a complaint, the Court took the opportunity 

in the case to interpret the nature of the fiduciary 

duty under ERISA. Id. at 1828. The Court found, 

among other things, that “ERISA’s fiduciary duty is 

‘derived from the common law of trusts’” and that, 

under trust law, “a trustee has a continuing duty to 

monitor trust investments and remove imprudent 

ones.” Id. at 1828 (quoting Cent. States, Se. & 

Sw. Areas Cent. Fund v. Cent. Transp., Inc., 472 

U.S. 559, 570 (1985)). According to the Court, 

this “continuing duty exists separate and apart 

from the trustee’s duty to exercise prudence in 

selecting investments at the outset.” Id. Therefore, 

a “plaintiff may allege that a fiduciary breached 

the duty of prudence by failing to properly monitor 

investments and remove imprudent ones.” 

Id. at 1829. 

In Tibble, the beneficiaries of a defined contribution retirement savings plan (the “Plan”) 

brought an ERISA action against the fiduciaries 

of the Plan to recover damages for alleged losses 

suffered by the Plan from alleged breaches of 

respondents’ fiduciary duties. Id. at 1824. At issue, 

among other things, was how respondents (the 

alleged fiduciaries) could have been considered to 

have acted prudently in offering six higher priced 

retail-class mutual funds as Plan investments when 

respondents could have offered effectively the 

same six mutual funds at a lower price offered to 

institutional investors. Id. 

In finding that a fiduciary has a “continuing 

duty of some kind to monitor investments and 

remove imprudent ones,” the Court in Tibble 

drew from trust law. Id. at 1828. Quoting the 

Restatement (Third) of Trusts, the Court observed 

that a “trustee’s duties apply not only in making 

investments but also in monitoring and reviewing 

investments, which is to be done in a manner that is 

reasonable and appropriate to the particular investments, courses of action, and strategies involved.” 

Id. (quoting Restatement (Third) of Trusts, § 90, 

cmt b (2007)). 

Objectives of the Investor Advocate with 

Respect to Fiduciary Duty 

In light of Chair White’s remarks and the recent 

activity by DOL, the Office of the Investor 

Advocate will endeavor to provide a voice for 

investors as this important issue is addressed by 

policymakers. For the Commission, it will be 

especially challenging to reconcile what appear to 

be contradictory mandates under Section 913 of 

the Dodd-Frank Act—to develop a standard for 

broker-dealers no less stringent than the existing 

standard for investment advisers, while accommodating sales-based compensation and the sale 

of proprietary products or limited product lines. 

Section 913 also prohibits the SEC from requiring 

a broker-dealer to have a continuing duty of care or 

loyalty to the customer after providing personalized 

investment advice. This limitation could lead to a 

duty for broker-dealers that is less rigorous than 

the continuing duty applied to ERISA advisers 

under Tibble. 

In at least two significant ways, an ill-advised SEC 

rule could be worse than no rule at all. First, a rule 

could dilute the existing standard for investment 

advisers in an attempt to adopt a “harmonized” 

standard for broker-dealers. Second, even though 

this effort is intended to reduce investor confusion 

about the differing standards of care for investment 

advisers and broker-dealers, a poorly-designed rule 

could create even worse confusion by purporting to 

give investors the protection of a “fiduciary duty” 

that is, in fact, less stringent than the traditional 

fiduciary duty that applies in other relationships 

of trust. We will fight to avoid these outcomes and 

to encourage rulemakings that are as strong as 

possible for investors. 

DISCLOSURE 

Disclosure is at the very heart of our system of 

securities regulation in the United States. The 

Commission is working on a number of disclosurerelated initiatives, as described below. In Fiscal Year 

2016, the Office of the Investor Advocate will work 

alongside others at the Commission to improve 

14 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

 

 

disclosure to investors in a wide variety of contexts. 

In doing so, we will seek input from users of data 

and communicate their needs to policymakers. 

Investment Company Reporting 

Modernization 

On May 20, 2015, the Commission proposed 

amendments to its rules and forms to modernize 

the reporting and disclosure of information by 

registered investment companies (“funds”).124 As 

the primary regulator of the asset management 

industry, the Commission relies on information 

included in reports filed by funds and investment 

advisers for a number of purposes, including 

monitoring industry trends, informing policy 

and rulemaking, identifying risks, and assisting 

Commission staff in examination and enforcement 

efforts. 125 As assets under management and 

complexity in the industry have grown over the 

years, so too has the volume and complexity of 

information that the Commission must analyze to 

carry out its regulatory duties.126 

For example, Commission staff estimates that 

there were approximately 16,619 funds registered 

with the Commission as of December 2014.127 

Commission staff also estimates that there were 

approximately 11,500 investment advisers 

registered with the Commission, along with 

another 2,845 advisers that file reports with the 

Commission as exempt reporting advisers, as of 

January 2015.128 Moreover, at year-end 2014, fund 

assets exceeded $18 trillion, having grown from 

approximately $4.7 trillion at the end of 1997.129 

Meanwhile, the fund industry has developed new 

product structures and new fund types, as well 

as increased its use of derivatives and other alternative strategies.130 Although these new products 

and strategies can offer greater opportunities for 

investors to achieve their investment goals, they can 

also add complexity to funds’ investment strategies, 

amplify investment risk, or expose investors to 

other risks, such as counterparty credit risk.131 

In addition, there has been a significant increase in 

the use of the Internet as a tool for disseminating 

information, and new technology can be utilized 

to report and analyze information. 132 In response 

to these developments, the Commission generally 

has allowed the use of the Internet as a platform 

for providing required disclosure to investors.133 

The Commission has also started to use structured 

and interactive data formats to collect, aggregate, 

and analyze data reported by registrants and 

other filers.134 These data formats have enabled 

the Commission and other data users, including 

investors and their intermediaries, to better collect 

and analyze reported information.135 

Amid these industry changes and technological 

advances, the Commission recognized a need to 

improve the type and format of the information that 

funds provide to the Commission and to investors.136 

The Commission also recognized the need to 

improve its monitoring of the fund industry.137 

Accordingly, the Commission has proposed a set of 

reporting and disclosure reforms designed to take 

advantage of the benefits of advanced technology 

and to modernize the fund reporting regime.138 The 

proposed reforms seek to increase the transparency 

of fund portfolios and investment practices to the 

Commission and to investors by taking advantage 

of technological advances.139 We will review the 

comments filed in response to the Commission’s 

proposal to modernize and enhance reporting by 

investment companies, and we will encourage the 

Commission to move forward with the adoption of 

a strong final rule. 

Variable Annuity Disclosure 

Commission staff have also been considering 

potential reforms to variable annuity disclosure.140 

For example, staff have been considering whether 

to recommend that the Commission require key 

information to be disclosed to new investors in 

a standardized order.141 In addition, staff have 

been considering the utility of tailoring disclosure 

for existing investors making additional purchase 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 15
 

 

payments.”142 We agree with staff that the mutual 

fund summary prospectus could serve as a useful 

model for providing variable annuity disclosure.143 

We strongly support staff’s efforts to address the 

problem of lengthy and complex disclosure for 

each variable annuity in a manner “that will tell 

the full story—the key facts that investors need 

to know about the risks and costs, as well as the 

benefits, of their investment.”144 

Disclosure Effectiveness 

As described in last June’s Report on Objectives, 

in the offer or sale of securities, all material facts 

must be disclosed to investors so they can make 

fully informed investment decisions. Enforcing 

these disclosure requirements is a critical element 

of investor protection. Ideally, issuers and sellers of 

securities should provide information to investors 

in a manner that enhances investors’ ability to 

understand it. Full and accurate information should 

be provided in a meaningful way, without unnecessary repetition and without burying important 

information within less important disclosures. 

We recognize and commend the Commission 

on the steps it has taken in recent years towards 

making disclosures more effective. For example, in 

2009, the Commission began requiring companies 

to provide financial statements using eXtensible 

Business Reporting Language (XBRL).145 XBRL 

is present in over twenty Commission forms and, 

through rulemaking, the Commission continues to 

expand the use of structured data.146 Further, the 

Commission recently began compiling and posting 

structured data for use by investors and academics, 

and the Commission is working to develop “Inline 

XBRL” to integrate XBRL tagging directly into 

HTML formatted documents.147 

In December 2013, the Commission issued the 

Report on Review of Disclosure Requirements 

in Regulation S-K (the “S-K Report”), a report 

mandated by Congress under the Jumpstart Our 

Business Startups Act (the “JOBS Act”).148 The 

S-K Report describes the evolution of the disclosure 

requirements within Regulation S-K and recommends a reevaluation of those disclosure requirements. The S-K Report recommends potential 

issues for further study and identifies specific 

areas of Regulation S-K that may benefit from 

further review. 

On April 11, 2014, the SEC’s Division of Corporation Finance announced a disclosure reform 

initiative that builds upon the S-K Report.149 The 

initiative will begin with a review of the business 

and financial disclosures that are reflected in 

periodic or current reports (Forms 10-K, 10-Q, and 

8-K). Commission staff will determine whether the 

requirements of Regulations S-K and S-X can be 

updated to reduce the costs and burdens to issuers 

while continuing to provide material information 

and eliminate duplicative disclosures. In the future, 

Commission staff will also consider ways to update 

and modernize disclosures that form the basis for 

most proxy disclosure. 

Because these disclosure rules are so important 

to investors, we will continue to focus our efforts 

and resources on disclosure effectiveness in 

Fiscal Year 2016. We will not only continue to 

16 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

assist the Division of Corporation Finance and 

others in the exploration of potential changes 

to the content of disclosure, but we will also 

advocate for further enhancements to the means 

of disclosure. We believe the means of disclosure 

is almost as important as the content, and that 

disclosure systems need to be modernized to 

achieve greater efficiency, accessibility, and 

usefulness. More specifically, we believe that data 

should be layered for the individual investor and 

structured for the analyst.150 Therefore, we will 

continue to encourage Commission staff to pursue 

the utilization of technology that can be used to 

make information more accessible and useful for 

investors. Additionally, to the extent that legislation 

is proposed or required to improve disclosures 

and practices, we may make recommendations to 

Congress as appropriate. 

MILLENNIALS 

The precise definition of “Millennials,” also known 

as “Generation Y” or “Echo Boomers,” varies 

from one source to another—in fact, there is no 

strong consensus about how to define Millennials.151 For example, William Strauss and Neil 

Howe, authors who are credited with coining 

the term “Millennial,” defined the generation as 

consisting of those individuals born between 1982 

and 2004.152 The Council of Economic Advisers, 

on the other hand, defines Millennials as those 

“born between 1980 and the mid-2000s.”153 The 

Pew Research Center generally defines Millennials 

as those born between 1981 and 1997,154 and the 

2012 National Financial Capability Study uses the 

span from 1978 to 1994.155 

For our purposes, a precise definition is not 

necessary. Using any of these definitions, the first 

of the Millennials are in their thirties, and many 

of them are at the beginning of their careers.156 

This generation is likely to be a force in the U.S. 

economy for decades to come.157 In a 2012 study 

by consulting firm Accenture, it is estimated 

that approximately $30 trillion in financial and 

non-financial assets is set to transfer from North 

American “Baby Boomers” to their heirs, namely, 

“Generation X” and Millennials, with the peak 

transfer of wealth projected to occur between 2031 

and 2045.158 

Millennials differ from previous generations 

and have been defined by the characteristics of 

the country they grew up in.159 They have seen 

increased racial diversity, climbing costs of higher 

education, and defining events such as the terrorist 

attacks of September 11, 2001.160 Millennials 

are the most educated generation161 and they 

have been shaped by technology, with much of 

the technological innovation coinciding with 

their childhood.162 They have had unparalleled 

access to information and computational power 

because they have come of age at a time when the 

“frontiers of technology have appeared unlimited” 

and the cost of creating and distributing digital 

content fell drastically.163 This has not only created 

opportunity for entrepreneurship and increased 

computer processing power; it has changed the way 

Millennials do many things.164 Millennials have 

become accustomed to using technology in every 

aspect of life.165 They take advantage of high-tech 

tools, social networking platforms, websites, and 

mobile applications to do many things, including 

pick stocks and find financial planners.166 Importantly, Millennials have also wrestled with financial 

challenges stemming from the Great Recession 

early on in their career paths, and they continue to 

negotiate a post-recession economy.167 

In the coming fiscal year, we will examine economic 

issues germane to Millennials in greater depth. We 

will, among other things, evaluate their financial 

literacy, the manner and extent in which they 

participate in financial markets, and the differences 

between Millennials and preceding generations. We 

will also consider whether proposed changes to laws, 

policies, and regulations are forward-looking and 

anticipate the needs of a new generation of investors. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 17
 

 

 

RETIREMENT READINESS 

According to the Census Bureau, the age 65-andolder demographic in the United States is likely 

to increase by more than 50 percent—to approximately 74 million—between 2015 and 2030.168 

Based on current trends, this age group will likely 

represent more than 20 percent of the total U.S. 

population by 2030.169 This development promises 

to have a significant and wide-ranging impact on a 

number of policy areas in the years ahead.

