Securities and Exchange Commission Investor Advisory Committee

Minutes of the Meeting on February 12, 2015

The Investor Advisory Committee (IAC) met on February 12, 2015, in a public meeting that was transmitted live by webcast. The meeting convened at 10:00 a.m. in the multipurpose room of the Securities and Exchange Commission’s headquarters in Washington, D.C.

The following persons attended the meeting:

Commissioners of the Securities and Exchange Commission

  • Chair Mary Jo White (morning session only)
  • Commissioner Michael S. Piwowar

Advisory Committee Members[1]

  • Kurt Schacht, Chairman
  • J. Robert Brown, Jr., Secretary
  • Jean Setzfand, Assistant Secretary
  • Darcy Bradbury
  • Joseph V. Carcello
  • Rick Fleming
  • Roger Ganser (by telephone)
  • Stephen Holmes
  • Adam M. Kanzer
  • Roy Katzovicz
  • Hester Peirce
  • Barbara Roper
  • Alan Schnitzer (by telephone)
  • Anne Sheehan
  • Damon Silvers
  • Steven Wallman
  • Ann Yerger

Staff of the Securities and Exchange Commission

  • David Fredrickson, Chief Counsel, Division of Corporation Finance
  • D. Bryant Morris, Assistant General Counsel, Legal Policy Group, Office of General Counsel
  • Marc Sharma, Senior Special Counsel, Office of the Investor Advocate


Mr. Schacht opened the meeting and invited Chair White to offer opening remarks.

Chair White provided an update on the Commission’s rulemaking agenda.[2]

Commissioner Piwowar followed with his opening remarks, which included comments on FINRA’s CARDS proposal.

Rick Fleming introduced Tracey McNeil, the SEC’s first Ombudsman.

July 10, 2014, Meeting Minutes Approval

Mr. Brown asked for approval of the minutes of the Committee’s meeting on February 12, 2014. The Committee approved the minutes without objection.

Consideration of Recommendation of the Market Structure Subcommittee on Shortening the Trade Settlement Cycle in U.S. Financial Markets

Mr. Wallman and Ms. Bradbury presented the Recommendation[3]:


The Committee believes that addressing this cause of systemic risk is critical.

  • The Committee strongly endorses the direction of the recommendation by the DTCC to shorten the settlement cycle, and encourages the Commission and all market participants to move forward with the implementation of a shorter settlement period for all securities as soon as possible. Additionally, the Committee recommends that the shortened settlement period apply to any security-based swaps referencing the forgoing.
  • Furthermore, the Committee strongly recommends the implementation of a T+1 settlement period at least for U.S. equities and other US securities (corporate and municipal bonds, and UIT transactions) as soon as possible. The Committee believes that moving to a T+1 settlement period, matching the settlement period that already exists for Treasuries and many mutual funds, would greatly reduce systemic risk and benefit investors. We are concerned that an interim step to T+2 for all securities on the current, multi-year timetable involving relaxed study, consensus, planning and review with no apparent urgency or priority will delay unreasonably a move to T+1 for all securities and reduce the overall benefits to the financial system and investors.
  • The Committee also recommends that the current industry/DTCC effort be strengthened with clear timetables and near term deadlines for action. The Committee believes that one of the causes for the current tentativeness is that this issue is being driven only by certain industry participants, without forceful Commission oversight and aggressive action for industry-wide coordination. Given the important systemic risk issues that longer settlement cycles pose, the Committee recommends that the Commission take a lead role in this process and not relegate this critical systemic risk issue to market participants or to the prudential banking regulators that do not have a central role in overseeing the critical market infrastructure that this change will impact. We understand that the Commission believes that priorities should be set based on overall impact and importance to the markets and investors. We agree. With perhaps only one or two exceptions, however, we cannot think of any other higher impact measure that is within reach, that does not potentially have other adverse consequences, and that can so substantially lessen what is otherwise significant systemic risk.
  • To the extent the interim step of T+2 is nevertheless pursued, we recommend that the Commission work with industry participants to create a clear plan for moving to T+1 in an expedited fashion rather than pausing at T+2 for an indeterminate period of time.

