REPORT ON OBJECTIVES FISCAL YEAR 2019

Office of the 

Investor

 Advocate

U.S. SECURITIES AND EXCHANGE COMMISSION
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | i

OFFICE OF THE INVESTOR ADVOCATE

REPORT ON OBJECTIVES

FISCAL YEAR 2019

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

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

Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.1

 A Report on Objectives is due no later than June 30 of each year, and its purpose is to 

set forth the objectives of the Investor Advocate for the following fiscal year.2 The instant report 

contains a summary of the Investor Advocate’s primary objectives for Fiscal Year 2019, beginning 

October 1, 2018.

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

activities of the Investor Advocate during the preceding fiscal year.3 For Fiscal Year 2019, the 

activities and accomplishments of the Office will be reported not later than December 31, 2019.

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

is provided directly to Congress without any prior review or comment from the Commission, any Commissioner, any other officer or employee of the Commission, or the Office of Management and Budget. Thus, 

the Report expresses solely the views of the Investor Advocate. It does not necessarily reflect the views of the 

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

for the Report and all analyses, findings, and conclusions contained herein.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | iii

CONTENTS

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

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

POLICY AGENDA FOR FISCAL YEAR 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Public Company Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

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

Fixed Income Market Reform. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Accounting and Auditing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Standards of Conduct for Broker-Dealers and Investment Advisers. . . . . . . . . . . . . . 11

Exchange-Traded Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Enhanced Disclosure for Funds and Variable Annuities . . . . . . . . . . . . . . . . . . . . 13

Transfer Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Impact of Kokesh v. SEC on Enforcement Actions . . . . . . . . . . . . . . . . . . . . . . . 15

OMBUDSMAN’S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Service by the Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Service Behind the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Standards of Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Investor Protection and the Retail Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Law School Clinic Outreach Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Objectives and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SUMMARY OF INVESTOR ADVISORY COMMITTEE 

RECOMMENDATIONS AND SEC RESPONSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

END NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 1

MESSAGE FROM THE

INVESTOR ADVOCATE

On behalf of the Office of the Investor 

Advocate, I am pleased to submit this 

Report on Objectives for Fiscal Year 2019. 

During Fiscal Year 2019, we expect to continue 

our work in several areas in which the Commission 

and self-regulatory organizations are engaged in 

multi-year rulemakings or reform initiatives. We 

will continue to monitor activities and make recommendations related to public company disclosure, 

equity market structure, fixed income market 

reform, and various initiatives involving accounting 

and auditing standards.

In addition, new priorities will require our attention 

in Fiscal Year 2019. Among other issues that 

undoubtedly will arise during the course of the 

year, we expect to examine the impact on investors 

resulting from proposed changes in the standards 

of conduct for broker-dealers, updates to the rules 

governing transfer agents and exchange-traded 

funds, and enhancements to the disclosures made 

by mutual funds and variable annuities. These 

topics are discussed in greater detail in this Report.

We are also examining issues that may require legislative intervention. For example, we are concerned 

about a recent Supreme Court case, Kokesh v. SEC, 

in which the Court held that the equitable remedy 

of disgorgement is a “penalty” that is subject to a 

five-year statute of limitations. As described in this 

Report, the decision may 

limit the SEC’s ability to 

return money to investors 

who were defrauded by 

someone who successfully 

concealed the wrongdoing. We are considering 

possible approaches to 

help restore or enhance 

the SEC’s ability to recover 

such losses and, in accordance with the statutory 

mandate of this Office, we may propose to Congress 

legislation that would be appropriate to promote the 

interests of investors. 
2 | OFFICE OF THE INVESTOR ADVOCATE

Similarly, as described in the Ombudsman Report 

below, we are troubled by the declining level of 

legal assistance for investors of limited means, 

particularly seniors. To address this shortfall, the 

SEC’s Investor Advisory Committee has recommended that the Commission and FINRA utilize 

money from fines and penalties to provide grants 

to law schools that establish or maintain investor 

advocacy clinics. We agree with this recommendation and may propose or support legislation as 

needed to achieve this goal. 

As always, I would welcome the opportunity to 

answer questions or provide additional information

to Members of Congress. It is a privilege to serve in 

this role.

Sincerely, 

Rick A. Fleming

Investor Advocate
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 3

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 

self-regulatory organizations (SROs);

(B) identify areas in which investors would 

benefit from changes in the regulations 

of the Commission or the rules of SROs;

(C) identify problems that investors have 

with financial service providers and 

investment products;

(D) analyze the potential impact on investors 

of proposed regulations of the Commission and rules of SROs; and

(E) to the extent practicable, propose to 

the Commission changes in the regulations or orders of the Commission and 

to Congress any legislative, administrative, or personnel changes that may 

be appropriate to mitigate problems 

identified and to promote the interests 

of investors.

Assisting Retail Investors

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

Advocate to assist retail investors in resolving 

significant problems such investors may have 

with the Commission or with SROs.4 To help 

accomplish that objective, the Investor Advocate 

has appointed an Ombudsman to, among other 

things, act as a liaison between the Commission 

and any retail investor in resolving problems that 

retail investors may have with the Commission or 

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

report from the Ombudsman is included within this 

Report on Objectives.6

Identifying Areas in Which Investors Would 

Benefit from Regulatory Changes

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

Investor Advocate to identify areas in which 

investors would benefit from changes in the 

regulations of the Commission or the rules of 

SROs.7 This is a broad mandate that authorizes the 

Investor Advocate to examine the entire regulatory 

scheme, including existing rules and regulations, 

to identify those areas that could be improved for 

the benefit of investors. For example, the Investor 

Advocate may look at the rules and regulations 

governing existing equity market structure to 

determine whether any regulatory changes would 

benefit investors. These and similar other concerns 

are discussed in greater detail below in the section 

entitled Policy Agenda for Fiscal Year 2019.

Identifying Problems with Financial Service 

Providers and Investment Products

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

Investor Advocate to identify problems that 

investors have with financial service providers 

and investment products.8 The Investor Advocate 

continues to monitor investor inquiries and 

complaints, SEC and SRO staff reports, 

enforcement actions, and other data to determine 
4 | OFFICE OF THE INVESTOR ADVOCATE

which financial service providers and investment 

products may be problematic. As required by 

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

be described in the Reports on Activities to be filed 

in December of each year.

Analyzing the Potential Impact on Investors 

of Proposed Rules and Regulations

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

Investor Advocate to analyze the potential impact 

on investors of proposed regulations of the 

Commission and proposed rules of SROs.9

 As 

required, in Fiscal Year 2019 the Office will review 

all significant rulemakings of the Commission and 

SROs, and we will communicate with investors 

and their representatives to determine the potential 

impact of proposed rules. In addition, we will 

study investor behavior and utilize a variety of 

research methods to examine the efficacy of 

policy proposals.

Proposing Appropriate Changes to the 

Commission and to Congress

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

to the extent practicable, the Investor Advocate 

may propose to the Commission changes in the 

regulations or orders of the Commission and 

to Congress any legislative, administrative, or 

personnel changes that may be appropriate to 

mitigate problems identified and to promote the 

interests of investors.10 As we study the issues in 

our Policy Agenda for Fiscal Year 2019, as set forth 

below, we will likely make recommendations to the 

Commission and Congress for changes that will 

promote the interests of investors.

Supporting the Investor 

Advisory Committee

Exchange Act Section 39 establishes the Investor 

Advisory Committee (IAC or Committee).11 As 

discussed in greater detail below in the section 

entitled Summary of IAC Recommendations and 

SEC Responses, the purpose of the Committee 

is to advise and consult with the Commission on 

regulatory priorities, issues impacting investors, 

initiatives to protect investors, and related matters. 

The Investor Advocate is a member of the IAC,12

and the Office will continue to provide staff and 

operational support to the IAC during Fiscal 

Year 2019.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 5

POLICY AGENDA FOR 

FISCAL YEAR 2019

As described above, the statutory mandate 

for the Office of the Investor Advocate 

is broad, and much of our time is 

consumed with the review of rulemakings that flow 

through the Commission and SROs. We monitor 

all rulemakings, but we prioritize certain issues 

so that we can develop expertise in those areas 

and maximize our impact for investors with the 

resources we have available. After discussions with 

numerous knowledgeable parties, both inside and 

outside the Commission, and after due consideration, the Investor Advocate has determined that 

the Office will focus upon the following issues 

during Fiscal Year 2019:

§	Public Company Disclosure

§	Equity Market Structure

§	Fixed Income Market Reform

§	Accounting and Auditing

§	Standards of Conduct for Broker-Dealers 

and Investment Advisers

§	Exchange-Traded Funds

§	Enhanced Disclosure for Mutual Funds 

and Variable Annuities

§	Transfer Agents

§	Impact of Kokesh v. SEC on 

Enforcement Actions

Although other issues may arise that will require 

the attention of the Office, the foregoing issues will 

remain on our policy agenda for FY 2019.

PUBLIC COMPANY DISCLOSURE

Disclosure obligations are at the very core of the 

laws governing the offer and sale of securities in 

the United States. When investors have access to all 

material information about potential investment 

opportunities, they are better equipped to make 

informed choices and are more willing to participate 

in the capital markets. 

Since our inception in 2014, the Office of the 

Investor Advocate has supported efforts to update 

and modernize the SEC’s disclosure requirements, 

and we will continue this work in Fiscal Year 

2019. In our view, efforts to make disclosure 

more effective can result in “win-wins,” whereby 

investors receive higher-quality information at a 

lower cost to the companies that must provide the 

disclosure. We will look for these types of opportunities, while remaining vigilant to guard against 

the reduction of disclosures that are important 

to investors.

The Commission’s Regulatory Flexibility Act 

Agenda13 includes several rulemaking projects 

pertaining to public company reporting and 

capital raises. Some are mandated by the Fixing 

America’s Surface Transportation Act and the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act. Others represent a continuation 

of a years-long Disclosure Effectiveness initiative, 

which is a more comprehensive effort to review and 
6 | OFFICE OF THE INVESTOR ADVOCATE

modernize public company reporting requirements. 

Additionally, Chairman Jay Clayton has announced 

a priority of looking for ways to make it more 

attractive for growing businesses to join the ranks 

of public companies.14

In a previous report, we described the phenomenon 

of fewer initial public offerings, a trend which has 

engendered a policy debate regarding causes and 

appropriate regulatory responses.15 In general, 

we believe it is appropriate for the Commission 

to encourage businesses to go through the transformation from a private company to a public 

reporting company because it is a process that 

produces stronger companies that better serve 

the interests of investors, particularly Main Street 

investors.16 Better disclosure also leads to betterinformed valuations and greater capital market 

efficiency overall. 

Early efforts to advance that goal appear to be 

centered on reducing compliance burdens, due to 

a concern that costs borne by public companies, 

ranging from direct compliance costs to the 

consumption of management and employee 

attention, exceed those for comparable private 

companies.17 Because these compliance burdens 

often involve issues related to disclosure obligations, current proposals tend to concentrate on 

those obligations. 

The rulemaking projects underway include, 

among others: 

§	Considering changes to the rules in Regulation 

S-X related to requirements for financial 

statements for acquired businesses;18

§	Considering additional changes to the rules 

in Regulation S-X to eliminate provisions 

thought to be redundant, overlapping, outdated, 

or superseded in light of other changes to 

Commission disclosure requirements, U.S. 

Generally Accepted Accounting Principles 

(GAAP), International Financial Reporting 

Standards, or technology developments;19

§	Considering amendments to Regulation S-K 

to change exhibit filing requirements and the 

related process for confidential treatment 

requests and also to allow for flexibility in 

discussing historical periods in the Management’s 

Discussion and Analysis section, among other 

miscellaneous updates;20

§	Mandating the use of a newer filing format 

called Inline XBRL, which may enhance the 

quality and reliability of the financial statement 

data that filers submit;21

§	Considering updates to certain industry-specific 

disclosure requirements, such as those pertaining 

to financial services companies’ lending activities 

and loan portfolios22 and to mining companies’ 

mineral properties;23

§	Amending the “smaller reporting company” 

definition, which would expand the number 

of issuers eligible to provide scaled-back 

disclosures;24 and

§	Considering amendments to extend the “test the 

waters” provision of the Jumpstart Our Business 

Startups Act to companies that are not emerging 

growth companies, which would make it easier 

to assess interest in a potential public offering.25 

For our part, we will continue to engage in investor 

outreach and share feedback internally with our 

Commission colleagues who are contemplating 

these and other reforms. In our investor outreach, 

we have been meeting with mainly buy-and-hold 

equity and debt investors, including individual 

investors as well as institutional portfolio managers 

and analysts—in other words, individuals who 

consume the information that public companies 

are required to disclose. We have asked them 

to tell us about how they make investment and 

voting decisions, what information they rely on to 

make those decisions, and where they get it. This 

outreach provides additional context for the input 

that the Commission has received in thousands of 

comment letters on its rulemaking projects. We 

also intend to coordinate our work where possible 

with the Office of the Advocate for Small Business 

Capital Formation, a soon-to-be-formed office with 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 7

a mission that will focus on small businesses and 

small business investors. 

While these types of disclosure-based initiatives, 

if properly implemented to maintain investor 

access to material information, may be helpful in 

encouraging more private companies to go public, 

we continue to believe that a holistic approach 

is needed to create a healthy ecosystem for small 

public companies. As we have stated previously, 

this approach should include efforts to improve 

the liquidity in smaller company shares and 

other reforms to enhance the market structure 

for equity securities.26

EQUITY MARKET STRUCTURE

As noted in our prior Reports on Objectives, the 

secondary trading market for U.S.-listed equities is 

dispersed and complex, and the Commission has 

been engaged in a multi-year effort to improve the 

environment for modern trading.27

Three years ago, the Commission proposed 

amending Regulation ATS to enhance the operational transparency of alternative trading system 

(ATS) venues that trade listed equity securities.28

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. In addition, in July 2016, 

the Commission proposed rules that, for the first 

time, would require broker-dealers to disclose the 

handling of institutional orders to customers under 

existing Rule 606 of Regulation NMS.29 This could 

provide certain customers with better information 

to evaluate the quality of execution for the orders 

they place with their brokers. 

As required by our statutory mandate, our Office 

has evaluated the potential impact of these 

proposals on investors. We have encouraged the 

Commission to adopt the proposed changes to 

Rule 606 and, in September 2016, we submitted 

a comment letter to the Commission in support of 

the proposed amendments to Regulation ATS.30

In our letter, we suggested a modest expansion of 

certain aspects of the proposal in order to enhance 

the operational transparency of venues that trade 

fixed-income securities, including those that solely 

trade government securities.31 We are pleased that 

the Chairman has indicated these two rules should 

be finalized soon, and we will continue to engage 

with the Commissioners and staff during that 

process.32

In addition to these rulemakings, in March 2018, 

the Commission proposed a rule to conduct 

a transaction fee pilot for NMS stocks.33 The 

proposed rule would subject the stock exchanges 

to new temporary pricing restrictions across three 

test groups and thereby reduce or eliminate the use 

of so-called “maker-taker” fee-and-rebate pricing 

for transactions in those securities. In addition, the 

rule would require the exchanges to prepare and 

publicly post data.34

Originating with electronic trading venues in 

the late 1990s, early alternatives to registered 

exchanges competed by, among other things, 

charging low fees while offering fast and fully 

automated trading.35 In response, exchanges began 

paying rebates for trading on their venues, which 

provided an additional incentive for traders to use 

a particular venue because it generated additional 

income beyond the spread between the bid and 

offer prices.36 In part enshrined by Rule 610 of 

Regulation NMS, which sets a maximum access fee 

cap for “takers” on equity exchanges, this makertaker fee model has been the subject of debate over 

the effects it may have on market structure, broker 

routing practices, and investor interests.37 Some 

believe the maker-taker model is a competitive 

tool for exchanges and may, directly or indirectly, 

provide better prices for investors. Others believe 

that it exacerbates conflicts of interest for brokers 

who have a legal duty to seek best execution of 

their customers’ orders, contributes to market 

fragmentation and market complexity through the 

proliferation of new exchange order types, and 

undermines price transparency.38
8 | OFFICE OF THE INVESTOR ADVOCATE

Following the Commission’s Equity Market 

Structure Advisory Committee’s recommendation 

that the Commission establish a pilot program 

of this nature,39 our Office encouraged the 

Commission to formally propose such a pilot. 

In Fiscal Year 2019, we will carefully consider 

whether the proposed elements of the pilot will 

provide the Commission with the most useful data 

for evaluating potential equity market structure 

reforms. Ultimately, we will consider whether 

lowering these fees and rebates on a permanent 

basis will improve market quality for investors.

On April 23, 2018, the Division of Trading and 

Markets held an equity market structure roundtable discussion on liquidity in thinly-traded 

equity securities.40 The discussion indicated that 

the Commission should continue to consider 

whether market structure changes could improve 

the liquidity in these small- and mid-cap stocks.41

Although it was clear from the discussion that 

investors would benefit from improved liquidity 

in existing public companies, there was less 

agreement as to whether alternative market 

structures could attract additional companies 

to become publicly listed. 

Following the roundtable, NASDAQ submitted 

a request for the Commission to suspend unlisted 

trading privileges during a one year pilot period 

for smaller companies with less than $2 billion 

in market capitalization and fewer than 100,000 

shares trading on an average day.42 In effect, 

this would prevent other exchanges from trading 

this set of Nasdaq-listed securities. NASDAQ 

suggests that consolidating liquidity for smaller 

companies would promote economic and pricing 

efficiency and improve market quality, and could 

incentivize additional smaller companies to list 

on public markets.43

The Commission intends to hold two additional 

roundtables in the near future—one on participant 

access to markets and market data and another on 

regulatory approaches to addressing retail fraud. 

We intend to consider the discussions around these 

important issues with an eye towards helping the 

Commission identify actionable recommendations 

that will benefit smaller public companies and 

their investors.

In addition to monitoring and evaluating rulemaking 

by the Commission during FY 2019, we will 

continue to examine the hundreds of rule proposals 

that are filed with the Commission by the SROs. 

Typically, a number of these filings involve market 

structure issues that impact investors. For example, 

IEX has recently proposed certain long-term listing 

standards,44 and CBOE has proposed a secondary 

closing auction for NYSE and NASDAQ listed 

securities.45 Where appropriate, we will make formal 

recommendations or utilize the comment process 

to ensure that the needs of investors are properly 

considered by the SROs and the Commission. 

