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Statement of Investor Advocate Rick A. Fleming Regarding His First Official Recommendation to the Securities and Exchange Commission

Rick A. Fleming, Investor Advocate

Oct. 16, 2015

Today, I informed the Commission that I recommend disapproval of a proposed rule change of the New York Stock Exchange. In its proposed rulemaking, NYSE would exempt certain early stage companies from having to obtain shareholder approval before selling additional shares to insiders and other related parties.

The Office of the Investor Advocate was created with a statutory mandate to examine the impacts on investors of proposed rule changes by self-regulatory organizations, including the national securities exchanges, and to make recommendations to the Commission regarding those proposals. This is a challenging task because the exchanges file hundreds of proposed rule changes with the Commission each year.

In considering a proposed change to an exchange rule, the Commission publishes the proposed amendment for public comment. However, given the volume of rule filings, it is difficult for the public to keep track of them all, and few individual investors, if any, typically submit comments for Commission consideration.

The Commission maintains a thorough review process for exchange filings, and the Commission staff carefully scrutinizes each filing under the federal securities laws. However, given the general lack of awareness of such filings among investors, the exchanges may have come to expect little scrutiny from investors of their routine proposals. Those days are now over. Today I make my first formal recommendation to the Commission, and it marks the beginning of my Office’s efforts to shine a brighter light on rule changes by the exchanges, either to oppose proposals that may be detrimental to investors or, conversely, to support the efforts of exchanges to amend their rules in ways that benefit investors.

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