One of those policy areas is Americans’ level of 

retirement readiness. Currently, there is no clear 

consensus regarding whether or not Americans are 

adequately prepared for retirement. Various studies 

and surveys offer “mixed evidence” about the 

adequacy of retirement savings.170 These studies 

“range widely in their conclusions about the degree 

to which Americans are likely to maintain their preretirement standard of living in retirement, 

largely because of different assumptions about 

how much income this goal requires.”171 

For example, a recent Gallup survey found that 

“[m]ost U.S. investors are generally confident 

that they are financially prepared for retirement, 

including 88% of retired investors and 76% of 

nonretired investors.”172 These survey results are 

echoed by some commentators who question the 

notion that Americans are not saving enough for 

retirement.173 Their findings would tend to support 

the contention that Americans at least believe that 

they are adequately prepared for retirement.174 

On the other hand, a Federal Reserve report on 

the economic well-being of U.S. households in 

2014 found, among other things, that 39 percent 

of non-retirees “have given little or no thought 

to financial planning for retirement and 31 

percent have no retirement savings or pension.”175 

According to the report, more than one-half of 

non-retirees with self-directed retirement accounts 

are either “not confident” or “slightly confident” in 

their ability to make the right investment decisions 

when investing the money in such accounts.176 

A recent study by the U.S. Government Accountability Office (the “GAO Retirement Study”) found 

that 52 percent of households age 55-and-older 

have no retirement savings in a defined contribution plan or individual retirement account, and 

nearly 30 percent of households age 55-and-older 

have no retirement savings and no defined benefit 

(e.g., pension) plan.177 Moreover, according to 

the study, Social Security furnishes most of the 

retirement income for approximately half of households age 65-and-older.178 It is findings like these 

that prompt some to warn of a “retirement crisis” 

and to caution that “millions of Americans may be 

forced to muddle through their final years partially 

dependent on others for financial support and to 

accept a standard of living significantly below that 

which they had envisioned.”179 

The Center for Retirement Research at Boston 

College (“Boston College”) asserts that “about 

half of working-age households are ‘at risk’ of 

being unable to maintain their pre-retirement 

standard of living in retirement.”180 The reasons 

for this, according to Boston College, include: 

(1) increased life expectancy; (2) declining Social 

Security replacement rates; (3) the shift in employer 

retirement plans from defined benefit to defined 

contribution plans; (4) increased out-of-pocket 

health care costs for retirees; and (5) the substantial 

decline in real interest rates since 1983.181 As a 

result, “baby boomers—and those who follow— 

will need more retirement income, but will receive 

less support from the traditional sources of Social 

Security and employer defined benefit plans.”182 

Therefore, concludes Boston College, “retirees need 

a much bigger nest egg than in the past to generate 

a given amount of income.”183 

Pivotal to the retirement readiness debate is the 

projected percentage of income required to be 

replaced during retirement. Income in retirement 

may come from several different sources, including 

Social Security, pension plan income, retirement 

plan savings (e.g., 401(k)s or IRAs), non-retirement 

18 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

savings such as home equity, and wages.184 

Adequate retirement income has been defined as 

“an income that allows retirees to maintain their 

pre-retirement standard of living.”185 

Yet, there is no consensus on how much income 

would be adequate to maintain a retiree’s 

pre-retirement standard of living.186 Experts 

generally agree that many retirees do not need to 

replace 100 percent of working income to maintain 

their standard of living because most retirees likely 

have reduced expenses as compared to when they 

were working.187 The GAO Retirement Study 

concluded that identifying a specific target for the 

replacement rate (i.e., a household’s post-retirement 

income as a percentage of pre-retirement) would 

require numerous complicated assumptions.188 

Moreover, the GAO Retirement Study observed, 

different studies use different replacement rates or 

other benchmarks to measure retirement income 

adequacy.189 

For example, the National Institute on Retirement 

Security (“NIRS”) posits that, “[t]o maintain its 

standard of living in retirement, the typical working 

American household needs to replace roughly 85 

percent of pre-retirement income” or eight times 

income at age 67.190 Although an 85 percent 

income replacement rate “may seem high,” NIRS 

contends that the rate “does not fully account for 

medical costs which can escalate rapidly during 

retirement.” 191 Nonetheless, even those who 

support NIRS’s position concede that the 85 

percent replacement rate generally is regarded as 

being “at the high end of standard replacement 

rate recommendations.”192 By comparison, 

the GAO Retirement Study cites a 2012 Urban 

Institute study that sets a 75 percent replacement 

rate target, but measures retirement income at 

age 70.193 Ratcheting down the replacement rate 

further, the Social Security Administration states 

that “Social Security replaces about 40 percent of 

an average wage earner’s income after retiring, and 

most financial advisors say retirees will need 70 

percent or more of pre-retirement earnings to live 

comfortably.”194 Yet, detractors argue that even 

that 70 percent figure is misleading.195 Boston 

College divides its retirement adequacy benchmark 

into tiers, estimating a 69 percent replacement rate 

for the highest-third of income earners, 72 percent 

for the middle third, and 79% for the lowest 

tier.196 Generally, those who argue that there is 

no retirement crisis tend not to identify a specific 

retirement adequacy benchmark.197 

To the extent that Americans are not adequately 

prepared for retirement, Boston College makes the 

following recommendations: 

§	Work longer. Delaying retirement can increase 

an individual’s Social Security income by 7-8 

percent for each year of delay, allow individuals 

to contribute to their employer-sponsored 

retirement plan for a longer period, and 

decrease the length of retirement over which 

an individual would need to stretch retirement 

funds.198 

§	Save more. Retirement nest eggs could be 

enhanced by making employer-sponsored 

retirement plans fully automatic (by enrolling 

all workers automatically into such plans, 

setting default contribution rates, and enrolling 

them into acceptable default investment options 

like target-date funds), and covering those 

employees who are not enrolled in an employersponsored retirement plan.199 

§	Consider home equity. Extra retirement income 

could be generated through downsizing or by 

taking out a reverse mortgage.200 

Whether or not there is a retirement crisis, the 

challenge of increasing savings is not new, and the 

concept of making employer-sponsored retirement 

plans “automatic” has gained traction. According 

to one study, the median amount that middle-class 

Americans have saved for retirement is $20,000, 

and half of those aged 50-75 have saved less than 

$25,000.201 This suggests that many Americans 

find saving for retirement more difficult than 

expected.202 To address issues like these, as well 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 19
 

 

as employee inertia, Congress enacted the Pension 

Protection Act in 2006 (the “PPA”).203 Very 

generally, the PPA gives 401(k) plan sponsors and 

employers a “safe harbor” from fiduciary liability if 

they offer to employees a retirement plan with the 

following “automatic” features: 

§	Automatic enrollment of employees in a 401(k) 

plan that would enroll employees at a default 

savings contribution rate (e.g., 3 percent of 

salary), but would permit employees to opt out 

affirmatively.204 

§	Automatic enrollment into default investments, 

known as Qualified Default Investment 

Alternatives, 205 some of which would 

automatically invest employee contributions in 

“approved” investment vehicles, such as target 

date funds.206 

§	Automatic escalation to increase employee 

contributions to their 401(k) accounts 

periodically. 207 

Given the lack of consensus regarding the subject 

of retirement readiness, we believe that this area 

of inquiry would benefit from further objective 

study. If the research demonstrates that Americans 

generally are prepared for retirement, then no 

further action may be required. But if the data lead 

to the opposite conclusion—that Americans are, in 

fact, unprepared for retirement—we will consider 

potential policy approaches to address the problem. 

SHAREHOLDER RIGHTS AND 

CORPORATE GOVERNANCE 

In the coming year, we will consider issues 

involving shareholder rights and corporate governance. In particular, we will focus upon the rules 

governing shareholder proposals and the proxy 

voting process. 

As a partial owner of the company, a shareholder 

has a right to vote on certain issues affecting the 

management of the company.208 This includes the 

right to participate in the election of persons to 

serve on the company’s board of directors.209 In 

addition, Exchange Act Rule 14a-8 gives certain 

shareholders the ability to submit a proposal for 

a vote of the other shareholders that, if approved, 

would recommend or require that the company 

take a certain course of action.210 

Shareholder votes are typically held during an 

annual shareholder meeting.211 However, because 

it may be inconvenient for shareholders to attend 

the meeting in person, state law generally provides 

a mechanism for shareholders to cast votes by 

proxy.212 The overwhelming majority of votes 

typically are cast in this manner, so the rules 

governing the proxy process are of great importance to investors. 

Election of Directors 

In a contested board election, a slate of candidates 

backed by the company’s current management 

is challenged by a slate of candidates backed by 

one or more shareholder proponents.213 Shareholders voting in person are able to choose from 

among candidates on both slates.214 Shareholders 

voting by proxy, however, generally must vote for 

candidates either on one slate or the other, with no 

ability to mix and match from among candidates 

on both slates.215 This result flows from what one 

SEC Commissioner Kara Stein has described as 

“the strange confluence of federal and state law.”216 

In practice, proxies (including both management 

and dissidents’ proxies in contested elections) 

typically state that any new proxy will revoke any 

previously granted proxy. As a result, if a shareholder submits more than one proxy, only the 

last proxy is given effect. This precludes a shareholder from voting for certain nominees from the 

management proxy card and other nominees from 

the dissident proxy card. Moreover, shareholders 

generally are not permitted to write-in the names 

of candidates on a ballot.217 Thus, shareholders 

voting by proxy may choose candidates from 

both slates only if the names of nominees from 

the opposing slates appear on one “universal” 

proxy ballot.218 

20 | OFFICE OF THE INVESTOR ADVOCATE 
Currently, federal law does not provide for such a 

universal ballot. Under what is called the bona fide 

nominee rule, a proxy card can list only the names 

of those director nominees who have consented to 

having their names appear on that particular proxy 

card and who have agreed to serve if elected.219 In 

practice, candidates typically, though not always, 

withhold consent for their names to appear on the 

competing proxy card. 

To address this issue, some advocates have called 

for the Commission to engage in rulemaking to 

facilitate universal proxies in which all candidates 

would appear on a single ballot.220 This would 

eliminate a significant difference between voting 

by proxy and voting in person at the shareholder 

meeting.221 In addition, a universal proxy could 

enhance shareholder voting by giving shareholders 

the opportunity to select those candidates they 

believe are best qualified, no matter on which 

side of the contest those candidates may have 

been positioned.222 Critics, meanwhile, assert 

that a universal ballot would further empower 

activist shareholders, increase the number of proxy 

contests, exacerbate “short-termism,” and result 

in a negative impact on boardroom focus and 

dynamics.223 

This issue has gained increasing attention in the 

past two years.224 In 2013, the Investor Advisory 

Committee recommended that the Commission 

explore changes to the proxy rules that would 

give proxy contestants the option, but not the 

obligation, to use universal ballots in connection 

with short slate director nominations.225 In a short 

slate, the dissident seeks a minority of board seats 

rather than control of the board.226 In January 

2014, the Council of Institutional Investors 

submitted a rulemaking petition requesting that the 

Commission facilitate the use of universal proxy 

cards in contested elections.227 Most recently, in 

February 2015, the Commission held a Proxy 

Voting Roundtable devoted, in part, to the consideration of a universal ballot.228 

During Fiscal Year 2016, we will study this issue 

and related proxy voting issues in greater depth, 

review real-world application of the existing proxy 

rules, and monitor relevant developments at the 

Commission. We will look for ways to enhance 

the fairness, efficiency, and utilization of the proxy 

voting process. 

Shareholder Proposals 

Exchange Act Rule 14a-8 allows a shareholder 

who holds voting shares worth at least $2,000 

(or one percent of the voting shares, whichever is 

less) to submit a proposal for a vote of the other 

shareholders.229 The proposal may recommend 

or require the company to take a certain course 

of action.230 The company is required to include 

such a proposal in the company’s proxy materials 

for a vote at a shareholder meeting unless the 

company can exclude the proposal under certain 

procedural and substantive exceptions set forth in 

the rule.231 One of those grounds for exclusion, 

found in Exchange Act Rule 14a-8(i)(9), allows a 

company to exclude a shareholder proposal that 

“directly conflicts” with one of the company’s own 

proposals.232 

Every year, Commission staff receive approximately 300 to 400 requests for assurance that 

the Commission will take no enforcement action 

against a company if the company were to exclude 

a shareholder proposal under one of the exceptions in Rule 14a-8.233 For example, in 2014, 

Whole Foods, Inc. (“Whole Foods”) sought such 

an assurance, called a “no-action letter,” from 

the Commission.234 Whole Foods requested the 

no-action letter because a shareholder of Whole 

Foods had submitted a proposal asking the Whole 

Foods board to adopt a form of proxy access that 

would have permitted a shareholder or group of 

shareholders (who held at least three percent of 

the outstanding stock for at least three years) to 

nominate up to 20 percent of the directors, but 

no fewer than two, for inclusion in the company’s 

own proxy statement.235 The company responded 

that it intended to include its own proposal asking 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 21
 

 

 

 

shareholders to approve a board-adopted bylaw 

that granted any single shareholder (who held 

at least nine percent of the outstanding stock for 

at least five years) to nominate for inclusion in 

the company proxy statement 10 percent of the 

directors, but no fewer than one.236 

Citing Rule 14a-8(i)(9), the company contended 

in its request to the Commission that it was 

authorized to exclude the shareholder proposal 

from its proxy materials on the grounds that the 

shareholder proposal directly conflicted with 

the company’s own proposal.237 Subsequently, 

in December 2014, the Division of Corporation 

Finance issued the requested no-action letter.238 

The shareholder proponent then requested either 

Division reconsideration or Commission review of 

the matter.239 

On January 16, 2015, Chair White directed the 

Division to review the proper scope and application 

of Rule 14a-8(i)(9).240 In light of the pending 

review, the Division withdrew the Whole Foods 

no-action letter and stated that it would not express 

a view on any no-action requests submitted in 

reliance upon that provision during the recent 

proxy season.241 

In the coming months, we will monitor the staff’s 

review of Rule 14a-8(i)(9) and, in particular, their 

interpretation of the term “directly conflicts.” We 

will also review other grounds for exclusion under 

Rule 14a-8. We will advocate for a fair application 

of the law and, if necessary, for modifications to the 

existing regulation. 

