10TH ANNIVERSARY EDITION

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FISCAL YEAR 2025

Report on

Objectives

10TH ANNIVERSARY EDITION

ABOUT THIS REPORT AND DISCLAIMER

Section 4(g)(6) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78d(g)(6), requires the

Investor Advocate to file two reports per year with the Committee on Banking, Housing, and Urban Affairs

of the Senate and the Committee on Financial Services of the House of Representatives.1 The two reports

are the mid-year Report on Objectives covering the forthcoming Fiscal Year and the end-of-year Report on

Activities covering the preceding Fiscal Year.

A Report on Objectives is due no later than June 30 of each year, and its purpose is to set forth the objectives

of the Investor Advocate for the following Fiscal Year.2 A Report on Activities is due no later than December

31 of each year.3 The Report on Activities describes the activities of the Investor Advocate during the

immediately preceding Fiscal Year.

Disclaimer: Pursuant to Exchange Act Section 4(g)(6)(B)(iii), 15 U.S.C. § 78d(g)(6)(B)(iii), this Report on

Objectives is provided directly to Congress without any prior review or comment from the Commission,

any Commissioner, any other officer or employee of the Commission outside of the Office of the Investor

Advocate or the Office of Management and Budget. This Report on Objectives expresses solely the views of

the Investor Advocate. It does not necessarily reflect the views of the Commission, the Commissioners, or

staff of the Commission, and the Commission disclaims responsibility for this Report on Objectives and all

analyses, findings, and conclusions contained herein.

CONTENTS

MESSAGE FROM THE INVESTOR ADVOCATE. . . . . . . . . . . . . . . . . . . . . . . . . 1

OBJECTIVES OF THE INVESTOR ADVOCATE . . . . . . . . . . . . . . . . . . . . . . . . . 3

FISCAL YEAR 2025 AGENDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SEC Policies and SRO Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Investor Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Investor Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

MESSAGE FROM THE OMBUDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

END NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

REPORT ON OBJECTIVES: FISCAL YEAR 2025

iii

“

Fraud is the ageless curse that

afflicts investors, the markets, and law

enforcement alike.”

MESSAGE FROM THE

INVESTOR ADVOCATE

TEN YEARS AGO, IN 2014, the Office of the

Investor Advocate and the Office of the Ombuds

were established at the Securities and Exchange

Commission. In the intervening ten years, the

investment landscape has significantly changed for

investors as well as markets. However, the extensive

development of new technologies, products, and

business models has not diminished two perennial

features of the investment landscape: the need for

legal assistance and the presence of fraud. What has

changed is that for many investors, there are now

fewer avenues to access legal assistance; and for

other investors, there is potentially a greater risk to

become the victim of fraud.

has dwindled to ten. There are currently no clinics

operating west of Chicago, or south of Washington

D.C. and north of Miami, Florida. This geographic

disparity leaves investors in most of the United

States without access to the unique and valuable

pro bono services these clinics can provide. As

detailed in the Ombuds’ report, we recognize

and value the contributions of the remaining ten

clinics, and we strongly encourage the expansion

of these successful clinical

programs to other law

schools, especially in those

geographic areas that lack

them now.

In 1997, two law schools in the New York City

area—Fordham University and Pace University—

launched securities arbitration clinics to provide

free legal services to investors of modest means

who could not easily access legal representation.

The establishment of the clinics was a priority of

then-SEC Chairman Arthur Levitt, who wanted to

respond to a challenge presented by retail investors

at several SEC town meetings: with claims that

were too small to justify large legal fees, they often

struggled to obtain counsel to represent them in

arbitration. The securities arbitration clinics served

this unmet need, while at the same time providing

law students with valuable practical experience.

Fraud is the ageless curse

that afflicts investors,

the markets, and law

enforcement alike. As

early as the fourth century

B.C., the Greek orator

Demosthenes described an elaborate insurance

scheme which may be the earliest recorded case of

investment fraud.4 Demosthenes himself alleged

that he was robbed of the value of his estate by

those to whom it had been entrusted.5 It is sad,

but no surprise, that fraud continues to this day.

What is new are the methods by which fraud

is committed—and the recent surge in fraud

complaints.

At their peak, there were 25 investor advocacy

clinics across the country. Today, that number

REPORT ON OBJECTIVES: FISCAL YEAR 2025

Multiple government agencies, here and abroad,

have recently reported an increase in fraud.6

Additionally, private entities are warning

consumers about the same troubling trend.7 The

Office of the Ombuds has itself observed an

increase in fraud complaints in the past six months,

and the complaints are sufficiently troubling to

make fraud the key theme of the Ombuds’ Report.

A common element in these reports, including

complaints to the Ombuds, is the role social media

or advanced technology play in facilitating fraud.

