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Change: Remarks at Meeting of the SEC Investor Advisory Committee

Washington D.C.

March 7, 2024

Thank you, Christopher [Mirabile]. Good morning and thank you to our assembled Committee members and panelists for your participation in this first gathering of the Investor Advisory Committee for 2024. It is wonderful to see you all here in person. As you know, this is also, sadly, the last meeting of the IAC for Christopher Mirabile, Cien Asoera, Ted Daniels, Elissa Germaine, and Lori Lucas. Being selected as a member of the Investor Advisory Committee is an honor, but it comes at a cost. I appreciate each of you for the time and energy that you have dedicated to the IAC during your terms.

I look forward to the panel discussion on the Commission’s 2022 equity market structure reform proposals. We adopted the first—and least controversial—of these rules yesterday, and now the question is whether and, if so, when and in what form the Commission will move forward on the remaining proposals to change equity market structure. Each of the remaining rules raises significant questions, including, in connection with at least a couple of them, what problem are we trying to solve? Assessing the improved execution quality information that will come from yesterday’s Rule 605 amendments once they are implemented should help us answer those questions. Today’s discussion also will be helpful as we think through those questions.

The second panel on materiality coincidentally relates to the other rule the Commission adopted yesterday—the long-awaited climate disclosure rule for public companies. I did not support the climate rule, in part because—despite protestations to the contrary—it is not based in materiality. Climate-related information may be material, but our rule presumes that a highly detailed set of climate disclosures is material across all companies. Information is material if there is a substantial likelihood that an objectively reasonable investor would consider the information important to an investment or voting decision. All reasonable investors value financial returns, but they may diverge on which non-economic considerations are important. A regime rooted in materiality helps companies inform investors without serving up a blizzard of immaterial information. Moving away from materiality, or changing it to allow for the consideration of non-economic interests, as I said yesterday, “could trigger a hodgepodge of requirements tailored to meet the demands of a vast and ever-expanding panoply of special interests.” What is the limiting principle? Specific to the climate rule, but illustrative of the danger of redefining materiality, I would be curious to hear what the Panelists and Committee members think a materiality determination would look like with respect to greenhouse gas emissions. (Yesterday’s rule requires disclosure of Scopes 1 and 2 greenhouse gas emissions only when they are material.)

The Committee also will consider a draft recommendation concerning the Commission’s recent Predictive Data Analytics proposal.[1] Today’s draft recommendation supersedes the draft recommendation introduced—but not voted on—at the Committee’s December 7 meeting.[2] While I am interested in hearing today’s discussion on the recommendation, I would have liked to see more time allotted to it. The discussion of the draft recommendation at the last meeting seemed rushed. Other conversations about the draft recommendation apparently had taken place before the meeting, including with non-Committee members. Based on those conversations, it seems that a decision was made to rewrite the recommendation before putting it up for a vote. I would have liked to hear more about why this decision was made, particularly because the draft before the Committee today is quite different from the last draft. I would like to understand the rationale for the specific changes and to hear from all Committee members their thoughts on the draft recommendation. What, for instance, explains the notable departure from the December 7 draft’s emphasis on the often-curative role disclosure plays when a conflict is present and the concerns that the proposed rule could upend that?[3] And why is today’s draft toned down so considerably?[4] The half hour allotted to discussion makes it impossible to get a full view into why the draft changed and what Committee members think of the controversial predictive data analytics rulemaking to which the recommendation pertains. I do not want to cut the other interesting discussions on today’s agenda short, but the Committee should set its schedule to allow robust public deliberation on recommendations.

Thank you all once more for your willingness to dedicate so much of your time and passion to the Investor Advisory Committee, and farewell, to our departing members. I also wish to thank Cristina Martin-Firvida, Marc Sharma, and Toni Tornatore for their work. I very much look forward to the discussions to come.

[1]See Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers, 88 Fed. Reg. 53960 (Aug. 9, 2023),

[2] (Draft) Recommendation of the SEC Investor Advisory Committee’s Disclosure Subcommittee Regarding Digital Engagement Practices,

[3] Among other changes, the following language has been struck from the draft recommendation. (“For example, Regulation Best Interest allows a broker-dealer to have a limited product set such as distributing only mutual funds advised by an affiliate. Additionally, some investment advisers only offer investments in the funds they manage. These practices are permissible under Regulation Best Interest and the Adviser Fiduciary Duty Interpretation with full and fair disclosure. However, under the PDA Rule Proposal, a broker-dealer or investment adviser cannot simply disclose the conflict of interest related to covered technologies, they must ‘eliminate or neutralize’ that conflict. The obligation to eliminate or neutralize the conflict is without regard to whether it can be fully and fairly disclosed. Clearly, deeply complex and opaque artificial intelligence algorithms cannot be fully and fairly disclosed, and the IAC is not proposing that they be handled with disclosure. But some adjacent and more benign and understandable technologies might be adequately handled by a disclosure-based approach. The PDA Rule Proposal appears to assume that any interests or conflicts related to covered technologies may never be adequately disclosed.”). Id. at 7-8.

[4] See, e.g., (Voting Draft) Recommendation of the SEC Investor Advisory Committee’s Disclosure Subcommittee Regarding Digital Engagement Practices at 7 (“The PDA rule proposal provides that if a firm uses or foresees the use of a covered technology that places or results in placing the interest of the firm ahead of investors, the firm must promptly eliminate or neutralize the effects of such conflict of interest. This formulation incorporates the standard utilized under existing requirements not to place a firm’s interest ahead of the retail customers or clients interest.”),

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