FIXED INCOME MARKET REFORM

Since our inception, the Office of the Investor 

Advocate has included municipal market reform 

on its policy agenda each fiscal year.46 During 

this time, significant and important reforms 

took place in the municipal securities market, 

including implementation of a best-execution 

rule, adoption of rules and guidance relating to 

mark-up disclosure and prevailing market price, 

and enhancements to the Municipal Securities 

Rulemaking Board’s (MSRB) Electronic Municipal 

Market Access (EMMA) website.47 During 

Fiscal Year 2019, we will continue to monitor 

the important work of the MSRB and SEC in 

overseeing the municipal securities markets, but 

we will also broaden our focus to fixed income 

market reform more generally. 

Fixed income markets are typically segmented by 

sector according to the category of issuer such as 

corporate securities, mortgage related securities, 

asset-backed securities, federal agency securities, 

treasury securities, money market securities, and 

municipal securities.48 As of the end of 2017, the 

value of outstanding debt securities in the U.S. was 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 9

approximately $40.7 trillion, including nearly 

$8.5 trillion of corporate securities,49 $9.3 trillion 

of mortgage related securities, $1.5 trillion of 

asset-backed securities, $2 trillion of federal 

agency securities, $14.5 trillion of treasury 

securities, $1 trillion of money market securities, 

and $3.9 trillion of municipal market securities.50

In Fiscal Year 2019, the Office will monitor these 

sectors of the fixed income market for issues that 

may directly or indirectly impact retail investors. 

Holdings of fixed income securities typically 

include both individual and institutional investors.51

Certain segments of the fixed income market have 

high rates of participation by individual investors, 

while others have higher participation by institutional investors.52 Corporate and municipal 

securities, in particular, may be an important 

part of individual investors’ investment and 

retirement strategies because they may produce 

regular income.53

In remarks at the Third Annual Conference on the 

Evolving Structure of the U.S. Treasury Market, SEC 

Chairman Jay Clayton stated, “[i]ndividual investors 

are key participants in the corporate and municipal 

debt markets, both directly as retail investors 

and indirectly through investment funds, such as 

pension funds and other pooled vehicles, including as 

insurance owners and beneficiaries.”54 Recognizing 

the importance of these markets to retail investors, 

American companies, and the nation’s infrastructure, 

the Commission announced the formation of a 

Fixed Income Market Structure Advisory Committee 

(FIMSAC) on November 9, 2017.55 This Committee, 

whose initial focus is on corporate bonds and 

municipal securities markets, will provide “advice 

to the Commission on the efficiency and resiliency 

of these markets and identify opportunities for 

regulatory improvements.”56 Chairman Clayton 

has asked the Committee to help the Commission 

ensure that its regulatory approach reflects the 

realities of the current market and the needs of 

Main Street investors, as well as companies and 

state and local governments.57

FIMSAC held its inaugural meeting on January 

11, 2018.58 During this meeting, FIMSAC focused 

much of its time on bond market liquidity.59 On 

April 9, 2018, FIMSAC held its second public 

meeting and discussed liquidity considerations 

for bond ETFs, retail investor disclosure and 

education, electronic trading in the retail market,60

and block trade dissemination in municipal 

securities and corporate bonds.61 Following this 

discussion, FIMSAC adopted a recommendation 

for a pilot program to study market implications 

of changing the reporting regime for block-size 

trades in corporate bonds by introducing a delay 

for larger trades.62 In Fiscal Year 2019, the Office 

of the Investor Advocate will monitor the discussions and recommendations of FIMSAC. 

Additionally, throughout Fiscal Year 2019, the 

Office will monitor, analyze, and review relevant 

Commission and SRO rulemakings and other 

activities relating to fixed income markets—with 

particular attention to amendments and rules 

impacting individual investors in municipal 

securities and corporate bond markets. For 

example, the Office will monitor attempts to 

deter abusive market practices that may present 

risk to investors, such as so-called “last look” 

or “pennying,” and the practice of “filtering” or 

“screening.”63 During its quarterly meeting on 

April 25–26, 2018, the MSRB Board agreed to 

seek public comment on draft interpretive guidance 

for dealers that would clarify existing regulations 

on the practice of “pennying.”64 As appropriate, 

the Office may provide public comment relating 

to this or other potentially problematic products 

or practices within the fixed income space. 

ACCOUNTING AND AUDITING

In a recent speech, SEC Chief Accountant Wesley 

Bricker emphasized the importance of maintaining 

the highest standards of general purpose financial 

reporting:

When formulating standards for general 

purpose financial reporting, the [Financial 
10 | OFFICE OF THE INVESTOR ADVOCATE

Accounting Standards Board] (and the 

[International Accounting Standards 

Board]) do not seek to influence the 

outcome of investor capital allocation 

decisions or actions taken by management; rather, the boards design standards 

that provide better information to inform 

those decisions and actions. The alternative, whereby standards are designed to 

privilege certain special purpose objectives, 

economic activities, financial products, or 

market participants, could diminish confidence in the accuracy or quality of reported 

information, which could thereby impair 

capital formation, and in turn negatively 

impact economic activity.65

We concur. High-quality financial reporting is 

essential to investors in their investment and voting 

decisions. It is therefore important for the Office 

of the Investor Advocate to track accounting 

and auditing issues, to represent investors in the 

policymaking process, and to encourage investors 

themselves to express their views. As in past years, 

we will continue to follow developments at the 

Commission as well as the Financial Accounting 

Standards Board (FASB) and the Public Company 

Accounting Oversight Board (PCAOB).

At FASB, work is underway to facilitate successful 

implementation of the new credit loss standard 

(Current Expected Credit Losses or CECL), 

which the accounting standard-setter adopted in 

2016 after a six-year, inclusive process.66 FASB’s 

Transition Resource Group67 has been engaging 

with all stakeholders on implementation on the 

new standard, which will take effect in 2020.68 The 

new standard is important to investors because it 

is expected to result in timelier reporting of credit 

losses and reduction of the information asymmetry 

between company management and investors.69

At the PCAOB, five new members have been 

appointed to the Board,70 and it has announced 

that it is taking a fresh look at the organization and 

its future direction. In preparing a new five-year 

strategic plan, the PCAOB has issued a survey 

to obtain the views of external parties, such as 

investors, auditors, preparers, audit committee 

members, and academics. We will engage with the 

PCAOB as it develops its new strategic plan, and 

we will monitor its implementation. 

In international markets, we will pay attention to 

developments in international financial reporting 

standards (IFRS) and international auditing 

standards. These standards are important to U.S. 

investors because, as of the end of 2016, U.S. 

investors had invested $9.9 trillion in equity and 

debt securities listed in non-U.S. jurisdictions.71

Moreover, since 2007, the Commission has allowed 

foreign private issuers to report under IFRS without 

reconciling to U.S. GAAP.72

We were pleased to see the appointment in May 

2018 of SEC Chief Accountant Wesley Bricker 

as a representative of the International Organization of Securities Commissions (IOSCO) to 

the Monitoring Group. As its name implies, the 

Monitoring Group is responsible for monitoring 

the overall governance of the international auditrelated standard-setting process. 

The question of an expectations gap regarding 

audits, though not new, has become a prominent 

theme recently in both the U.S. and the U.K. An 

expectations gap is the difference between what 

investors expect from the financial statements and 

independent audit, on the one hand, and what 

they actually communicate to investors. In June, 

Mr. Bricker discussed this topic within a speech he 

presented in London,73 and the issue was raised at 

a June meeting of the PCAOB’s Standing Advisory 

Group in the context of the new auditor reporting 

standard and its requirement to communicate 

critical audit matters (CAMS).74 The topic of an 

expectations gap also has appeared recently in the 

press, including an article in the Economist under 

the title “Company audits: Great expectations 

gap.”75 In the coming fiscal year, we will pay 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 11

close attention to this issue, focusing on 

causes and potential solutions to narrow or 

close the expectation gap in ways that best 

protect investors.

STANDARDS OF CONDUCT 

FOR BROKER-DEALERS AND 

INVESTMENT ADVISERS

On April 18, 2018, the Commission voted to 

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

transparency of relationships that retail investors 

have with investment advisers and broker-dealers 

while preserving access to different types of advice 

relationships and investment products.76 Specifically, the regulatory package includes the following 

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

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

some cases, clarifying the Commission’s view of 

the fiduciary duty that investment advisers owe to 

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

document called a customer or client relationship 

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

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

their firm names or professional titles.77 

Proposed Regulation Best Interest would require a 

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

customer when making a recommendation of 

any securities transaction or investment strategy 

involving securities to a retail customer, without 

putting the financial or other interest of the brokerdealer ahead of the interests of the retail customer.78

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

each of the following three specific obligations.

§	Disclosure obligation, which would require the 

broker-dealer to disclose to the retail customer 

the key facts about the relationship, including 

material conflicts of interest.

§	Care obligation, which would require the 

broker-dealer, in making a recommendation, 

to exercise reasonable diligence, care, skill, and 

prudence, to (i) understand the potential risks and 

rewards associated with the recommendation, 

and have a reasonable basis to believe that 

the recommendation could be in the best 

interest of at least some retail customers; 

(ii) have a reasonable basis to believe that the 

recommendation is in the retail customer’s 

best interest; and (iii) have a reasonable basis 

to believe that a series of recommended 

transactions is not excessive and is in the retail 

customer’s best interest.

§	Conflict of interest obligation, which would 

require the broker-dealer to establish, maintain, 

and enforce policies and procedures reasonably 

designed to identify and then, at a minimum, 

to disclose and mitigate (or eliminate), material 

conflicts of interest arising from financial 

incentives; and to at least disclose other material 

conflicts of interest.79 

The proposed investment adviser interpretation 

would reaffirm and clarify certain aspects of the 

fiduciary duty that an investment adviser owes to 

its clients.80 The aim of the proposed interpretation 

is to provide greater clarity to investment advisers 

and their clients regarding advisers’ legal obligations toward their clients.81
12 | OFFICE OF THE INVESTOR ADVOCATE

The proposed short-form disclosure document 

known as the customer or client relationship 

summary—Form CRS—would be a standardized 

disclosure of no more than four pages that would 

highlight key differences in the principal types of 

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

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

and certain conflicts of interest that may exist.82

This proposed rule, if adopted, would require 

investment advisers and broker-dealers, and their 

respective associated persons, to provide retail 

investors with a relationship summary.83 Proposed 

Form CRS is intended to furnish retail investors 

with simple, easy-to-understand information 

about the nature of their relationship with their 

investment professional and would supplement 

other more detailed disclosures.84

The proposed restriction on certain broker-dealers 

and their associated persons from using the terms 

“adviser” or “advisor” as part of their name or title 

in communications with investors and prospective 

investors is meant to allay investor confusion 

regarding investment professionals’ registration 

status.85 The new rule would require investment 

advisers and broker-dealers and their associated 

persons to be direct and clear about their registration status in communications with investors 

and prospective investors.

We are encouraged that the Commission has determined to address these long-standing issues, and 

we appreciate the willingness of Commissioners 

and staff to engage in active dialogue with us as 

the proposals were being developed. Nonetheless, 

while the resulting proposed rulemakings and 

interpretations reflect some of our views, they 

do not necessarily represent our strongest policy 

preferences. For instance, in addition to mitigating 

conflicts arising from financial incentives, we 

think that broker-dealers should be required to 

mitigate—not merely disclose—material conflicts 

involving situations in which the broker-dealer 

cannot form a reasonable basis for believing that 

disclosure effectively addresses those conflicts. 

We also believe that the prohibition on labeling 

should not be limited to use of the terms “adviser” 

or “advisor,” but should instead be a principlesbased restriction on the use of any label that 

would connote an ongoing relationship of trust 

with an investor. These are just two examples 

of the myriad issues that we are considering in 

connection with the proposed rulemakings. As this 

rulemaking process unfolds, we will continue to 

analyze developments in this area and promote the 

interests of retail investors at every opportunity.

On a separate but parallel track, we have been 

conducting investor testing generally on the 

nature of advice relationships.86 For example, 

we have been researching, among other things, 

whether investors understand the distinctions 

among different types of investment professionals, 

how effectively investors navigate the market for 

financial advice, investor perceptions of financial 

conflicts of interest, and the types of conduct 

investors expect from an investment professional who is required to act in an investor’s best 

interest. We will also explore, through controlled 

experiments, the optimal length and content of 

the proposed Form CRS, as well as alternative 

disclosure methods such as video and web-based 

delivery. We hope to use the information obtained 

from our research efforts to help augment the 

Commission’s data-driven policymaking approach.

EXCHANGE-TRADED FUNDS

Since the Commission approved the first exchangetraded fund (ETF) in 1992, the U.S. ETF market 

has grown to $3.4 trillion in total net assets—and 

approximately 1,832 funds—at year-end 2017.87

Currently, ETFs rely on exemptive orders from the 

Commission, which permit the funds to operate 

as investment companies under the Investment 

Company Act (subject to representations and 

conditions that have developed over time). 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 13

Because the Commission has granted more than 

300 of these exemptive orders in the past quarter 

century, differences in representations and conditions have resulted, which has led to some variations 

in the regulatory structure for existing ETFs.88 To 

address these and related issues, the Commission has 

determined to modernize the regulatory framework 

for ETFs to reflect its 26 years of experience in 

regulating these products. The objective is to create 

a consistent, transparent, and efficient regulatory 

framework for ETFs and to facilitate greater competition and innovation in the ETF space. 

We support the Commission’s efforts to permit 

ETFs that satisfy certain conditions to operate 

without the expense and delay of obtaining an 

exemptive order insofar as such efforts do not 

sacrifice investor protection. However, while we 

favor rulemaking that would cover “plain vanilla” 

ETFs and would promote full daily portfolio 

transparency and broad disclosure (e.g., historical 

information on premiums and discounts, bid-ask 

spread information), among other things, we will 

be taking a closer look at the treatment of leveraged 

and inverse ETFs and some of the more complex 

and less transparent products that have sought or 

obtained exemptive relief.

ENHANCED DISCLOSURE FOR FUNDS 

AND VARIABLE ANNUITIES

On June 4, 2018, the Commission issued a request 

for comment to elicit the views of retail investors 

with respect to mutual funds, ETFs, and other 

pooled investment vehicles.89 The purpose of the 

request for comment is to help the Commission 

learn how individual investors and other interested 

parties use disclosures by funds and how investors 

believe those disclosures could be improved to help 

investors make informed investment decisions. This 

would include investor feedback on the delivery, 

design, and content of fund disclosures.

Fund disclosures are important because millions of 

individuals invest in funds as a means of achieving 

their financial goals, such as saving for retirement 

and funding their children’s educations.90 Indeed, 

an estimated 100 million Americans representing 

approximately 56.2 million households owned 

mutual funds as of mid-2017.91 Given this level of 

investor participation in funds, it makes sense for 

the Commission to seek the input of Main Street 

investors on how they use, and how to improve, 

fund disclosures.

The Office of the Investor Advocate is heavily 

involved in efforts to understand investor behavior. 

As reported previously, in 2017 we launched an 

investor research and testing effort to examine 

potential ways to improve fund fee and expense 

disclosure. This investor testing research project, 

which is part of a larger testing initiative known 

as Policy Oriented Stakeholder and Investor 

Testing for Innovative and Effective Regulation 

(POSITIER) that encompasses several research 

streams, seeks to inform the rulemaking process 

with evidence obtained from surveys and other 

research methods. The fund fee and expense 

disclosure research stream explores, for example, 

topics such as the effectiveness of dollar-denominated fee and expense disclosure as compared to 

disclosure expressed in percentage terms, the utility 

of standardized cost disclosure generally, and ways 

to provide further context for the disclosure. This 

research effort is ongoing.

Our interest and involvement in fund disclosure 

extends to separate accounts that offer variable 

annuities.92 Indeed, we have consistently 

advocated for enhanced disclosure concerning 

separate accounts that offer variable annuities. 

For example, three years ago, in our Report 

on Objectives, Fiscal Year 2016 (published in 

June 2015), we indicated our strong support for 

“staff’s efforts to address the problem of lengthy 

and complex disclosure” for variable annuities.93

We continue to support the development of a 

summary prospectus for variable annuities that 

would disclose the key facts that investors need 

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

benefits, of their investment.94
14 | OFFICE OF THE INVESTOR ADVOCATE

According to the Commission’s agenda that was 

developed in accordance with the Regulatory 

Flexibility Act, Commission staff is considering 

such enhanced disclosure for separate accounts 

registered as unit investment trusts and offering 

variable annuities.95 We remain convinced that 

the mutual fund summary prospectus could serve 

as a useful model for providing variable annuity 

disclosure,96 and there appears to be support for 

this idea within the Commission. On March 19, 

2018, for example, Commissioner Hester Peirce 

stated that the “Commission got off to a good start 

on revamping fund disclosures with its adoption 

of the mutual fund summary prospectus” and that 

a “similar variable annuity summary prospectus 

would be a valuable project.”97 We look forward 

to working with Commission staff as they develop 

a proposal for enhanced disclosure for separate 

accounts registered as unit investment trusts and 

offering variable annuities.

TRANSFER AGENTS

In recent years, Commission enforcement actions 

have focused on gatekeepers,98 including cases 

against auditors, transfer agents, and attorneys. 

Transfer agents, in particular, play a critical role 

with respect to securities settlement. Transfer 

agents issue and cancel stock certificates to reflect 

changes in ownership, act as an intermediary 

for the company, and handle lost, destroyed, or 

stolen certificates, among other key functions.99

Additionally, transfer agents play an important 

role in monitoring the restrictive legends and “stop 

transfer” orders that distinguish restricted securities 

from freely-tradable securities.100 The failure of a 

transfer agent to promptly, accurately, and safely 

perform its duties can, among other things, hinder 

the successful completion of secondary trades, 

disenfranchise investors, and expose issuers, 

investors, securities intermediaries, and the securities 

markets as a whole to significant financial loss.101

Restricted securities are securities acquired in an 

unregistered, private sale from the issuing company 

or from an affiliate of the issuer.102 Typically, 

restricted securities bear a legend indicating that 

they cannot be resold legally unless there is an 

effective registration statement for their resale or 

there is an available exemption from registration 

for the resale.103 Often, transfer agents are the party 

responsible for affixing, tracking, and removing 

restrictive legends from a security.104

Distribution of unregistered securities is particularly 

problematic in the microcap market,105 where there 

may be limited publicly available information and 

increased risk for fraud.106 Often, less sophisticated 

investors may be the victims of microcap fraud.107 

Given their responsibilities, transfer agents are well 

positioned to play important gatekeeper functions108

in that they can potentially detect and prevent 

frauds involving unregistered microcap securities.109

The Commission first adopted transfer agent 

rules in 1977110 and has rarely updated the rules 

since that time.111 Transfer agents now perform 

a more diverse array of services and operate in a 

market structure that has changed significantly 

since 1977.112 Recognizing the increasingly critical 

role of transfer agents and changing landscape, 

in December 2015, the Commission issued an 

advanced notice of rulemaking, together with a 

concept release requesting public comment on the 

Commission’s broader review of transfer agent 

regulation.113 The concept release highlighted, 

among other things, a transfer agent’s particular 

role with respect to the issuance and transfer of 

restricted securities and removal of restricted 

legends.114 Modernization of transfer agent rules 

and more specificity around transfer agents’ 

responsibilities with respect to restricted securities 

could enhance investor protection and combat 

fraud and manipulation in the microcap market.115

In the coming fiscal year, we will examine issues 

relating to transfer agents, transfer agent rules, and 

the critical role transfer agents play as gatekeepers. 