FINANCIAL REPORTING AND 

AUDITING 

High-quality financial reporting is critically 

important to investors. Understanding a company’s 

true financial condition and results is indispensable 

in making investment and voting decisions. 

Indeed, our overall system of financial disclosures 

and controls constitutes a significant reason 

why investors are willing to place their trust and 

confidence in the U.S. financial markets. Thus, it is 

important for the Office of the Investor Advocate 

to track potential changes involving accounting, 

auditing, and related issues, and to give a voice to 

the needs of investors in the policymaking process. 

In the coming fiscal year, we will be monitoring 

a number of discrete issues, but we will primarily 

focus on two broad topics. The first involves the 

convergence of global accounting standards in 

general, and of U.S. Generally Accepted Accounting 

Principles (“GAAP”) and International Financial 

Reporting Standards (“IFRS”) in particular. The 

second involves proposed new disclosures by 

audit committees and auditors. Because financial 

information is a significant part of the disclosure 

regime under Regulation S-X and S-K, our consideration of these issues will complement our efforts 

to promote more effective disclosure under those 

regulations, as discussed above. 

Financial Standards 

Since 2002, the Financial Accounting Standards 

Board and the International Accounting Standards 

Board have been working to develop a single set 

“of high-quality, compatible accounting standards 

that could be used for both domestic and crossborder financial reporting.”242 In 2010, the 

Commission expressed its support for this goal.243 

More recently, Chair White has asked the SEC’s 

Chief Accountant to recommend what action, if 

any, the Commission should take regarding the 

further incorporation of IFRS into the U.S. capital 

markets. 244 

The SEC’s Chief Accountant, James Schnurr, 

has made this a priority. His staff is currently 

developing a recommendation which he expects 

to present to the Chair in the near term.245 Mr. 

Schnurr has also mentioned one potential 

alternative—i.e., allowing domestic issuers to 

provide IFRS-based information as a supplement 

to U.S. GAAP financial statements without 

requiring reconciliation.246 Since 2007, the SEC 

has permitted foreign private issuers to report 

22 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

under IFRS without requiring reconciliation to U.S. 

GAAP.247 Today, more than 500 foreign companies 

representing trillions of dollars in aggregate market 

capitalization report to the SEC under IFRS with 

no reconciliation.248 

As we continue to monitor developments in this 

area, we will work to help ensure that investor 

confidence is not undermined by undue erosions 

of financial standards. We are also sensitive to the 

necessity of having comparable financial information in an increasingly international marketplace. 

Auditing 

Recent attention has focused on disclosures made 

by the audit committee of a company’s board of 

directors, which oversees a company’s financial 

reporting and its outside audit and thus plays a 

critical role in our financial reporting framework. 

Chair White has asked Commission staff to 

examine the existing audit committee report to 

make it more useful to investors, noting that 

investors have expressed interest in increased transparency into the audit committee’s activities.249 

Indeed, in recent years, investors and others have 

focused on enhancements to audit committee 

reports of public companies. In 2013, several 

governance organizations jointly issued a call to 

action to enhance the reports.250 The organizations 

observed that “[i]nvestors, too, are increasing their 

focus on the activities and transparency of audit 

committees, particularly as those activities relate 

to enhanced audit quality through oversight of 

the independent external auditor.”251 They noted 

that some investors were seeking greater disclosure 

from audit committees concerning the appointment 

and oversight of the external auditor, audit firm 

tenure, audit firm fee determinations, and audit 

committee involvement in the selection of the audit 

engagement partner.252 Other jurisdictions, such 

as the United Kingdom, have already adopted 

enhanced disclosures of the audit committee. 

On June 5, 2015, SEC Chief Accountant Schnurr 

announced that his office was developing a concept 

release on audit committee disclosures.253 He 

stated that he expected to recommend Commission 

approval of the release in the near future.254 

According to Mr. Schnurr, the concept release 

will seek feedback on how investors currently 

use the information provided in audit committee 

disclosures, as well as feedback on the usefulness 

of potential enhancements, including additional 

disclosures.255 Noting the significance of the audit 

committee’s oversight of the external auditor, he 

expressed particular interest in learning more from 

investors, audit committees, auditors, and others 

regarding current audit committee disclosures 

related to oversight of the independent auditor.256 

Mr. Schnurr also stated that the staff was considering current trends, including disclosures by many 

companies and their audit committees that go 

beyond what is required by current rules.257 

If the Commission issues a concept release on audit 

committee disclosures, the Office of the Investor 

Advocate will review the comments, interact with 

a variety of stakeholders, and evaluate the impact 

that proposed changes would have on investors. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 23
24 | OFFICE OF THE INVESTOR ADVOCATE 
OMBUDSMAN’S REPORT
 

APPOINTMENT OF SEC OMBUDSMAN 

AND FOUNDATIONAL ACTIVITIES 

The Investor Advocate is responsible for appointing 

an Ombudsman 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 SROs; (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.258 

On August 26, 2014, the Investor Advocate, in 

consultation with Chair White, appointed Tracey 

L. McNeil as Ombudsman. She formally began 

her duties on September 22, 2014, and since that 

time, the Ombudsman’s activities have focused 

largely on establishing processes to handle inquiries 

from retail investors. These foundational activities 

include the following: 

§	Meeting with SEC staff, formally and on an 

as-needed basis, to raise their awareness of the 

roles and responsibilities of the Ombudsman; 

§	Drafting internal policies and procedures, and 

establishing internal protocols for handling 

inquiries; 

§	Routing certain inquiries to the appropriate SEC 

divisions and offices; 

§	Establishing an external Ombudsman email 

address. Since the email address was established 

in October 2014, the Ombudsman has received 

and responded to 170 email inquiries; 

§	Establishing dedicated Ombudsman telephone 

lines. Since the direct and toll-free telephone 

lines were established in November 2014, the 

Ombudsman has received 155 initial phone calls 

from retail investors and interested parties; 

§	Convening meetings 

with the SEC’s Office 

of Information 

Technology to 

develop a platform 

for inquiry 

management, data 

collection, and 

reporting; 

§	Meeting with other 

SEC divisions 

and offices, and 

ombudsmen and staff 

from other agencies 

and entities, to discuss data tracking systems; 

§	Meeting with ombudsmen from other federal 

agencies to discuss best practices and to share 

information on topical issues of importance; 

§	Meeting with ombudsmen and staff from other 

agencies and entities to discuss staffing and 

office structure; 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 25
 

§	Developing a strategy to market the ombudsman role once additional staff are on board; 

§	Completing ombudsman coursework with the 

International Ombudsman Association; and, 

§	Meeting with certain SEC and SRO directors 

and senior staff to discuss methods and 

protocols for collaboration when inquiries 

received by the Ombudsman necessitate their 

involvement. 

ASSISTING RETAIL INVESTORS AND 

OTHER INTERESTED PERSONS 

The Ombudsman currently assists retail investors 

and other interested persons in a variety of ways, 

including, but not limited to: 

§	Listening to inquiries, 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. 

The Ombudsman is required to review and make 

recommendations regarding policies and procedures to encourage persons to present questions to 

the Investor Advocate relating to securities laws. 

The establishment of the role, the Ombudsman’s 

ability to handle inquiries on a confidential basis, 

and the Ombudsman’s access to appropriate SEC 

staff across the agency should encourage persons 

to present questions to both the Ombudsman 

and the Investor Advocate. As the role is further 

established and additional staff come on board, the 

Ombudsman will develop specific outreach initiatives to further publicize the role and the resources 

available at the SEC and to encourage persons to 

interact with the Office of the Investor Advocate. 

STANDARDS OF PRACTICE 

Any retail investor with an issue or concern related 

to the SEC or to a self-regulatory organization 

that is under SEC oversight may contact the 

Ombudsman. The Ombudsman may assist in 

identifying available SEC options and resources 

that may help resolve the issue or concern, as the 

agency has several channels and procedures in 

place for solving problems, resolving disputes, 

handling inquiries, and addressing concerns. 

Similar to the ombudsmen at other federal 

agencies,259 the Ombudsman follows three core 

standards of practice: 

CONFIDENTIALITY . The Ombudsman has 

established safeguards to protect confidentiality, 

including a separate email address, dedicated 

telephone and fax lines, and secure file storage. 

The Ombudsman will not disclose information 

provided by a person in confidence, including 

identity, unless expressly authorized by the person 

to do so, or if required by law or other exigent 

circumstances, such as a threat of imminent risk or 

serious harm. At times, the Ombudsman may need 

to disclose information on a limited basis to other 

SEC staff to address inquiries and related issues. In 

these instances, information is only shared to the 

extent necessary to route and review the matter. 

IMPARTIALITY . The Ombudsman does not 

represent or act as an advocate for any individual 

or entity, and does not take sides on any issues 

brought to her attention. The Ombudsman 

maintains a neutral position, considers the interests 

and concerns of all involved parties, and works to 

promote a fair process. 

INDEPENDENCE . By statute, the Ombudsman 

reports directly to the Investor Advocate, who 

reports directly to the Chair of the SEC. However, 

the Office of the Investor Advocate and the 

Ombudsman are designed to remain somewhat 

independent from the rest of the SEC. Through the 

Congressional report filed every six months by the 

Investor Advocate (including the instant Report on 

26 | OFFICE OF THE INVESTOR ADVOCATE 
Objectives), the Ombudsman reports directly to 

Congress without any prior review or comment by 

the Commission. 

INQUIRY MANAGEMENT SYSTEM 

During the second quarter of Fiscal Year 2015, the 

Ombudsman began meeting with the SEC’s Office 

of Information Technology (OIT) to discuss the 

development of an inquiry management system. 

The system will be a customer-facing application 

which will collect and record inquiries, as well as 

track and report related actions. The system will 

leverage the Salesforce technology platform and 

will replace the manual data collection process that 

is currently in use. 

The development acquisition process started in the 

third quarter of Fiscal Year 2015, and a contract is 

expected to be in place and awarded by July 2015. 

The full software development lifecycle process will 

be followed for this effort, ensuring compliance 

with SEC and OIT development, security, and 

privacy guidelines and standards. OIT is planning 

a 7 to 8 month delivery schedule, with an expected 

product in place no later than the second quarter of 

Fiscal Year 2016. 

On May 18, 2015, the Ombudsman selected an 

attorney to assist with fulfilling the duties of the 

office. Initially, the attorney will work closely with 

OIT to complete the development and testing 

phases of the inquiry management system, as the 

attorney has extensive experience with similar 

customer-facing systems currently in use at the SEC. 

Once the inquiry management system is in place, 

the Ombudsman and approved staff will have 

the ability to review investor inquiries, including 

communication, handling, and resolution histories, 

within the system. This is expected to result in 

improved service to retail investors, as the system 

should reduce inquiry response times and allow for 

improved data collection, analysis, and reporting. 

The data collection, analysis, and reporting features 

of the system will also support recommendations 

made by the Ombudsman to the Investor Advocate, 

and will provide enhanced measures to ensure the 

confidentiality of communications between retail 

investors and the Ombudsman. 

INQUIRY STATISTICS 

The Ombudsman began receiving inquiries 

from retail investors a few days before formally 

beginning her duties on September 22, 2014. 

