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U.S. Securities and Exchange Commission

Securities and Exchange Commission Investor Advisory Committee
Minutes of September 28, 2012 Meeting1

The Investor Advisory Committee convened its September 28, 2012, meeting at 10:00 a.m. in the multipurpose room of the Securities and Exchange Commission’s headquarters in Washington, D.C. The meeting lasted until approximately 3:45 p.m. and was open to the public, except for non-public subcommittee sessions. Those attending were:

Commissioners of the Securities and Exchange Commission

Chairman Mary Schapiro (afternoon session only)
Commissioner Elisse Walter
Commissioner Daniel Gallagher (morning session only)

Advisory Committee Members

Darcy Bradbury
J. Robert Brown, Jr.
Joseph Dear
Eugene Duffy
Roger Ganser
Craig Goettsch
Joseph Grundfest (by telephone)
Mellody Hobson (by telephone)
Stephen Holmes
Adam Kanzer
Roy Katzovicz
Barbara Roper
Kurt Schacht
Alan Schnitzer
Jean Setzfand
Anne Sheehan
Damon Silvers
Mark Tresnowski
Steven Wallman
Ann Yerger

Staff of the Securities and Exchange Commission

Lori Schock
Mary Head
David Fredrickson
Lona Nallengara
Jonathan Ingram


Ms. Schock opened the meeting. Commissioner Walter and Commissioner Gallagher welcomed the Committee.


The Committee approved the minutes without objection.


David Fredrickson from the Office of General Counsel proposed options for the Committee’s consideration concerning the participation by a quorum of Committee members in a subcommittee meeting. Those options were: (i) limiting the participation by full Committee members in subcommittee meetings, (ii) amending the by-laws so only subcommittee members can vote at subcommittee meetings, and (iii) affirming that the subcommittees prepare items for the Committee to deliberate. The Committee voted to amend the by-laws to permit any Committee member to attend a subcommittee meeting, but to restrict voting to the members of the subcommittee.

The Committee requested that Mr. Fredrickson draft a notice provision for deliberation at next Committee meeting that addresses notice to Committee members to consider subcommittee recommendations outside of regularly scheduled Committee meetings. The provision is to include: (i) Committee action, upon recommendation of a subcommittee, subject to the notice requirements that exist in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), (ii) affording Committee members the opportunity to review the proposal and to discuss online or by phone, (iii) consideration of strenuous objection to the proposal, and (iv) requiring, to the extent possible, anticipation by the subcommittee of the issues that might require action between regularly scheduled Committee meetings and notice to the Committee.


Lona Nallengara and Jonathan Ingram of the Division of Corporation Finance discussed Titles II and III of the JOBS Act. Mr. Nallengara and Mr. Ingram answered Committee questions about the Commission’s Title II general solicitation proposal.3 Mr. Nallengara and Mr. Ingram answered Committee questions about the Title III crowdfunding provision, including enforcement of the requirements, portals, and liability.



Investor as Purchaser Subcommittee

Mr. Schacht reported on the Investor as Purchaser Subcommittee. He highlighted five priorities of the subcommittee: (i) single fiduciary duty standard in the context of providing investment advice, (ii) economic analysis in Commission rulemaking, (iii) target date funds, specifically disclosures to 401(k) investors, (iv) money market mutual funds, and (v) JOBS Act implementation issues, most importantly the general solicitation proposal.

Mr. Grundfest and Mr. Goettsch reviewed the subcommittee recommendations with the Committee. Mr. Goettsch stated that no mechanism exists for the Committee to comment by October 5, when the public comment period closes, on the Commission’s Title II proposal permitting general solicitation. He requested that Chairman Dear issue a notice of a special meeting of the Committee to be held by conference call on October 12, at which time the Committee can vote on the subcommittee’s recommendations. The Committee agreed to meet on October 12, 2012.

Investor as Owner Subcommittee

Ms. Sheehan reported on the Investor as Owner Subcommittee. The subcommittee highlighted short-term and long-term focusses. Short-term focusses are: (i) voter information forms, universal proxy cards, and online voting and (ii) a recommendation to the Committee encouraging the Commission to move as quickly as possible on the final Dodd-Frank executive compensation rulemakings. Long-term focusses are: (i) empty voting, end to end vote confirmation, client direct voting, ESG reporting, and financial reporting and (ii) interaction with the Office of Minority and Women Inclusion.

Investor Education Subcommittee

Mr. Ganser reported on the Investor Education Subcommittee. The subcommittee stated that a self-assessment program might be an appropriate tool to use with retirees facing lump-sum payout amounts. The subcommittee highlighted two actions for Commission staff to undertake prior to subcommittee action: (i) a targeted public service announcement about investor education and (ii) requiring a percentage of public pension trustees to be outside experts. Mr. Silvers noted that the Commission has never imposed substantive qualifications for public companies and mutual fund boards. The subcommittee also determined that the understanding of investment fundamentals is its responsibility, as opposed to financial literacy generally.

Market Structure Subcommittee

Mr. Wallman reported on the Market Structure Subcommittee. He highlighted four broad based categories for subcommittee consideration: (i) systemic risk to investments, (ii) fairness throughout the markets, (iii) competition among market players, and (iv) Dodd-Frank and the JOBS Act issues such as decimalization, book-entry, and good control location. The subcommittee requested a budget to consult subject matter experts in these areas. Ms. Schock said the staff would take it under consideration.

Ms. Bradbury summarized the more near-term items. They are: (i) the impact of decimalization on different kinds of investors relative to the benefits of creating greater access to smaller public companies and capital formation, (ii) the Commission’s Market Technology Roundtable dealing with market structure, (iii) the cost-benefit analysis The Depository Trust and Clearing Corporation performs in its T+1/T+3 study as it relates to the cost to investors of having credit exposure to broker-dealers during T+3, (iv) Commission margin and customer collateral protections swaps rules, and (v) the mechanism for transferring money and securities when using funding portals that are not banks or broker-dealers.

Also, the subcommittee requested that the Office of General Counsel and the Division of Corporation Finance determine whether the Commission can add investor protection prongs to the accredited investor test before 2014.


Chairman Schapiro and Commissioner Walter thanked the Committee for its work. The Committee agreed to work on a schedule for meetings to occur in 2013. Mr. Dear closed the meeting.

1 A Webcast of the meeting is available at http://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac092812.

2 For purposes of these minutes, descriptions of discussions have been grouped and listed seriatim, even though the discussions of different items overlapped on occasion.

3 Securities Act Release No. 9354, 77 FR 54464 (Aug. 29, 2012).



Modified: 01/29/2013