We will consider whether proposed changes and 

modernization to transfer agent regulations are 

appropriate and would benefit the retail investor. 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 15

Based upon our findings, we will advocate for 

reforms as needed.

IMPACT OF KOKESH V. SEC ON 

ENFORCEMENT ACTIONS

On June 5, 2017, the Supreme Court unanimously 

held that 28 U.S.C. § 2462,116 which establishes 

a five-year statute of limitations period for “an 

action, suit or proceeding for the enforcement 

of any civil fine, penalty, or forfeiture,” bars the 

Commission from obtaining disgorgement in 

actions brought beyond the five-year statute of 

limitations.117 The Court’s June 2017 holding in 

Kokesh v. SEC expanded on its 2013 ruling in 

Gabelli v. SEC, wherein the Supreme Court held 

that the Commission must bring enforcement 

actions seeking civil money penalties within five 

years of when the conduct occurred.118

In 2009, the Commission brought an action 

against Charles Kokesh alleging that he violated 

various securities laws by concealing the misappropriation of $34.9 million from four business 

development companies from 1995 to 2009.119

The Commission sought monetary civil penalties, 

disgorgement, and an injunction barring Mr. 

Kokesh from future violations.120 Mr. Kokesh was 

found liable for various securities laws violations 

at a jury trial.121 The District Court determined 

that with respect to the civil monetary penalties, 

28 U.S.C. § 2462’s five-year statute of limitations 

precluded any penalties for misappropriation that 

occurred prior to the filing of the Commission’s 

complaint.122 The District Court agreed with the 

Commission, however, that because disgorgement 

is not a “penalty” within the meaning of 28 

U.S.C. § 2462, no limitation period applied to 

disgorgement.123 Thereafter, the Court of Appeals 

for the Tenth Circuit affirmed, agreeing that 

disgorgement is not a penalty, and further finding 

that disgorgement is not a forfeiture.124

Following a circuit split125 over whether 28 U.S.C. 

§ 2462 applies to claims for disgorgement in 

SEC enforcement actions, the Supreme Court 

granted certiorari to resolve the disagreement.126

The Supreme Court unanimously held that 

disgorgement, as it is applied in SEC enforcement 

proceedings, operates as a penalty under 28 U.S.C. 

§ 2462. Accordingly, any claim for disgorgement 

in an SEC enforcement action must be commenced 

within five years of the date the claim accrued.127

The Kokesh holding may have a far-reaching 

impact on SEC enforcement actions and the 

Commission’s ability to recover funds stolen from 

investors.128 On May 16, 2018, the co-directors 

of the SEC’s Division of Enforcement, Stephanie 

Avakian and Steven Peikin (the Directors), testified 

before the House Committee on Financial Services, 

Subcommittee on Capital Markets, Securities, 

and Investment.129 The Directors testified that 

the Kokesh decision already has had significant 

impact across many parts of the Division130

because many securities frauds are complex and 

take significant time to uncover and investigate.131

Moreover, some fraud schemes are well concealed 

and are not discovered until investors have been 

victimized over many years.132 In such cases, 

Kokesh may severely limit the recovery available 

to harmed investors.133 The Directors further 

expressed concern with “an outcome where some 

investors must shoulder additional losses—and 

the fraudulent actor is able to keep those ill-gotten 

gains—because those investors were tricked early 

in a scheme rather than later.”134

The overall impact of Kokesh remains to be seen. 

However, in the wake of Kokesh, the Division will 

need to work to bring cases as quickly as possible 

to have the best chance at recovery for harmed 

investors.135 Moreover, as the Directors testified, 

some of the effects of Kokesh have already become 

clear. For example, in the Kokesh case alone, 

Mr. Kokesh kept more than 80 percent of the 

approximately $35 million he fraudulently 

obtained from his firm’s advisory clients.136 Due 

to the Court’s ruling, the harmed investors will not 

recover any of those funds.137 In the year since the 

Kokesh decision, the Division of Enforcement has 
16 | OFFICE OF THE INVESTOR ADVOCATE

had to forego over $800 million of disgorgement in 

both litigated and settled actions.138 

Shortly after the Court’s ruling, former SEC Chair 

Mary Jo White and former SEC enforcement 

officials described the potential impacts of the 

Kokesh ruling on SEC enforcement actions.139

According to those commentators, the decision 

could result in, among other things, reduced 

leverage for the SEC in settlement negotiations, 

fewer investigations involving aged conduct, earlier 

(and potentially less successful) staff requests for 

tolling agreements, and cascading effects on other 

sanctions such as injunctive relief or bars from 

serving as an officer or director.140

In our view, the Supreme Court’s Kokesh holding 

has had, and will continue to have, troubling 

impacts on retail investors. The decision limits the 

Commission’s ability to recover funds on behalf 

of harmed investors and potentially threatens the 

Commission’s ability to protect investors through 

other sanctions. As Director Peikin testified, the 

Division of Enforcement is interested in working 

with legislators to fashion a proposal to address the 

impacts of Kokesh, or alternatively, to respond to 

any legislation that may come forward.141 During 

FY 2019, the Office will work with the Division 

of Enforcement and others to explore possible 

solutions to the Kokesh decision. 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 17

OMBUDSMAN’S REPORT

As set forth in Exchange Act Section 

4(g)(8), 15 U.S.C. § 78d(g)(8), the

Ombudsman is required to: (i) act as 

a liaison between the Commission and any

retail investor in resolving problems that retail 

investors may have with the Commission or with 

self-regulatory organizations (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.142

The Ombudsman is also required to “submit a

semi-annual report to the Investor Advocate that 

describes the activities and evaluates the effectiveness of the Ombudsman during the preceding 

year” (Ombudsman’s Report).143 The Ombudsman’s Report must be included in the semi-annual 

reports submitted by the Investor Advocate to 

Congress. To maintain reporting continuity, the 

Ombudsman’s Report included in the Investor 

Advocate’s June 30 Report on Objectives will 

describe the Ombudsman’s activities during the first 

six months of the current fiscal year and provide 

the Ombudsman objectives and outlook for the 

following full fiscal year. The Ombudsman’s Report 

included in the Investor Advocate’s December 31 

Report on Activities will provide a look back 

on the Ombudsman’s activities during the full 

preceding fiscal year. 

Accordingly, this report provides a look back on 

the Ombudsman’s activities for the six-month 

period of October 1, 2017, through March 31, 

2018 (Reporting Period) and discusses the 

Ombudsman’s objectives and outlook for 

Fiscal Year 2019, beginning October 1, 2018. 

SERVICE BY THE NUMBERS

The Ombudsman144 assists retail investors—

sometimes referred to as 

individual investors or 

Main Street investors—

and other persons with 

concerns or complaints 

about the SEC or SROs 

the SEC oversees. 

The assistance the 

Ombudsman provides 

includes, but is not 

limited to:

§ listening to inquiries, concerns, complaints, and

related issues;

§ helping persons explore available SEC options

and resources;

§ clarifying certain SEC decisions, policies,

and practices;

§ taking objective measures to informally resolve

matters that fall outside of the established

resolution channels and procedures at the

SEC; and

§ acting as an alternate channel of communication

between retail investors and the SEC.
18 | OFFICE OF THE INVESTOR ADVOCATE

In practice, individuals often seek the Ombudsman’s assistance as an initial point of contact to 

resolve their inquiries or as a subsequent or ongoing 

point of contact when they are dissatisfied with the 

outcome, rate of progress, or resolution. At times, 

individuals request the Ombudsman’s assistance 

with things the Ombudsman is not permitted to do. 

For example, they may expect the Ombudsman to 

participate in a formal investigation, play a role in a 

formal resolution process, or overturn a decision of 

a fact-finder or appellate body.

The Ombudsman maintains inquiry data records 

to: (i) identify and respond to problems raised by 

retail investors and others; (ii) track and analyze 

inquiry volume; (iii) categorize and report data, 

trends, and concerns; and (iv) provide data-driven 

support for recommendations presented by the 

Ombudsman to the Investor Advocate for review 

and consideration. 

Inquiry volume is counted in terms of matters 

and contacts. The initial contact—a new, 

discrete inquiry received by or referred to the 

Ombudsman—is the contact that establishes 

the matter. When a matter is established, the 

Ombudsman reviews the facts, circumstances, and 

concerns raised, and assesses the staff engagement 

and resources that may be required to respond to, 

refer, or resolve the matter. 

The matter established by the initial contact may 

generate subsequent contacts—related inquiries 

and communications to or from the Ombudsman 

staff deriving from the matter. Subsequent contacts 

often require further staff attention to answer 

additional questions, explain or clarify proposed 

resolution options, or respond to challenging or 

persistent communications from an investor. This 

system of counting matters and contacts helps the 

Ombudsman quickly assess volume and resource 

issues related to each matter. 

Data Across Primary Issue Categories

During the Reporting Period, retail investors, 

industry professionals, concerned citizens, and 

other interested persons contacted the Ombudsman 

for assistance on 102 new matters covering nine 

primary issue categories. 

Non-SEC / Other Matters (20)

Allegations of Securities Law Violations / Fraud (19)

SEC Questions / Complaints (17)

Investment Products / Retirement Accounts (13)

Securities Ownership (10)

Company Disclosures and Information (9)

Securities Laws / Rules / Regulations / Procedures (8)

SEC Investigation / Litigation / Enforcement Actions (5)

Atypical Matters (1)

Matters by Primary Issue Category 

October 1, 2017–March 31, 2018 

19%

17%

13%

9%

10%

1%

5%

8%

18%

In addition to the 102 new matters, we fielded 503 

contacts during the Reporting Period, covering ten 

primary issue categories, for a total of 605 contacts. 

A portion of these contacts related to matters 

received prior to this Reporting Period. As expected, 

a small number of matters relating to issues outside 

of the SEC’s purview yielded a disproportionate 

number of contacts due to persistent investor 

communications and the submission of additional 

documents and communications to support the 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 19

allegations raised in those matters. The chart that 

follows displays the distribution of the 605 contacts 

by primary issue category.

Non-SEC / Other Matters (295)

Allegations of Securities Law Violations / Fraud (59)

SEC Questions / Complaints (58)

Securities Laws / Rules / Regulations / Procedures (46)

Investment Products / Retirement Accounts (39)

SEC Investigation / Litigation / Enforcement Actions (38)

Company Disclosures and Information (28)

Securities Ownership (27)

Atypical Matters (11)

FINRA Arbitration / Rules / Procedures (4)

49%

9%

8%

6%

6%

5%

10%

1%

4%

2%

Contacts by Primary Issue Category

October 1, 2017–March 31, 2018

How the Numbers Inform our Efforts 

The Ombudsman tracks matter and contact 

data to maintain a comprehensive view of the 

allocation of staff resources and to identify 

matters and contacts that significantly alter 

workflow volumes, call for the realignment of 

Ombudsman staff assignments, or require added 

staff support to manage effectively. The data also 

informs resource allocation considerations related 

to proposed program development, training, and 

outreach efforts. By tracking the distribution 

of matters and contacts across primary issue 

categories, the data helps the Ombudsman identify 

potential areas of concern or interest and enables 

the Ombudsman to act as an early warning system 

to alert agency leaders about the number and 

potential impact of particular issues and concerns 

raised by retail investors and others.

SERVICE BEHIND THE NUMBERS 

While the matter and contact data quantifies the 

volume and categories of inquiries the Ombudsman 

receives, the data does not capture the full value of 

the service the Ombudsman provides to the investing 

public. Among the most common situations in 

which investors present their problems and concerns 

to the Ombudsman are those in which the investors 

are unfamiliar with the existing channels established 

to resolve the particular concerns they raise, unsure 

which resolution channel to use or how to initiate 

the process, and unable to get the specific outcome 

they want through the resolution channels available. 

In these situations, investors generally assume the 

outcome they want is a viable option and expect 

that the Ombudsman is permitted to do whatever is 

necessary to reach that outcome. 

Investors who are unfamiliar with or unsure of the 

available resolution channels usually will thoughtfully consider the advantages and disadvantages of 

the resolution options the Ombudsman presents, 

and establish their expectations based upon the 

potential outcome each option offers. For these 

investors, the Ombudsman serves a valuable 

resource function, but the investor retains responsibility for choosing how to proceed based on 

the resources the Ombudsman presents. On the 

other hand, investors who believe they are entitled 

to a particular result and want the Ombudsman 

to provide it can be challenging to assist, as they 

typically conclude that any outcome, other than the 

particular outcome they want, is unacceptable. 

The vignettes that follow are provided to give a 

sense of the variety of issues we address. Together, 

they offer a closer look at the how the Ombudsman 

staff’s time, effort, and commitment provide 

meaningful, personalized service to investors, and 

illustrate the value of the day-to-day work more 

effectively than the data alone.
20 | OFFICE OF THE INVESTOR ADVOCATE

A retail investor who invested a considerable amount of money in an initial coin offering (ICO) reached 

out to the Ombudsman after reading a press release about the SEC halting the ICO. The investor wanted 

help understanding the next steps in the SEC process and recovering his investment. The Ombudsman 

staff contacted the investor, discussed the salient aspects of the press release, answered his general 

questions about ICOs, and directed the investor to the appropriate Division of Enforcement resources for 

submitting a complaint to the agency.

An investor who previously corresponded with the SEC many times regarding his stock ownership made 

an additional submission to the Commission. The investor reached out to the Ombudsman because he 

allegedly had not received any response from the agency. The Ombudsman staff followed up with the 

appropriate staff in an SEC regional office and confirmed that the regional office staff had indeed contacted the investor. In this instance, the investor was simply dissatisfied that his previous correspondence 

did not result in the particular outcome he desired, and he wanted the Ombudsman to help him force a 

specific result.

A retail investor contacted the Ombudsman after attempting to submit a complaint to the Division of 

Enforcement about a fraudulent cryptocurrency. The investor was concerned that her complaint had 

not been received by the SEC and was referred to the Ombudsman after calling the general SEC phone 

number. The Ombudsman staff discussed the investor’s concerns with her and made sure that her complaint was properly submitted so that SEC staff focused on cryptocurrency matters were made aware of 

the possibly fraudulent activity the investor wanted to report.

The daughter of an elderly retail investor reached out to the Ombudsman after learning that a broker 

may have squandered her mother’s sizable investment. The daughter discovered the broker had been 

investigated and charged by the SEC and wanted information on how to receive any funds recovered from 

the broker. Her attempts to reach the broker had, up to that point, been unsuccessful. The Ombudsman 

responded to her concerns and directed her to the SEC Office of Investor Education and Advocacy for 

additional assistance. The daughter thanked the Ombudsman, and subsequently was able to reach the 

broker directly. While the daughter felt she had the situation under control, the Ombudsman encouraged 

her to contact the SEC should she have additional questions or concerns in the future.

Several non-U.S. investors reached out to the Ombudsman with questions about SEC endorsement 

letters, solicitation documents, and other communications containing the SEC seal. After reviewing the 

details and the documents provided by the investors, the Ombudsman strongly believed that the investors were contacted by individuals engaged in advance fee frauds, common fraudulent schemes directed 

at non-U.S. investors by entities falsely claiming to be registered or affiliated with the SEC. These types 

of scams generally involve requests that investors pay a fee in advance to conduct or close a proposed 

transaction. After the investor pays the fee, the soliciting person or entity typically breaks off contact, the 

proposed transaction does not take place, and the investor is never paid and never recovers the fees paid 

in advance. The Ombudsman advised each of these investors to not send money or personal information in 

response to the solicitations, and to submit their information to the Division of Enforcement. The Ombudsman also directed the investors to information on government impersonators and advance fee fraud scams 

available on www.sec.gov.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 21

Our interactions with investors provide invaluable 

insight into the information investors rely upon 

and the assistance they want when making 

financial decisions. When investors raise questions 

or complaints that point to the need for more 

information or additional explanations to assist 

their understanding of a particular product or 

process, we attempt to provide personalized, 

straightforward service to investors by liaising 

with the appropriate persons and entities, by 

providing the information necessary to help 

investors better understand the solutions the 

SEC can provide, and by empowering and 

equipping investors to make well-informed 

investment decisions. 

Communications with Investors 

During the Reporting Period, the Ombudsman 

continued to work extensively with the SEC’s 

Office of Information Technology (OIT) and a 

technology contractor to refine data and functionality requirements for the Ombudsman Matter 

Management System (OMMS), an electronic 

platform for tracking, analyzing, and reporting 

matter and contact information while ensuring all 

necessary data management, confidentiality, and 

reporting requirements are met. The OMMS Form, 

a web-based form permitting the submission of 

inquiries directly to the Ombudsman, was made 

available to the public in September 2017 via the 

www.sec.gov/ombudsman webpage. The OMMS 

Form guides the user through a series of questions 

specifically tailored to elicit information concerning 

matters within the scope of the Ombudsman’s 

function. In addition, the OMMS Form allows 

users to electronically upload and submit other 

questions, concerns, information, and documents 

for review. The OMMS Form is instructive and 

user-friendly, and is also compatible for use on 

mobile devices.

After the launch of the OMMS Form to the public, 

the Ombudsman began meeting with the SEC’s 

Office of Public Affairs (OPA) to discuss ways 

to better market the OMMS Form. During these 

meetings, OPA also made recommendations for 

improving the OMMS Form user experience. These 

recommendations enhanced the look and feel of the 

OMMS Form and were implemented seamlessly, 

with no disruptions to OMMS Form access. 

For the Ombudsman, OMMS makes it much easier 

to review and respond to all emails, voicemails, 

and other correspondence, and to analyze data, 

compare issues, and customize reports for a deeper 

dive into the issues raised. The Ombudsman also 

reviews matter and contact data on a frequent basis 

to remain aware of any issues or trends impacting 

the volume or types of inquiries received. When 

complicated or sensitive issues are raised, the 

Ombudsman either handles the inquiry directly or 

works closely with staff to determine what the next 

steps should be. 

To respond to inquiries effectively and efficiently, 

the Ombudsman monitors the volume of inquiries 

and the staff resources devoted to addressing the 

particular concerns raised. The Ombudsman tracks:

§ all inquiries received by, or referred to, the

Ombudsman;

§ all related correspondence and communications

to and from Ombudsman staff;

§ staff engagement and resources utilized to

respond to inquiries; and,

§ inquiry status from receipt to referral or

resolution.