As noted by INTERPOL in its recent Global

Financial Fraud Assessment: “Within financial

fraud, technology has emerged as the key enabling

factor for criminal groups. The use of AI, large

language models (LLM) and cryptocurrencies

can scale up certain types of financial fraud

exponentially with low levels of investment.”8

It should concern everyone that fraud is now

possible at a scale and complexity not previously

practical. We will continue to closely monitor

new fraud models and their impact on investors

and encourage all investors to keep vigilance as a

constant companion.

As we enter our second decade of service to the

investing public, we renew our commitment to

provide investors with a strong, clear voice, and we

look ahead to further improving the value of our

contributions to the work of the Commission.

I am pleased to submit this Report on Objectives

for Fiscal Year 2025 on behalf of the Office of the

Investor Advocate, and I welcome any questions

from Members of Congress.

Respectfully Submitted,

CRISTINA BEGOÑA MARTIN FIRVIDA

Investor Advocate

O F F I C E O F T H E I N V E S T O R A D V O C AT E

OBJECTIVES OF THE

INVESTOR ADVOCATE

ASSISTING RETAIL INVESTORS

The Investor Advocate is responsible for assisting

retail investors in resolving significant problems

which investors may have with the Commission or

with self-regulatory organizations (SROs).9 To help

accomplish this objective, the Investor Advocate

has appointed an Ombuds to, among other things,

act as the primary liaison between the Commission

and retail investors in resolving problems that retail

investors may have with the Commission or with

SROs.10 The Ombuds’ Report is included within

this Report on Objectives.11

IDENTIFYING AREAS IN WHICH

INVESTORS WOULD BENEFIT FROM

REGULATORY CHANGES

The Investor Advocate also identifies areas in

which investors would benefit from changes in

the regulations of the Commission or the rules of

SROs.12 This is a broad mandate that authorizes

the Investor Advocate to examine the entire

regulatory scheme, including existing rules and

regulations, to identify those areas that could be

improved for the benefit of investors. For example,

the Investor Advocate may review the rules and

regulations governing existing equity market

structure to determine whether any regulatory

changes to that framework would benefit

investors. These and other concerns are discussed

in greater detail below in the section entitled SEC

Policies and SRO Filings.

IDENTIFYING PROBLEMS WITH

FINANCIAL SERVICE PROVIDERS AND

INVESTMENT PRODUCTS

The Investor Advocate also is responsible for

identifying problems that investors have with

financial service providers and investment

products.13 The Investor Advocate continues to

monitor investor inquiries and complaints, SEC and

SRO staff reports, enforcement actions, and other

data to determine which financial service providers

and investment products may be problematic. The

Investor Advocate identifies these problems in the

Reports on Activities filed every December.

ANALYZING THE POTENTIAL IMPACT

ON INVESTORS OF PROPOSED RULES

AND REGULATIONS

The Investor Advocate analyzes the potential

impact on investors of proposed regulations of the

Commission and proposed rules of SROs on an

ongoing basis.14 In Fiscal Year 2025, the Office will

review significant rulemakings of the Commission

and SROs and will communicate with investors

and their representatives to determine the potential

impact of proposed rules. In the section entitled

Investor Engagement, we expand upon our plan

to engage with investors and their representatives.

In addition, we will study investor behavior and

utilize a variety of research methods to examine the

efficacy of certain policy proposals. For example,

we will study the effectiveness of various disclosures

REPORT ON OBJECTIVES: FISCAL YEAR 2025

that are provided to retail investors. Included in the

section Office of Investor Research are descriptions

of our upcoming research projects. In our

December Report on Activities, we will describe the

findings of our various research projects.

PROPOSING APPROPRIATE CHANGES

TO THE COMMISSION AND TO

CONGRESS

The Investor Advocate may propose to the

Commission changes in the regulations or orders

of the Commission and to Congress any legislative,

administrative, or personnel changes that may be

appropriate to mitigate problems identified and to

promote the interests of investors.15 As we study

the issues in our SEC Policies and SRO Filings,

as set forth below, we may recommend to the

Commission and/or to Congress changes that will

promote the interests of investors.

O F F I C E O F T H E I N V E S T O R A D V O C AT E

SUPPORTING THE INVESTOR

ADVISORY COMMITTEE

Exchange Act Section 39 establishes the Investor

Advisory Committee (IAC).16 The purpose of

the Committee is to advise and consult with

the Commission on regulatory priorities, issues

impacting investors, initiatives to protect investors,

and related matters. The Investor Advocate is a

statutory member of the IAC,17 and the Office will

continue to provide staff and operational support

to the IAC during Fiscal Year 2025, as we have

been doing so since 2014.

FISCAL YEAR 2025

AGENDA

AS DESCRIBED ABOVE, THE OBJECTIVES

of the Office of the Investor Advocate are broad

in scope. Among the many activities that we

undertake to satisfy those objectives, we evaluate

and, where applicable, provide recommendations

on Commission rulemakings and SRO filings. We

communicate regularly with investors and their

representatives and seek their feedback on investorfocused concerns. We also observe and report out

on investor behavior and trends. In fulfilling the

responsibilities of our Office, we approach our

work with investor interests foremost.

