Securities and Exchange Commission Investor Advisory Committee
Minutes of November 22, 2013 Meeting1
The Investor Advisory Committee convened its November 22, 2013 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 12:15 p.m. and was open to the public. Those attending were:
Commissioners of the Securities and Exchange Commission
Chair Mary Jo White (morning session only)
Advisory Committee Members
Staff of the Securities and Exchange Commission
Lori J. Schock, Office of Investor Education and Advocacy
Mr. Dear opened the meeting. Chair White welcomed the Committee and answered questions. Chair White delivered remarks summarizing the Commission’s rulemaking efforts since the Committee’s July 25, 2013 meeting and updated the Committee on Commission consideration of the Committee’s target date funds, universal proxy ballots, and data tagging recommendations.
July 25, 2013 MEETING MINUTES APPROVAL3
The Committee approved the minutes without objection.
COMMITTEE OFFICERS’ MEETING WITH CHAIR WHITE
Mr. Brown briefed the Committee on a meeting the Committee Chairman, Vice Chairman, Secretary, Assistant Secretary, and the Chairs of the Investor as Purchaser and the Investor as Owner Subcommittees had with Chair White and certain members of the Commission staff. The participants discussed the procedures for Commission responses to recommendations, such as the recommendations on target date funds, universal proxy ballots, and data tagging.
CONSIDERATION OF RECOMMENDATION OF THE INVESTOR AS PURCHASER SUBCOMMITTEE REGARDING LEGISLATION TO FUND INVESTMENT ADVISER EXAMINATIONS4
Mr. Goettsch presented the recommendation (italicized below) from the Investor as Purchaser Subcommittee on legislation to fund investment adviser examinations and invited comments and questions.
Recommendation on Legislation to Fund Investment Adviser Examinations
The SEC should request legislation from Congress that would authorize its Office of Inspection, Examination, and Enforcement (OCIE) to impose “user fees” on SEC-registered investment advisers, the revenue from which could be retained by the Commission to fund an enhanced investment adviser examination program including more frequent on-site examinations of SEC-registered advisers. As the Commission Staff Section 914 Study observes, user fees imposed upon registered investment advisers would provide scalable resources to support the Commission’s examination of registered investment advisers. The fees collected from investment advisers would be available to the Commission without further appropriation, used solely to fund the Commission’s investment adviser examination program, and set at a level designed to achieve an acceptable frequency of examinations. The IAC observes that legislation that would effectuate this policy has been introduced in the 113th Congress.5
The Committee approved the recommendation with a technical amendment to correct the name of OCIE to the “Office of Compliance, Inspections, and Examinations.”
CONSIDERATION OF RECOMMENDATIONS OF THE INVESTOR AS PURCHASER SUBCOMMITTEE REGARDING BROKER-DEALER FIDUCIARY DUTY6
Ms. Roper, Chair of the Investor as Purchaser Subcommittee, presented the recommendations (italicized below) from the Investor as Purchaser Subcommittee on broker-dealer fiduciary duty and invited comments and questions.
The Commission should conduct a rulemaking to impose a fiduciary duty on broker-dealers when they provide personalized investment advice to retail investors.
A. The Committee favors an approach that involves rulemaking under the Investment Advisers Act to narrow the broker-dealer exclusion from the Act while providing a safe harbor for brokers who do not engage in broader investment advisory services or hold themselves out as providing such services.
B. At the same time, the Committee recognizes that the Commission is considering rulemaking under Section 913(g) of the Dodd-Frank Act. Should the Commission choose to conduct rulemaking under Section 913, the Committee supports the following approach:
As part of its rulemaking, the Commission should adopt a uniform, plain English disclosure document to be provided to customers and potential customers of broker-dealers and investment advisers that covers basic information about the nature of services offered, fees and compensation, conflicts of interest, and disciplinary record.
The Committee approved the recommendations with the following amendments to Recommendation 2.
As part of its rulemaking, the Commission should adopt a uniform, plain English disclosure document to be provided to customers and potential customers of broker-dealers and investment advisers at the start of the engagement, and periodically thereafter (emphasis added), that covers basic information about the nature of services offered, fees and compensation, conflicts of interest, and disciplinary record.
FUTURE COMMITTEE MEETING DATES APPROVAL
The Committee approved future meeting dates without objection. The approved dates are: (i) January 31, 2014; (ii) April 10, 2014; (iii) July 10, 2014; and (iv) October 9, 2014.
MARKET STRUCTURE SUBCOMMITTEE REPORT REGARDING TICK SIZE
Mr. Wallman presented an update on Market Structure Subcommittee efforts to present a recommendation at the January 2014 Committee meeting regarding tick size. Ms. Bradbury and Mr. Holmes presented opposing viewpoints to the Committee regarding increasing tick size and invited comments and questions.
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=iac112213.
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 The July 25, 2013, meeting minutes are available at http://www.sec.gov/spotlight/investor-advisory-committee-2012/iac072513-minutes.htm.
5 H.R. 1627, the Investment Adviser Examination Improvement Act of 2013.