A discussion ensued.

Ms. Peirce proposed amending the recommendation by adding one sentence in the section titled “Consistency for Derivatives” paragraph of the Background section of the Recommendation. The amended paragraph, as she proposed, would read as follows (with the amendment highlighted in bold):

Consistency for Derivatives- The shorter settlement period should also be extended, if possible and as applicable, to include security-based swaps referencing underlying U.S. securities. Having the settlement period for derivatives match the settlement period for the underlying reference asset helps ensure consistency in the marketplace and investors manage cash flows and operational issues. These changes should be made in consideration of the many other regulatory changes taking place in the swaps markets.

Upon a motion from Mr. Holmes, the Committee voted without objection to adopt the recommendation as amended.[4]

Discussion of Proxy Access

Mr. Schacht introduced the topic and a panel of three speakers:

  • David Fredrickson, Chief Counsel, SEC Division of Corporation Finance
  • Mike Garland, Assistant Controller for Environmental, Social and Governance, New York City Office of the Comptroller[5]
  • Zachary Oleksiuk, Director, Americas Head of Corporate Governance, BlackRock
  • Darla Stuckey, President and CEO, Society of Corporate Secretaries and Governance Professionals[6]

A discussion ensued regarding proxy access as well as the current SEC staff review of Exchange Act Rule 14a-8(i)(9).[7]


The Committee went into recess at approximately 12:05 p.m. for lunch and non-public subcommittee meetings.


The public meeting resumed at approximately 1:55 p.m. Mr. Schacht began the session by noting the death earlier that day of former Commissioner Harvey Goldschmidt.

Subcommittee Reports/Discussion

The heads of three of the subcommittees— Barbara Roper, chairman of the Investor as Purchaser Subcommittee; Anne Sheehan, chairman of the Investor as Owner Subcommittee; Mr. Wallman, chairman of Market Structure Subcommittee—reported on the non-public discussions each group had held immediately preceding the afternoon session.

Update on FINRA's CARDS Proposal

Ms. Roper introduced the next topic of discussion: the Comprehensive Automated Risk Data System (CARDS) proposal issued by the Financial Industry Regulatory Authority (FINRA). Ms. Roper also introduced three panelists who discussed the topic further:

  • Dan Sibears, Executive Vice President, FINRA
  • Robin Traxler, Vice President, Regulatory Affairs, Financial Services Institute (FSI)[8]
  • T. Ryan Wilson, Senior Strategic Policy Advisor, AARP

Following presentations by the panelists, Committee members discussed the issues with the outside speakers.

Update on MSRB and FINRA Proposals for Improved Disclosures for Same-Day, Retail-Size Principal Transactions in Fixed Income Securities

Mr. Fleming introduced the topic and three panelists:

  • Michael L. Post, Deputy General Counsel, MSRB
  • Stephanie Dumont, Senior Vice President, FINRA
  • Sean C. Davy, Managing Director, Capital Markets, SIFMA

Presentations and a discussion followed.


The meeting was adjourned at approximately 4:10 p.m.

[1] Eugene Duffy, James Glassman, Craig Goettsch, and Joseph Grundfest did not attend the meeting.

[5] Title at the time of the meeting. Mr. Garland’s title has since changed to Assistant Comptroller for Corporate Governance and Responsible Investment.

[6] Ms. Stuckey also submitted a comment letter to the Advisory Committee.

[7] The Commission's proxy rules enable shareholders to submit proposals for inclusion in a company's proxy materials for a vote at a shareholder meeting, subject to certain procedural and substantive exclusions. One of the exclusions, Exchange Act Rule 14a-8(i)(9), allows a company to exclude a shareholder proposal that "directly conflicts" with a management proposal. Due to questions that have arisen about the proper scope and application of Rule 14a-8(i)(9), Chair White has directed the staff to review the rule and report to the Commission on its review.

[8] Ms. Traxler also submitted a comment letter to the Advisory Committee.