The diagram on the following page highlights 

the standard lifecycle of what happens when 

investors or other interested persons contact the 

Ombudsman for assistance.
22 | OFFICE OF THE INVESTOR ADVOCATE

START

END

We review 

your information, 

determine if you are a 

retail investor and if your 

matter concerns the SEC 

or a related SRO, and 

confirm that your 

matter is entered 

in OMMS. We review 

your matter in detail, 

including any related 

background information, 

laws, and policies.

The Ombudsman 

may contact you, 

SEC staff, and other key 

persons for more details 

on the matter. The 

Ombudsman will discuss 

your concerns about 

confidentiality, if any, 

at this point.

The Ombudsman 

and staff discuss 

your matter internally

 to determine the best 

options for resolution 

and to identify other 

resources that may 

be helpful to you.

The Ombudsman 

and staff may contact 

you to gather more 

information and to 

reply to any interim 

correspondence. This 

may occur several times 

as we work to resolve 

your matter.

The Ombudsman 

resolves your matter 

or provides options for 

you to consider. You may 

be informed that your 

matter was referred 

to another SEC division 

or office for further 

assistance or 

resolution.

We update 

your OMMS matter 

record accordingly. This 

provides the Ombudsman 

with easy access to your 

matter information 

should you have 

additional questions 

or concerns.

What Happens When You Contact the Ombudsman

During FY 2018, the full first fiscal year using 

OMMS functionality, the Ombudsman and staff 

will closely monitor questions and suggestions 

relating to the OMMS Form and will continue 

to work to enhance the user experience. The 

Ombudsman is also working with OPA to create 

a stronger public presence on the web, in social 

media, and with investor-focused groups, so that 

retail investors and others are better informed 

about the role of the Ombudsman and the 

resources the Ombudsman provides. For any 

persons who do not wish, or are unable, to use 

the OMMS Form, they may still contact the 

Ombudsman by email, telephone, fax, and mail.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 23

STANDARDS OF PRACTICE

Similar to ombudsmen at other federal agencies, the Ombudsman follows three core standards of practice:

CONFIDENTIALITY IMPARTIALITY INDEPENDENCE

The Ombudsman has established 

safeguards to protect confidentiality, 

including the use of OMMS, a separate 

email address, dedicated telephone 

and fax lines, and secure file storage.

The Ombudsman generally treats 

matters as confidential, and takes 

reasonable steps to maintain the 

confidentiality of communications.

The Ombudsman also attempts to 

address matters without sharing 

information outside of the Ombudsman 

staff, unless given permission to do 

so. However, the Ombudsman may 

need to contact other SEC divisions 

or offices, SROs, entities, and/or 

individuals and share information 

without permission under certain 

circumstances including, but not 

limited to: a threat of imminent risk or 

serious harm; assertions, complaints, 

or information relating to violations 

of the securities laws; allegations of 

government fraud, waste, or abuse; or 

if otherwise required by law.

The Ombudsman does 

not represent or act as an 

advocate for any individual 

or entity, and does not 

take sides on any issues 

brought to her attention.

The Ombudsman maintains 

a neutral position, considers 

the interests and concerns 

of all involved parties, 

and works to resolve 

questions and complaints 

by clarifying issues and 

procedures, facilitating 

discussions, and identifying 

options and resources.

By statute, the Ombudsman 

reports directly to the 

Investor Advocate, who 

reports directly to the 

Chairman of the SEC.

However, the Office of the 

Investor Advocate and the 

Ombudsman are designed 

to remain somewhat 

independent from the 

rest of the SEC. Through 

the Congressional reports 

filed every six months by 

the Investor Advocate, the 

Ombudsman reports directly 

to Congress without any 

prior review or comment 

by the Commission or other 

Commission staff.

INVESTOR PROTECTION AND 

THE RETAIL INVESTOR

The SEC’s mission is to “protect investors, maintain 

fair, orderly, and efficient markets, and facilitate 

capital formation.”145 At the center of many 

complaints the Ombudsman receives is a misunderstanding about the SEC’s relationship and obligations to investors because of the “protect investors” 

language in the SEC mission statement. In these 

situations, investors frequently assume the purpose 

for SEC investigations and enforcement actions 

is to protect investors by getting their money 

back. As a result, investors often request that the 

Ombudsman take actions that the Ombudsman is 

not authorized to take, including: 

§	deciding the facts in a dispute that the investor 

has with the Commission or an SRO, or in a 

dispute before an SRO, such as an arbitration 

or mediation; 

§	intervening on behalf of, or representing the 

interest of, an investor in a formal dispute or 

investigation process; 

§	providing advice on how the federal securities 

laws may impact their particular investments or 

legal options; or 

§	changing formal outcomes, including decisions 

about whether to investigate an allegation of 

wrongdoing, settle an enforcement action, or 

create a Fair Fund.
24 | OFFICE OF THE INVESTOR ADVOCATE

At times, SEC investigations and enforcement 

actions may align with the personal interests of 

harmed investors; however, the SEC does not 

pursue investigations and enforcement actions 

solely to represent an investor’s individual legal 

interests or to recover money a particular investor 

may have lost. The Investor Advocate explained it 

this way in a recent speech:146

The SEC, itself, continually reminds investors of its constraints in advocating for 

their individual interests. Consider how 

many times every day an investor is told 

by the SEC staff that we cannot give them 

legal advice or represent their individual 

interests. For good reasons, nearly every 

SEC Investor Alert and hotline phone 

call includes a disclaimer to the effect that 

the reader or caller should consult with 

an attorney who specializes in securities 

law. In fact, I have personally communicated this to investors many times over 

the course of my career. When I was a 

state regulator, I frequently cautioned 

investors that they should retain private 

counsel, because even though the interests 

of victims were generally aligned with the 

interests of the [state], those interests could 

diverge—for example, it might be in the 

best interest of the state to take away a 

license, which may decrease the likelihood 

that a victim would be repaid.

In addition, investors have remedies that 

may not be available to regulators, the 

most important of which is the ability to 

seek full restitution of their losses instead of 

merely disgorging the bad actor’s ill-gotten 

gains. Resource constraints can also make 

regulators pick and choose among cases, 

which means that the government may 

decline to pursue many viable cases. In 

short, our regulatory framework assumes 

that investors themselves will serve an 

important role in policing the markets.

What, then, can the Ombudsman do for investors 

who have been harmed by violations of the federal 

securities laws? The Ombudsman routinely 

explains to investors that they have the ability to 

protect their interests and preserve their legal rights 

in ways that the Ombudsman cannot. For example, 

an investor can file an arbitration complaint with 

FINRA to address a broker dispute, or hire private 

legal counsel to advise the investor on the best ways 

to protects the investor’s rights or reach a particular 

outcome. Investors who do not have the means 

to hire legal counsel may want to request representation through no-cost legal clinics sponsored 

by various law schools. While the Ombudsman 

staff cannot represent the interests of investors 

in private disputes, we do serve these investors 

by providing information that will assist them in 

making choices for themselves. The Ombudsman 

is always available to answer questions, identify 

options and resources to address concerns, and to 

explore informal, objective steps to address issues 

that may fall outside of the SEC’s existing inquiry 

and complaint processes.

Monitoring Areas of Interest for 

Retail Investors 

The Office of the Investor Advocate is required 

to analyze the potential impact on investors of 

proposed regulations of the Commission and the 

rules of SROs. In addition, we are required to 

identify areas in which investors would benefit 

from changes to existing rules and regulations. The 

Ombudsman assists the Investor Advocate in this 

important mission by monitoring policy matters at 

the SEC and SROs, particularly those that involve 

rules or processes that are related to issues brought 

to our attention through the Ombudsman’s direct 

interaction with investors. The updates that follow 

include information about some of the policy topics 

of particular concern to the Ombudsman. 

FINRA Expungement of Customer 

Dispute Information 

As discussed in the Report on Activities, Fiscal 

Year 2017, the Ombudsman has a strong interest 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 25

in the information contained in the Central Registration Depository (CRD), especially because the 

information is valuable to regulators, firms, and 

investors.147 Similarly, FINRA has stated that it has 

an interest in “protecting the integrity of the CRD 

system and the information contained in it.”148

During the Reporting Period, FINRA issued a 

notice proposing amendments to several of its rules 

related to the expungement of customer complaints 

and dispute information from CRD (the Notice).149

Some of the rule changes proposed in the Notice 

include: (1) creating a limitations period for brokers 

and firms to request expungement from FINRA; 

(2) establishing an “Expanded Expungement 

Roster” of attorney arbitrators with specialized 

experience; (3) requiring arbitrator panels to unanimously agree to award expungement; (4) potentially 

increasing the fees that brokers or firms must pay 

when requesting expungement; and (5) requiring the 

arbitrator panel to unanimously find that the case 

has no investor protection or regulatory value.150

Through the Notice, FINRA seeks to address 

weaknesses in the expungement process related to 

settled cases, particularly, “the practice of brokers 

continually being granted expungement of their 

disciplinary histories from industry databases.”151

FINRA also seeks to reduce the expungement rate 

by, for example, making hearings less one-sided, 

having hearings presided over by more experienced 

arbitrators, and adding potential procedural and 

cost hurdles.

On February 15, 2018, the Investor Advocate 

and Ombudsman responded to the Notice by 

submitting a comment letter to FINRA noting 

our support for some proposals, objections to 

other proposals, and recommendations to better 

protect retail investors.152 One of the proposals 

we supported was that the three-person arbitrator 

panel must unanimously find that at least one Rule 

2080 prong is present to award expungement.153 In 

our view, this requirement will encourage brokers 

to seek expungement only when the complaint is 

meritless, and will provide greater assurance that 

only meritless complaints are expunged. We also 

supported the proposal to codify two of the five 

rights of investors contained in FINRA’s Expanded 

Expungement Guidance relating to participating 

in expungement hearings—the right of investors 

to participate in expungement hearings, and the 

right to participate via telephone if the investor 

chooses. Moreover, we recommended that all five 

rights be codified.154 Other proposals we supported 

were that, for arbitrations not decided on the 

merits, any expungement request related to the case 

would be heard by a panel of arbitrators from the 

Expungement Arbitrator Roster, and for simplified 

arbitration cases, expungement requests must be 

filed after the arbitration is concluded.155

The Investor Advocate and Ombudsman also 

noted concerns about several proposals and gaps 

in FINRA’s expungement framework. One concern 

related to the proposal that an arbitration panel 

that believes that expungement is appropriate must 

find that the customer dispute information has no 

investor protection or regulatory value. While we 

appreciated the intent, we were concerned that 

the terms “investor protection” and “regulatory 

value” were vague and could be interpreted differently and inconsistently by arbitrators. We were 

especially concerned about the term “regulatory 

value” because arbitrators are not regulators and 

are not guided by regulatory concerns. As a result, 

we recommended that FINRA define these terms, 

as well as provide a framework for how these terms 

should be interpreted and applied by arbitrators. 

FINRA stated in the Notice that its staff had been 

working with NASAA on “various expungement 

issues, including potential amendments to the 

existing regulatory review process.”156 As CRD 

is co-owned by FINRA and NASAA, both are 

stakeholders in the integrity of CRD and in the 

expungement process. In our comment letter, we 

encouraged FINRA to give further consideration 

to an issue that NASAA brought to the attention 

of the FINRA Dispute Resolution Task Force 
26 | OFFICE OF THE INVESTOR ADVOCATE

(the Task Force);157 namely, to consider establishing a procedure for providing pre-notice to 

state regulators during an ongoing arbitration or 

establish a standardized protocol for informing 

states when FINRA waives its role as a party.158 In 

closing the comment letter, we commended FINRA 

for proposing procedural changes that should 

benefit retail investors, but reiterated our concerns 

about other proposals.159 We encouraged FINRA 

to review the proposal comments and consult 

with NASAA, and once that was completed, we 

encouraged FINRA to propose the amended rules 

to the SEC for approval.

Funding for New and Existing Investor 

Advocacy Clinics

Availability of Investor Advocacy Clinics

Arbitration is the forum most used to resolve 

disputes between retail investors and brokers.160 

However, retail investors with small claim 

amounts often cannot obtain legal assistance or 

retain counsel to represent them in arbitration 

proceedings.161 In response, in 1997, then SEC 

Chairman Arthur Levitt announced the start of 

two pilot securities arbitration clinics that provided 

no cost legal services to help these retail investors.162

Over time, other securities arbitration clinics were 

established and sustained through funding from 

portions of securities fraud enforcement case 

awards163 and from state securities commissions.164

As discussed in the Report on Objectives, Fiscal 

Year 2018,

165 from 2009 through 2012, the FINRA 

Investor Education Foundation (the Foundation) 

also provided grants of $250,000 each to eight law 

schools as start-up funding to establish investor 

advocacy clinics.166

At the peak, 24 investor advocacy clinics existed 

across the country, most located in the Northeast. 

There are only 17 clinics in operation today.167

Since 2012, no Foundation funds have been 

awarded to clinics, leading to a perception that 

the Foundation has a policy not to fund new or 

ongoing clinic operations.168 While the start-up 

grants were sufficient for those clinics that were 

WA

OR

ID

MT

WY

ND

SD

NE

UT

NM

TX

OK

KS

LA

MS AL

TN

KY

AR

MO

IA

MN

WI

MI

IN

OH

WV

VA

NC

MD

DE

DE

NJ

NY

PA

DC

NV IL

CA

GA

FL

DE

MA

NH

VT ME

SC

CO

AZ

AK

HI

Investor Advocacy Clinic Locations (as of March 31, 2018)
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 27

able to secure additional sustaining funds, as 

external funding options have dwindled, some 

clinics have been forced to close, leaving a void 

for advocacy and access to justice for retail 

investors across the majority of the country.169

Investor advocacy clinics present a unique opportunity to educate and help protect retail investors 

with smaller claims. As the investors interact directly 

with clinic faculty and law students, an obvious 

advantage is that the investors—often seniors and 

persons with limited access to technology—have the 

benefit of personalized service, either in person or by 

phone, while avoiding miscommunications, the need 

for computer access, and unwanted or unsuitable 

sales tactics. The Task Force noted that while it was 

not inclined to second guess the Foundation’s policy 

of limiting funding to “new or expanded projects 

with reasonable prospects for post-grant sustainability,”170 continued funding of investor advocacy 

clinics would be an appropriate use of FINRA fines 

and penalties.171 The Ombudsman agrees with the 

Task Force that funding investor advocacy clinics 

would be an appropriate use of FINRA fines and 

penalties, as these clinics offer an invaluable service 

by providing legal advice and representation to retail 

investors who need it most.

The Important Services Provided by 

Investor Advocacy Clinics

Many retail investors lack the familiarity and 

sophistication to navigate the securities arbitration 

process without legal representation.172 As expressed 

to then SEC Chairman Levitt during town hall 

meetings more than 20 years ago, small investors 

often did not pursue their claims due to difficulties 

in obtaining legal representation, and intimidation 

and unfamiliarity with the arbitration process.173

To help small investors “who have nowhere else 

to turn,” the SEC launched a pilot securities 

arbitration clinic program in 1997.174 The clinics 

were designed to help small investors receive “high 

quality legal representation and assistance, while 

at the same time providing law students with a 

valuable learning experience.”175

Investor advocacy clinics have evolved over the 

years. Not only do clinics provide legal advice 

and representation during the arbitration process, 

they help many more retail investors by providing 

investor education, counseling, outreach services, 

and presentations—in person, online, and through 

printed resources. These efforts keep retail 

investors informed of important issues and help 

them avoid becoming victims of frauds and scams. 

Clinics also draft and submit formal comment 

letters to the SEC, FINRA, and other securities 

industry organizations to draw attention to issues 

affecting retail investors, providing a voice and 

platform for the concerns of retail investors to be 

heard and examined.

The Ombudsman, working directly with the 

Investor Advocate and staff, renewed the SEC’s 

commitment and outreach to investor advocacy 

clinics by developing and implementing the Law 

School Clinic Outreach Program (LSCOP),176

discussed in more detail below. To date, the 

Ombudsman and key Office of the Investor 

Advocate counsel have visited 16 of the 17 law 

school clinics currently in operation across the 

country.177 Through insights gained from their 

personalized, direct interactions with retail 

investors, these clinics have provided the 

Ombudsman and Investor Advocate vital information and feedback on problematic products 

and practices, as well as suggestions for enhancing 

the SEC’s outreach to retail investors.178

Recommendation of the SEC Investor 

Advisory Committee

As noted by the SEC Investor Advisory Committee 

(the IAC or the Committee) in a recent recommendation to the Commission,179 “[l]aw school and 

investor advocacy clinics fill a crucial gap for retail 

investors by providing high quality legal advice and 

representation to investors with small claims, that 

otherwise, would have no access to representation. 

The Committee is concerned that due to the lack 

of external funding available to existing investor 

advocacy clinics, clinics will be forced to further 
28 | OFFICE OF THE INVESTOR ADVOCATE

curtail services or close their doors, leaving small 

investors with nowhere to turn. Moreover, the 

Committee recognizes that law school investor 

advocacy clinics play an important role in the 

protection of retail investors through their 

education and advocacy efforts.”180 For these 

reasons, the IAC made a formal recommendation 

to the SEC to improve funding sources for 

investor advocacy clinics. In the short term, the 

IAC recommended the SEC work with FINRA 

to provide continued funding to existing clinics, 

and work with NASAA and the broader legal 

community to identify potential state and local 

funding sources. In addition, for the long term, 

the IAC encouraged the SEC to request legislation 

from Congress to consider “permanently funding 

investor advocacy clinics, possibly through a 

matching grant program through the SEC 

Investor Protection Fund.”181

The Committee believes the investor 

advocacy clinics serve an important function in providing retail investors access to 

protection, education, and advocacy, and 

therefore, clinics should have a defined 

and reliable source of funding. 

The Committee believes the SEC Investor 

Protection Fund is the appropriate source 

of funding to advance investor education initiatives to help investors protect 

themselves against securities fraud or 

other violations of securities laws. The 

SEC Investor Protection Fund as enacted 

provides funding for the SEC’s whistleblower award program and the employee 

suggestion program of the SEC’s Office of 

Inspector General. It is funded by monetary 

sanctions collected by the Commission through judicial and administrative 

actions against securities laws violators. 

