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Meeting of the Investor Advisory Committee

May 21, 2020

Thank you, Anne (Sheehan), and thank you for recognizing the importance of the Commission’s staff to all of our work. As recent events have proved, they are true professionals who have the interests of investors front of mind. I want to start by extending a warm welcome to the new members of the Committee: Cien Asoera, Ted Daniels, Elissa Germaine, Satyam Khanna, Lori Lucas and Christopher Mirabile. Satyam will be joining the Committee at the next meeting. Your diverse and impressive expertise will benefit the work of this Committee and I look forward to working with you.

For several of the current members of the Committee—Anne (Sheehan), John (Coates), Craig (Goettsch), Stephen (Holmes), Barbara (Roper), Damon (Silvers) and Elisse (Walter)—this is your last meeting. I thank each of you for your service and express my personal appreciation of the views and insights you have shared with me. I remember—and those memories are reflected in the work of the Commission—substantive discussions with each of you. As just two examples, I note Damon’s strong, transparent advocacy for workers as investors and their welfare and development as an often important consideration for investors and Elisse’s well-informed perspective on mark-ups, as well as pre- and post-trade transparency. Also, I thank Anne for her leadership and, more specifically, as many of her committee members have noted, her ability to identify and drive consensus.

Turning to today’s agenda, I am pleased that you will spend time this morning talking about index funds. I and others at the SEC have raised concerns for some time now about the risks of investing in emerging markets, including China, now the world’s second largest economy. In the past decade, exposure of U.S. retail investors to emerging markets investments has increased significantly, including through actively and passively managed mutual funds and ETFs that invest in companies based on indices. I welcome your thoughts in this space. I also want to commend the SEC staff for moving forward on a roundtable to discuss more generally issues regarding investing in emerging markets on July 9.

Additionally, I look forward to hearing about your discussion today on credit ratings. Last November, I suggested that one area of the committee’s focus should be how much retail investors rely on credit rating agencies. Another suggested area of focus was how much ratings influence today’s marketplace—one important aspect of this question includes the potential risks and downstream effects of investment strategies and mandates that reference ratings (and consequently take action based on downgrades). In this regard, I note that our COVID-19 Market Monitoring group has recently announced an initiative to examine the effect (or lack of effect) of such mechanistic provisions.[1] All of these questions are even more important in light of recent market events and market volatility.

Finally, you will be considering several recommendations on a number of topics that have been the focus of a lot of work by the staff and the Commission for some time. My views and support for effective disclosure on “decision useful” information, including the modernization of financial disclosures and my views on disclosures about “E” matters, “S” matters and “G” matters (I believe E, S and G are quite different baskets of disclosure matters and that lumping them together diminishes the usefulness, including investor understanding, of such disclosures), are not new to you.[2] I look forward to reviewing your recommendations.


[1] See Chairman Jay Clayton and S.P. Kothari, COVID-19 Market Monitoring Group—Update and Current Efforts (May 13, 2020), available at https://www.sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13.

[2] See, e.g., Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (Nov. 7, 2019), available at https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719; Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (Dec. 13, 2018), available at https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-meeting-121318.

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