Corporate & Securities Law

By Jim Hamilton

Senator Akaka Envisions SEC Investor Advocate Office as Ombudsman for Retail Investors

Authored by Senator Daniel Akaka, Section 914 of the Senate-passed financial reform legislation enhances the ability of the SEC to better represent the interests of retail investors by creating an Investor Advocate within the SEC. The Investor Advocate is tasked with assisting retail investors to resolve significant problems with the SEC or the self-regulatory organizations. The Investor Advocate?s mission includes identifying areas where investors would benefit from changes in Commission or SRO policies, noted Senator Akaka, and problems that investors have with financial service providers and investment products. The Investor Advocate will recommend policy changes to the Commission and Congress on behalf of investors. Cong. Record, May 20, 2010, S4068.

Senator Akaka envisions the Office of Investor Advocate as being very different from the SEC?s existing Office of Investor Education and Advocacy, which provides a variety of services and tools to address the problems and questions that confront investors. Senator Akaka wants the Investor Advocate to act as the chief ombudsman for retail investors and increase transparency and accountability at the SEC. The Investor Advocate will be best equipped to act in response to feedback from investors and potentially avoid situations such as the mishandling of information that could have exposed Ponzi schemes much earlier. Cong. Record, May 20, S4069.

The Office of Investor Education and Advocacy posts information to warn people about scams, compiles complaints, and provides help for people seeking to recover funds. The Office of the Investor Advocate will be a very different office, said Senator Akaka. The Investor Advocate is precisely the kind of external check, with independent reporting lines and independently determined compensation, that cannot be provided within the current structure of the SEC. It is not that the SEC does not advocate on behalf of investors, noted Senator Akaka, it is that it does not have a structure by which any meaningful self-evaluation can be conducted. This would be an entirely new function, he added, and the Investor Advocate would help to ensure that the interests of retail investors are built into rulemaking proposals from the outset and that agency priorities reflect the issues confronting investors. Cong. Record, May 20, S4069.

Full post as published by Jim Hamilton's World of Securities Regulation on May 27, 2010 (boomark / email).