Money deposited into the fund is designated after harmed retail investors receive 

payment. Since the Investor Protection 

Fund’s creation the balance has remained 

over $300,000,000 in each fiscal year 

report from 2011–2017. As such, the 

SEC Investor Protection Fund is the 

ideal funding source for investor advocacy clinics. Moreover, investor advocacy 

clinics directly align with the Congressional intent of the SEC Investor Protection 

Fund to educate and protect retail 

investors.182

Recommendation of the Clinic Directors

In response to FINRA’s request for comment on 

its investor education initiatives,183 13 investor 

advocacy clinic directors raised similar concerns 

about the establishment and support of clinics, 

and made recommendations for funding clinics 

in a June 19, 2017, letter to FINRA: 

Because FINRA’s investor protection 

mission and the live-client representation and educational functions of law 

school securities arbitration clinics align 

so closely, we respectfully request that 

FINRA’s investor education engagement 

initiatives include creating a funding 

model that sustains and grows clinics. 

This request is not without precedent. For 

example, in its 2015 report, the FINRA 

Dispute Resolution Taskforce wrote 

that it “believes that an appropriate use 

of FINRA fines and penalties would be 

funding of law school arbitration clinics 

and recommends FINRA consideration.” 

Moreover, funds may be available for 

this purpose from both FINRA and the 

FINRA Investor Education Foundation. 

The FINRA Investor Education Foundation’s 2015 Form 990 indicates net assets 

exceeding $74 million. In that year, FINRA 

awarded $50 million to the Foundation. 

FINRA’s 2015 annual report also noted 

that its “financial position remains strong 

and highly liquid with approximately 

$2.3 billion of total assets, including 

$2.0 billion of cash and investments, 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 29

and approximately $1.5 billion in 

equity.” Successful models for funding 

of law school clinics already exist. As 

one example, addressing similar needs in 

the context of unrepresented taxpayers, 

the IRS Office of the Taxpayer Advocate created a successful low income 

taxpayer clinic (LITC) grant program 

in 1999. In its first year, that program 

“awarded grants totaling less than $1.5 

million to 34 entities located in 18 states 

and the District of Columbia.” Almost 

20 years later, in 2016, the program has 

grown to fund “138 entities located in 

49 states and the District of Columbia.” 

To ensure sustainability of LITCs, the 

program requires that law schools match 

grants dollar for dollar up to a maximum 

grant of $100,000. A similar program 

for securities arbitration clinics would 

ensure the longevity of existing clinics 

and create capacity for new clinics in high 

need areas.184

Ombudsman’s Support of the IAC and 

Clinic Directors’ Recommendations

On behalf of retail investors, particularly the most 

vulnerable and those residing in the more than 

40 states and U.S. territories where no investor 

advocacy clinics are located, the Ombudsman fully 

supports the recommendations made by both the 

IAC and the clinic directors to financially support 

and expand the critical services performed by the 

existing investor advocacy clinics, and to create 

additional funding pathways for new clinics to be 

established at law schools throughout the country.

As the clinic directors noted in their letter to FINRA, 

successful models for funding clinics already exist. 

As the IAC noted in its recommendation, the SEC 

Investor Protection Fund is an appropriate source 

of funding to advance investor education initiatives to help investors protect themselves against 

securities fraud or other violations of securities laws, 

as the purpose and work of the clinics directly align 

with the congressional intent of the SEC Investor 

Protection Fund. Furthermore, the SEC Investor 

Protection Fund is not subject to fluctuations due 

to congressional budget appropriations, thereby 

ensuring that the clinics have a predictable and 

dependable source of funding.

The Ombudsman agrees that one effective solution 

would be for the SEC to request legislation from 

Congress to permanently fund investor advocacy 

clinics, and that the SEC Investor Protection Fund 

is a suitable funding source. The Ombudsman also 

agrees that funds from FINRA and its Foundation 

would be appropriate to fund investor advocacy 

clinics. The Ombudsman is confident that, should 

FINRA resume funding for investor advocacy 

clinics, and should the SEC request legislation from 

Congress to fund investor advocacy clinics through 

the SEC Investor Protection Fund, the Ombudsman 

could utilize the framework of the successful LITC 

grant program as a starting point and tailor an 

investor advocacy clinic grant program to best serve 

the needs and work of these clinics. The SEC and 

Congress can be assured that the Ombudsman, with 

dedicated staff, would develop a comprehensive 

program to monitor and audit the designation and 

effectiveness of grant awards to ensure that the work 

and services of the clinics can be tracked accordingly, and most importantly, that the needs of retail 

investors who rely upon these clinics the most are met.

LAW SCHOOL CLINIC 

OUTREACH PROGRAM

During the Reporting Period, the Office continued 

the broad rollout of the Law School Clinic 

Outreach Program (LSCOP or the Program). 

As discussed in prior reports,185 the Ombudsman, 

working directly with the Investor Advocate and 

other staff, developed LSCOP to connect with law 

schools with investor protection, securities law, 

and investor-focused clinics that align with our 

Office’s statutory mandate and core functions, 

and to benefit law student clinic participants and 

the investing public.
30 | OFFICE OF THE INVESTOR ADVOCATE

In October 2017, the Ombudsman and the Office 

hosted clinic directors and students from five law 

schools at SEC Headquarters. This visit coincided 

with the October 12, 2017, public meeting of the 

IAC. During that meeting, the IAC discussed the 

work of law school clinics and invited two clinic 

directors and a law student to submit prepared 

remarks to the Committee and provide an overview 

of clinic advocacy efforts on behalf of retail 

investors.186 In addition to attending and presenting 

at the IAC meeting, clinic directors and students had 

the opportunity to meet and engage in interactive 

discussions with Chairman Clayton, Commissioner Stein, Commissioner Piwowar, Division 

of Investment Management Director Dalia Blass, 

Division of Enforcement Associate Director Melissa 

Hodgman, and other senior staff. The law school 

clinic discussion and subsequent meetings generated 

great dialogue about the work of law school clinics 

and the challenges clinics face, including ongoing 

funding challenges. 

Shortly thereafter, the Ombudsman and Office 

staff had the opportunity to observe in-person an 

Investor Education Roadshow in Teaneck, New 

Jersey, sponsored by Seton Hall University School 

of Law’s Investor Advocacy Project. This was the 

Office’s first opportunity to observe first-hand 

clinic investor education and outreach. The Office 

appreciated the opportunity to gain a better 

understanding of direct clinic outreach efforts, 

and was impressed by the clinic-led presentation 

and information session.

The Ombudsman and Office staff also conducted 

on-site visits to the University of Miami School of 

Law Investor Rights Clinic and UNLV’s William 

S. Boyd School of Law Investor Protection Clinic 

during this Reporting Period, engaging with clinic 

faculty and students in the classroom setting. Prior 

to visiting the University of Miami School of Law 

Investor Rights Clinic, the Ombudsman and Office 

staff submitted discussion topics and questions 

to the clinic director. As in prior visits, the clinic 

students raised extremely insightful questions and 

provided feedback aimed at ameliorating common 

problems experienced by the clinic clients. 

In January 2018, UNLV William S. Boyd School 

of Law’s Investor Protection Clinic opened its 

doors, becoming the seventeenth investor advocacy 

clinic currently active in the United States.187 The 

Ombudsman and Office staff visited the new 

clinic, engaged with clinic faculty and students, 

and shared more about the work of our Office, 

the Program, and how the clinic and the Office 

may work together moving forward. Additionally, 

the Ombudsman and staff were able to solicit 

perspectives and policy feedback on retail 

investor concerns. 

In March 2018, the Ombudsman and the Office 

coordinated an in-person visit for approximately 

26 clinic faculty and students, representing 

seven different law schools, at SEC Headquarters. 

Clinic faculty and students attended the public 

IAC meeting and met with Chairman Clayton, 

Commissioner Stein, Commissioner Piwowar, 

Commissioner Peirce, and other senior staff. 

The in-person visit provided clinic faculty and 

students the opportunity to discuss the potential 

impact of SEC policy considerations on their 

clients directly with SEC Commissioners and 

senior staff. Moreover, during the March 2018 

public meeting of the IAC, the IAC voted to 

approve a recommendation, “Financial Support 

for Law School Clinics that Support Investors,”188

addressing the ongoing funding concerns clinics 

face and have highlighted to the Office throughout 

the Program’s existence. 

Additionally, throughout the Reporting Period, 

a number of law schools and faculty expressed 

interest in starting investor advocacy clinics at their 

institutions. To that end, although our Office does 

not assist law schools with establishing clinics, 

the Ombudsman has acted as a liaison, providing 

appropriate resources and connections related to 

establishing investor advocacy clinics to law school 

faculty and administrators.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 31

OBJECTIVES AND OUTLOOK 

During the Reporting Period, retail investors 

continued to raise questions and complaints that 

highlighted a fundamental lack of understanding 

about how the SEC protects investors. As noted 

in the Report on Activities, Fiscal Year 2017, the 

Ombudsman will continue to examine the various 

ways the SEC communicates with the investing 

public to identify areas for improvement. The 

Ombudsman will continue to work with SEC 

divisions and offices to identify places where our 

messaging to retail investors—particularly as that 

messaging relates to the SEC’s mission, authority, 

and efforts to protect investors—should be refined 

and improved. 

To this end, the Ombudsman worked with OPA 

during this fiscal year to improve the look and feel 

of the OMMS Form and to revamp the www.sec.

gov/ombudsman webpage to update the content, 

improve messaging, and simplify navigation. The 

updated webpage should be available to the public 

before the end of this fiscal year. 

To focus our efforts and staff resources properly, 

the Ombudsman will continue to track matter and 

contact data, identify trends, and conduct detailed 

research and analysis. With the use of OMMS for 

the entire 2018 Fiscal Year, the Ombudsman anticipates OMMS will help identify additional areas 

of concern to investors and permit more targeted 

research and analysis. 

Finally, the Ombudsman looks to Fiscal Year 2019 

as an opportunity to establish more extensive 

channels of communication with retail investors, 

including through working with law school clinics 

and other organizations focused on retail investor 

concerns. Clinic faculty and students participating 

in our Program remain eager to identify areas in 

which retail investors could potentially benefit 

from rulemaking and policy changes, and to offer 

feedback and practical solutions. The Ombudsman 

will continue to seek opportunities to solicit 

perspectives, feedback, and formal comments on 

SEC rulemakings and policy and retail investor 

concerns from the clinic faculty and students. 

Most importantly, the Ombudsman will continue 

to foster an environment for the voices of retail 

investors to be heard and considered as a vital part 

of the work of the Office. 

Tracey L. McNeil

Ombudsman

REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 33

SUMMARY OF INVESTOR ADVISORY 

COMMITTEE RECOMMENDATIONS AND 

SEC RESPONSES

Congress established the Investor Advisory 

Committee (IAC) to advise and consult 

with the Commission on regulatory 

priorities, initiatives to protect investor interests, 

initiatives to promote investor confidence and 

the integrity of the securities marketplace, and 

other issues.189 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.190

Exchange Act Section 39 authorizes the Committee 

to submit findings and recommendations for review 

and consideration by the Commission.191 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.192 While 

the Commission must respond to the IAC’s recommendations, it is under no obligation to agree with 

or act upon the recommendations.193 

In each of our reports to Congress, the Office of 

the Investor Advocate summarizes the IAC recommendations and the SEC’s responses to them.194 In 

the past, the Commission has taken action that was 

responsive to the IAC’s recommendations related 

to crowdfunding,195 a shortened trade settlement 

cycle,196 and increasing the number investment 

adviser examinations.197 This report covers all 

other recommendations the IAC has made since its 

inception. For more detailed summaries, please see 

our earlier reports to Congress.

The Commission may be pursuing initiatives that 

are responsive to IAC recommendations but have 

not yet been made public. Commission staff—

including the staff of this Office—are prohibited 

from disclosing nonpublic information.198 Therefore, 

any such initiatives are not reflected in this Report.
34 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Financial Support for 

Law School Clinics that 

Support Investors199

March 8, 

2018

Explore ways to improve external 

funding sources to the law school 

investor advocacy clinics. Work 

with FINRA, NASAA, and other 

potential partners, and request 

legislation from Congress to 

consider permanent funding.

Pending.

Dual Class and 

Other Entrenching 

Governance Structures 

in Public Companies200

March 8, 

2018

The SEC Division of Corporation 

Finance should scrutinize 

disclosure documents filed by 

companies with dual class and 

other entrenching governance 

structures and develop a 

pilot program to monitor 

shareholder disputes and to 

determine if enhanced disclosure 

requirements are necessary.

Pending.

Promotion of 

Electronic Delivery 

and Development of a 

Summary Disclosure 

Document for Delivery 

of Investment Company 

Shareholder Reports201

Dec. 7, 

2017

Explore methods to encourage 

a transition to electronic delivery 

that respect investor preferences 

and that increase the likelihood 

that investors will see and read 

important disclosure documents, 

and explore development of a 

summary disclosure document 

for annual shareholder reports 

that incorporates key information 

from the report along with 

prominent notice regarding how 

to obtain a copy of the full report.

On June 4, 2018, the SEC adopted 

new rule 30e-3 under the Investment 

Company Act, which allows registered 

investment companies to deliver 

shareholder reports by making 

such reports accessible at a website 

address specified in a written notice to 

investors,202 unless an investor expresses 

a preference for delivery of printed 

shareholder reports. Within the notice 

of availability of the shareholder report, 

an investment company is permitted to 

provide additional information, including 

content from the shareholder report that 

the fund considers helpful to investors.

203 

Enhance Information 

for Bond Market 

Investors204

June 7, 

2016

Provide post-trade price 

transparency, including markups 

or markdowns, in municipal, 

corporate and agency bonds 

and, over the longer term, 

provide pre-trade price 

transparency as well.

On November 17, 2016, the SEC 

approved new FINRA and MSRB rules 

requiring disclosure of mark-ups and 

markdowns on most municipal and 

corporate bond transactions, calculated 

from the bond’s prevailing market 

price.

205 The rules became effective on 

May 14, 2018.

206 In November 2017, the 

SEC announced the formation of its 

Fixed Income Market Structure Advisory 

Committee, which began meeting in 

January 2018.

207
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 35

Topic Date IAC Recommendation SEC Response

Mutual Fund Cost 

Disclosure208

April 14, 

2016

Enhance investors’ understanding 

of mutual fund costs and the 

impact of those costs on total 

accumulations over time. Provide 

standardized disclosure of actual 

dollar costs on customer account 

statements.

On June 4, 2018, the SEC issued a 

request for comment seeking input 

from individual investors and other 

interested parties on how to enhance 

the delivery, design, and content of 

fund disclosures, including shareholder 

reports and prospectuses.

209 The request 

for comment solicits investor feedback 

on, among other things, fund fees and 

expenses, and includes questions related 

to the IAC recommendation (e.g., dollar 

vs. percentage disclosure, disclosure 

within account statements, etc.).

210

Empowering Elders 

and Other Investors: 

Background Checks211

July 16, 

2015

Develop a disciplinary database 

to allow easy searches to 

determine whether a person 

or firm has been sanctioned 

for securities law violations.

Reduce the complexity of 

background searches.

On May 2, 2018, the SEC launched a 

new online search tool that enables 

investors to research whether the 

person trying to sell them investments 

has a judgment or order entered 

against them in an enforcement action.

The new tool is called SEC Action 

Lookup for Individuals (SALI).

212

Accredited Investor 

Definition213

Oct. 9, 

2014

Consider enabling individuals 

to qualify as accredited 

investors based on their 

financial sophistication.

On December 18, 2015, the SEC issued 

a staff report that discussed, among 

other alternatives, using sophistication 

as an element of the accredited investor 

definition.

Impartiality in 

the Disclosure of 

Preliminary Voting 

Results214

Oct. 9, 

2014

Ensure impartiality in the 

disclosure of preliminary 

voting results.

Pending.

Decimalization and 

Tick Sizes215

Jan. 31, 

2014

Oppose any test or pilot 

programs to increase the 

minimum quoting and trading 

increments (“tick sizes”) in the 

securities markets.

A 2-year pilot program began in 

October 2016 and is set to expire on 

Oct. 2, 2018. FINRA and the exchanges 

have a deadline of July 3, 2018, to 

submit a joint assessment of the impact 

of the Tick Pilot.
36 | OFFICE OF THE INVESTOR ADVOCATE

Topic Date IAC Recommendation SEC Response

Broker-Dealer 

Fiduciary Duty216

Nov. 22, 

2013

Establish a fiduciary duty for 

broker-dealers when they provide 

personalized investment advice 

to retail investors.

On April 18, 2018, the SEC voted to 

propose Regulation Best Interest, 

under which a broker-dealer would 

be required to act in the best interest 

of a retail customer when making a 

recommendation of any securities 

transaction or investment strategy 

involving securities to a retail customer.

The SEC is seeking public comments for 

90 days.

217

Universal Proxy 

Ballots218

July 25, 

2013

Allow universal ballots in 

connection with short slate 

director nominations.

On October 26, 2016, the SEC proposed 

amendments to the proxy rules to 

require parties in a contested election 

to use universal proxy cards that would 

include the names of all board of 

director nominees.

219

Data Tagging220 July 25, 

2013

Promote the use of machinereadable data tagging formats 

for data filed with the SEC.

The SEC has addressed data tagging in 

a number of final and proposed rules.

221

On April 20, 2018, the SEC Staff issued 

updated FAQs on IFRS Taxonomy.

Target Date 

Mutual Funds222

April 11, 

2013

Revise an SEC proposed rule 

on target date retirement fund 

names and marketing, and 

develop a glide path illustration 

based on a measure of fund risk.

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.

223 The comment 

period closed on June 9, 2014.

General Solicitation 

and Advertising224

Oct. 12, 

2012

Strengthen investor 

protections and enhance 

regulators’ ability to police 

the private placement market.

The SEC adopted final general 

solicitation and advertising rules on July 

10, 2013, and also proposed a related 

rule to enhance its ability to monitor the 

market following lifting of the ban. That 

proposal, which relates to most of the 

IAC recommendations, is pending.

225 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 37

End Notes

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

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

(A)(i).

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

(B)(i).

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

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

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

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

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

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

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

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

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

(1)(A).

13 See Regulatory Flexibility Agenda, Securities Act 

Release No. 10424, Exchange Act Release No. 81839, 

Investment Company Act Release No. 32857, 83 Fed. 

Reg. 2,022 (Jan. 12, 2018); SEC, “Spring 2018 Unified 

Agenda of Regulatory and Deregulatory Actions,” 

https://www.reginfo.gov/public/do/eAgendaMain. 

The Current Agenda for the Securities and Exchange 

Commission lists the rulemakings that Chairman Jay 

Clayton “actually intends and realistically expects to 

accomplish over the coming year.” See Examining 

the SEC’s Agenda, Operations and Budget: Hearing 

Before the H. Comm. on Financial Services, 115th 

Cong. (2017) (testimony of Jay Clayton, Chairman, 

SEC), https://www.sec.gov/news/testimony/testimonyexamining-secs-agenda-operation-and-budget

[hereinafter Clayton Testimony on Examining the SEC’s 

Agenda, Operation, and Budget]. The “Current Long 

Term Actions” lists rulemaking projects with a less 

certain timetable.