Since that time, when an inquiry is received, the 

Ombudsman may correspond with the person to 

learn more about his or her specific issue, conduct 

additional research and review related laws and 

policies, confer with other SEC staff as necessary, 

and recommend the use of existing SEC channels 

with a goal of reaching a resolution. When these 

actions are not satisfactory to the individual, the 

Ombudsman may further discuss the issue with the 

individual and SEC staff as necessary, and suggest 

recommendations for additional action. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 27
 

Of the 330 emails, telephone calls, and hard copy 

correspondence received by the Ombudsman, 

97% came from retail investors. The remaining 

eight inquiries came from Congress on behalf 

of constituents, law firms, and from other SEC 

divisions and offices. Email and telephone inquiries 

comprised 52% and 47% of the inquiries received, 

respectively. The majority of the inquiries received 

fell into 10 primary categories: 

2% 2%

32%

24%

15%

9%

5%

4%

4% 3%

Account Mismanagement and Fraudulent Activity 

Filing SEC Complaints 

Stock Certificates and Ownership 

Guidance on SEC Regulations 

Information about Financial Professionals 

Investment Scams and Ponzi Schemes 

Fair Funds 

FINRA Arbitration 

Margin Calls and Reverse Stock Splits 

Foreign Investments by U.S. Persons 

RECOMMENDATIONS AND OUTLOOK 

The Ombudsman will continue to track primary 

inquiry categories to further identify trends and 

issues, and to identify areas of focus for outreach 

activities. With the additional staff coming on 

board, and the expanded capability to analyze 

additional data through the inquiry management 

system, the Ombudsman expects to conduct 

systemic reviews and make recommendations to 

the Investor Advocate based on this expanded data 

collection and analysis. 

One issue that the Ombudsman will begin to focus 

on immediately is investor inquiries surrounding 

the FINRA arbitration process. While the number 

of inquiries received were low compared to other 

categories, several investors raised questions about 

the impartiality of arbitrators. They also voiced 

concerns about the treatment of investors and 

the amounts recovered by investors during the 

mandatory arbitration process. 

As an ongoing series of recommendations, the 

Ombudsman will continue to closely monitor 

general inquiries by investors relating to clarification of the roles of the various SEC divisions 

and offices, the use of established SEC resolution 

channels, and the specific ways the Ombudsman 

is able to assist investors. Many of these inquiries 

and issues are expected to be addressed by the 

enhanced agency and external outreach efforts the 

Ombudsman will implement in the coming months, 

and the Ombudsman expects to report favorably 

on those efforts and initiatives in the next report. 

Tracey L. McNeil 

SEC Ombudsman 

28 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

SUMMARY OF IAC
 

RECOMMENDATIONS AND
 

SEC RESPONSES
 

Investor Advisory Committee . Front row from left to right: Hester Peirce; Joseph V . Carcello; Ann Yerger; Jean Setzfand; Darcy Bradbury; 

Craig Goettsch; Adam Kanzer . Back row from left to right: Rick Fleming; Alan Schnitzer; Kurt Schacht; Barbara Roper; Roger Ganser; 

Stephen Holmes; Steven Wallman; Damon Silvers . (Not pictured: J . Robert Brown, Jr .; Eugene Duffy; James Glassman; Joseph Grundfest; 

Roy Katzovicz; and Anne Sheehan) . 

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.260 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.261 

Exchange Act Section 39 authorizes the Committee 

to submit findings and recommendations for 

review and consideration by the Commission.262 

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.263 

While the Commission must respond to the IAC’s 

recommendations, it is under no obligation to agree 

with or act upon the recommendations.264 

In its reports to Congress, including this one, the 

Office of the Investor Advocate summarizes the 

IAC recommendations and the SEC’s responses 

to them.265 This report covers all recommendations the IAC has made since its inception.266 

SEC responses to IAC recommendations may 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 29
 

take various forms. If an IAC recommendation 

pertains to a current rulemaking, the Commission’s 

proposing release or the adopting release may 

constitute the Commission’s response. If an IAC 

recommendation involves no current rulemaking, 

Chair White has indicated that the Commission 

would respond with a written statement.267 

The Commission may be pursuing initiatives 

that are responsive to IAC recommendations 

but have not yet been made public. Commission 

staff—including staff of the Office of the Investor 

Advocate—are prohibited from disclosing 

nonpublic information.268 Therefore, any such 

initiatives are not reflected in this Report. 

SHORTENING THE TRADE 

SETTLEMENT CYCLE IN U.S. 

FINANCIAL MARKETS 

This recommendation,269 adopted on February 

12, 2015, calls for shortening the security 

settlement period in the U.S. financial markets 

from a three-day settlement cycle (referred to as 

T+3) to a one-day settlement cycle (T+1) for “at 

least” transactions in U.S. equities, corporate and 

municipal bonds, and unit investment trusts. The 

IAC acknowledged a proposal of the Depository 

Trust & Clearing Corporation (DTCC) to shorten 

the settlement cycle to a two-day period (T+2), but 

favored a move to T+1 in the near term. Moreover, 

to the extent that T+2 was nevertheless pursued, 

the IAC recommended that the Commission work 

with industry participants to create a clear plan for 

moving to T+1 in an expedited fashion rather than 

pausing at T+2 for an indeterminate period of time. 

COMMISSION RESPONSE The Commission 

response to this recommendation is pending. 

IMPARTIALITY IN THE DISCLOSURE OF 

PRELIMINARY VOTING RESULTS 

Exchange Act Rule 14a-2(a)(1) provides an 

exemption from the proxy rules for brokers that 

forward proxy materials to shareholders who 

own shares in “street name.”270 On October 9, 

2014, the IAC adopted a recommendation that the 

staff of the Commission take the steps necessary 

to ensure that the exemption is conditioned upon 

the broker (and any intermediary designated by 

the broker) acting in an impartial and ministerial 

fashion throughout the proxy process, and that any 

broker who uses an intermediary take reasonable 

steps to verify that the intermediary is not subject 

to impermissible conflicts of interest and will act 

in an impartial manner. In adopting these recommendations, the IAC noted several concerns about 

current industry practices, including the disclosure 

of preliminary voting results to issuers while the 

results are withheld from exempt solicitors, as well 

as possible conflicts of interest between the issuer 

and the broker’s designated intermediary. 

COMMISSION RESPONSE The Commission 

response to this recommendation is pending. 

THE ACCREDITED INVESTOR 

DEFINITION 

On October 9, 2014, the IAC adopted a set of 

recommendations related to the Commission’s 

review of the accredited investor definition as 

required by the Dodd-Frank Act.271 The IAC 

first recommended that the Commission seek to 

determine whether the current definition achieves 

the goal of identifying a class of individuals who do 

not need the protections afforded by the Securities 

Act of 1933 because they are sufficiently able to 

protect their own interests. If, as the IAC expects, 

the analysis reveals a failure to meet that goal, then 

the Committee recommended prompt rulemaking 

to revise the definition. 

The IAC also recommended that the Commission 

revise the definition to enable individuals to qualify 

as accredited investors based on their financial 

sophistication. However, should the Commission 

choose to continue with an approach that relies 

exclusively or mainly on financial thresholds, the 

Committee recommended the consideration of 

alternative approaches to setting those thresholds, 

such as limiting investments in private offerings to 

a percentage of assets or income. 

30 | OFFICE OF THE INVESTOR ADVOCATE 
In addition to any changes to the accredited 

investor standard, the IAC recommended that 

the Commission take concrete steps to encourage 

development of an alternative means of verifying 

accredited investor status that shifts the burden 

away from issuers. The IAC also recommended 

that the Commission strengthen the protections 

that apply when non-accredited individuals, who 

do not otherwise meet the sophistication test for 

such investors, qualify to invest solely by virtue of 

relying on advice from a purchaser representative. 

COMMISSION RESPONSE . At the IAC meeting on 

April 9, 2015, Chair White said that Commission 

staff is completing its internal review of the 

definition of accredited investor. 

CROWDFUNDING 

At its meeting on April 10, 2014, the IAC adopted 

a package of six recommendations for the SEC 

to strengthen its proposed rules to implement the 

crowdfunding provisions of the JOBS Act.272 The 

Committee stated that its recommendations would 

better ensure that investors understand the risks 

of crowdfunding and avoid unaffordable financial 

losses. Among other things, the Committee recommended that the SEC: 

§	Adopt tighter limits on the amount of money 

that investors could invest in crowdfunding; 

§	Strengthen the mechanisms for the enforcement 

of the investment limits in order to better 

prevent errors and evasion; 

§	Clarify and strengthen the obligations of 

crowdfunding intermediaries to ensure that 

issuers comply with their legal obligations; 

clarify the requirements for background checks; 

clearly affirm the right of portals to “curate” 

offerings; and consider a tiered regulatory 

structure based upon factors such as the size of 

offering, investment limits, and participation 

by individuals with a record of securities law 

violations; 

§	Enhance the effectiveness of educational 

materials for investors; 

§	Replace the proposed definition of electronic 

delivery with a stronger definition that, at a 

minimum, requires disclosure of a specific URL 

where required disclosures can be found; and 

§	Replace the proposal to eliminate application 

of the integration doctrine with a narrower 

approach. 

COMMISSION RESPONSE . These recommendations relate to proposed rules that are still under 

consideration.273 Chair White told the IAC at its 

April 9, 2015, meeting that crowdfunding is the 

last major rulemaking to complete under the JOBS 

Act and is a priority for 2015. Earlier, Chair White 

informed the IAC that the Commission’s response 

to the IAC’s recommendations would be reflected 

in the adopting release for the final rules. 

DECIMALIZATION AND TICK SIZES 

On January 31, 2014, the IAC adopted a resolution 

opposing any test or pilot programs to increase the 

minimum quoting and trading increments (“tick 

sizes”) in the securities markets.274 The resolution 

argued that larger tick sizes would disproportionately harm retail investors by raising prices without 

achieving the goals of improved research coverage 

or liquidity of small-cap companies. 

If, however, the SEC were to decide to pursue a 

pilot program of increasing tick sizes, the IAC 

made three more recommendations: to limit the 

pilot program’s duration, with a short “sunset” on 

the pilot unless benefits were proven to outweigh 

the costs; to conduct a careful evaluation of costs 

and benefits to investors, with a particular focus 

on retail investors; and to pilot other competition-based measures designed to encourage trading 

and capital formation. 

COMMISSION RESPONSE . On June 24, 2014, 

the Commission directed the national securities 

exchanges and FINRA (collectively, “SROs”) to 

submit a plan for a pilot program to test a tick size 

of 5 cents per share in three groups of securities. 

Within the Order to the SROs, the Commission 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 31
 

 

specifically discussed the IAC recommendations.275 

On August 25, 2014, the SROs submitted a plan 

for a 12-month pilot program,276 and Chair White 

subsequently encouraged the Committee’s further 

feedback on the proposed pilot.277 On May 6, 

2015, after receiving 77 comment letters,278 the 

Commission approved the SROs’ proposal, with 

modifications, for a two-year pilot program 

to widen tick sizes for stocks of some smaller 

companies.279 Among other modifications, the 

Commission increased the duration of the pilot 

program (from one year to two years) while 

reducing the size of companies in it (lowering 

the market capitalization threshold from 

$5 billion to $3 billion). Implementation will 

begin May 6, 2016. 

In the footnotes to the SEC release dated May 

6, 2015, several references are made to the IAC 

recommendations. In particular, footnote 269 

notes the IAC’s “concern that a pilot would 

disproportionately harm retail investors because 

their trading costs would rise.” It goes on to 

state, “The Commission has carefully considered 

the IAC Recommendations from January 2014. 

After careful deliberation and considering the IAC 

Recommendations, the Commission is approving 

the NMS plan, as modified.” 

LEGISLATION TO FUND INVESTMENT 

ADVISER EXAMINATIONS 

On November 22, 2013, the IAC recommended 

that the SEC request legislation from Congress 

that would authorize the Commission to impose 

user fees on SEC-registered investment advisers 

to provide a scalable source of funding for more 

frequent compliance examinations of advisers.280 

The IAC asserted that the examination cycle for 

SEC-registered investment advisers, was “simply 

inadequate to detect or credibly deter fraud.” 

COMMISSION RESPONSE. While refraining from 

taking a position on user fees, the Commission’s 

Fiscal Year 2015 budget request made it a top 

priority to increase examinations of investment 

advisers. The Commission’s request called for an 

increase of 316 new positions to the examination 

program in the SEC’s Office of Compliance 

Inspections and Examinations (OCIE).281 Congress 

appropriated $1.5 billion for the SEC in FY 2015, 

32 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

which was less than the SEC’s request of $1.722 

billion but 11 percent more than the previous 

year’s overall budget. The SEC budget request for 

FY 2016 calls for funding to hire an additional 

225 OCIE examiners, primarily to conduct 

additional examinations of investment advisers. It 

is estimated that the increase in staffing would raise 

examination coverage of advisers to approximately 

14 percent per year (after a time lag needed for 

hiring and training).

