Subject: File No. S7-07-12
From: Keith P Bishop
Affiliation: Former California Commissioner of Corporations

November 17, 2012

The Commission should not consider the comments of the Investor Advisory Committee dated October 12, 2012 for the following reasons:

1. The Investor Advisory Committee's comments were submitted after the close of the comment period established by the Commission (October 5, 2012). Indeed, the Investor Advisory Committee did not even meet to approve its recommendations until after the close of the Commission's comment period. Neither the Commission's rules nor the notice of proposed rule changes provide for the consideration of late-filed comments.

2. The Investor Advisory Committee's procedures precluded effective public comment on the recommendations. Notice of the meeting at which the Investor Advisory Committee considered its recommendations was not timely given to the public. The notice was dated October 9, 2012. The Government in Sunshine Act provides a benchmark for determining adequate public notice. That act requires that agencies provide notice at least one week before a meeting date. 5 U.S.C. Sec. 552b(e). Even if the Committee is not subject to that requirement, it is obvious that three days notice of a meeting to discuss and vote on important rulemaking recommendations clearly does not provide the Committee with the opportunity to obtain considered public input.

3. The Investor Advisory Committee's procedures precluded effective public comment because it did not post its proposed recommendations before the meeting at which they were considered by the committee. Members of the public cannot comment on what they cannot see.

4. The Investor Advisory Committee's recommendations include significant matters not covered in the Commission's proposed rule. Thus, the public has not been provided time to provide the Commission with a response to these recommendations.

5. The Investor Advisory Committee is illegally constituted. Section 911(c)(1)(A) of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act provides that "The members of the Committee shall elect, from among the members of the Committee— (A) a chairman, who may not be employed by an issuer . . .". This same requirement is included in Section 9(1) of the Committee's Charter. Section 3(a)(8) of the Securities Exchange Act of 1934 defines "issuer", with certain exceptions not relevant here, as "any person who issues or proposes to issue any security . . .". The Chairman of the Investor Advisory Committee, Mr. Joseph Dear, is an employee of the State of California. See Cal. Govt. Code 20098. The State of California is an issuer because it offers and sells securities in the form of bonds and other evidences of indebtedness. Accordingly, Mr. Dear clearly may not serve as Chairman of the Investor Advisory Committee.

6. The Commission has failed to take any steps to ensure that the Investor Advisory Committee's recommendations are not inappropriately influenced by any special interests and are the product of the committee's independent judgment. In particular, the Commission has not required that members of the Investor Advisory Committee independent. In fact, it appears that several members of the committee may hold positions with firms that have significant financial relationships or share common directorships.