Remarks at the Meeting of the SEC Investor Advisory Committee (IAC)

Good morning, and thank you to all members of the Investor Advisory Committee for your time and input today.

It is a pleasure to welcome Christina Martin Firvida as the Commission’s new Investor Advocate. We’ve had the opportunity to meet on several occasions. The unique perspective she brings to the Commission will be of enormous value to the interests of working families who invest in our capital markets.

The first panel today will examine the significant growth of private markets. The stark gap in capital raised in private versus public markets is well-known. Between July 2021 and June 2022, $4.45 trillion was raised through private offerings. By comparison, just $126 billion was raised in IPOs during the same period. With upwards of 58% of Americans reporting having invested in our public markets, this disparity raises several questions that I hope the IAC will explore during today’s session and in the course of its ongoing work:

• Are retail investors, working families in particular, relegated to the end of the line when it comes to the private markets – in terms of disclosures, reliable financial information, and liquidity?
• How can retail investors who happen to make it over the accredited investor threshold compete with much larger institutional investors when they have no leverage? Is this an insiders’ game that favors large players?
• Does the vast influx of capital into private markets cause disparities in terms of access to funding for smaller businesses, because they need funding in amounts that are too small for most public institutional investors today?
• What innovative steps can the Commission take that will provide retail investors with greater access to public companies, while retaining all of the hallmarks of investor protection that exist today?

On the second panel regarding the oversight of investment advisers, it is important to note that investment advisers provided asset management services to 47.3 million individual investors in 2020, almost all of whom were non-high net worth individuals. Just one year later, that number grew to 50.6 million clients. In light of this rapid growth, I look forward to your insights on how the Commission, with its limited resources, can preserve and strengthen investor protections through a robust and comprehensive exams program.

The make-up of the third panel on the Commission’s open-end fund liquidity proposal raises significant concerns about balance. Three out of the four panelists represent the interests of institutional investors and will likely express strong reservations about certain aspects of the open-end fund liquidity proposal. For the sake of fairness and in the interest of representing a diverse range of viewpoints, I hope to see future panels of this nature include more representation of the interests of retail investors. Retail investors hold 89% of the nearly $24 trillion in US mutual fund net assets. The panel as constituted will no doubt represent the views of institutional investors and asset managers well, and they are important market participants. However, the interests of institutional investors and of individual retail investors are not always the same and should not be treated as such.

And while individual retail investors may be a more diffuse group than other stakeholders, their importance, as evidenced by the numbers, cannot be minimized and relegated to an after-thought. In light of this, it is my hope that the Committee will bear in mind the significant and potential benefits of the rule for these investors.

Finally, in meeting with the Committee ahead of today’s sessions, it was heartening to learn about its plans for an Access and Inclusion Working Group. I encourage the Committee to explore these issues in depth and with less of a focus on the needs of those that are already currently well-served by the system. I look forward to hearing progress updates about the efforts of this working group in the very near future.