SEC POLICIES AND SRO FILINGS

After discussions with numerous knowledgeable

parties, both inside and outside the Commission,

and after due consideration, the Office will focus

on the following policies and filings during Fiscal

Year 2025:

Broker and Adviser Conduct

Private Markets

§ Innovation and Disclosure

Broker and Adviser Conduct

As noted in last year’s report, retail investors often

access the securities markets through client or

customer relationships with investment advisers

and/or broker-dealers. Because investors are not

homogenous, they benefit from the availability of

diverse types of advice relationships and investment

products and services. Our Office continues to

advocate to improve the quality and transparency

of these relationships, to bring regulations and

disclosures in line with reasonable investor

expectations, and to preserve investor access (in

terms of choice and cost) to a variety of investment

services and products.

Since the implementation of Regulation Best

Interest (Reg BI) in 2020, we have monitored

how the Commission and the Financial Industry

Regulatory Authority, Inc. (FINRA) use this

regulatory tool to address violative conduct in the

brokerage business and otherwise help to improve

outcomes for retail customers.18 Similarly, in

connection with the Commission’s interpretation

regarding the standard of conduct for investment

advisers, we have monitored subsequent

Commission communications addressing the duty

of care enforced under the Investment Advisers

Act of 1940 (Advisers Act) governing registered

investment advisers. Although the specific

application of Reg BI and the investment adviser

fiduciary standard may differ in some respects and

be triggered at different times, in the staff’s view,

they generally yield substantially similar results in

terms of the ultimate responsibilities that registered

brokers and investment advisers owe to retail

investors.19

There are a host of important policy questions

to consider as more and more discount brokers

facilitate retail investor trading through mobile

devices and applications. Although these

technological developments have increased investor

REPORT ON OBJECTIVES: FISCAL YEAR 2025

access and choice, they have also created new

business models and the potential for more conflicts

of interest. Our Office continues to consider

both: (1) how these digital platforms fit within

the Reg BI framework concerning investment

recommendations; and (2) to the extent that this

new digital engagement does not implicate Reg BI,

how other regulatory tools might help ensure that

retail investors are the primary beneficiaries of this

new technology.20

Similarly, to the extent that investment advisers

provide investment advice to retail clients through

digital engagement, the Commission has already

made clear that it expects any such advice to

be consistent with the adviser’s fiduciary duty.21

Registered advisers must comply with various other

obligations imposed by rules adopted under the

Advisers Act, including disclosure requirements,

reporting requirements, marketing requirements,

compliance program obligations, supervision

requirements and insider trading procedures, and

recordkeeping requirements.22 We continue to

scrutinize how advisers meet their existing fiduciary

obligations in light of technological changes, and

we continue to advocate for strengthened investor

protection measures should new advisory practices

threaten existing protections.

We were encouraged to see the Commission

proposed rulemaking addressing brokers’ and

advisers’ digital engagement practices (DEPs)

for retail investors.23 The use of predictive data

analytics (PDA), differential marketing, and

behavior prompts may implicate Reg BI or an

adviser’s fiduciary duty. Even where enhanced

content, presentations, and tailoring do not do

so, it is appropriate for regulators to consider

enhancements to their oversight. In Fiscal Year

2025, we intend to continue our engagement

with the Commission and interested parties

on the fundamental question of how best to

enhance investor protection in this space. We

O F F I C E O F T H E I N V E S T O R A D V O C AT E

expect our engagement to focus, at least in part,

on issues that the Investor Advocate raised in a

comment letter that we submitted in response to

the Commission’s Digital Engagement Practices

Proposal.24 The comment letter notes, among

other things, our concern that current investor

protection efforts are struggling to keep pace with

technological innovation.25

The Commission has also proposed enhancements

to broker order routing behavior, an area where

investors, both retail and institutional, largely

depend upon their brokers’ expertise to implement

trades.26 The proposed rules intend to enhance

the existing regulatory framework maintained by

FINRA and the Municipal Securities Rulemaking

Board (MSRB). A broker’s duty of best execution

requires customers’ trades to be executed at the

most favorable terms reasonably available under

the circumstances, but the details underlying the

execution are of particular importance. Our Office

has reviewed the public comments received on

proposed Regulation Best Execution,27 and we

look forward to working with the Commission

to determine the most effective way to improve

investor outcomes in this space.

FINRA, as the self-regulatory organization for

broker-dealers, plays many additional roles in

regulation and oversight. Issues related to broker

conduct, including during the customer arbitration

process and in its oversight of trading in the

over-the-counter (OTC) equity market, are the

frequent subject of complaints that investors bring

to the attention of SEC Ombuds Stacy Puente. The

Ombuds’ Office was also instrumental in analyzing

the customer arbitration process for investment

advisers last year and continues to hear from

investors on the issue. Ombuds Puente and her

staff will continue to participate in our dialogue

with the Commission and FINRA to address these

types of issues on behalf of investors during Fiscal

Year 2025.

