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U.S. Securities and Exchange Commission

Speech by SEC Staff:
Remarks at the BetterInvesting National Convention


by Lori J. Schock
Director, Office of Investor Education and Advocacy

U.S. Securities and Exchange Commission

Covington, Kentucky
September 17, 2011

I. Introduction

I would like to begin by thanking BetterInvesting for inviting me to speak with you today. As I begin, I must remind you that my remarks expressed here are my own views, and not necessarily those of the Commission or its staff.1

I’d like to begin my talk today with an overview of how the Commission’s Office of Investor Education and Advocacy (OIEA) helps empower individual investors throughout the United States. I will follow that discussion with a brief summary of the financial reform bill that Congress passed last year, followed by discussion of the recent work that the Commission is doing in connection with that legislation. I’ll leave a few minutes for questions at the end, if there are any.

II. Overview of OIEA

OIEA’s mission is to provide individual investors with the information they need to make sound decisions concerning investments in the securities markets. OIEA administers three primary programs to promote this mission: conducting educational outreach to individual investors; assisting individual investors with complaints and inquiries about the securities markets; and providing the Commission and Commission staff with input from the perspective of the individual investor.

III. Investor Outreach and Education

OIEA administers the SEC’s nationwide investor education program. In addition to participation in numerous financial literacy and investor education events throughout the year, this program includes Investor.gov, print publications, Investor Alerts and Bulletins, and numerous partnerships with outside organizations.


In March 2011, the SEC re-launched Investor.gov, its first-ever Web site devoted exclusively to investor education, to make it easier for people to get objective information on investing wisely and avoiding fraud. The updated site contains a new design and additional information in an even more user-friendly format.

By visiting Investor.gov, individuals can access unbiased information on a variety of investing topics, including researching investments and investment professionals, understanding fees, and avoiding fraud. Most of the content on the site is written at an 8 th grade reading level, including the “Investing Basics” section, which explains common retail investment products in plain language.

Investor.gov also offers helpful tools and materials targeted to specific groups, such as members of the military, teachers, and retirees. The site will be further enhanced with videos, interactive quizzes, and additional investor education resources in the coming months. In addition, we are working with the Department of Treasury to ensure that key resources from Investor.gov are included in relevant sections of the Financial Literacy and Education Commission’s financial education web site, MyMoney.gov.

Print Publications

Like our online materials, our print publications are directed at helping individuals make wise investment choices and avoid fraud. We emphasize factors everyone should consider before they invest, and explain important questions to which they should get answers before investing. All of our materials are available free of charge and not copyrighted, so that the widest possible dissemination is encouraged.

We offer our most popular brochures in both English and Spanish, including publications focused on mutual funds and variable annuities. Our most recent publication is a primer to help students get started on a long-term financial goal. The SEC’s Saving and Investing for Students booklet explains different types of financial products, the realities of risk, and other key information for students.

Individuals can order free copies of Saving and Investing for Students or any SEC print publication by calling (888) 878-3256 or visiting Investor.gov. Individuals can also receive SEC brochures by ordering the Financial Literacy and Education Commission’s MyMoney toolkit. Additionally, we have developed a series of 14 information sheets including such topics as Asset Allocation, Target Date Funds, Ponzi Schemes and Affinity Fraud.

Investor Alerts and Bulletins

Another way we reach out to individual investors is through our Investor Alerts and Bulletins program. Investor Alerts and Investor Bulletins are short articles written to inform the investing public about topical issues. Investor Bulletins provide individual investors with important information regarding various investment-related topics; through our Investor Alerts, OIEA warns investors about potentially questionable activity that the Commission’s staff has been made aware of, including through investor complaints and inquiries. In the past year we have published over 25 different pieces on a variety of subjects, including Forex trading, reverse mergers, municipal securities, stock trading basics, life settlements , and a number of new SEC rules. Recent Investor Alerts have covered Cobell Indian Settlement Payout investment scams, pre-IPO investment fraud, BP payout investment scams, and fake securities-related websites. Moreover, we have issued a number of joint alerts, including on target date funds with the Department of Labor and on structured notes with principal protection with FINRA.