14 See Clayton Testimony on Examining the SEC’s 

Agenda, Operation, and Budget, supra note 13. 

15 See SEC, Office of the Investor Advocate, Report 

on Objectives, Fiscal Year 2018, at 5-7 (June 29, 

2017), https://www.sec.gov/advocate/reportspubs/

annual-reports/sec-office-investor-advocate-reporton-objectives-fy2018.pdf [hereinafter Report on 

Objectives, Fiscal Year 2018]; see also Editorial, Where 

Have All the Public Companies Gone?, Bloomberg

(Apr. 9, 2018), https://www.bloomberg.com/view/

articles/2018-04-09/where-have-all-the-u-s-publiccompanies-gone. In 2017, more capital was raised 

privately in the U.S. than was raised in the public 

markets; Jean Eaglesham & Coulter Jones, The Fuel 

Powering Corporate America, The Wall St. J. (Apr. 

3, 2018), https://www.wsj.com/articles/stock-andbond-markets-dethroned-private-fundraising-is-nowdominant-1522683249. 

16 See William Hinman, Director, Division of Corporation 

Finance, SEC, Keynote Address at the PLI’s Seventeenth 

Annual Institute on Securities Regulation in Europe 

(Feb. 1, 2018), https://www.sec.gov/news/speech/

speech-hinman-020118. 

17 See Clayton Testimony on Examining the SEC’s 

Agenda, Operation, and Budget, supra note 13. 

18 See Request for Comment on the Effectiveness of 

Financial Disclosures About Entities Other Than 

the Registrant, Securities Act Release No. 9929, 

Exchange Act Release No. 75985, 80 Fed. Reg. 

59,083 (Oct. 1, 2015).

19 See Disclosure Update and Simplification, Securities Act 

Release No. 10101, Exchange Act Release No. 78310, 

Investment Company Act Release No. 32175, 81 Fed. 

Reg. 51,607 (proposed Aug. 4, 2016).

20 See FAST Act Modernization and Simplification of 

Regulation S-K, Securities Act Release No. 10425, 

Exchange Act Release No. 81861, 82 Fed. Reg. 50,988 

(proposed Nov. 2, 2017).

21 See Inline XBRL Filing of Tagged Data, Exchange Act 

Release No. 10323, Securities Act Release No. 10323, 

82 Fed. Reg. 14,282 (proposed Mar. 17, 2017).

22 See Request for Comment on Possible Changes to 

Industry Guide 3 (Statistical Disclosure by Bank 

Holding Companies), Securities Act Release No. 

10321, Exchange Act Release No. 10321, 82 Fed. Reg. 

12,757 (Mar. 7, 2017). 

23 See Modernization of Property Disclosures for 

Mining Registrants, Securities Act Release No. 10098, 

Exchange Act Release No. 78086, 81 Fed. Reg. 41,651 

(proposed June 27, 2016).

24 See Amendments to Smaller Reporting Company 

Definition, Securities Act Release No. 10107, Exchange 

Act Release No. 78168, 81 Fed. Reg. 43,130 (proposed 

July 1, 2016).

25 See Oversight of the SEC’s Division of Corporation 

Finance: Hearing Before the Subcomm. on Capital 

Markets, Securities, and Investment of the H. Comm. 

on Fin. Servs., 115th Cong. (2018), https://www.sec.

gov/news/testimony/testimony-oversight-secs-divisioncorporation-finance (testimony of William Hinman, 

Director, Division of Corporation Finance, SEC).

26 Rick A. Fleming, Investor Advocate, SEC, Remarks 

Before the NASAA 2017 Public Policy Conference: 

Enhancing the Demands for IPOs (May 9, 2017), 

https://www.sec.gov/news/speech/fleming-enhancingdemand-ipos-050917.

27 See generally Concept Release on Equity Market 

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

Reg. 3,594 (Jan. 21, 2010).

28 See Regulation of NMS Stock Alternative Trading 

Systems, Exchange Act Release No. 76474, 80 Fed. 

Reg. 80,997 (proposed Dec. 28, 2015).
38 | OFFICE OF THE INVESTOR ADVOCATE

29 See Disclosure of Order Handling Information, 

Exchange Act Release No. 78309, 81 Fed. Reg. 49,431 

(proposed July 27, 2016). 

30 See Comment Letter, Rick A. Fleming, Investor 

Advocate, SEC, RE: File No. S7-23-15, Regulation 

of NMS Stock Alternative Trading Systems (Sept. 9, 

2016), https://www.sec.gov/about/offices/investorad/

investor-advocate-comment-letter-regulation-ats.pdf.

31 See id.

32 Jay Clayton, Chairman, SEC, Remarks at the Equity 

Market Structure Symposium Sponsored by the 

University of Chicago and the STA Foundation (Apr. 

10, 2018), https://www.sec.gov/news/speech/speechclayton-2018-04-10. 

33 See Transaction Fee Pilot for NMS Stocks, Exchange 

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

Mar. 14, 2018). 

34 See id. at 13,026.

35 Id. at 13,009.

36 Id. 

37 Id. at 13,010.

38 Id. at 13,010-11. See also Letter from Carl Levin, 

Chairman, Permanent Subcommittee on Investigations, 

U.S. Senate (July 9, 2014), https://www.hsgac.senate.

gov/download/levin-letter-to-sec-chairman-mary-jowhite-re-equity-market-structure-july-15_2014. A 

recent academic paper analyzed selected market data 

and suggests that a significant number of retail firms 

route nonmarketable orders to the venue offering the 

highest rebate, and do so in a manner that the authors 

believe might not be consistent with the brokers’ 

duty of best execution. See Robert Battalio, Shane A. 

Corwin & Robert Jennings, Can Brokers Have it All? 

On the Relation Between Make-Take Fees and Limit 

Order Execution Quality, at 5 (Mar. 31, 2015), http://

papers.ssrn.com/sol3/papers.cfm?abstract_id=2367462.

39 See SEC, EMSAC, Recommendation for an Access 

Fee Pilot (July 8, 2016), https://www.sec.gov/spotlight/

emsac/recommendation-access-fee-pilot.pdf. 

40 See SEC, Equity Market Structure Roundtables, 

Roundtable on Market Structure for Thinly-Traded 

Securities (Apr. 23, 2018), https://www.sec.gov/

spotlight/equity-market-structure-roundtables. 

41 See Webcast: Roundtable on Market Structure for 

Thinly-Traded Securities (Apr. 23, 2018) (on file with 

SEC), https://www.sec.gov/video/webcast-archiveplayer.shtml?document_id=042318-roundtable-thinlytraded-securities. 

42 See Letter from Edward S. Knight, Executive Vice 

President and General Counsel, NASDAQ, Application 

to Permit Issuer Choice to Consolidate Liquidity 

by Suspending Unlisted Trading Privileges (Apr. 25, 

2018), https://www.sec.gov/comments/265-31/26531-

3515735-162293.pdf. 

43 See id.

44 See Self-Regulatory Organizations; Investors 

Exchange LLC; Notice of Filing of Proposed Rule 

Change To Establish a New Optional Listing 

Category on the Exchange, “LTSE Listings on IEX”, 

Exchange Act Release No. 82948, 83 Fed. Reg. 

14,074 (Apr. 2, 2018).

45 See Self-Regulatory Organizations; Bats BZX 

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

1 and Order Granting Approval of a Proposed Rule 

Change, as Modified by Amendment No. 1, To 

Introduce Cboe Market Close, a Closing Match Process 

for Non-BZX Listed Securities Under New Exchange 

Rule 11.28, Exchange Act Release No. 82522, 83 Fed. 

Reg. 3,205 (Jan. 23, 2018); see also Securities Exchange 

Act of 1934; Order Granting Petitions for Review and 

Scheduling Filing of Statements, Exchange Act Release 

No. 82794, 83 Fed. Reg. 9,561 (Mar. 6, 2018). 

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

Objectives, Fiscal Year 2015 (June 30, 2014), https://

www.sec.gov/reportspbs/annual-reports/sec-officeinvestor-advocate-report-on-objectives-fy2015.

pdf [hereinafter Report on Objectives, Fiscal Year 

2015]; SEC, Office of the Investor Advocate, 

Report on Objectives, Fiscal Year 2016 (June 30, 

2015), https://www.sec.gov/advocate/reportspubs/

annual-reports/sec-office-investor-advocate-reporton-objectives-fy2016.pdf [hereinafter Report on 

Objectives, Fiscal Year 2016]; SEC, Office of the 

Investor Advocate, Report on Objectives, Fiscal Year 

2017 (June 30, 2016), https://www.sec.gov/advocate/

reportspubs/annual-reports/sec-office-investoradvocate-report-on-objectives-fy2017.pdf [hereinafter 

Report on Objectives, Fiscal Year 2017]; Report on 

Objectives, Fiscal Year 2018, supra note 15. 

47 Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change To Revise the Effective Date 

of New Rule G-18, on Best Execution of Transactions 

With Sophisticated Municipal Market Professionals, 

and Rule D-15, on the Definition of Sophisticated 

Municipal Market Professional, Exchange Act Release 

No. 75934, 80 Fed. Reg. 57,410 (Sept. 23, 2015), 

http://www.msrb.org/~/media/Files/SEC-Filings/2015/

MSRB-2015-10-Federal-Register.ashx; Notice of Filing 

of Amendment No. 1 and Order Granting Accelerated 

Approval of a Proposed Rule Change, as Modified by 

Amendment No. 1, to MSRB Rules G–15 and G–30 

To Require Disclosure of Mark-Ups and Mark-Downs 

to Retail Customers on Certain Principal Transactions 

and To Provide Guidance on Prevailing Market, 

Exchange Act Release No. 79347, 81 Fed. Reg. 84,637 

(Nov. 23, 2016), http://www.msrb.org/~/media/Files/

SEC-Filings/2016/MSRB-2016-12-Fed-Reg-Approval.

ashx; MSRB, Milestones in Municipal Market 

Transparency: The Evolution of EMMA (2018), http://

www.msrb.org/~/media/Files/Resources/MSRB-WhitePaper-Evolution-of-EMMA.ashx?la=en; see generally

MSRB, MSRB Newsletters, http://www.msrb.org/

News-and-Events/MSRB-Monthly-Update.aspx (last 

visited Mar. 28, 2018). 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 39

48 See SIFMA, Bonds Outstanding, https://www.sifma.

org/resources/research/bond-chart/ (last visited June 4, 

2018); see also Written Testimony of Randy Snook, 

Executive Vice President, Securities Industry and 

Financial Markets Association, before the U.S. House 

of Representatives, Committee on Financial Services, 

Subcommittee on Capital Markets, Securities, and 

Investment: A Review of Fixed Income Market 

Structure (July 14, 2017), https://www.sifma.org/

resources/submissions/randy-snook-on-a-review-offixed-income-market-structure/ [hereinafter Testimony 

of Randy Snook].

49 Corporate bonds include debt issued by businesses 

that in turn, use the proceeds for a variety of purposes 

including, buying equipment, investing in research 

and development, paying shareholders dividends, and 

refinancing debt. Testimony of Randy Snook, supra 

note 48; What Are Corporate Bonds, SEC Office

of Investor Education and Advocacy, https://www.

investor.gov/additional-resources/news-alerts/alertsbulletins/what-are-corporate-bonds (last visited June 5, 

2018) [hereinafter Investor.gov]. 

50 SIFMA, Bonds Outstanding, supra note 48. The 

remaining portion of the total outstanding bonds 

include mortgage related securities, asset-backed 

securities, federal agency securities, treasury securities, 

and money market securities. Investor.gov, supra

note 49.

51 Testimony of Randy Snook, supra note 48, at 5. 

52 Id.

53 Municipal securities may be held indirectly by 

individual investors through mutual funds, money 

market funds, or closed end funds and exchange-traded 

funds (ETFs) and are a valuable source of funding for 

state and local projects that affect residents’ quality of 

life. Individuals may be exposed to corporate bonds 

through mutual funds and bond ETFs. See Federal 

Reserve Board, Financial Accounts of the United 

States: Flow of Funds, Balance Sheets, and Integrated 

Macroeconomic Accounts, Fourth Quarter 2017, 121 

tbl.L.212 (Mar. 8, 2018, 12:00 PM), https://www.

federalreserve.gov/releases/z1/20180308/z1.pdf; see

Testimony of Randy Snook, supra note 48, at 4; see

Investor.gov, supra note 49.

54 Jay Clayton, Chairman, SEC, Remarks at the Third 

Annual Conference on the Evolving Structure of the 

U.S. Treasury Market (Nov. 28, 2017), https://www.

sec.gov/news/speech/clayton-2017-11-28 [hereinafter 

Chairman Jay Clayton U.S. Treasury Market Speech].

55 See id.; SEC, Press Release, SEC Announces Formation 

and First Members of Fixed Income Market Structure 

Advisory Committee (Nov. 9, 2017), https://www.sec.

gov/news/press-release/2017-209 [hereinafter FIMSAC 

Press Release]. 

56 FIMSAC Press Release, supra note 55.

57 See Chairman Jay Clayton U.S. Treasury Market 

Speech, supra note 54. 

58 SEC, Notice of Meeting, Fixed Income Market 

Structure Advisory Committee, Exchange Act Release 

No. 82338, 82 Fed. Reg. 60,639 (Dec. 21, 2017), 

https://www.sec.gov/rules/other/2017/34-82338.pdf. 

59 SEC, Press Release, SEC Issues Agenda for Inaugural 

Meeting of Fixed Income Market Structure and 

Advisory Committee (Jan. 8, 2018), https://www.sec.

gov/news/press-release/2018-1.

60 Id.; SEC, Fixed Income Market Structure Advisory 

Committee, Agenda for April 9, 2018, Meeting, 

https://www.sec.gov/spotlight/fixed-income-advisorycommittee/fimsac-agenda-040918.htm (last visited 

June 4, 2018) [hereinafter FIMSAC April Agenda]; see 

also SEC, Fixed Income Market Structure Advisory 

Committee, Webcast of April 9, 2018, Meeting, 

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

shtml?document_id=040918fimsac (last visited June 4, 

2018) [hereinafter FIMSAC April Webcast]. 

61 FIMSAC April Agenda, supra note 60; SEC, Fixed 

Income Market Structure Advisory Committee, 

Transparency Subcommittee, Consideration 

of Block Masking and Trade Dissemination in 

Municipal Bond Market (2018), https://www.sec.

gov/spotlight/fixed-income-advisory-committee/

transparency-subcommittee-consideration-of-blockmasking-fimsa-040918.pdf; SEC, Fixed Income 

Market Structure Advisory Committee, Preliminary 

Recommendation for a Pilot Program to Study the 

Market Implications of Changing the Reporting 

Regime for Block-Size Trades in Corporate Bonds 

(2018), https://www.sec.gov/spotlight/fixed-incomeadvisory-committee/transparency-subcommitteepreliminary-recommendation-fimsa-040918.pdf

[hereinafter FIMSAC Preliminary Recommendation]; 

see also FIMSAC April Webcast, supra note 60. 

62 See FIMSAC Preliminary Recommendation, supra note 

61; see also FIMSAC April Webcast, supra note 60.

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

bid-wanted out to the market and compiles the bids 

received to determine the winning bid. In “pennying” 

or as it may also be called, “last-look,” the dealer, 

rather than execute a trade with the highest bidder, 

will nominally exceed the high bid to the client and 

buy the bond for the dealer’s own trading account. The 

MSRB has expressed concern that it can be harmful to 

investors over the long-term if the practice discourages 

broad market participation in the bidding process and 

renders the market less efficient. Filtering (or screening) 

is the practice where a dealer may use automated tools 

available on an alternate trading system to screen out 

bids and offers received from certain dealers or where 

a selling dealer may direct a broker’s broker to limit the 

audience for a bid-wanted. According to the MSRB, 

policies and procedures should be in place to govern 

when and how to: reasonably use filters; periodically 

review any established filters; and consider lifting them 

upon request. See Letter from Lynnette Kelly, Exec. 

Dir., MSRB, to Rick A. Fleming, Investor Advocate, 

SEC, RE: Response to SEC Request Highlighting 
40 | OFFICE OF THE INVESTOR ADVOCATE

Municipal Market Practices (Oct. 17, 2017) (on file 

with the Office of the Investor Advocate, SEC). 

64 Press Release, Jennifer A. Galloway, MSRB Chief 

Communications Officer, MSRB Holds Quarterly 

Meeting (Apr. 30, 2018), http://www.msrb.org/

News-and-Events/Press-Releases/2018/MSRB-HoldsQuarterly-Meeting.aspx. 

65 Wesley R. Bricker, Chief Accountant, SEC, Remarks 

before the 2018 Baruch College Financial Reporting 

Conference: Working Together to Advance Financial 

Reporting (May 3, 2018), https://www.sec.gov/news/

speech/speech-bricker-040318 [hereinafter Working 

Together to Advance Financial Reporting].

66 Financial Accounting Standards Board, Measurement

of Credit Losses on Financial Instruments 249-84 

(2016), https://www.fasb.org/jsp/FASB/Document_C/

DocumentPage?cid=1176168232528&acceptedDiscla

imer=true.

67 Id. at 244-45.

68 Id. at 5. For public business entities that are SEC 

filers, the new standard will become effective for fiscal 

years beginning after December 15, 2019, including 

interim periods within those fiscal years. Thus, for a 

calendar-year company, it would be effective January 

1, 2020.

69 See Bricker, Working Together to Advance Financial 

Reporting, supra note 65.

70 PCAOB Chairman Duhnke and Board Member 

Hamm Sworn in Today, Public Company Accounting

Oversight Board (Jan. 2, 2018), https://pcaobus.org/

News/Releases/Pages/PCAOB-Duhnke-and-HammSworn-in-Today.aspx; PCAOB Board Member J. 

Robert Brown Sworn into Office Today, Public

Company Accounting Oversight Board (Feb. 1, 

2018), https://pcaobus.org/News/Releases/Pages/

PCAOB-Board-Member-J--Robert-Brown-Sworn-intoOffice-Today.aspx; James G. Kaiser Sworn in Today as 

PCAOB Board Member, Public Company Accounting

Oversight Board (Mar. 1, 2018), https://pcaobus.org/

News/Releases/Pages/James-Kaiser-Sworn-in.aspx; 

Duane M. DesParte is Sworn in as PCAOB Board 

Member, Public Company Accounting Oversight

Board (Apr. 9, 2018), https://pcaobus.org/News/

Releases/Pages/Duane-M--DesParte-is-Sworn-in.aspx.