Private Markets

As described in our prior Reports, the Office of the

Investor Advocate has long focused on the issues

surrounding the considerable expansion of the

private markets in the United States over the past

two decades.28 The private markets encompass

a broad array of asset classes that range from

funding start-up companies to investing in pooled

investment vehicles such as hedge funds and private

equity funds. We have noted previously that the

private markets have become a vital avenue both

for companies seeking to raise capital and for

investors seeking investment opportunities and

portfolio diversification.29 We have also expressed

concern about the heightened risks of investing in

the private markets compared to investing in the

public markets, particularly for retail investors.30

These risks may include reduced, incomplete or

unreliable disclosure, illiquidity, and greater risk of

fraud and/or investment loss.31

In view of the ever-expanding size and significance

of the private markets, the Office will continue

to pay close attention to the issues surrounding

the private markets during the Reporting Period.

We will maintain our ongoing outreach effort

to investors and market participants regarding

topics such as accredited investor status, the degree

of transparency in the private markets, and the

interplay between the private and public markets,

and we will continue to share feedback internally

with our Commission colleagues.

Throughout our investor outreach efforts, we have

received feedback from a variety of individual

investors, or their representatives, of different

demographics and ranging in age from millennials

to retirees. Notably, these investors hold diverse

views on the subject of the accredited investor

definition. Generally, they agree that annual

income and net worth are imperfect proxies for

financial sophistication. However, their perspectives

diverge on the question of whether to tighten the

current accredited investor financial thresholds (for

instance, pegging those benchmarks to inflation, or

excluding retirement savings from the benchmarks)

or to expand the categories of investors who

would qualify under the definition so as to increase

access to private markets. Access, in particular, is a

concern for traditionally underrepresented groups

of investors. Based on the feedback we have heard

from many individual investors, we have become

aware of the tension between the preference for

greater investor protections with respect to private

markets and the desire for greater access to those

private markets. We believe that in order to achieve

an appropriate balance between investor protection

and investor access, the difficult task of making

amendments to the accredited investor definition

may require more than the adjustment of the

thresholds alone can accomplish.

The Commission’s Regulatory Flexibility Act

Agenda includes several rulemaking projects

relating to private markets and capital raising, and

we will endeavor to provide a voice for investors

as the Commission contemplates potential changes

in this area.32 We will also continue to monitor

pending legislative proposals in Congress that

address various aspects of the private markets and

evaluate the impact that these bills would have on

investors if enacted.

Consistent with our overall interest in new and

innovative approaches to disclosure informed by

investor testing data, one of our areas of focus

will be on potential approaches to improving the

quality and usability of the disclosures provided

to investors who are considering making initial

investments in private offerings. Currently, issuers

are not required to provide disclosures to accredited

investors when conducting private offerings

pursuant to the widely used Rule 506(b) exemption

under Regulation D, though, in practice, many

accredited investors receive some, and at times

extensive, disclosures in these offerings.33

REPORT ON OBJECTIVES: FISCAL YEAR 2025

During the Reporting Period, we will explore,

among other things, possible ways in which issuers

could more effectively provide the information

necessary for investors to make well-informed

decisions as to whether or not to invest in certain

private offerings, including whether investor testing

conducted by our Office of Investor Research

(OIR) could be a source of useful objective data to

assist the Commission in considering various policy

approaches in this area.34

Innovation and Disclosure

Disclosure to investors, particularly disclosure

intended for retail investor consumption, is an

evergreen topic of interest for OIAD. Fiscal Year

2025 will be no exception. As we’ve noted in

previous reports to Congress, we believe that,

as innovation in financial products and services

continues to accelerate, the Commission’s approach

to disclosure will also need to innovate to keep

pace.35 More generally, we are concerned that the

Commission’s historical core approach to investor

protection—traditional disclosure models and

informed consent—may prove insufficient for many

highly complex financial products and services.

Today’s retail investors are presented with a

virtually unlimited menu of financial products,

many of which are of recent vintage. Although

most sponsors of these products strive to

disclose the features and risks of every product

in accordance with Commission regulations (for

the products that fall under the Commission’s

regulatory jurisdiction) we are not aware of any

research indicating that retail investors actually

comprehend all the information presented to

them in these required disclosures. Anecdotally,

investors inundated with volumes of information

for numerous financial products tell us that, in fact,

they do not understand much of the disclosure

surrounding those products. Moreover, qualitative

and quantitative investor-testing research OIAD

recently conducted on disclosure relating to at least

one complex financial product demonstrated that

O F F I C E O F T H E I N V E S T O R A D V O C AT E

various traditional approaches to disclosure were

ineffective in achieving investor understanding of

the product, even for sophisticated retail investors.36

Currently, many if not most investor protection

efforts rely on a presumption that traditional

disclosure by financial product sponsors is

sufficient to allow investors to make fully informed

decisions about investment products. Investor

testing of disclosures thus far does not support this

presumption. If investor-testing research indicates

that disclosure in its current form is not fully

understood by investors, then we have to question

whether traditional disclosure models need to

be revisited for financial product sponsors and

financial professionals who provide investment

advice to meet their regulatory obligations.

