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From Securities Regulation Daily, March 21, 2014

White talks about SEC’s role as the investor’s advocate

By Jacquelyn Lumb

Chair Mary Jo White presented the keynote address at the Consumer Federation of America’s (CFA) 2014 consumer assembly during which she focused on the SEC’s role as the investor’s advocate. White said the SEC fulfills this role by providing investor education, bringing bad actors to justice, returning money to defrauded investors, and through new rules and regulations.

White noted that the majority of U.S. households today are directly connected to the securities markets. The retail investor population represents a broad spectrum of Americans, she said, many of whom share common investment goals. Investor education is one way the SEC protects investors and potential investors. White said the SEC’s Office of Investor Education and Advocacy has been in existence for almost 20 years. The office responds to complaints and inquiries and provides investor education programs and materials.

Enforcement. Another primary way in which the SEC protects retail investors is through its enforcement program. The SEC pursues securities law violators in every area of the market and imposes tough sanctions, including monetary penalties, disgorgement orders, industry bars, and other relief. White reported that in 2013, the Enforcement Division obtained orders to return $3.4 billion in disgorgement and penalties — the highest level in the SEC’s history.

White said the SEC always looks for ways to strengthen its enforcement message. She talked about the modification of its long-standing no admit/no deny settlement protocol, which permits defendants to settle cases by paying civil penalties and agreeing to other remedies without admitting or denying the facts that showed they broke the law. White said this protocol has served the SEC and many other civil law enforcement agencies well for many years and will continue to do so.

Under the new protocol, the SEC considers requiring admissions where a securities violation includes particularly egregious conduct, affects a large number of investors and places the markets or investors at significant risk. The SEC also considers whether an admission will send an important message to the markets. In White’s view, the change was important to achieve greater public accountability and to bolster the public’s confidence in the safety of the markets.

Rulemaking. White reviewed a number of rulemaking initiatives that are driven by investor interests, including the SEC’s consideration of whether to impose a uniform fiduciary standard for broker-dealers and investment advisers when they deal with retail customers. The decision is a priority, White said, and it is time to move forward.

The SEC is closely focused on the impact of the JOBS Act provisions on retail investors, according to White. She shares concerns that the lifting of the ban on general solicitation for certain exempt securities offerings could lead to more fraudulent activity. The SEC formed an intra-agency working group to closely monitor market developments. White said the SEC also will provide guidance, bring enforcement actions, or engage in further rulemaking to address any problems that arise. The SEC has also proposed additional rules to enhance its ability to monitor these developments. The completion of this rulemaking is a priority for White.

White reported that she has directed the staff to develop a request for additional comment on a proposal relating to target date funds to ensure that investors understand the risks. She said the SEC’s Investor Advisory Group has provided a useful set of recommendations in connection with the proposal.

Another issue awaiting the SEC’s decision is whether or how to implement Dodd-Frank Act Sec. 921 to limit or eliminate mandatory pre-dispute agreements.

White also reviewed the SEC’s project to improve the current disclosure regime. She said that making maximum and appropriate use of the Internet in providing disclosures to investors will be an important part of this initiative. She added that the CFA has published a useful discussion of these issues.

Companies: Consumer Federation of America

MainStory: TopStory SECNewsSpeeches Enforcement DoddFrankAct JOBSAct

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