OIEA publishes Investor Alerts and Bulletins on the SEC’s website, SEC.gov, as well as on Investor.gov. We also disseminate them out through a variety of other channels, including a designated RSS feed, Gov.delivery, press releases, and our Twitter account, @SEC_Investor_Ed. In that light, and especially given potential constraints on resources, we plan to continue to explore the possible utilization other social media tools to reach more individual investors with limited additional cost.

IV. OIEA’s Investor Assistance Program

OIEA’s Office of Investor Assistance responds to questions, complaints, and suggestions from members of the public. The Office handles investment-related complaints and questions from tens of thousands of individual investors and others every year. Investors contact OIEA’s Investor Assistance Office seeking information about the securities markets, securities laws and regulations, investment products, and financial professionals. Investors also submit complaints involving brokers, investment advisers, transfer agents, mutual funds and other companies that issue securities.

V. Overview of Dodd-Frank

As you may know, the Dodd-frank Wall Street Reform and Consumer Protection Act, also known as the “Dodd-Frank Act,” was signed into law by President Obama in July 2010. This enormous law has 16 sections, and requires regulators to issue more than 20 studies and more than 100 rules. These requirements are split among banking regulators, the SEC and the Commodity Futures Trading Commission, with a large majority of the work falling on the SEC. Accordingly, we have and will continue to be very busy complying with the requirements of the new law.

Providing an overview of all the provisions of the new law could take us sometime. Instead, I plan to focus on some of the studies and rules that the SEC is required to complete under the law which will have a significant impact on individual investors.

VI. Dodd-Frank Studies and Rulemakings

The Dodd-Frank Act requires the SEC’s staff to complete a number of studies and rulemakings regarding issues that are important to individual investors.

Financial Literacy Study

One of the studies currently being worked on by the Commission involves an assessment of financial literacy among retail investors and subgroups of retail investors. In this study, we will examine and identify:

  • The existing level of financial literacy among retail investors;
  • Methods to improve the timing, content, and format of disclosures to investors with respect to financial intermediaries, investment products, and investment services;
  • Methods to increase the transparency of expenses and conflicts of interest in transactions involving investment services and products; and
  • The most effective existing private and public efforts to educate investors.

As part of this financial literacy study, the SEC currently is conducting investor testing to examine the effectiveness of SEC-mandated disclosure documents, specifically, the Form 10-K annual report and the mutual fund shareholder report, in communicating useful information to individual investors. This testing is designed to gather feedback from investors in order to determine how these disclosure materials could more effectively communicate information to individual investors.

We plan to deliver the results of this study in a final report to Congress by July 2012.

BD and IA Registration Information Access Study

Another Dodd-Frank Act study, which we recently completed, examines investor access to information about investment professionals. Currently, investors who want to investigate their broker or advisor online have to use two separate databases. For brokers and brokerage firms, the information is available through BrokerCheck, which is owned and operated by FINRA, the Financial Industry Regulatory Authority, the self-regulatory organization for broker-dealers. For investment advisers and advisory firms, the information is available online through the Investment Adviser Public Disclosure system, or IAPD, which FINRA operates on behalf of the Commission. Most brokers, advisers and firms are either in one system or the other, but not both. At present, there is no crossover or link between the two systems, so investors have to know where to start — with BrokerCheck for brokers and brokerage firms, or with IAPD for advisers and advisory firms.

This study analyzes the advantages and disadvantages of centralizing access to the information in these two databases. Additionally, the study also examines and identifies ways to make these databases more accessible and useful for investors. Based on our staff’s analysis of these two databases, the primary recommendations of the study include:

  • Unifying FINRA’s BrokerCheck and the SEC’s Investment Adviser Public Disclosure (“IAPD”) database search results;
  • Adding a ZIP code search function to BrokerCheck and IAPD; and
  • Adding educational content to BrokerCheck and IAPD.

In addition, the study recommends that our staff and FINRA continue to analyze the feasibility and advisability of expanding BrokerCheck to include information currently available in the Central Registration Depository (the securities industry online registration and licensing database developed by FINRA in consultation with the states), as well as the method and format of publishing that registration information.