In Fiscal Year 2025, we intend to continue to

encourage investor testing on both existing

and proposed disclosures to retail investors.

Additionally, we will continue to advocate for

innovative, and more investor focused, approaches

to disclosure. There is justified concern among

some investor advocates that much of the

disclosure ostensibly written to inform investors

serves instead to shield financial product

sponsors and professionals from litigation.

Disclosures written for lawyers by lawyers can

often result in communications that are opaque

to many investors. To the extent data reveals

that disclosure related to any given financial

product or service is inadequate to fully inform

a reasonable investor of the product/service’s

features and risks, we urge the Commission to

explore new and innovative approaches to fairly

and fully informing investors. Finally, where even

the most well-designed, best-intentioned disclosure

proves inadequate, we will support Commission

efforts to target its investor-protection efforts

toward measures designed to enhance investor

protection and that may be more effective when

coupled with disclosure.37

INVESTOR ENGAGEMENT

The Office of the Investor Advocate is statutorily

mandated to identify problems that investors

may have, analyze the potential impacts on

investors of rules or regulations, and make

proposals to the Commission to promote the

interests of investors.38 One of the primary ways

in which OIAD collects this information and

sustains a focus on investors is through ongoing

investor engagement activities.39 This includes

investor-focused meetings, events, and activities

that are designed primarily to engage directly

with investors and receive feedback about policy

questions, investing challenges, regulatory policy

and rulemaking, investment products and services,

investor issues, and/or potential misconduct.

The Office actively seeks input from a broad range

and variety of investors—including individual retail

investors, smaller and regional investor groups,

non-profits and consumer groups, academics and

researchers, public and private pension funds, and

other small and large money managers—as well as

regulatory and law enforcement counterparts (see

Figure 1).

Retail investors, and their unique perspectives, are

particularly important to OIAD. We place special

emphasis on individuals and groups whose views

and needs may be less frequently heard, including

those who do not routinely travel to Washington,

D.C. to lobby government leaders, or who do

not regularly submit comment letters to the

FIGURE 1. Diversity of Investors Represented

Retail

Financial

OIAD

Engagement

Students

Public Plans

Business

Individual

REPORT ON OBJECTIVES: FISCAL YEAR 2025

Commission. Among those whom OIAD especially

seeks to hear from are older investors, new

investors, veterans and military spouses, affinityconnected investors, investors from historically

underserved, rural, or Native American/First

Nations’ communities, investors with disabilities,

and investors with varying levels of exposure

to capital markets. The Office also solicits and

encourages input from stakeholders with a range of

epistemological perspectives and values.

The goals for our investor engagement are twofold:

§ Understand investor experiences and

perspectives regarding products, practices,

regulations, rulemakings, and the markets, and

communicate them in a decision-useful context

for Commission leaders and staff; and

§ Advocate for investors’ interests in the

regulatory and rulemaking environments in a

manner consistent with the Office’s statutory

mission.

In the coming fiscal year, we anticipate

expanding engagement opportunities where retail

investors can share their experiences directly

with Commission leadership and staff, meeting

with a broad array of investors and investor

representatives to gain from their perspectives and

inform policy, and identifying and advocating

for the trends, issues, and policies that investors

consider to be important.

The Office plans to continue partnering with other

SEC Divisions and Offices, federal departments,

state agencies, and law enforcement partners, to

hear directly from investors how the Commission

can best serve them.

§ Divisions and Offices The Office is expanding

opportunities for investors to communicate

their perspectives directly with the Divisions.

For example, earlier in 2024 we hosted the

SEC-NASAA-Georgia Secretary of State

Joint Public Roundtable in Georgia. 40 This

event, which took place over two days at two

different colleges in northern Georgia, was an

opportunity to hear directly from investors and

the public on topics important to them and

was attended by the Director of the Division

of Enforcement, and the Deputy Director of

the Division of Examinations, amongst other

Commission Leaders.

§ Federal Departments and Agencies Other

federal departments and agencies are constantly

working to protect the financial markets,

products, and consumers. As part of the

Office’s regular course of business, we often

communicate and partner with federal agencies

to support the larger investor advocacy mission,

DIVISIONS AND OFFICES. Investor Roundtable

Atlanta Regional Office Director Nekia Hackworth Jones and Division of Enforcement Director Gurbir Grewal

at the Joint Investor Roundtables at the University of North Georgia and Dalton State College

O F F I C E O F T H E I N V E S T O R A D V O C AT E

STATE AGENCIES. SEC-NASAA-Wisconsin DFI Joint Public Roundtable

Commissioner Mark Uyeda, Investor Advocate Cristina Martin Firvida, Wisconsin Securities Administrator

Leslie Van Buskirk, and others in Madison, Wisconsin.

or to obtain diverse investor and stakeholder

feedback consistent with our statutory mission.