282 

In a related development, Chair White has asked 

staff to develop recommendations for a program 

of third-party compliance reviews for investment 

advisers. The reviews would supplement, but 

not replace, the examinations conducted by 

OCIE staff.283 

BROKER-DEALER FIDUCIARY DUTY 

On November 22, 2013, the IAC adopted a set 

of recommendations encouraging the SEC to 

establish a fiduciary duty for broker-dealers when 

they provide personalized investment advice to 

retail investors.284 The Committee preferred 

to accomplish this objective by narrowing the 

exclusion for broker-dealers within the definition 

of an “investment adviser” under the Investment 

Advisers Act of 1940. As an alternative, the 

Committee recommended the adoption of a rule 

under Section 913 of the Dodd-Frank Act to 

require broker-dealers to act in the best interests 

of their retail customers when providing personalized investment advice, with sufficient flexibility to permit certain sale-related conflicts of 

interest that are fully disclosed and appropriately 

managed. In addition, the Committee recommended the adoption of a uniform, plain English 

disclosure document to be provided to customers 

and potential customers of broker-dealers and 

investment advisers. The document would disclose 

information about the nature of services offered, 

fees and compensation, conflicts of interest, and 

the disciplinary record of the broker-dealer or 

investment adviser. 

COMMISSION RESPONSE. In March 2015, Chair 

White announced her belief that broker-dealers and 

investment advisers should be subject to a 

uniform fiduciary standard of conduct when 

providing personalized securities advice to retail 

investors. In Congressional testimony, she said 

that she would soon begin discussing the issue 

with fellow Commissioners, and that she had 

asked Commission staff to develop rulemaking 

recommendations for Commission consideration.285 

The following month, she told the IAC: 

As most of you know from the remarks 

I made last month on my own behalf, I 

expect we will be discussing advancing 

rulemakings to impose a uniform fiduciary 

duty on broker-dealers and investment 

advisers under Section 913 of the DoddFrank Act and to require a program of 

third party examinations of investment 

advisers to increase our exam coverage. 

Further Commission action is pending. 

UNIVERSAL PROXY BALLOTS 

On July 25, 2013, the IAC adopted a recommendation urging the SEC to explore the relaxation 

of the “bona fide nominee rule” (Rule 14a-4(d) 

(1)) to provide proxy contestants with the option, 

but not the obligation, to use Universal Ballots in 

connection with short slate director nominations.286 

The IAC also encouraged the Commission to hold 

one or more roundtable discussions on the topic. 

COMMISSION RESPONSE . On February 19, 2015, 

the Commission held a Proxy Voting Roundtable, 

which discussed universal proxy ballots as one of 

two topics. In a briefing to the IAC on April 9, 

2015, David Frederickson, Chief Counsel of the 

SEC Division of Corporation Finance, remarked 

that Commission staff was actively thinking 

through issues raised by universal ballots, in 

preparation for a possible recommendation to the 

Commission. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 33
 

DATA TAGGING 

At its meeting on July 25, 2013, the IAC adopted 

a recommendation for the SEC to promote the 

collection, standardization, and retrieval of data 

filed with the SEC using machine-readable data 

tagging formats.287 The Committee urged the SEC 

to take steps to reduce the costs of providing tagged 

data, particularly for smaller issuers and investors, 

by developing applications that allow users to enter 

information on forms that can be converted to 

machine-readable formats by the SEC. In addition, 

the IAC recommended that the SEC give priority 

to the data tagging of disclosures on corporate 

governance, including information about executive 

compensation and shareholder voting. 

COMMISSION RESPONSE . The Commission has 

incorporated the collection of structured data into 

the following final and proposed rules: 

§	Investment Company Reporting Modernization. 

On May 20, 2015, the Commission proposed a 

new rule that would require reporting of certain 

information in a structured data format.288 The 

proposed rule would require two new forms: 

Form N-PORT, which would require certain 

registered investment companies to report 

information about their monthly portfolio 

holdings to the Commission in an eXtensible 

Markup Language (“XML”) format; and 

Form N-CEN, which would require registered 

investment companies, other than face amount 

certificate companies, annually to report certain 

census-type information to the Commission, 

also in an XML structured format.289 According 

to the release, the structured data format would 

make both forms more useful to investors and 

others.290 

§	Executive Pay versus Performance. On April 

29, 2015, the Commission voted to propose 

rules to require companies to disclose the 

relationship between executive compensation 

and the financial performance of a company. 

The proposed rule would require a company 

to disclose, in a table, executive pay and 

performance information for itself and 

companies in a peer group. Companies 

would also be required to tag the disclosure 

in an interactive data format using eXtensible 

Business Reporting Language, or XBRL, with 

the requirements phased in for smaller reporting 

companies.291 

§	Regulation A+. On March 25, 2015, the 

Commission adopted final rules to update 

and expand Regulation A, an exemption from 

registration for smaller issuers of securities. The 

Regulation now requires that issuers file certain 

key information in XML format. Under the 

rule, Part I of Form 1-K will consist of an online 

XML based fillable form, and it will capture key 

information about the issuer and its proposed 

offering.292 

§	Reporting and Dissemination of Security-Based 

Swap Information. On January 14, 2015, the 

Commission adopted rules that will require 

security-based swap data repositories (SDRs) 

to register with the SEC.293 The rules require 

registered SDRs to establish and maintain 

policies and procedures that enumerate the 

specific data elements and the acceptable data 

formats for transaction reporting.294 Any 

reporting languages or protocols adopted 

by registered SDRs must be open-source 

structured data formats that are widely used 

by participants. The Commission also made 

clear that SDRs should be able to provide to 

the Commission normalized and uniform data, 

which would allow the Commission to analyze 

data from a single SDR and to aggregate and 

analyze data received from multiple SDRs. The 

Commission left open the possibility of adopting 

specific formats and taxonomies in the future.295 

§	Asset-backed Securities. On September 4, 

2014, the Commission adopted rules to require 

loan-level disclosure for asset-backed securities 

in XML format so investors may more easily 

access and analyze data about the asset pool. 

§	Crowdfunding. Proposed rules governing 

“crowdfunding”296 include requirements for 

issuers to file certain key financial information 

in an XML format. 

34 | OFFICE OF THE INVESTOR ADVOCATE 
 

 

 

§	Money Market Funds. Rule 30b1-7 under the 

Investment Company Act of 1940 requires 

money market funds to file Form N-MFP within 

five business after the end of each month. The 

information required by the form must be 

data-tagged in XML format and filed through 

EDGAR.297 

Consistent with the IAC’s recommendation to 

reduce the costs of providing structured data, 

Chair White has indicated that Commission 

staff is considering a new filing method called 

“Inline-XBRL.”298 This new technology would 

effectively eliminate the need for companies to 

reconcile separate HTML and XBRL versions of 

the financial statement content, thus reducing the 

possibility of rekeying or similar errors. Instead, 

Inline-XBRL would allow companies to integrate 

(or embed) the XBRL tagging of the financial statements directly into their standard HTML formatted 

10-K and 10-Q filings. In addition, Commission 

staff is working on a prototype viewer to allow 

users to display and search the integrated XBRL 

tagging while viewing the familiar HTML version 

of the financial statements. 

TARGET DATE MUTUAL FUNDS 

On April 11, 2013, the IAC adopted recommendations for the Commission to revise its proposed rule 

regarding target date retirement fund names and 

marketing.299 The package of five IAC recommendations pertained to a 2010 SEC proposal that 

would, among other things, require marketing 

materials for target date retirement funds to include 

a table, chart, or graph depicting the fund’s asset 

allocation over time (i.e., an “asset allocation 

glide path”).300 

As either a replacement for or supplement to 

the SEC’s proposed asset allocation glide path 

illustration, the IAC recommended that the 

Commission develop a glide path illustration that 

would be based on a measure of fund risk. To 

promote comparability between funds, the IAC 

recommended the adoption of standard methodologies to be used in glide path illustrations. 

In addition, the IAC urged the Commission to 

require clearer disclosure about the risk of loss, the 

cumulative impact of fees, and the assumptions 

used to design and manage the funds. 

COMMISSION RESPONSE . On April 3, 2014, the 

Commission reopened the comment period on the 

proposed rule in order to seek public comment on 

the IAC’s recommendations to adopt a risk-based 

glide path illustration and the methodology to be 

used for measuring risk.301 The comment period 

closed on June 9, 2014, and a final rule has not yet 

been adopted. 

GENERAL SOLICITATION AND 

ADVERTISING 

On October 12, 2012, the IAC adopted a set of 

seven recommendations concerning rulemaking to 

lift the ban on general solicitation and advertising 

in offerings conducted under Rule 506.302 The IAC 

asserted that the recommendations would strengthen 

investor protections and enhance regulators’ ability 

to police the private placement market. 

COMMISSION RESPONSE . On July 10, 2013, 

the SEC took three related actions.303 First, the 

Commission adopted a final rule permitting general 

solicitation and advertising in Rule 506 offerings.304 

Second, it adopted a final rule disqualifying 

offerings involving felons and other bad actors.305 

Third, it proposed an additional rule to enhance the 

Commission’s ability to evaluate the development 

of market practices in Rule 506 offerings and to 

address concerns that may arise because the ban on 

general solicitation was lifted.306 

Taken together, the two final rules and the 

proposed rule generally reflect consideration of the 

IAC recommendations. However, the majority of 

the IAC recommendations relate to the proposed 

rule, which has not yet been adopted. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 35
 

ENDNOTES 25 See Mary Jo White, Chair, SEC, Speech at Sandler 

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

(ii) (2012). 

O’Neill & Partners, L.P. Global Exchange and 

Brokerage Conference, Enhancing Our Equity Market 

Structure (June 5, 2014), available at http://www.sec. 

2 Exchange Act § 4(g)(6), 15 U.S.C. § 78d(g)(6). gov/News/Speech/Detail/Speech/1370542004312; 

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

(i). 

Concept Release on Equity Market Structure, 

Exchange Act Release No. 61358 (Jan. 14, 2010) [75 

FR 3594, 3596 (Jan. 21, 2010)]. 

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

(i). 26 See Equity Market Structure Advisory Committee 

Meeting (May 13, 2015), available at https://www. 

5 Id. sec.gov/news/otherwebcasts/2015/equity-market6 Exchange Act § 4(g)(4)(A), 15 U.S.C. § 78d(g)(4)(A). structure-advisory-committee-051315.shtml. See also 

SEC Equity Market Structure Advisory Committee 

7 Exchange Act § 4(g)(8)(A), 15 U.S.C. § 78d(g)(8)(A). Meeting, SIFMA Hearing Summary (May 14, 2015), 

8 

9 

10 

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

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

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

27 

available at http://www.sifma.org/members/hearings. 

aspx?id=8589954718. 

See Bradley Hope & Scott Patterson, NYSE Plan 

Would Revamp Trading, Wall St. J., Dec. 17, 2014. 

11 Exchange Act § 4(g)(4)(C), 15 U.S.C. § 78d(g)(4)(C). (Intercontinental Exchange Inc. controls the NYSE, 

12 Exchange Act § 4(g)(4)(D), 15 U.S.C. § 78d(g)(4)(D). NYSE Arca and NYSE MKT exchanges). 

13 Exchange Act § 4(g)(4)(E), 15 U.S.C. § 78d(g)(4)(E). 28 See Letter to Brent Fields, Sec’y, SEC, from Joe 

Ratterman, then CEO (now Chairman), BATS Global 

14 Exchange Act § 39, 15 U.S.C. § 78pp. Markets, Inc., File No. 4-680, (Jan. 21, 2015), 

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

(A). 

available at https://www.sec.gov/rules/petitions/2015/ 

petn4-680.pdf. (BATS Global Markets controls the 

BATS, BATS Y, EDGA and EDGX exchanges). 

16 See generally Concept Release on Equity Market 

Structure, Exchange Act Release No. 61358 (Jan. 14, 

2010) [75 FR 3594 (Jan. 21, 2010)] (hereafter, “Equity 

Market Concept Release”). 

29 See generally Nasdaq Equity Trader Alert #2015-18 

(Feb. 5, 2015), available at http://www.nasdaqtrader. 

com/TraderNews.aspx?id=ETA2015-18. 

17 Id. 30 See Frank Hatheway, Nasdaq Chief Economist, 

Nasdaq Access Fee Experiment Report (Mar. 

18 Id.. 2015), available at http://www.nasdaqomx.com/ 

19 Regulation NMS: Final Rules and Amendments 

to Joint Industry Plans, Exchange Act Release No. 

digitalAssets/97/97754_nasdaq-access-fee-experiment-­

-first-report.pdf. 

51808 (June 9, 2005) [70 FR 37496 (June 29, 2005)] 31 See White, supra note 25; Concept Release on Equity 

(hereafter, “Regulation NMS”) (Among other things, Market Structure, Exchange Act Release No. 61358 

Regulation NMS eliminated trade-through protection (Jan. 14, 2010) [75 FR 3594, 3596 (Jan. 21, 2010)]. 

for manual quotations). 32 See SEC Press Release, supra note 24. See also White, 

20 Regulation of Exchanges and Alternative Trading supra note 25. 

System: Final Rule, Exchange Act Release No. 40760 

(Dec. 8, 1998) [63 FR 70844 (Dec. 22, 1998)]. 33 Statement of Kevin Cronin Global Head of Trading, 

Invesco Ltd. U.S. Senate Comm. on Banking, Housing, 

21 Order Execution Obligations, Exchange Act Release and Urban Affairs Hearing Examining the Role of 

No. 37619A (Sept. 6, 1996) [61 FR 48290 (Sept. 12, Regulation in Shaping Equity Market Structure and 

1996)]. High Frequency Trading (July 8, 2014), available 

22 

23 

Regulation NMS, Exchange Act Release No. 51808, 

supra note 19. 