Say-on-Pay and Golden Parachute Votes

The Dodd-Frank Act requires the SEC to establish new rules regarding shareholder approval of executive compensation and “golden parachute” compensation. On January 25, 2011, the SEC adopted new rules that require public companies subject to the Commission’s proxy rules to provide their shareholders with separate advisory votes on:

  • The compensation of the most highly compensated executives, generally known as “Say-on-Pay” votes;
  • The frequency of Say-on-Pay votes – every one, two or three years; and
  • The compensation arrangements and understandings with those executive officers in connection with an acquisition or merger, known as “golden parachute” arrangements.

In addition to the advisory vote on “golden parachute” arrangements, the new rules require companies to disclose, in narrative and tabular form, any agreements with executive officers regarding compensation related to the acquisition or merger.

All public companies subject to the proxy rules, except smaller ones, must hold Say-on-Pay and frequency votes at shareholder meetings starting on January 21, 2011. Smaller public companies – those companies with a $75 million public float or less – are not required to hold these votes until January 21, 2013. All companies subject to the proxy rules are required to comply with the “golden parachute” vote and disclosure requirements for any proxy statement submitted on or after April 25, 2011.

VII. Whistleblower Program

In addition to new rules and regulations, the Dodd-Frank Act creates a powerful new tool to assist the SEC in the investigation and prosecution of violations of the federal securities laws. The Dodd-Frank Act authorizes the SEC to establish a new whistleblower program. This whistleblower program allows the SEC to pay awards to individuals who provide the Commission with high-quality tips that lead to successful SEC enforcement actions and certain related actions. This provision of the Dodd-Frank Act substantially expands the Commission’s authority to compensate individuals who provide the SEC with information about violations of federal securities law. Prior to the Dodd-Frank Act, the Commission’s bounty program was limited to insider trading cases, and the amount of the award was capped at 10 percent of the penalties collected in the action.

Under this new whistleblower program, the SEC will pay awards to individuals who voluntarily provide the Commission with original information that leads to a successful SEC enforcement action which results in monetary sanctions exceeding $1 million. The amount the SEC may award individuals ranges from 10 to 30 percent of the total monetary sanctions collected in the Commission’s enforcement action or any related action such as in a criminal case. The SEC determines the specific amount awarded on a case-by-case basis, taking into consideration factors such as the importance of the information and the degree of assistance provided.

The Commission has adopted rules detailing the procedures potential whistleblowers would need to follow to qualify for award. In addition, the Commission has established a new Office of the Whistleblower that will work with whistleblowers, handle their tips and complaints, and help the Commission determine the awards for each eligible whistleblower. The initial staffing of this new office has been completed and the Investor Protection Fund, which will be used to pay awards to eligible whistleblower, has been fully funded.

Lastly, in order to better protect potential whistleblowers, the Dodd-Frank Act expressly prohibits retaliation by employers against whistleblowers and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers.

VIII. The Investor Advocate and Investor Advisory Committee

The Dodd-Frank Act also established an Office of the Investor Advocate within the Commission. The Investor Advocate will report directly to the SEC Chairman and be responsible for:

  • Assisting retail investors in resolving significant problems they may have with the Commission or SROs;
  • Identifying areas in which investors would benefit from changes in Commission regulations or SRO rules;
  • Analyzing the potential impact on investors of proposed Commission regulations and SRO rules; and
  • Identifying problems that investors have with financial services providers.

This office will also have an “Ombudsman” appointed by the Investor Advocate who will act as a liaison between the Commission and investors. Additionally, the Dodd-Frank Act mandates the creation of a new “Investor Advisory Committee” composed of the Investor Advocate, state regulators, and representatives of a broad cross-section of the investing public. This committee will meet at least twice a year to advise and consult with the Commission on investor protection issues and related regulatory matters. The Commission plans to establish both the Office of Investor Advocate and the Investor Advisory Committee sometime in the near future.

IX. Conclusion

I hope I’ve given you a little insight into what the SEC has been doing and will be doing in the months ahead. And now I’d be happy to take your questions.

1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees.  The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or the author’s colleagues upon the staff of the Commission.



Modified: 09/29/2011