For example, OIAD recently joined the

Secretary of Veterans Affairs, the Honorable

Denis McDonough, and other federal financial

regulators, at the Joseph Maxwell Cleland

FEDERAL DEPARTMENTS AND AGENCIES.

Joseph Maxwell Cleland Atlanta Department

of Veterans Affairs Medical Center panel

discussion

Secretary of Veterans Affairs Denis McDonough

and Adam Anicich, Special Advisor and Investor

Engagement Manager, OIAD discussing investorrelated topics in Atlanta, GA.

Atlanta Department of Veterans Affairs Medical

Center for a panel discussion on retail investorrelated topics and investor advocacy.

§ State Agencies State Securities Regulators

play a critical part in the regulatory and

investor protection mosaic, and the Office

intends to continue to enhance the already

very strong connections with the North

American Securities Administrators Association

(NASAA) and individual state regulators. A

recent example of this was the SEC-NASAAWisconsin DFI Joint Public Roundtable, held

in the State Offices in Madison, Wisconsin,

co-hosted with NASAA and the Wisconsin

Department of Financial Institutions.41

§ Law Enforcement Partners As part of OIAD’s

commitment to investors, understanding the

frauds and crimes perpetrated against investors

through financial services providers and

investment products is of paramount concern. In

order to enhance the Office’s ability to mitigate

problems and promote the interests of investors,

OIAD will convene recurring meetings between

law enforcement at the federal, state, and local

levels, and the Commission Staff.

REPORT ON OBJECTIVES: FISCAL YEAR 2025

FIGURE 2. Phases of Investor Engagement

PHASE 1

PHASE 2

PHASE 3

PHASE 4

Active listening

Research and

data analysis

Collaboration and

partnerships

Successful results

Creating Accessibility and Enhancing

Communications with Investors

In the coming fiscal year, we anticipate a pivot to

conducting more virtual events, which will allow

the Commission to hear from more voices, more

often, and will enhance the geographic area of

those we are able to reach. While in-person events

offer unique opportunities to build connections

with investors, we feel the benefits clearly outweigh

the downside when conducting virtual events:

§ Expanding accessibility for investors from a

greater diversity of locations, including more

remote areas, to share their perspectives and

voices with the Commission;

§ Expanding accessibility for investors with a

greater diversity of abilities to travel to a single

location or to communicate in a public setting

to also share their experiences;

§ Reducing costs associated with hosting and

participating in larger, in-person events for all

participants;

§ Enhancing OIAD’s posture of good stewardship

of resources.

Our intention is to expand the opportunities for

investors to share their perspectives while also

engaging in good stewardship of the taxpayer

resources with which we are entrusted to

O F F I C E O F T H E I N V E S T O R A D V O C AT E

produce meaningful results aligned with our

statutory authority.

Quality Enhancement and Continuous

Improvement

One area in which OIAD seeks to further mature

is the support we can provide to decision makers

regarding the insights our office develops with

regard to investor preferences, capabilities,

and trends. OIAD has the unique ability to

identify, answer, evaluate, and operationalize the

questions of:

§ What do we learn from investors?

§ What do we do with that information?

One method through which OIAD does this is

through research, as detailed in the next section of

this report. Another manner in which we transmit

what we hear from investors is by partnering with

other Divisions and Offices so that they may hear

directly from investors regarding the impact that

potential rules and regulations have on them. We

will continue to seek additional avenue and formats

in which OIAD can share learnings from investors

with the Commission. The goal is to further elevate

input from a broader set of stakeholders into

more stages of the Commission’s operations (see

Figure 2).

Another area in which OIAD is enhancing

capability is by seeking out new investor groups

with whom to engage and obtain feedback from

regarding regulations and policies that affect

them. This includes attempting to arrange more

engagements with a wider variety of participants,

enhancing platforms that allow investors to

provide more informal feedback on policy and

rulemaking, developing additional partnerships

with investor-related groups, and actively

seeking-out marginalized voices throughout the

investment landscape.

INVESTOR RESEARCH

The Investor Advocate has a mandate to identify

problems that investors have with financial service

providers and investment products, as well as areas

in which investors would benefit from changes

in the Commission’s or SROs’ regulations. The

Office of Investor Research (OIR) within OIAD

conducts research that may help to augment other

OIAD efforts to identify problems that investors

(especially retail investors) may have, and analyze

the potential impacts of rules or regulations on

investors. OIR serves the public by providing data

and evidence that can inform policymaking. As

detailed in OIAD’s Report on Activities for Fiscal

Year 2023, OIR aims to provide deep insight into

how investors and other stakeholders interact with

the investment marketplace and how they could be

or are affected by SEC policy.