Id. 

at http://www.banking.senate.gov/public/index. 

cfm?FuseAction=Files.View&FileStore_id=32d50b9e3ddf-4611-b223-9465138d61dc; See also, e.g., 

Letter from Managed Funds Association, Equity 

24 See Press Release, SEC Announces Members of New Market Structure Policy Recommendations (Sept. 

Equity Market Structure Advisory Committee (Jan. 30, 2014), available at https://www.managedfunds. 

13, 2015), available at http://www.sec.gov/news/ org/wp-content/uploads/2014/09/MFA-Equity-Mktpressrelease/2015-5.html. Structure-Recommendations-final-9-30-14.pdf. 

34 See Order Approving the National Market System Plan 

to Implement a Tick Size Pilot Program, Exchange Act 

Release No. 74892 (May 6, 2015) [80 FR 27514 (May 

13, 2015)] (File No. 4-657). 

36 | OFFICE OF THE INVESTOR ADVOCATE 
35 See White, supra note 25; Concept Release on Equity 47 Order Granting Approval of a Proposed Rule Change 

Market Structure, Exchange Act Release No. 61358 Consisting of Rule G-18, on Best Execution of 

(Jan. 14, 2010) [75 FR 3594, 3596 (Jan. 21, 2010)]. Transactions in Municipal Securities, and Amendments 

36 Federal Reserve Board, Financial Accounts of the 

United States: Flow of Funds, Balance Sheets, and 

Integrated Macroeconomic Accounts, Fourth Quarter 

2014, Table L.211 (Mar. 12, 2015, 12:00 PM), 

available at http://www.federalreserve.gov/releases/z1/ 

to Rule G-48, on Transactions with Sophisticated 

Municipal Market Professionals (“SMMP”), and 

Rule D-15, on the Definition of SMMP, Exchange Act 

Release No. 73764 (Dec. 5, 2014) [79 FR 53236 (Sept 

8, 2014)]. 

current/z1.pdf. 48 See MSRB, SEC Approves MSRB Rule G-18 on Best 

37 

38 

Securities Industry and Financial Markets Association, 

US Bond Market Issuance: Quarterly Data, available 

at http://www.sifma.org/research/statistics.aspx (last 

visited May 5, 2015). 

SEC, Report on the Municipal Securities Market, July 

31, 2012, http://www.sec.gov/news/studies/2012/ 

munireport073112.pdf. 

Execution of Transactions in Municipal Securities and 

Related Amendments to Exempt Transactions with 

Sophisticated Municipal Market Professionals, MSRB 

Regulatory Notice 2014-22 (Dec. 8, 2014), available at 

http://www.msrb.org/~/media/Files/Regulatory-Notices/ 

Announcements/2014-22.ashx?n=1. Amendments to 

Rule G-48 provide that the best execution obligations 

will not apply to transactions with customers that 

39 

40 

Id. at 112-32. 

Id. at 143. 

are SMMPs, as defined by MSRB Rule D-15. The 

MSRB, in coordination with the Financial Industry 

Regulatory Authority (“FINRA”), plans to issue 

41 Id. at 121-22. practical guidance on complying with the best 

42 Id. at 122-23. execution standard prior to the rule become effective. 

MSRB, SEC Approves MSRB Rule G-18 on Best 

43 Id. at 143-50. Execution of Transactions in Municipal Securities and 

44 

45 

Id. at 149-50. 

The MSRB received eleven responsive comment letters 

and determined to propose a best execution rule. On 

February 19, 2014, the MSRB published a request 

for comment on its proposed best execution rule and 

on August 20, 2014, the MSRB filed a proposed rule 

change with the SEC. The MSRB filing proposed 

changes to Rule G-18, on best execution transactions 

49 

Related Amendments to Exempt Transactions with 

Sophisticated Municipal Market Professionals, MSRB 

Regulatory Notice 2014-22 (Dec. 8, 2014), available at 

http://www.msrb.org/~/media/Files/Regulatory-Notices/ 

Announcements/2014-22.ashx?n=1. 

See SEC, Report on the Municipal Securities Market, 

July 31, 2012, at 147-50, http://www.sec.gov/news/ 

studies/2012/munireport073112.pdf. 

in municipal securities; amendments to Rule G-48, 50 See id. at 148. 

on transactions with Sophisticated Municipal Market 

Professionals (“SMMP”); and Rule D-15, on the 

definition of SMMP. The MSRB’s proposed rule 

51 

52 

See id. 

See id. 

change was published for comment in the Federal 

Register on September 8, 2014, and the SEC received 

six responsive comment letters, to which the MSRB 

responded on November 21, 2014. See MSRB, Request 

for Comment on Whether to Require Dealers to Adopt 

a “Best Execution” Standard for Municipal Securities 

Transactions, Comment Letters, available at http:// 

www.msrb.org/Rules-and-Interpretations/RegulatoryNotices/2013/2013-16.aspx?c=1; MSRB, Request for 

Comment on Draft Best-Execution Rule, Including 

Exception for Transactions with Sophisticated 

Municipal Market Professionals, MSRB Regulatory 

Notice 2014-02 (Feb. 19, 2014), http://www.msrb. 

org/~/media/Files/Regulatory-Notices/RFCs/2014-02. 

ashx?n=1; Exchange Act Release No. 73764 (Dec. 5, 

2014), File No. SR-MSRB-2014-07 (Aug. 20, 2014), 

53 

54 

Id. 

MSRB, Request for Comment on Draft Rule 

Amendments to Require Dealers to Provide 

Pricing Reference Information on Retail Customer 

Confirmations, MSRB Regulatory Notice 2014-20 

(Nov. 17, 2014), available at http://www.msrb.org/~/ 

media/Files/Regulatory-Notices/RFCs/2014-20. 

ashx?n=1; Press Release, MSRB Holds Quarterly 

Meeting (May 6, 2014), available at http://www. 

msrb.org/News-and-Events/Press-Releases/2014/ 

MSRB-Holds-Quarterly-Meeting-April-2014.aspx; 

Press Release, MSRB Holds Quarterly Meeting (Aug. 

5, 2014), available at http://www.msrb.org/News-andEvents/Press-Releases/2014/MSRB-Holds-QuarterlyMeeting-July-2014.aspx. 

available at http://www.sec.gov/rules/sro/msrb/2014/34­

73764.pdf; [79 FR 173, 53236 (Sept. 8, 2014)]. 

55 Press Release, FINRA and MSRB Release Proposals 

to Provide Pricing Reference Information to Investors 

46 See MSRB, Request for Comment on Whether to 

Require Dealers to Adopt a “Best Execution” Standard 

for Municipal Securities Transactions, Comment 

Letters, available at http://www.msrb.org/Rules-andInterpretations/Regulatory-Notices/2013/2013-16. 

in Fixed Income Markets (Nov. 17, 2014), available 

at http://www.msrb.org/News-and-Events/PressReleases/2014/FINRA-and-MSRB-Release-Proposalsto-Provide-Pricing-Reference-Information-for-Investors. 

aspx. 

aspx?c=1. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 37
 

56 

57 

58 

59 

60 

61 

62 

63 

64 

65 

66 

67 

68 

69 

70 

71 

72 

73 

74 

75 

76 

77 

78 

79 

80 

81 

82 

83 

Id.; See MSRB, Request for Comment on Draft
 

Rule Amendments to Require Dealers to Provide
 

Pricing Reference Information on Retail Customer
 

Confirmations, MSRB Regulatory Notice 2014-20
 

(Nov. 17, 2014), http://www.msrb.org/~/media/Files/
 

Regulatory-Notices/RFCs/2014-20.ashx; FINRA,
 

Pricing Disclosure in the Fixed Income Markets, 


Regulatory Notice 14-52 (Nov. 2014), http://www.
 

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

Regulatory_14-52.pdf. 


Staff of the U.S. Securities and Exchange Commission,
 

Study on Investment Advisers and Broker-Dealers 

as Required by Section 913 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, at i (Jan. 

21, 2011). 

Id.
 

Id.
 

Id.
 

Id.
 

Id. at iii.
 

Id. at 106.
 

Id.
 

Id.
 

Id.
 

Id. at iii.
 

SEC v. Capital Gains Research Bureau, Inc., 375 U.S.
 

180, 191-92 (1963); See also Staff of the U.S. Securities
 

and Exchange Commission, supra note 57 at 22.
 

Staff of the U.S. Securities and Exchange Commission,
 

supra note 57 at iii.
 

Id. at 22.
 

Id. (quoting Concept Release on the U.S. Proxy System,
 

Investment Advisers Act Release No. 3052 (July 14,
 

2010), [75 FR 42982 (July 22, 2010)]).
 

Staff of the U.S. Securities and Exchange Commission,
 

supra note 57 at iii.
 

Id. at iv.
 

Id.
 

Id.
 

Id.
 

Id.
 

Id.
 

Id.
 

Id.
 

Id.
 

Dodd-Frank Act, Pub. L. No. 111-203, § 913, 124 

Stat. 1376 (2010). 

Id. 

84	 Staff of the U.S. Securities and Exchange Commission, 

supra note 57. 

85	 Id. at vi. 

86	 Id. at v-vi. 

87	 Id. at vi; Exchange Act § 15(k)(1), 15 U.S.C. § 78. 

88	 Staff of the U.S. Securities and Exchange Commission, 

supra note 57 at vi; Exchange Act § 15(k)(2), 15 U.S.C. 

§ 78. 

89	 Staff of the U.S. Securities and Exchange Commission, 

supra note 57 at vi. 

90	 Id. 

91	 Id. at vii. 

92	 See Duties of Brokers, Dealers, and Investment 

Advisers, Securities Exchange Act Release No. 69013 

(Mar. 1, 2013) [78 FR 14848 (Mar. 7, 2013)]. 

93	 See id. 

94	 SEC, Recommendation of the Investor Advisory 

Committee: Broker-Dealer Fiduciary Duty, Nov. 22, 

2013, http://www.sec.gov/spotlight/investor-advisorycommittee-2012/fiduciary-duty-recommendation-2013. 

pdf. 

95	 Id. 

96	 Id. 

97	 Id. 

98	 Id. 

99	 See Definition of the Term “Fiduciary”; Conflict of 

Interest Rule – Retirement Investment Advice [80 FR 

21928 (April 20, 2015)]. 

100	 See id. 

101	 See id. 

102 Employment Retirement Income Security Act, § 

3(21)(A) (1974), 29 U.S.C. §1002(21)(A); See also 

Definition of the Term “Fiduciary”; Conflict of Interest 

Rule—Retirement Investment Advice, supra note 99. 

103 25 C.F.R. § 2510.3-21(c) (2015). See also Definition 

of the Term “Fiduciary”; Conflict of Interest Rule— 

Retirement Investment Advice, supra note 99. 

104	 Id. 

105	 See Id. The 2015 proposal notes that brokers who 

provide investment advice to IRA owners or plan 

participants, and who otherwise satisfy the terms of the 

current five-part test, already are fiduciaries under the 

existing fiduciary regulation. See Definition of the Term 

“Fiduciary”; Conflict of Interest Rule—Retirement 

Investment Advice, supra note 99. The 2015 proposal 

cites as an example a broker who regularly advises an 

individual IRA owner on specific investments, the IRA 

owner routinely follows the recommendations, and 

both parties understand that the IRA owner relies on 

the broker’s advice; in that case, “the broker is almost 

certainly a fiduciary.” 

38	 | OFFICE OF THE INVESTOR ADVOCATE 
106 See id.
 

107 See id.
 

108 See id. at 21936.
 

109 See id.
 

110 See id.
 

111 See id.
 

112 See id. at 21929.
 

113 See id.
 

114 See id. at 21936.
 

115 See id. at 21929.
 

116 See id. For purposes of the BIC Exemption, the 2015
 

Proposal’s definition of “retail investors” includes 

(1) the participants and beneficiaries of participantdirected plans, (2) IRA owners, and (3) the sponsors 

of non-participant directed plans with fewer than 

100 participants to the extent the sponsors act as a 

fiduciary with respect to plan investment decisions. See 

Definition of the Term “Fiduciary”; Conflict of Interest 

Rule—Retirement Investment Advice, supra note 99 at 

21929 n. 2. 

117	 See Definition of the Term “Fiduciary”; Conflict of 

Interest Rule—Retirement Investment Advice, supra 

note 99 at 21929. 

118	 See id. 

119	 See id. 

120 See, e.g., Justin Baer & Andrew Ackerman, SEC Head 

Backs Fiduciary Standards for Brokers, Advisers, Wall 

St, J., Mar. 17, 2015; Michael J. de la Merced, S.E.C. 