71 Wesley R. Bricker, Remarks to the Institute of 

Chartered Accountants in England and Wales: The 

intersection of financial reporting and innovation 

(June 6, 2018), https://www.sec.gov/news/speech/

speech-bricker-060618 [hereinafter The intersection 

of financial reporting and innovation] (citing Dep’t of

the Treasury, Fed. Reserve Bank of New York, U.S. 

Portfolio Holdings of Foreign Securities (Oct. 2017), 

http://ticdata.treasury.gov/Publish/shc2016_report.pdf).

72 James Schnurr, Chief Accountant, Office of the 

Chief Accountant, Remarks before the 2014 AICPA 

National Conference on Current SEC and PCAOB 

Developments (Dec. 8, 2014), https://www.sec.gov/

news/speech/2014-spch120814js.

73 Bricker, The intersection of financial reporting and 

innovation, supra note 71.

74 6/6/18 (Part 3/3) Standing Advisory Group Meeting, 

Public Company Accounting Oversight Board (June 

6, 2018), https://pcaobus.org/News/Events/Pages/

SAG-meeting-June-2018.aspx (referring to statements 

made in video).

75 Company Audits: Great Expectations Gap, The

Economist, May 26, 2018, at 62. 

76 SEC, Press Release, SEC Proposes to Enhance 

Protections and Preserve Choice for Retail Investors 

in Their Relationships With Investment Professionals, 

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

press-release/2018-68. 

77 Id.

78 See Regulation Best Interest, Exchange Act Release No. 

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

[hereinafter Regulation Best Interest]. 

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

Enhance Protections and Preserve Choice for Retail 

Investors in Their Relationships With Investment 

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

sec.gov/news/press-release/2018-68 [hereinafter 

Proposal to Enhance Protections and Preserve Choice 

for Retail Investors Fact Sheet]. See also Regulation 

Best Interest, supra note 78. 

80 See Proposed Commission Interpretation Regarding 

Standard of Conduct for Investment Advisers, 

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

203 (proposed May 9, 2018) [hereinafter Proposed 

Commission Interpretation Regarding Standard 

of Conduct for Investment Advisers]; Request 

for Comment on Enhancing Investment Adviser 

Regulation, Investment Advisers Act Release No. 

4889, 83 Fed. Reg. 21,203 (proposed May 9, 2018) 

[hereinafter Request for Comment on Enhancing 

Investment Adviser Regulation]; Proposal to Enhance 

Protections and Preserve Choice for Retail Investors 

Fact Sheet, supra note 79. 

81 See Proposed Commission Interpretation Regarding 

Standard of Conduct for Investment Advisers, 

supra note 80; Request for Comment on Enhancing 

Investment Adviser Regulation, supra note 80; Proposal 

to Enhance Protections and Preserve Choice for Retail 

Investors Fact Sheet, supra note 79. 

82 See Form CRS Relationship Summary; Amendments 

to Form ADV; Required Disclosures in Retail 

Communications and Restrictions on the Use of 

Certain Names or Titles, Exchange Act Release No. 

83063, Investment Advisers Act Release No. 4888, 83 

Fed. Reg. 21,416 (proposed May 9, 2018) [hereinafter 

Form CRS Relationship Summary]; Proposal to 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 41

Enhance Protections and Preserve Choice for Retail 

Investors Fact Sheet, supra note 79. 

83 See Form CRS Relationship Summary, supra note 82; 

Proposal to Enhance Protections and Preserve Choice 

for Retail Investors Fact Sheet, supra note 79. 

84 See Form CRS Relationship Summary, supra note 82; 

Proposal to Enhance Protections and Preserve Choice 

for Retail Investors Fact Sheet, supra note 79. 

85 See Form CRS Relationship Summary, supra note 82; 

Proposal to Enhance Protections and Preserve Choice 

for Retail Investors Fact Sheet, supra note 79.

86 Jay Clayton, Chairman, SEC, Public Statement: 

Statement on Public Engagement Regarding Standards 

of Conduct for Investment Professional Rulemaking 

(Apr. 24, 2018), https://www.sec.gov/news/publicstatement/public-engagement-standards-conductinvestment-professionals-rulemaking. 

87 See Inv. Co. Institute, 2018 Inv. Co. Fact Book 86 (58th 

ed., 2018), https://www.ici.org/pdf/2018_factbook.pdf.

88 Regarding ETFs, Commissioner Hester Peirce has 

expressed concern about what she calls the “make-it-up 

as you go approach to regulation.” Hester M. Peirce, 

Commissioner, SEC, Remarks at the 2018 Mutual 

Funds and Investment Management Conference: 

Looking at Funds through the Right Glasses (Mar. 19, 

2018), https://www.sec.gov/news/speech/peirce-lookingfunds-through-right-glasses. 

89 See Request for Comment on Fund Retail Investor 

Experience and Disclosure, Securities Act Release No. 

10503, Exchange Act Release No. 83376, Investment 

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

https://www.sec.gov/rules/other/2018/33-10503.pdf. 

90 See id.

91 See Inv. Co. Institute, supra note 87.

92 See Report on Objectives, Fiscal Year 2015, supra note 

46, at 16.

93 Id.

94 Id.

95 Regulatory Flexibility Agenda, Securities Release No. 

10470, Exchange Act Release No. 82869, Investment 

Advisers Act Release No. 4869, Investment Company 

Act Release No. 33045, 83 Fed. Reg 27,279 (June 11, 

2018); Office of Info. and Regulatory Affairs, Office 

of Mgmt. and Budget, Agency Rule List—Spring 

2018, SEC available at https://www.reginfo.gov/public/

do/eAgendaMain?operation=OPERATION_GET_

AGENCY_RULE_LIST¤tPub=true&agencyCo

de=&showStage=active&agencyCd=3235&Image58.

x=18&Image58.y=15&Image58=Submit (last visited 

June 1, 2018). 

96 See id.

97 Peirce, supra note 88.

98 See Mary Jo White, Chair, SEC, Chairman’s Address 

at SEC Speaks 2015 (Feb. 20, 2015), https://www.

sec.gov/news/speech/2015-spch022015mjw.html; 

see, e.g., Manhattan Transfer Registrar Company, 

Exchange Act Release No. 83267, 2018 WL 2260102 

(May 17, 2018), https://www.sec.gov/litigation/

admin/2018/33-10497.pdf; Olde Monmouth Stock 

Transfer Co., Inc., Exchange Act Release No. 79985, 

2017 WL 491756 (Feb. 7, 2017), https://www.sec.

gov/litigation/admin/2017/33-10303.pdf; SEC, Press 

Release, SEC Charges Florida-Based Transfer Agent 

and Owner with Defrauding Investors, 2014-146 (July 

24, 2014), http://www.sec.gov/News/PressRelease/

Detail/PressRelease/1370542364725; SEC, Press 

Release, SEC Obtains Asset Freeze to Halt Fraud at 

Illinois-Based Transfer Agent, 2014-107 (May 28, 

2014), http://www.sec.gov/News/PressRelease/Detail/

PressRelease/1370541926263; SEC, Press Release, 

SEC Charges Las Vegas-Based Transfer Agent With 

Disclosure Failures in Registration Forms, 2014-71 

(Apr. 8, 2014), http://www.sec.gov/News/PressRelease/

Detail/PressRelease/1370541443215. See also Jay 

Clayton, Chairman, SEC, Remarks at the PLI 49th 

Annual Institute on Securities Regulation: Governance 

and Transparency at the Commission and in Our 

Markets, (Nov. 8, 2017), https://www.sec.gov/news/

speech/speech-clayton-2017-11-08#_ftnref24. 

99 SEC, Fast Answers, Transfer Agents (last modified 

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

answerstransferagenthtm.html. 

100 SEC, Division of Trading and Markets, Transfer Agents

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

divisions/marketreg/mrtransfer.shtml. 

101 Concept Release, Transfer Agent Regulations, 

Exchange Act Release No. 34-76743, 80 Fed. Reg. 

81,948, at 81,949 (Dec. 31, 2015) [hereinafter Transfer 

Agent Concept Release].

102 Restricted Securities, SEC Office of Investor

Education and Advocacy, https://www.investor.

gov/additional-resources/general-resources/glossary/

restricted-securities (last visited May 4, 2018) 

[hereinafter Restricted Securities].

103 Transfer Agent Concept Release, supra note 101, at 

81,981; Restricted Securities, supra note 102. 

104 Transfer Agent Concept Release, supra note 101, at 

81,981. 

105 Id.

106 SEC, Investor Publications, Microcap Stock: A 

Guide for Investors (Sept. 18, 2013), https://

www.sec.gov/reportspubs/investor-publications/

investorpubsmicrocapstockhtm.html. 

107 SEC, Press Release, SEC Announces Enforcement 

Initiatives to Combat Financial Reporting and 

Microcap Fraud and Enhance Risk Analysis, 2013-121 

(July 2, 2013), https://www.sec.gov/news/pressrelease/2013-2013-121htm. 
42 | OFFICE OF THE INVESTOR ADVOCATE

108 Transfer Agent Concept Release, supra note 101, at 

81,981; see also Ed Beeson, SEC Transfer Agent Rule 

Revamp Faces Uncertain Future, Law 360 (Dec. 23, 

2015), https://www.law360.com/articles/741549/

sec-transfer-agent-rule-revamp-faces-uncertain-future. 

109 Transfer Agent Concept Release, supra note 101, at 

81,981; see also Ed Beeson, SEC Transfer Agent Rule 

Revamp Faces Uncertain Future, Law 360 (Dec. 23, 

2015), https://www.law360.com/articles/741549/

sec-transfer-agent-rule-revamp-faces-uncertain-future. 

110 See generally Regulation of Transfer Agents, Exchange 

Act Release No. 34-13636, 42 Fed. Reg. 32,404 (June 

24, 1977).

111 See Transfer Agent Concept Release, supra note 101, 

at 81,987. 

112 See id.

113 SEC, Press Release, SEC Seeks Public Comment on 

Transfer Agent Rules, 2015-288 (Dec. 22, 2015) 

https://www.sec.gov/news/pressrelease/2015-288.html. 

114 Transfer Agent Concept Release, supra note 101, 

at 81,981.

115 See id. at 81,982.

116 The statute in full reads, “[e]xcept as otherwise 

provided by Act of Congress, an action, suit or 

proceeding for the enforcement of any civil fine, 

or forfeiture, pecuniary or otherwise, shall not be 

entertained unless commenced within five years from 

the date when the claim first accrued if, within the same 

period, the offender or the property is found within the 

United States in order that proper service may be made 

thereon.” 28 U.S.C. § 2462.

117 Kokesh v. SEC, 137 S. Ct. 1635, 1645 (2017). 

118 See Gabelli v. SEC, 568 U.S. 442, 454 (2013). 

119 Kokesh, 137 S. Ct. at 1641. 

120 Id. 

121 Id. 

122 Id.

123 Id.

124 Kokesh v. SEC, 834 F.3d 1158, 1164-67 (2016). 

125 In holding that disgorgement is not a penalty, the 

Tenth Circuit expressly disagreed with a June 2016 

opinion by the Eleventh Circuit in SEC v. Graham that 

declaratory relief and disgorgement are a penalty and 

forfeiture respectively under the plain meaning of 28 

U.S.C. § 2463. SEC v. Graham, 823 F.3d 1357, 1364 

(2016). See also Mary Jo White et al., What Kokesh 

V. SEC Means for Enforcement Actions, Law360

(June 8, 2017, 4:54 pm ET) https://www.law360.

com/articles/932661/what-kokesh-v-sec-means-forenforcement-actions. 

126 See Kokesh, 137 S. Ct. at 1641.

127 See id. at 1645.

128 Oversight of the U.S. Securities and Exchange 

Commission’s Division of Enforcement: Hearing Before 

the H. Comm. on Fin. Servs., Subcomm. on Capital 

Mkts., Secs., and Inv., 115th Cong., at 8 (2018), https://

financialservices.house.gov/uploadedfiles/hhrg-115-

ba00-wstate-savakianspeikin-20180516.pdf (testimony 

of Stephanie Avakian and Steven Peikin, Co-Directors, 

Division of Enforcement, SEC).

129 Id at 1. 

130 Id. at 8.

131 Id. 

132 Id.

133 Id.

134 Id.

135 See id.

136 Id.

137 Id.

138 Oversight of the U.S. Securities and Exchange 

Commission’s Division of Enforcement: Hearing 

Before the H. Comm. on Fin. Servs., Subcomm. on 

Capital Mkts., Secs., and Inv., 115th Cong. (2018), 

https://financialservices.house.gov/calendar/eventsingle.

aspx?EventID=403383 (testimony of Stephanie 

Avakian and Steven Peikin, Co-Directors, Division of 

Enforcement, SEC) (webcast of verbal testimony). 

139 White et al., supra note 125. 

140 Id.

141 Oversight of the U.S. Securities and Exchange 

Commission’s Division of Enforcement: Hearing 

Before the H. Comm. on Fin. Servs., Subcomm. on 

Capital Mkts., Secs., and Inv., 115th Cong. (2018), 

https://financialservices.house.gov/calendar/eventsingle.

aspx?EventID=403383 (testimony of Stephanie 

Avakian and Steven Peikin, Co-Directors, Division of 

Enforcement, SEC) (webcast of verbal testimony).

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

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

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

refer to the Ombudsman, or to the Ombudsman and 

Office of the Investor Advocate staff and contractors 

directly supporting the ombudsman function.

145 What We Do, SEC, https://www.sec.gov/Article/

whatwedo.html (last modified June 10, 2013).

146 Rick Fleming, Investor Advocate, SEC, PLI’s The SEC 

Speaks in 2018, Mandatory Arbitration: An Illusory 

Remedy for Public Company Shareholders (Feb. 24, 

2018), https://www.sec.gov/news/speech/fleming-secspeaks-mandatory-arbitration.

147 SEC, Office of the Investor Advocate, Report on 

Activities, Fiscal Year 2017 at 27-31 (Dec. 20, 2017), 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 43

https://www.sec.gov/advocate/reportspubs/annualreports/sec-investor-advocate-report-on-activities-2017.

pdf [hereinafter Report on Activities, Fiscal Year 2017].

148 Royal Alliance Associates v. Liebhaber, 206 Cal. Rptr. 

3d 805, 814 (Cal. Ct. App. 2016).

149 See generally FINRA, Reg. Notice 17-42, Expungement 

of Customer Disp. Info. (Dec. 2017), http://www.finra.

org/industry/notices/17-42 [hereinafter Notice 17-42]. 

Some of the data in CRD serves as the source data for 

BrokerCheck. Both systems are maintained by FINRA.

150 Id.

151 Antoinette Gartrell, FINRA to Address Expungement 

Issues, Arbitration Chief Says, Bloomberg BNA

(Mar. 21, 2016), http://www.bna.com/finra-addressexpungement-n57982068766 (quoting statements from 

Richard Berry, Executive Vice-President and Director, 

FINRA Dispute Resolution).

152 See generally Comment Letter, Rick A. Fleming, 

Investor Advocate and Tracey L. McNeil, Ombudsman, 

SEC, RE: Regulatory Notice 17-42 (Feb. 15, 2018) 

[hereinafter Comment Letter RE: Notice 17-42], http://

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

ref/17-42_SEC_comment.pdf.

153 Id. at 6. Under FINRA Rule 2080(b)(1), the arbitrator 

panel must find that: (A) the claim, allegation or 

information is factually impossible or clearly erroneous; 

(B) the registered person was not involved in the alleged 

investment-related sales practice violation, forgery, 

theft, misappropriation or conversion of funds; or 

(C) the claim, allegation or information is false.

154 See id. at 5-6. The five rights are: (1) Allow the 

customer and their counsel to appear at the 

expungement hearing; (2) Allow the customer to 

testify (telephonically, in person, or other method) at 

the expungement hearing; (3) Allow counsel for the 

customer or a pro se customer to introduce documents 

and evidence at the expungement hearing; (4) Allow 

counsel for the customer or a pro se customer to crossexamine the broker and other witnesses called by the 

party seeking expungement; and (5) Allow counsel for 

the customer or a pro se customer to present opening 

and closing arguments if the panel allows any party to 

present such arguments. Only items (1) and (2) would 

be codified under the proposal.

155 Id. at 6-7.

156 Notice 17-42, supra note 149, at 1.

157 Comment Letter, William Beatty, President, NASAA, 

RE: NASAA Comments on Expungement of Matters 

from the Central Registration Depository (CRD) at 7 

(Aug. 31, 2015), http://nasaa.cdn.s3.amazonaws.com/

wp-content/uploads/2011/07/NASAA-ExpungementLetter-enclosure.pdf.

158 Comment Letter RE: Notice 17-42, supra note 152, 

at 4-5.

159 Id. at 9.

160 Jill Gross, The Improbable Birth and Conceivable 

Death of the Securities Arbitration Clinic, 15 Cardozo 

J. Conflict Resol. 597, 598 (2014).

161 See FINRA, Final Rep. and Recommendations of the

FINRA Disp. Resol. Task Force 52 (Dec. 16, 2015), 

https://www.finra.org/ sites/default/files/Final-DR-taskforce-report.pdf [hereinafter Final Report]. 

162 SEC, Press Release, SEC Announces Pilot Securities 

Arbitration Clinic to Help Small Investors—Levitt 

Responds to Concerns Voiced at Town Meetings, 

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

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

163 Office of the New York State Attorney General,

Press Release, Former Telecom Executive Agrees to 

Turn Over IPO Profits (Dec. 4, 2003), https://ag.ny.

gov/press-release/former-telecom-executive-agrees-turnover-ipo-profits.

164 Univ. of Pittsburgh, Press Release, Pitt Law School 

to Open Securities Arbitration Clinic (May 2, 2011), 

http://www.news.pitt.edu/news/pitt-law-school-opensecurities-arbitration-clinic.

165 See Report on Objectives, Fiscal Year 2018, supra note 

15, at 23-24. 

166 See FINRA Investor Education Foundation, Press 

Release, FINRA Foundation Announces $1 Million in 

Grants to Fund Securities Advocacy Clinics (Jan. 28, 

2010), http://www.finra.org/newsroom/2010/finrafoundation-announces-1-million-grants-fund-securitiesadvocacy-clinics; see also Gross, supra note 160, at 603 

(“As a result of these [FINRA] grants, clinics opened 

at other law schools such as Florida International 

University, Howard University, Suffolk University, 

and Pepperdine in 2009; at Seton Hall University and 

University of Miami in 2010; and at Georgia State and 

Michigan State University in 2012.”). As formal clinic 

names vary, for purposes of this Report, all securities 

law, securities arbitration, and investor protectionfocused clinics referenced herein are referred to as 

investor advocacy clinics or clinics. 