In the coming year, we will continue to conduct

thoughtful research on issues that affect a broad

set of investors. In particular, we intend to continue

researching disclosure effectiveness. Building on our

recent research on Registered Index Linked Annuity

Products (detailed more fully in our 2023 Report

on Activities), we continue to seek opportunities

to generate insights that allow investors and

policymakers to be better aware of the risks and

challenges of an emerging set of complex products

and decision environments. We will also continue

to seek opportunities to work with rulemaking

divisions and use our tools to advocate for investorcentered thinking in policy design.

To expand our capacity to provide timely insights,

in 2023 we launched a program of longitudinal

investor surveys. Longitudinal surveys provide

an effective method for monitoring key investor

developments and offer the potential to serve as

an early warning system that can help to detect

emerging investor issues. Moreover, a survey

product of this type allows for rapidly recruiting

participants and understanding time-sensitive

dynamics within a given household—information

that is critical to understanding investor activity

and promoting policy efficacy. This program

provides an infrastructure that allows us to quickly

respond to policymakers’ needs by shortening the

lead time required to collect information from

a variety of U.S. households. Our vision is to

use these surveys to support investor testing and

develop and track policy metrics over time, and our

intention is to develop and improve this research

infrastructure as resources allow.

REPORT ON OBJECTIVES: FISCAL YEAR 2025

“

As part of our Office’s duty to protect

investors, we must consider whether our own

communications with the public sufficiently equip

retail investors to make informed decisions in this

new, sometimes perilous landscape.”

MESSAGE FROM

THE OMBUDS

TODAY’S MARKET IS A RUGGED

LANDSCAPE. Technological advancements

have opened doors for new populations of

investors to participate in the markets and build

wealth. However, these same advancements have

created a wider pool of potential fraud victims.

Between Fiscal Year 2022 and Fiscal Year 2023,

the Ombuds Office saw a 17 percent increase in

alleged securities fraud. Notably, this number

does not reflect the significant number of fraud

allegations involving digital assets, which might

not implicate the securities laws. Some victims

are defrauded more than once—perhaps as part

of the same ongoing scheme. As we see daily, the

financial and psychological impact of these frauds

on investors is immeasurable.

As discussed in this report below,42 social media

drives much of the fraud reported to our office.

Over time, the proliferation of social media and

internet forums has made market information

more decentralized and less reliable. Market

“information” is now often tailored to targeted

audiences and posted for the purpose of acquiring

subscribers, or worse: manipulating investors

with similar views to make misguided investment

decisions as part of a scam.

Congress charged the Investor Advocate and the

Ombuds to assist retail investors in resolving

concerns with financial service providers and

investment products that cause them harm.

This significant responsibility is increasingly

challenging—as the markets rapidly increase in

complexity, and the web of online misinformation

spreads across the globe.

As part of our Office’s

duty to protect investors,

we must consider whether

our own communications

with the public sufficiently

equip retail investors to

make informed decisions

in this new, sometimes

perilous landscape. We

must consider how to the

quell the rising tide of

online misinformation.

This Ombuds Report is dedicated to those retail

investors who are most vulnerable to online fraud

and who most deserve our protection.

Respectfully Submitted,

STACY A. PUENTE

Ombuds

REPORT ON OBJECTIVES: FISCAL YEAR 2025

WHO WE ARE

The Securities and Exchange Act requires the

Investor Advocate to appoint an Ombudsman

(Ombuds) to act as a liaison for retail investors

to relay their concerns and questions about the

Commission and the self-regulatory organizations

(SROs) the Commission oversees.43 The Ombuds

staff consists of an experienced team of lawyers,

each with differing subject matter expertise, all

dedicated to providing personalized, tailored

assistance to the retail investors that contact

the Ombuds Office for help. Through direct

engagement with investors, relevant parties

within the Commission, and external stakeholders

committed to investor protection issues, the

Ombuds Office fulfills its statutory duty to help

retail investors resolve issues relating to the

Commission or SROs.

Among other statutory duties, the Ombuds must

submit biannual reports to Congress describing the

work of the office and its effectiveness in assisting

retail investors.44 This Ombuds’ Report provides

a look back on the Ombuds’ activities for the

six-month period of October 1, 2023, through

March 31, 2024 (Reporting Period), and discusses

the Ombuds’ objectives and outlook for Fiscal

Year 2025.

What We Do

As noted above, the Ombuds is required by

statute to:

act as a liaison between the Commission and

any retail investor in resolving problems that

retail investors may have with the Commission

or with self-regulatory organizations;

FIGURE 3. Ombuds Process: Review, Research, Resolve

Review

The Ombuds team reviews

all incoming investor

correspondence to determine if

and how we may assist.