Chief Voices Support for Higher Advice Standard for 

Brokers, N.Y. Times, Mar. 17, 2015. 

121	 See id. 

122	 See id. 

123	 See id. 

124	 See Investment Company Reporting Modernization, 

Securities Act Release No. 9776 (May 20, 2015) 

[ __FR__ (Date)]. For purposes of this Report, the 

term “funds” means registered investment companies 

other than face amount certificate companies and any 

separate series thereof—i.e., management companies 

and unit investment trusts. 

125	 See id. 

126	 See id. 

127	 Id. (citing data obtained from the Investment Company 

Institute). 

128	 Id. 

129	 Id. (citing Investment Company Institute, 2015 

Investment Company Factbook 9 (55th ed., 2015)). 

130	 Id. (citing Use of Derivatives by Investment Companies 

Under the Investment Company Act of 1940, 

Investment Company Act Release No. 29776 (Aug. 31, 

2011) [76 FR 55237 (Sept. 7, 2011)]). 

131	 Id. 

132	 Id. 

133	 Id. 

134	 Id. 

135	 Id. 

136	 Id. 

137	 Id. 

138	 Id. Specifically, the Commission is proposing new 

Form N-PORT, which would require certain funds 

to report information about their monthly portfolio 

holdings to the Commission in a structured data 

format. In addition, the Commission is proposing 

amendments to Regulation S-X, which would require 

standardized, enhanced disclosure about derivatives in 

investment company financial statements, as well as 

other amendments. The Commission is also proposing 

new rule 30e-3, which would permit but not require 

funds to transmit periodic reports to their shareholders 

by making the reports accessible on a website and 

satisfying certain other conditions. The Commission 

is proposing further new Form N-CEN, which would 

require registered investment companies, other than 

face amount certificate companies, to annually report 

certain census-type information to the Commission in 

a structured data format. Finally, the Commission is 

proposing to rescind current Forms N-Q and N-SAR 

and to amend certain other rules and forms. 

139	 Id. 

140 See David W. Grim, then Deputy Director (now 

Director), SEC Division of Investment Management, 

Remarks before the 5th Annual DCIIA Public Policy 

Forum at the Defined Contribution Institutional 

Investment Association, Washington, D.C. (Apr. 3, 

2014), available at http://www.sec.gov/News/Speech/ 

Detail/Speech/1370541453144. 

141	 See id. 

142	 See id. 

143	 See id. 

144	 See id. 

145 Mark J. Flannery, Chief Economist and Director, SEC, 

Speech at the Data Transparency Coalition’s Fall Policy 

Conference: The Commission’s Production and Use of 

Structured Data, Washington, D.C. (Sept. 30, 2014), 

available at http://www.sec.gov/News/Speech/Detail/ 

Speech/1370543071869. 

146	 Id. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 39
 

147 Press Release, SEC, SEC Announces Program to 

Facilitate Analysis of Corporate Financial Data, (Dec. 

30, 2014), available at http://www.sec.gov/news/ 

pressrelease/2014-295.html; Flannery, supra note 145. 

148 Staff of the U.S. Securities and Exchange Commission, 

Report on Review of Disclosure Requirements in 

Regulation S-K (Dec. 20, 2013), available at http:// 

www.sec.gov/news/studies/2013/reg-sk-disclosurerequirements-review.pdf. 

149 Keith F. Higgins, Director, Division of Corporation 

Finance, SEC, Remarks Before the American Bar 

Association Business Law Section Spring Meeting: 

Disclosure Effectiveness (Apr. 11, 2014), available 

at http://www.sec.gov/News/Speech/Detail/ 

Speech/1370541479332. 

150 Rick A. Fleming, Investor Advocate, SEC, Speech at 

SEC Speaks: Effective Disclosure for the 21st Century 

Investor, Washington, D.C. (Feb. 20, 2015), available 

at http://www.sec.gov/news/speech/022015-spchraf. 

html. 

151 The Council of Economic Advisers, 15 Economic Facts 

About Millennials (Oct. 2014), at 3 n.1., available at 

https://www.whitehouse.gov/sites/default/files/docs/ 

millennials_report.pdf. 

152 Bruce Horovitz, After Gen X, Millennials, What 

Should Next Generation be?, USA Today (May 

4, 2012), http://usatoday30.usatoday.com/money/ 

advertising/story/2012-05-03/naming-the-next-gener 

ation/54737518/1?loc=interstitialskip; Philip Bump, 

There are Already More #millennials than BoomersDepending on how you Define ‘Millennial,’ Wash. 

Post., (Jan. 20, 2015), http://www.washingtonpost. 

com/blogs/the-fix/wp/2015/01/20/there-are-alreadymore-millennials-than-boomers-depending-on-howyou-define-millennial/. 

153 The Council of Economic Advisers, supra note 151 at 

3. 

154 Richard Fry, This Year, Millennials will Overtake Baby 

Boomers, Pew Research Center (Jan. 16, 2015), http:// 

www.pewresearch.org/fact-tank/2015/01/16/this-yearmillennials-will-overtake-baby-boomers/; Christopher 

Mims, How Aging Millennials Will Affect Technology 

Consumption, Wall St. J., (May 18, 2015), http://www. 

wsj.com/articles/how-aging-millennials-will-affecttechnology-consumption-1431907666?mod=LS1. 

155 Gary R. Mottola, Ph.D., FINRA Foundation Financial 

Capability Insights, The Financial Capability of Young 

Adults – A Generational View (Mar. 2014), available at 

http://www.finra.org/sites/default/files/14_0100%201_ 

IEF_Research%20Report_CEA_3%206%2014%20 

%28FINAL%29_0_0.pdf. 

156 The Council of Economic Advisers, supra note 151 at 

3. 

157 Id.; See Mottola, supra note 155. 

158 Accenture: Wealth and Asset Management Services, 

The Greater Wealth Transfer (June 7, 2012), available 

at http://www.accenture.com/SiteCollectionDocuments/ 

PDF/Accenture-CM-AWAMS-Wealth-Transfer-FinalJune2012-Web-Version.pdf. 

159 Mottola, supra note 155. 

160	 Id. 

161 The Council of Economic Advisers, supra note 151 at 

3; See Mottola, supra note 155. 

162 The Council of Economic Advisers, supra note 151 at 

7. 

163	 Id. 

164	 Id. 

165 Brett Relander, How Millennials Use Tech & Social 

Media to Invest, Investopedia (Feb. 27, 2015), http:// 

www.investopedia.com/articles/investing/022715/ 

how-millennials-use-tech-social-media-invest.asp. 

166	 Id. 

167 Mottola, supra note 155; See The Council of Economic 

Advisers, supra note 151 at 3. 

168 U.S. Census Bureau, Projections of the Population by 

Sex and Selected Age Groups for the United States: 

2015 to 2060 (December 2014). 

169	 Id. 

170	 See U.S. Gov’t Accountability Office, Retirement 

Security—Most Households Approaching Retirement 

Have Low Savings (May 12, 2015). 

171	 See id. 

172	 See Lydia Saad, Investors Moderately Confident About 

Retirement Savings, Gallup (Apr. 3, 2015), http:// 

www.gallup.com/poll/182264/investors-moderatelyconfident-retirement-savings.aspx. 

173	 See, e.g., Andrew C. Biggs & Sylvester Schieber, Is 

There a Retirement Crisis?, National Affairs (2014) at 

55, 70. 

174	 See id. (referencing research by Jason S. Seligman, 

Missing the Mark: Employment Related Risks to 

Retirement Security for Older Workers, TIAA-CREF 

Policy Briefs (2010)). 

175 Board of Governors of the Federal Reserve System, 

Report on the Economic Well-Being of U.S.
 

Households in 2014 (May 2015) at 2.
 

176	 Id. 

177	 See U.S. Gov’t Accountability Office, supra note 170 at 

7. 

178 See id. 

179 Keith Miller et al., The Reality of the Retirement Crisis, 

Center for American Progress (Jan. 26, 2015) at 1. 

40	 | OFFICE OF THE INVESTOR ADVOCATE 
180 Alicia H. Munnell, Falling Short: The Coming 

Retirement Crisis and What to Do about It, Issue in 

Brief 15-7, Center for Retirement Research at Boston 

College (Apr. 2015). 

181	 Id. 

182	 Id. 

183	 Id. 

184	 See U.S. Gov’t Accountability Office, supra note 170 at 

3. 

185 Andrew C. Biggs & Sylvester Schieber, Is There a 

Retirement Crisis?, National Affairs (2014) at 55, 70 

(referencing research by Jason S. Seligman, Missing 

the Mark: Employment Related Risks to Retirement 

Security for Older Workers, TIAA-CREF Policy Briefs 

(2010)). 

186	 See U.S. Gov’t Accountability Office, supra note 170 at 

22. 

187 See id. 

188 See id. 

189 See id. at 23. 

190 Naree Rhee & Ilana Boivie, The Continuing 

Retirement Savings Crisis, Nat’l Inst. on Retirement 

Security (March 2015) at 2. See also U.S. Gov’t 

Accountability Office, supra note 170 at 25. 

191 Rhee & Boivie, supra note 190 at 2. 

192 Keith Miller et al., The Reality of the Retirement Crisis,
 

Center for American Progress (Jan. 26, 2015) at 7.
 

193 See U.S. Gov’t Accountability Office, supra note 170 at
 

24. 

194 SSA Publication No. 05-10024, Social Security— 

Understanding the Benefits, at 4 (2015), available at 

www.socialsecurity.gov. 

195 Biggs & Schieber, supra note 185. 

196 See U.S. Gov’t Accountability Office, supra note 170 at 

25. 

197 See id. 

198 Munnell, supra note 180. 

199 Id. 

200 Id. 

201 See generally 2014 Wells Fargo Middle-Class 

Retirement Study. 

202 See generally 2014 Wells Fargo Middle-Class 

Retirement Study. 

203 Pub. L. No. 109-280, 120 Stat. 780 (2006). 

204	 See Section 902 of the Pension Protection Act. See also 

Section 401(k)(13) of the Internal Revenue Code. 

205 See generally Default Investment Alternatives Under 

Participant Directed Individual Account Plans, 72 FR 

60452, 60452-53 (Oct. 24, 2007). 

206	 See, e.g., DOL Fact Sheet—Regulation Relating 

to Qualified Default Investment Alternatives in 

Participant-Directed Individual Account Plans 

(Apr. 2008), available at https://www.dol.gov/ebsa/ 

newsroom/fsQDIA.html (last visited May 26, 2015). 

207	 See Pub. L. No. 109-280, 120 Stat. 780 (2006). See 

also Section 401(k)(13) of the Internal Revenue Code. 

208 Jeffrey Bauman, Elliott Weiss & Alan R. Palmiter, 

Corporations Law and Policy 392 (2004) 

209	 Id. 

210 Exchange Act Rule 14a-8, 17 CFR 240.14a-8 (2015). 

211 Bauman, supra note 208, at 393. 

212 Bauman, supra note 208. 

213 Kara M. Stein, Commissioner, SEC, Remarks to the 

U.S. Treasury Department’s Corporate Women in 

Finance Symposium: Toward Healthy Companies 

and a Stronger Economy (Apr. 30, 2015), available at 

http://www.sec.gov/news/speech/stein-toward-healthycompanies.html#_ftn19. 

214	 Id. 

215	 Id. 

216	 Id. 

217	 Id. 

218 Del. Code Ann. tit. 8, § 211 (West 2009). 

219	 Id. There is a partial exception to the bona fide 

nominee rule that allows the proponent of a “short 

slate” of dissident candidates to round out the slate 

with some of management’s nominees without 

obtaining their prior consent. 

220 	See, e.g., SEC Proxy Voting Roundtable (Feb.19, 

2015), available at http://www.sec.gov/news/ 

otherwebcasts/2015/proxy-roundtable-021915.shtml 

(in which advocates and opponents of universal proxies 

expressed their views). 

221	 Id. 

222	 Id. 

223	 Id. 

224 SEC, Recommendations of the Investor Advisory 

Committee Regarding SEC Rulemaking to 

Explore Universal Proxy Ballots (adopted July 25, 

2013), available at http://www.sec.gov/spotlight/ 

investor-advisory-committee-2012/universal-proxyrecommendation-072613.pdf. 

225	 Id. 

226	 Id. 

227 Letter from Glenn Davis, Director of Research, Council 

of Institutional Investors, Request For Rulemaking to 

Amend Section 14 of the Securities Exchange Act of 

1934 to Facilitate the Use of Universal Proxy Cards in 

Contested Elections (Jan. 8, 2014), available at https:// 

www.sec.gov/rules/petitions/2014/petn4-672.pdf. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 41
 

228 SEC Proxy Voting Roundtable, supra note 220. 

229 17 CFR § 240.14a-8 (2015). 

230	 Id. 

231	 Id. 

232 17 CFR § 240.14a-9 (2015). 

233 Mary Jo White, Chair, SEC, Speech at Tulane 

University Law School 27th Annual Corporate Law 

Institute: A Few Observations on Shareholders in 2015 

(Mar. 19, 2015), available at http://www.sec.gov/news/ 

speech/observations-on-shareholders-2015.html. 