167 From 1997 to 2012, clinics were established at 

the following sixteen law schools (listed in order 

of founding year): Pace University Law School, 

Fordham Law School, Brooklyn Law School, Buffalo 

Law School, Duquesne School of Law, University of 

San Francisco School of Law, Albany Law School, 

Cardozo Law School, Syracuse University College 

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

Law Center, New York Law School, Northwestern 

University School of Law, Hofstra School of Law, 

Cornell University School of Law, and University of 

Pittsburgh School of Law. From 2009 to 2012, clinics 

were opened at an additional eight law school using 

Foundation start up grants: Florida International 

University School of Law, Howard University School 

of Law, Suffolk University School of Law, Pepperdine 
44 | OFFICE OF THE INVESTOR ADVOCATE

University School of Law, Seton Hall University 

School of Law, University of Miami School of Law, 

Georgia State University School of Law, and Michigan 

State University School of Law. Gross, supra note 

160, at 602-03. UNLV William S. Boyd School of 

Law formally opened its clinic in the spring semester 

of 2018.

168 Gross, supra note 160, at 619.

169 There are currently seventeen clinics in operation: eight 

located in New York (Brooklyn, Cardozo, Cornell, 

Fordham, New York Law School, Pace, St. John’s, and 

Syracuse), two in California (Pepperdine and University 

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

Columbia (Howard), Florida (University of Miami), 

Georgia (Georgia State), Illinois (Northwestern), 

Nevada (UNLV), New Jersey (Seton Hall), and 

Pennsylvania (University of Pittsburgh). Clinic 

programs at the following law schools have closed: 

Albany Law School, Buffalo Law School, Duquesne 

School of Law, Florida International University 

College of Law, Hofstra School of Law, Michigan 

State University School of Law, and Suffolk University 

School of Law. 

170 Final Report, supra note 161, at 52.

171 Id.

172 Gross, supra note 160, at 599.

173 See id. at 601.

174 SEC, Press Release, SEC Announces Pilot Securities 

Arbitration Clinic to Help Small Investors—Levitt 

Responds to Concerns Voiced at Town Meetings, 

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

news/press/pressarchive/1997/97-101.txt (quoting 

Chairman Levitt).

175 Id.

176 The Ombudsman listed the LSCOP as part of the fiscal 

year 2017 Outreach and Engagement. See Report on 

Objectives, Fiscal Year 2017, supra note 46, at 26. 

177 As of February 2018, securities arbitration and 

investor advocacy clinics exist at the following sixteen 

law schools: Benjamin N. Cardozo School of Law, 

Cornell Law School, Fordham University School 

of Law, Georgia State University College of Law, 

Howard University School of Law, New York Law 

School, Northwestern Pritzker School of Law, Pace 

University Elisabeth Haub School of Law, Pepperdine 

University School of Law, Seton Hall University 

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

Syracuse University College of Law, University of 

Miami School of Law, University of Pittsburgh 

School of Law, University of San Francisco School 

of Law, and UNLV William S. Boyd School of Law. 

See Pace Investor Rights Clinic, Investor’s Guide to

Securities Industry Disputes, How to Prevent and

Resolve Disputes with Your Broker 10 (Jill I. Gross & 

Elissa Germaine eds., 2017). UNLV William S. Boyd 

School of Law formally opened its clinic in the spring 

semester of 2018 after the publication of the Investor’s 

Guide. Brooklyn Law School maintains an investor 

advocacy clinic with a unique structure—it is unclear 

if the clinic is currently active. 

178 See generally Meeting with Elissa Germaine, Dir., 

and Jill Gross, Dir., Pace Univ. Sch. of Law, Investor 

Rights Clinic, in White Plains, N.Y. (Oct. 19, 2016); 

Meeting with Teresa J. Verges, Dir., and Scott A. 

Eichhorn, Supervising Attorney, Univ. of Miami Sch. 

of Law, Investor Rights Clinic, in Coral Gables, Fla. 

(Oct. 20, 2016); Meeting with David White, Founding 

Dir., Seton Hall Univ. Sch. of Law, Investor Advocacy 

Project, in Washington, D.C. (Aug. 2, 2017); Meeting 

with Howard S. Meyers, Instructor, New York Law 

School, New York Law School Legal Serv.’s, Inc., Sec. 

Arbitration Clinic, in New York, N.Y. (Aug. 7, 2017); 

Meeting with Christine Lazaro, Director, Francis 

“Jay” Facciolo, Assistant Dir., Ann Goldweber, Dir. 

of Clinical Legal Education, and Michael A. Simons, 

Dean, St. John’s Univ. School of Law, St. Vincent De 

Paul Legal Program, Inc., Sec. Arbitration Clinic, in 

Queens, N.Y. (Aug. 7, 2017); Meeting with Alice 

L. Stewart, Univ. of Pittsburgh School of Law, The 

Sec. Arbitration Clinic, in Pittsburgh, Pa. (Aug. 8, 

2017); Meeting with J. Samuel Tenenbaum, Dir., and 

Colleen J. Balek, Atty., Northwestern Pritzker School 

of Law, Bluhm Legal Clinic, Investor Protection 

Clinic, in Chicago, Ill. (Aug, 9, 2017); Meeting 

with Nicole Iannarone, Dir. and Assistant Clinical 

Professor, Georgia State Univ. College of Law, Investor 

Advocacy Clinic, in Atlanta, Ga. (Aug. 10, 2017); 

Meeting with Bruce Sanders, Supervising Attorney, 

and Cheryl Nichols, Associate Professor of Law, 

Howard University School of Law, Investor Justice and 

Education Clinic, in Washington, D.C. (Aug. 24, 2017); 

Meeting with Gary Pieples, Dir., Syracuse Univ. College 

of Law, Sec. Arbitration and Consumer Law Clinic, in 

Syracuse, N.Y. (Aug. 28, 2017); Meeting with William 

A. Jacobson, Dir., Cornell Univ. School of Law, Sec. 

Law Clinic, in Ithaca, N.Y. (Aug. 29, 2017); Meeting 

with Elizabeth Goldman, Dir., Yeshiva Univ., Benjamin 

N. Cardozo School of Law, Cardozo Sec. Arbitration 

Clinic, in New York, N.Y. (Sept. 14, 2017); Report on 

Activities, Fiscal Year 2017, supra note 147, at 32-34. 

179 SEC, Recommendation of the Investor Advisory 

Committee: Financial Support for Law School Clinics 

that Support Investors (Mar. 8, 2018), https://www.

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

law-clinics-recommendation.pdf [hereinafter 

Recommendation of the Investor Advisory 

Committee: Financial Support for Law School Clinics 

that Support Investors]. 

180 Id.

181 Id.

182 Id. at 7-8. The Investor Protection Fund “shall 

be available to the Commission, without further 

appropriation or fiscal year limitation, for the following 

purposes: (A) Paying awards to whistleblowers as 
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 45

provided in subsection (a). (B) Funding investor 

education initiatives designed to help investors protect 

themselves against securities fraud or other violations 

of the securities laws, or the rules and regulations 

thereunder.” H.R. Rep. No. 111-687 (2009).

183 See FINRA, Special Notice: Engagement Initiative, 

(Mar. 21, 2017), http://www.finra.org/sites/default/files/

notice_doc_file_ref/Special-Notice-032117.pdf.

184 Comment Letter, Center for Clinical Programs, RE: 

FINRA Special Notice: Engagement Initiative Dated 

March 21, 2017 at 8 (June 19, 2017), https://www.

finra.org/sites/default/files/notice_comment_file_ref/

SN-32117_GSU_comment.pdf.

185 Report on Objectives, Fiscal Year 2018, supra note 15, 

at 24; Report on Activities, Fiscal Year 2017, supra 

note 147, at 32-34. 

186 Prepared Remarks of Nicole Iannarone, Assistant 

Clinical Professor and Director, Investor Advocacy 

Clinic, Georgia State University College of Law 

(Oct. 12, 2017) https://www.sec.gov/spotlight/

investor-advisory-committee-2012/nicole-iannaroneremarks-iac-101217.pdf; Prepared Remarks of Qudsia 

Shafiq, Student Attorney, Investor Advocacy Clinic, 

Georgia State University College of Law (Oct. 12, 

2017) https://www.sec.gov/spotlight/investor-advisorycommittee-2012/qudsia-shafiq-remarks-iac-101217.

pdf; Prepared Remarks of David M. White, Director, 

Investor Advocacy Project, Seton Hall University 

School of Law (Oct. 12, 2017) https://www.sec.gov/

spotlight/investor-advisory-committee-2012/davidwhite-remarks-iac-101217.pdf. The Investor Advocate, 

the Ombudsman, and the Office are extremely 

appreciative of the time and effort extended by the 

clinics to help us further understand and address 

important issues faced by retail investors, particularly 

those with smaller claims and lack of access to legal 

representation and resources.

187 Currently, securities arbitration and investor advocacy 

clinics exist at the following sixteen law schools: 

Benjamin N. Cardozo School of Law, Cornell Law 

School, Fordham University School of Law, Georgia 

State University College of Law, Howard University 

School of Law, New York Law School, Northwestern 

Pritzker School of Law, Pace University Elisabeth 

Haub School of Law, Pepperdine University School of 

Law, Seton Hall University School of Law, St. John’s 

University School of Law, Syracuse University College 

of Law, University of Miami School of Law, University 

of Pittsburgh School of Law, University of San 

Francisco School of Law, and UNLV William S. Boyd 

School of Law. 

188 Recommendation of the Investor Advisory Committee: 

Financial Support for Law School Clinics that Support 

Investors, supra note 179. 

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

190 Id.

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

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

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

194 According to Exchange Act § 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.” Exchange Act § 4(g)(6)(B)(ii), 15 

U.S.C. § 78d(g)(6)(B)(ii).

195 SEC, Recommendation of the Investor Advisory 

Committee: Crowdfunding Regulations (Apr. 10, 

2014), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-adviser-crowdfundingrecommendation.pdf; SEC, Final Rule, Crowdfunding, 

Securities Act Release No. 9974, 80 FR 71,387 (Nov. 

16, 2015); see Report on Objectives, Fiscal Year 2017, 

supra note 46 for an analysis of how the final rules 

correspond with the IAC recommendations.

196 SEC, Recommendation of the Investor Advisory 

Committee: Shortening the Trade Settlement Cycle in 

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

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

settlement-cycle-recommendation-final.pdf. See also

SEC, Press Release, SEC Adopts T+2 Settlement Cycle 

for Securities Transactions, 2017-68 (Mar. 22, 2017), 

https://www.sec.gov/news/press-release/2017-68-0; 

Securities Transaction Settlement Cycle, Exchange 

Act Release No. 80295, 82 Fed. Reg. 15,564 

(Mar. 29, 2017).

197 See SEC, Recommendation of the Investor Advisory 

Committee: Legislation to Fund Investment Adviser 

Examinations (Nov. 22, 2013), https://www.sec.gov/

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

198 17 C.F.R. §§ 200.735-3(b)(2)(i), 230.122 (2014); 

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

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

Information) (July 31, 2005).

199 Recommendation of the Investor Advisory Committee: 

Financial Support for Law School Clinics that Support 

Investors, supra note 179. 

200 SEC, Recommendation of the Investor Advisory 

Committee: Dual Class and Other Entrenching 

Governance Structures in Public Companies (Mar. 

8, 2018), https://www.sec.gov/spotlight/investoradvisory-committee-2012/recommendation-on-dualclass-shares.pdf. 

201 SEC, Recommendation of the Investor Advisory 

Committee: Regarding Promotion of Electronic 

Delivery and Development of a Summary Disclosure 

Document for Delivery of Investment Company 

Shareholder Reports (Dec. 7, 2017), https://www.

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

recommendation-promotion-of-electronic-delivery-anddevelopment.pdf.
46 | OFFICE OF THE INVESTOR ADVOCATE

202 Optional Internet Availability of Investment Company 

Shareholder Reports, Securities Act Release No. 

10506, Exchange Act Release No. 83380, Investment 

Company Act Release No. 33115 (June 5, 2018). 

203 Id.

204 SEC, Recommendation of the Investor Advisory 

Committee to Enhance Information for Bond Market 

Investors (June 7, 2016), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/recommendationenhance-information-bond-market-investors-060716.

pdf. See also MSRB, Regulatory Notice 2016-28, New 

Disclosure Requirements Under MSRB Rule G-15 and 

Prevailing Market Price Guidance Pursuant to Rule 

G-30 Effective May 14, 2018 (Nov. 29, 2016) http://

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

Announcements/2016-28.ashx [hereinafter MSRB 

Notice 2016-28]; FINRA, Regulatory Notice 17-08, 

Pricing Disclosure in the Fixed Income Markets (Feb. 

2017), https://www.finra.org/sites/default/files/notice_

doc_file_ref/Regulatory-Notice-17-08.pdf [hereinafter 

FINRA Notice 17-08].

205 Self-Regulatory Organizations; Financial Industry 

Regulatory Authority, Inc.; Notice of Filing of 

Amendment No. 1 and Order Granting Accelerated 

Approval of a Proposed Rule Change, as Modified 

by Amendment No. 1, Relating to FINRA Rule 2232 

(Customer Confirmations) To Require Members to 

Disclose Additional Pricing Information on Retail 

Customer Confirmations Relating to Transactions in 

Certain Fixed Income Securities, Exchange Act Release 

No. 79346, 81 Fed. Reg. 84,659 (Nov. 23, 2016); 

Self-Regulatory Organizations; Municipal Securities 

Rulemaking Board; Notice of Filing of Amendment 

No. 1 and Order Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by Amendment 

No. 1, to MSRB Rules G-15 and G-30 To Require 

Disclosure of Mark-Ups and Mark-Downs to Retail 

Customers on Certain Principal Transactions and 

To Provide Guidance on Prevailing Market Price, 

Exchange Act Release No. 79347, 81 Fed. Reg. 84,637 

(Nov. 23, 2016). 

206 FINRA Notice 17-08, supra note 204, at 1; MSRB 

Notice 2016-28, supra note 204, at 1. 

207 SEC Announces Formation and First Members of Fixed 

Income Market Structure Advisory Committee, supra

note 55. 

208 SEC, Recommendation of the Investor Advisory 

Committee Regarding Mutual Fund Cost Disclosure

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

209 Request for Comment on Fund Retail Investor 

Experience and Disclosure, Securities Act Release 

No. 10503, Exchange Act Release No. 83376, 

Investment Company Act Release No. 33113, 83 

Fed. Reg. 26,891 (June 11, 2018). 

210 Id.

211 SEC, Recommendation of the Investor Advisory 

Committee: Empowering Elders and Other Investors 

Re: Background Checks in the Financial Markets (July 

16, 2015), https://www.sec.gov/spotlight/investoradvisory-committee-2012/final_iac_backgroundcheck_

recommendation_071615.pdf. 

212 SEC, Press Release, SEC Launches Additional Investor 

Protection Search Tool, 2018-78 (May 2, 2018), https://

www.sec.gov/news/press-release/2018-78.

213 See SEC, Recommendation of the Investor Advisory 

Committee: Accredited Investor Definition (Oct. 9, 

2014), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-advisor-accrediteddefinition.pdf. 

214 See SEC, Recommendation of the Investor Advisory 

Committee: Impartiality in the Disclosure of 

Preliminary Voting Results (Oct. 9, 2014), https://www.

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

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

215 See SEC, Recommendation of the Investor Advisory 

Committee Decimalization and Tick Sizes (Jan. 31, 

2014), https://www.sec.gov/spotlight/investor-advisorycommittee-2012/investment-adviser-decimilizationrecommendation.pdf. 

216 See SEC, Recommendation of the Investor Advisory 

Committee: Broker-Dealer Fiduciary Duty 

(Nov. 22, 2013), https://www.sec.gov/spotlight/

investor-advisory-committee-2012/fiduciary-dutyrecommendation-2013.pdf. 

217 Regulation Best Interest, supra note 78, at 21,574.

218 See SEC, Recommendations of the Investor Advisory 

Committee: Regarding SEC Rulemaking to Explore 

Universal Proxy Ballots (July 25, 2013), https://www.

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

universal-proxy-recommendation-072613.pdf. 

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

Investment Company Act Release No. 32339, 81 Fed. 

Reg. 79,122 (proposed Nov. 10, 2016).

220 SEC, Recommendations of the Investor Advisory 

Committee Regarding the SEC and the Need for the 

Cost Effective Retrieval of Information by Investors

(July 25, 2013), https://www.sec.gov/spotlight/

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

221 See the Office of the Investor Advocate’s Report on 

Activities for Fiscal Year 2016 for a list of rulemakings 

that require data tagging. See SEC, Office of the 

Investor Advocate, Report on Activities, Fiscal 

Year 2016 at 53-55, https://www.sec.gov/advocate/

reportspubs/annual-reports/sec-investor-advocatereport-on-activities-2016.pdf.
REPORT ON OBJECTIVES: FISCAL YEAR 201 9 | 47

222 SEC, Recommendation of the Investor Advisory 

Committee: Target Date Mutual Funds (Apr. 11, 

2013), https://www.sec.gov/spotlight/investoradvisory-committee-2012/iac-recommendation-targetdate-fund.pdf. 

223 Investment Company Advertising: Target Date 

Retirement Fund Names and Marketing, Securities Act 

Release No. 9570, Exchange Act Release No. 71861, 

Investment Company Act Release No. 31004, 79 Fed. 

Reg. 19,564 (proposed Apr. 9, 2014).

224 SEC, Recommendations of the Investor Advisory 

Committee Regarding SEC Rulemaking to Lift the Ban 

on General Solicitation and Advertising in Rule 506 

Offerings: Efficiently Balancing Investor Protection, 

Capital Formation and Market Integrity (2012), 

https://www.sec.gov/spotlight/investor-advisorycommittee-2012/iac-general-solicitation-advertisingrecommendations.pdf. 

225 Eliminating the Prohibition Against General 

Solicitation and General Advertising in Rule 506 

and Rule 144A Offerings, Securities Act Release No. 

9415, Exchange Act Release No. 69959, Investment 

Advisers Act Release No. 3624, 78 Fed. Reg. 44,771 

(July 24, 2013). Disqualification of Felons and Other 

“Bad Actors” from Rule 506 Offerings, Securities Act 

Release No. 9414, 78 Fed. Reg. 44,729 (July 24, 2013). 

Amendments to Regulation D, Form D and Rule 156, 

Securities Act Release No. 9416, Exchange Act Release 

No. 69960, Investment Company Act Release No. 

30595, 78 Fed. Reg. 44,806 (proposed July 24, 2013).
OFFICE OF THE 

INVESTOR ADVOCATE

U.S. Securities and 

Exchange Commission

100 F Street NE

Washington, DC 20549

202.551.3302