Securities and Exchange Commission Investor Advisory Committee

Minutes of the Meeting on October 15, 2015

The Investor Advisory Committee (IAC) met on October 15, 2015, in a public meeting that was transmitted live by webcast. The meeting convened at 10:00 a.m. in the multipurpose room of the Securities and Exchange Commission’s headquarters in Washington, D.C.

The following persons attended the meeting:

Commissioners of the Securities and Exchange Commission

  • Chair Mary Jo White (morning session only)
  • Commissioner Kara Stein (morning session only)

Advisory Committee Members[1]

  • Kurt Schacht, Chairman
  • Anne Sheehan, Vice Chairman
  • J. Robert Brown, Jr., Secretary
  • Jean Setzfand, Assistant Secretary (morning only)
  • Darcy Bradbury
  • Joseph V. Carcello
  • Lisa M. Fairfax
  • Rick Fleming
  • Matthew Furman
  • Roger Ganser
  • James Glassman
  • Craig Goettsch
  • Stephen Holmes
  • Adam M. Kanzer
  • William D. Lee (morning only)
  • Roy Katzovicz
  • Hester Peirce
  • Barbara Roper
  • Damon Silvers
  • Steven Wallman

Staff of the Securities and Exchange Commission

  • Wesley Bricker, Deputy Chief Accountant
  • Andrew J. Ceresney, Director, Enforcement Division
  • Giles Cohen, Counsel to Commissioner Aguilar
  • Brian Croteau, Deputy Chief Accountant
  • Gary Goldsholle, Deputy Director, Division of Trading and Markets
  • Jeff Minton, Chief Counsel, Office of the Chief Accountant
  • James Schnurr, Chief Accountant

Outside Speakers

  • Samara Cohen, Managing Director in iShares, Blackrock
  • Chris Concannon, President and Chief Executive Officer, BATS Global Markets
  • Donald C. Langevoort, Thomas Aquinas Reynolds Professor of Law, Georgetown University Law Center
  • Eric Noll, President & CEO, Convergex Group
  • Brendon Weiss, Co-Head of Government Affairs, Intercontinental Exchange

MORNING SESSION

Opening Remarks

Chairman Kurt Schacht opened the meeting and invited SEC Chair White to deliver opening remarks. Chair White began by welcoming three new Committee members: William D. Lee, Lisa Fairfax, and Matthew Furman. Chair White then provided an update on the Commission’s rulemaking and other initiatives. In addition, she gave an overview of the Commission’s continuing analysis of exchange traded products, including how they operated during the market volatility on August 24, 2015. Her remarks are available here.

Commissioner Stein said that this was an excellent time to examine how the SEC was fulfilling its investor mandate. She also remarked that the events of August 24 amounted to a “mini-stress test” that offered an opportunity to make changes to benefit all market participants.

Giles Cohen, Counsel to Commissioner Aguilar, read opening remarks on behalf of the Commissioner, who was unable to attend the meeting as planned. The remarks paid tribute to Eugene Duffy, who recently stepped down as a member of the Committee, and welcomed the three incoming members.

Rick Fleming gave opening remarks, including a standard disclaimer on behalf of all SEC staff members scheduled to appear before the Committee. He also introduced Dr. Brian Scholl, an economist who recently joined the Office of the Investor Advocate to work on economic analysis of rulemaking proposals and investor testing.

April 9, 2015, Meeting Minutes Approval

Mr. Ganser moved to approve the minutes of the Committee’s previous meeting, which was held on April 9, 2015. The Committee approved the minutes as presented without objection.

Discussion of Recent Market Structure Developments

Mr. Schacht introduced two panelists:

  • Gary Goldsholle, Deputy Director, SEC Division of Trading and Markets, and
  • Eric Noll, President & CEO of Convergex Group. Mr. Noll is also a member of the SEC Equity Market Structure Advisory Committee.

Mr. Goldsholle provided the Committee with an update on Commission initiatives related to equity market structure, including the launch of the Equity Market Structure Advisory Committee and the adoption of a tick size pilot project. Following their presentations, the speakers discussed the topics raised with Committee members.

Discussion of ETF Pricing

Mr. Schacht introduced three panelists:

  • Chris Concannon, President and Chief Executive Officer, BATS Global Markets
  • Brendon Weiss, Co-Head of Government Affairs, Intercontinental Exchange
  • Samara Cohen, Managing Director in iShares, Blackrock

The panelists expressed their views concerning ETF products and the pricing difficulties that were experienced on August 24, 2015. Following their presentations, the speakers discussed the topics raised with Committee members.

RECESS

The Committee went into recess at 12:48 p.m. for lunch and non-public subcommittee meetings.

AFTERNOON SESSION

The public meeting resumed at approximately 2:40 p.m.

FASB Materiality Definition Proposal

Mr. Schacht introduced James Schnurr, the SEC’s Chief Accountant, and three members of his staff: Deputy Chief Accountants Wesley Bricker and Brian Croteau, and Jeff Minton, Chief Counsel in the Office of the Chief Accountant. Following opening remarks by Mr. Schnurr, the Committee and panelists discussed two exposure drafts issued by the Financial Accounting Standards Board (FASB) concerning the definition of materiality.

Discussion of SEC Enforcement Priorities

Mr. Schacht introduced two panelists:

  • Andrew J. Ceresney, Director of the SEC Division of Enforcement, and
  • Donald C. Langevoort, Thomas Aquinas Reynolds Professor of Law, Georgetown Law.

Mr. Ceresny gave an overview of the Enforcement Division’s efforts to protect retail investors. Professor Langevoort argued that securities laws are under-enforced, with the amount of misbehavior far exceeding the reach of regulators, but that this was because agencies such as the SEC and the Department of Justice were themselves under-resourced.

Following the opening remarks, a discussion with the Committee ensued.

CLOSING

The meeting was adjourned at 4:05 p.m.



[1] Joseph Grundfest was absent.