234 Whole Foods Market, Inc. (December 1, 2014), 

available at http://www.sec.gov/divisions/corpfin/ 

cf-noaction/14a-8/2014/jamesmcritchie120114.pdf. 

235	 Id. 

236	 Id. 

237	 Id. 

238	 Id. 

239	 Id. 

240 Statement from Chair White Directing Staff to Review 

Commission Rule for Excluding Conflicting Proxy 

Proposals (January 16, 2015), available at http://www. 

sec.gov/news/statement/statement-on-conflicting-proxyproposals.html. 

241 Division of Corporation Finance Will Express No 

Views under Exchange Act Rule 14a-8(i)(9) for Current 

Proxy Season, available at http://www.sec.gov/corpfin/ 

announcement/cf-announcement---rule-14a-8i9-noviews.html. 

242 FASB & IASB, Memorandum of Understanding: The 

Norwalk Agreement (Sept. 18, 2002), available at 

http://www.fasb.org/news/memorandum.pdf. 

243 Commission Statement in Support of Convergence of 

Global Accounting Standards, Securities Act Release 

No. 33-9109 (February 24, 2010) [75 FR 9494 (March 

2, 2010)]. 

244 Mary Jo White, Chair, SEC, Remarks at the Financial 

Accounting Foundation Trustees Dinner, Washington 

D.C. (May 20, 2014), available at http://www.sec.gov/ 

News/Speech/Detail/Speech/1370541872065. 

245 James Schnurr, Chief Accountant, Remarks before the 

2015 Baruch College Financial Reporting Conference 

(May 7, 2015), available at http://www.sec.gov/news/ 

speech/schnurr-remarks-before-the-2015-baruchcollege-financial-reporti.html. 

246	 Id. 

247 James Schnurr, Chief Accountant, SEC, Remarks 

before the 2014 AIPCA National Conference on 

Current SEC and PCAOB developments (Dec. 8, 

2014), available at http://www.sec.gov/News/Speech/ 

Detail/Speech/1370543609306. 

248 Mary Jo White, Chair, SEC, Remarks at the Financial 

Accounting Foundation Trustees Dinner (May 20, 

2014), available at http://www.sec.gov/News/Speech/ 

Detail/Speech/1370541872065. 

249	 Id. 

250	 See Audit Committee Collaboration, Enhancing the 

Audit Committee Report, A Call to Action (Nov. 20, 

2013), available at http://www.thecaq.org/reports-andpublications/enhancing-the-audit-committee-report-acall-to-action. 

251	 See id. 

252	 Id. 

253 James Schnurr, Chief Accountant, Office of the Chief 

Accountant, SEC, Remarks at the 34th Annual SEC 

and Financial Reporting Institute Conference (June 

5, 2015), available at http://www.sec.gov/news/ 

speech/remarks-34th-sec-financial-reporting-instituteconference.html. 

254	 Id. 

255	 Id. 

256	 Id. 

257	 Id. 

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

259 Although other descriptive terms may be used, 

the ombudsmen at several agencies, including, for 

example, the Consumer Financial Protection Bureau, 

Federal Deposit Insurance Corporation, and Federal 

Housing Finance Agency, follow these basic tenets 

of ombudsman practice, available at http://www. 

consumerfinance.gov/ombudsman/; https://www. 

fdic.gov/regulations/resources/ombudsman/; and 

http://www.fhfa.gov/AboutUs/Pages/About-TheOmbudsman.aspx. 

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

261	 Id. 

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

(B). 

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

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

265 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.” 

266 All IAC Recommendations are available at http://www. 

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

shtml. 

267 Mary Jo White, Chair, SEC, Remarks at the Meeting of 

the IAC (July 25, 2013). 

42	 | OFFICE OF THE INVESTOR ADVOCATE 
268	 17 CFR 200.735-3(b)(2)(i), 230.122 (2014); Exchange 

Act § 24(b), 15 U.S.C. § 78x; 5 U.S.C. § 552a(i)(1); 

SECR18-2, Section 8.5 (Nonpublic Information) 

(July 31, 2005). 

269 SEC, Recommendation of the Investor Advisory 

Committee: Shortening the Trade Settlement Cycle 

in U.S. Financial Markets, February 12, 2015, 

http://www.sec.gov/spotlight/investor-advisorycommittee-2012/settlement-cycle-recommendationfinal.pdf. 

270 Exchange Act Rule 14a-2(a)(1), 17 CFR 240.14a-2(a) 

(1). 

271 SEC, Recommendations of the Investor Advisory 

Committee: Impartiality in the Disclosure of 

Preliminary Voting Results, Oct. 9, 2014, http://www. 

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

impartiality-disclosure-prelim-voting-results.pdf. 

272 SEC, Recommendation of the Investor Advisory 

Committee: Crowdfunding Regulations, Apr. 10, 

2014, http://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-adviser-crowdfundingrecommendation.pdf. 

273 Crowdfunding, Securities Act Release No. 9470 (Oct. 

23, 2013) [78 FR 66427 (Nov. 5, 2013)]. 

274 SEC, Recommendation of IAC: Decimalization and 

Tick Sizes, Jan. 31, 2014, http://www.sec.gov/spotlight/ 

investor-advisory-committee-2012/investment-adviserdecimilization-recommendation.pdf. 

275 Order Directing the Exchanges and the Financial 

Industry Regulatory Authority To Submit a Tick Size 

Pilot Plan, Exchange Act Release No. 72460 (June 24, 

2014) [79 FR 36840 (June 30, 2014)]. 

276 Letter from Brendon J. Weiss, Vice President, NYSE 

Group, Inc. et al, Re: Plan to Implement a Tick Size 

Pilot Program (Aug. 25, 2014), http://www.sec.gov/ 

divisions/marketreg/tick-size-pilot-plan-transmittalletter.pdf; BATS Exchange, Inc. et al, Plan to Implement 

a Tick Size Pilot Program, http://www.sec.gov/divisions/ 

marketreg/tick-size-pilot-plan-final.pdf. 

277 Mary Jo White, Chair, SEC, Opening Remarks at 

the IAC Meeting (Oct. 9, 2014) (transcript available 

at http://www.sec.gov/News/PublicStmt/Detail/ 

PublicStmt/1370543132802). 

278 Examining the SEC’s Agenda, Operations and FY 2016 

Budget Request: Testimony before H. Subcomm. On 

Fin. Services, 113 Cong. (Mar. 24, 2015) (testimony of 

Mary Jo White, Chair, SEC). 

279 Joint Industry Plans; Order Approving the National 

Market System Plan to Implement a Tick Size Pilot 

Program, Exchange Act Release No. 34-74892 (May 

6, 2015) [80 FR 27514 (May 13, 2015)], available at 

http://www.sec.gov/rules/sro/nms/2015/34-74892.pdf. 

280 SEC, Recommendation of the Investor Advisory 

Committee: Legislation to Fund Investment Adviser 

Examinations, Nov. 22, 2013, http://www.sec.gov/ 

spotlight/investor-advisory-committee-2012/investmentadviser-examinations-recommendation-2013.pdf. 

281 Testifying in support of the budget request, Chair 

White stated, “There is an immediate and pressing 

need for significant additional resources to permit the 

SEC to increase its examination coverage of registered 

investment advisers so as to better protect investors and 

our markets.” Budget Hearing: Before H. Subcomm. 

on Fin. Service & Gen. Gov’t of the H. Comm. on 

Appropriations, 113th Cong. (Apr. 1, 2014) (statement 

of Mary Jo White, Chair, SEC), available at http:// 

docs.house.gov/meetings/AP/AP23/20140401/102004/ 

HHRG-113-AP23-Wstate-WhiteM-20140401.pdf. 

282 SEC, FY 2016 Budget Request Tables and FY 2016 

Budget Request by Program at 68, http://www.sec.gov/ 

about/reports/sec-fy2016-budget-request-by-program. 

pdf. Chair White has reiterated these numbers in 

Congressional testimony. See, e.g. Fiscal Year 2016 

Budget Request of the U.S. Securities and Exchange 

Commission: Testimony before Subcomm. on Fin. 

Serv. and Gen. Gov’t Comm. on Appropriations, 113th 

Cong. (May 5, 2015) (testimony of Mary Jo White, 

Chair, SEC), available at http://www.sec.gov/news/ 

testimony/testimony-fy-2016-sec-budget-request.html. 

283 Examining the SEC’s Agenda, Operations and FY 2016 

Budget Request: Testimony before H. Subcomm. On 

Fin. Services, 113 Cong. (March 24, 2015) (testimony 

of Mary Jo White, Chair, SEC), available at http:// 

www.sec.gov/news/testimony/2015-ts032415mjw.html. 

284 SEC, Recommendation of the Investor Advisory 

Committee: Broker-Dealer Fiduciary Duty, Nov. 22, 

2013, http://www.sec.gov/spotlight/investor-advisorycommittee-2012/fiduciary-duty-recommendation-2013. 

pdf. 

285 White, supra note 282. 

286 SEC, Recommendations of the Investor Advisory 

Committee Regarding SEC Rulemaking to Explore 

Universal Proxy Ballots, July 25, 2013, http://www. 

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

universal-proxy-recommendation-072613.pdf. 

287 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, http://www.sec.gov/spotlight/ 

investor-advisory-committee-2012/data-taggingresolution-72513.pdf. 

288 Investment Company Reporting Modernization, 

Securities Act Release No. 9776 (May 20, 2015) 

[ __FR__ (Date)]. For purposes of this Report, the 

term “funds” means registered investment companies 

other than face amount certificate companies and any 

separate series thereof—i.e., management companies 

and unit investment trusts. 

REPORT ON OBJECTIVES: FISCAL YEAR 201 6 | 43
 

289 Id. 

290 Id. 

291 Pay Versus Performance, Exchange Act Release No. 

74835 (May 7, 2015) [80 FR 26330 (May 7, 2015)]. 

292 Amendments for Small and Additional Issues 

Exemptions under the Securities Act (Regulation A), 

Securities Act Release No. 9741 (March 25, 2015) [80 

FR 21805 (April 20, 2015)]. 

293 Regulation SBSR—Reporting and Dissemination 

of Security-Based Swap Information, Exchange Act 

Release No. 74244 (February 11, 2015) [80 FR 14564 

(March 19, 2015)]. 

294 Id. 

295 Id. 

296 Crowdfunding, Securities Act Release No. 9470 (Oct. 

23, 2013) [78 FR 66427 (Nov. 5, 2013)]. 

297 Money Market Fund Reform; Amendments to Form 

PF, Securities Act Release No. 9616 (July 23, 2014) [79 

FR 47736, 47944 (Aug. 14, 2014)]. 

298 Oversight of the SEC’s Agenda, Operations and FY 

2015 Budget Request: Testimony before H. Subcomm. 

on Fin. Services, 113 Cong. (Apr. 29, 2014) (testimony 

of Mary Jo White, Chair, SEC). 

299 SEC, Recommendation of the Investor Advisory 

Committee: Target Date Mutual Funds, Apr. 11, 

2013, http://www.sec.gov/spotlight/investor-advisorycommittee-2012/iac-recommendation-target-datefund.pdf. 

300 Investment Company Advertising: Target Date 

Retirement Fund Names and Marketing, Exchange Act 

Release No. 9126 (June 16, 2010) [75 FR 35920 (June 

23, 2010)]. 

301 Investment Company Advertising: Target Date 

Retirement Fund Names and Marketing, Securities Act 

Release No. 9570 (Apr. 3, 2014) [79 FR 19564 (Apr. 9, 

2014)]. 

302 SEC, Recommendation of the IAC 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, Oct. 12, 2012. Title II of the 

JOBS Act requires the SEC to lift the ban on general 

solicitation and advertising in Rule 506 securities 

offerings. Jumpstart Our Business Startups Act, Pub. L. 

No. 112-106, sec. 201(a), 126 Stat. 306, 313 (2012). 

303 At the IAC meeting on July 25, 2013, Chair White 

provided the IAC with a chart mapping each of its 

recommendations to the corresponding text in the 

Commission’s proposed and final rule releases. 

304 Eliminating the Prohibition Against General 

Solicitation and General Advertising in Rule 506 and 

Rule 144A Offerings, Securities Act Release No. 9415 

(July 10, 2013) [78 FR 44771 (July 24, 2013)]. 

305 Disqualification of Felons and Other “Bad Actors” 

from Rule 506 Offerings, Securities Act Release No. 

9414 (July 10, 2013) [78 FR 44729 (July 24, 2013)]. 

306 Amendments to Regulation D, Form D and Rule 156, 

Securities Act Release No. 9416 (July 10, 2013) [78 FR 

44806 (July 24, 2013)]. 

44 | OFFICE OF THE INVESTOR ADVOCATE 

OFFICE OF THE 

INVESTOR ADVOCATE 

U .S . Securities and 

Exchange Commission 

100 F Street NE 

Washington, DC 20549 

202 .551 .3302