Research

The Ombuds team identifies the nature of

the issue, conducts tailored research, and

engages with appropriate personnel within

the Commission or SROs to gather relevant

information.

Resolve

The Ombuds team works to

resolve investor questions and

complaints by providing investors

with requested information and

access to additional resources, by

escalating certain matters through

appropriate channels, when necessary,

and by monitoring outcomes.

O F F I C E O F T H E I N V E S T O R A D V O C AT E

§ review and make recommendations regarding

policies and procedures that encourage investors

to present questions to the Investor Advocate

regarding compliance with the securities

laws; and

§ establish safeguards to maintain the

confidentiality of communications between

retail investors and the Ombuds.45

INVESTOR VOICES, BY THE NUMBERS

HOW WE HELP

1. Allegations of Securities Law Violations:

Investor alleges that an individual, firm, or

entity has violated or is violating the U.S.

securities laws.

Our overarching responsibility is to assist retail

investors by resolving concerns, questions,

and complaints about the SEC and the SROs

subject to SEC oversight. We accomplish this in

several ways—most commonly by conducting

research, providing information, making

referrals, and collaborating with other divisions,

offices, and SROs about complaints that impact

investor interests. We submit credible allegations of securities violations to the Division of

Examinations and the Division of Enforcement

for potential examination or investigation,

sometimes thwarting fraud before it occurs. We

study and report on issues of widespread impact

to retail investors. Last, we inform the Investor

Advocate and other interested parties within the

Commission about trending investor protection

concerns and areas of potential reform.

2. Atypical matters: Matters of undetermined or

harassing nature.

3. FINRA Complaints/Questions/Procedures:

Questions or complaints relating to a FINRA

investigation or arbitration, a FINRA

employee, or about FINRA rules, policies, or

procedures.

4. Inquiries about Corporate Disclosure/

Registration: Questions about SEC filings and

other matters relating to corporate disclosure.

Figure 3 illustrates the process by which we receive

and assist investors with their requests.

HOW TO CONTACT US

Our primary means of communication with

the public is through the Ombudsman Matter

Management System (OMMS), an online portal

for receiving, responding to, and managing data

submitted to our Office. The public can also

The Ombuds team maintains records

in OMMS of all submissions and

responses handled by our Office.

Matters are assigned a label or

“Primary Issue Category,” reflecting the nature of

the issues raised in the submission. The 12 Primary

Issue Categories can be defined as follows:

5. Investment Products – Questions/Complaints:

Questions or complaints about a specific type

of investment product.

6. Investor Account Matters: Questions or

complaints relating to a retail investor’s

personal investments or finances.

7. Non-SEC/Other Matters: Questions or

complaints about issues that do not fall within

the SEC’s jurisdiction.

8. Other SEC Questions/Complaints: Questions

or complaints about the SEC, including its

policies, procedures, rules, and employees.

REPORT ON OBJECTIVES: FISCAL YEAR 2025

9. Other SRO Complaints/Questions/

Procedures: Questions or complaints relating

to the policies, procedures, or rules of an SRO

other than FINRA.

10. Potential Organized Campaign: Submission

appears to be part of a coordinated effort by

multiple individuals to contact the Ombuds’

Office about the same issue.

11. SEC Investigations/Litigation/Enforcement

Actions: Questions or complaints about

SEC investigations, litigation, or other related

issues, such as distributions.

12. SEC/Other Impersonators: Complaints

about SEC or SRO impersonators,

and complaints involving fraudulent

use of the SEC or SRO seal.

As noted previously, the data above reveals a

notable increase in the reported number of fraud

schemes involving securities and digital assets.

This comports with recent data released by the

Federal Trade Commission, which found that

consumers reported losing more than $4.6 billion

in investment scams in 2023—reflecting a

21 percent increase over the collective amount lost

to investment scams in 2022.46 In the following

section, we highlight the most common types of

reported fraud and the role of social media in

perpetuating these scams.

FIGURE 4. Matters by Primary Issue Category,

October 1, 2023 – March 31, 2024

13%

22%

In tracking investor submissions by volume and

by Primary Issue Category, OMMS may serve as

an early warning system, identifying existing or

potential concerns for retail investors.

During the Reporting Period (October 1, 2023 –

March 31, 2024), the Ombuds Office received

and processed 1,346 matters submitted by U.S.

and foreign investors, market participants, and

other interested members of the public. Figure 4

illustrates the number of matters divided into

12 Primary Issue Categories used to classify the

nature of the submissions.

In addition, the Ombuds team made approximately 1,298 follow-up emails, phone calls, and

other forms of correspondence to resolve the 1,346

matters received—for a combined total of 2,644

contacts with or on behalf of submitters from

October 1, 2023, to March 31, 2024. Figure 5

details the number of follow-up contacts with the

public, separated by Primary Issue Category.

13%

30%

0.15%

Atypical Matters (295)