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Report on

Objectives

FISCAL YEAR 2024

OFFICE OF THE INVESTOR ADVOCATE

REPORT ON OBJECTIVES

FISCAL YEAR 2024

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

report contains a summary of the Investor Advocate’s primary objectives for Fiscal Year 2024,

beginning October 1, 2023.

A Report on Activities is due no later than December 31 of each year, and it describes the

activities of the Investor Advocate during the preceding fiscal year.3 For Fiscal Year 2023, the

activities and accomplishments of the Office will be reported not later than December 31, 2023.

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

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

Commissioner, any other officer or employee of the Commission, or the Office of Management and Budget.

Thus, the Report 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 the Report and all analyses, findings, and conclusions contained herein.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

iii

CONTENTS

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

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

Assisting Retail Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Identifying Areas in Which Investors Would Benefit from Regulatory Changes . . . . . . . . . 3

Identifying Problems with Financial Service Providers and Investment Products. . . . . . . . . 3

Analyzing the Potential Impact on Investors of Proposed Rules and Regulations. . . . . . . . 3

Proposing Appropriate Changes to the Commission and to Congress . . . . . . . . . . . . . . . 4

Supporting the Investor Advisory Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

POLICY AGENDA FOR FISCAL YEAR 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

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

Investor Engagement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Office of Investor Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

OMBUDS’ REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Ombuds Role and Standards of Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Streamlined Communications With Retail Investors . . . . . . . . . . . . . . . . . . . . . . . . . 19

Service by the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Areas of Interest and Importance to Retail Investors . . . . . . . . . . . . . . . . . . . . . . . . .23

Acting in the Interests of Retail Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Ombuds Outreach and Engagement Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Objectives and Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

SUMMARY OF INVESTOR ADVISORY COMMITTEE RECOMMENDATIONS

AND SEC RESPONSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ENDNOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

REPORT ON OBJECTIVES: FISCAL YEAR 2024

MESSAGE FROM THE

INVESTOR ADVOCATE

Earlier this year, I

was honored to be

appointed as the

second Investor

Advocate of the

U.S. Securities

and Exchange

Commission

(SEC). As the

new Director of

the Office of the

Investor Advocate

and as an investor myself, I owe a debt of gratitude

to Rick Fleming, who served for eight years as

the first individual appointed to this role. Rick’s

dedication to public service, thoughtful approach

to policy questions, and commitment to the fair

treatment of investors are traits I aspire to emulate

in my tenure as the Investor Advocate. I also wish

to acknowledge Marc Sharma, Chief Counsel of

the Office of the Investor Advocate, who led the

Office for more than six months after Rick Fleming

stepped down.

The SEC has a three-part mission: to protect

investors, to maintain fair, orderly, and efficient

markets, and to facilitate capital formation. These

three objectives are interrelated, and protecting

investors provides a firm foundation for markets

to perform at their best. Catastrophic failures

to adequately protect investors led Congress to

establish the SEC in 1934. Eighty years later, the

commitment to investor protection was accelerated

with the creation and formation of the Office of

the Investor Advocate. In 2014, the Office was

operational, following the passage of an act of

Congress in 2010, to provide retail investors a

dedicated voice inside the Commission. In the role

of Investor Advocate, I am privileged to lead an

office whose main objective is to identify, analyze,

and address the concerns of investors.

First among the statutorily mandated functions of

this Office is the directive to assist retail investors in

resolving significant problems such investors may

have with the Commission or with self-regulatory

organizations (SROs). To fulfill this function, it

is our intention to strengthen our efforts to help

investors who seek our assistance with problems of

this nature. In pursuit of providing the best service

possible, Stacy Puente has been appointed as the

new Ombudsman (Ombuds). She brings extensive

securities law experience and a deep commitment

to assisting individuals in her new role. Additional

REPORT ON OBJECTIVES: FISCAL YEAR 2024

staff have also been recruited to help ensure the

appropriate attention and service is provided to

investors who contact the Ombuds Office. In

Fiscal Year 2024, we will implement improvements

in the technology used to assist investors. The

software updates aim to streamline the investor

user experience, and make our Ombuds service

more efficient. By prioritizing and resourcing these

actions, we signal our unwavering commitment to

serving retail investors.

Congress also directed the Office of the Investor

Advocate to identify problems investors may 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 and policies. To ensure that retail

investors are at the center of our efforts to meet

these obligations, we will place a renewed focus on

engaging directly with investors and their representatives, especially those who do not routinely

communicate with financial regulators. We will

also continue to enhance our research strategies,

which offer evidence-based solutions to the

challenges—both old and new—that retail investors

face in a rapidly changing investment environment.

The robust regulatory agenda of the Commission

provides our Office a roadmap of proposals to

analyze from the perspective of retail investors. As

detailed below, our Office is currently evaluating

numerous pending and forthcoming proposals

of significance to retail investors, informed by

our research and investor engagements. We will

continue to evaluate such proposals in the next

fiscal year.

As the daughter of immigrants who were not

always free to enjoy the rights and opportunities

that are unique to our nation, I am mindful

that preserving and promoting those rights and

opportunities demand our daily attention. Our

capital markets are the envy of the world, and

the financial freedom they offer—but do not

guarantee—give millions of investors hope. In

the role I have been privileged to assume, I am

committed to listen to the experiences of investors,

promote their interests, and encourage the

conditions that can foster financial success.

I am pleased to submit this Report on Objectives

for Fiscal Year 2024 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

that investors may have with the Commission or

with self-regulatory organizations (SROs).4 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.5 The Ombuds’ Report is included within this

Report on Objectives.6

IDENTIFYING AREAS IN WHICH

INVESTORS WOULD BENEFIT

FROM REGULATORY CHANGES

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.8

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 also identifies areas in

which investors would benefit from changes in

the regulations of the Commission or the rules of

SROs.7 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.

The Investor Advocate analyzes the potential

impact on investors of proposed regulations of the

Commission and proposed rules of SROs on an

ongoing basis.9 In Fiscal Year (FY) 2024, 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 that are

REPORT ON OBJECTIVES: FISCAL YEAR 2024

provided to retail investors. Included in the section

Office of Investor Research are descriptions of

our research methods. 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.10 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).11 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

member of the IAC,12 and the Office will continue

to provide staff and operational support to the

IAC during FY 2024, as we have done since

2014. The section entitled Summary of Investor

Advisory Committee Recommendations and SEC

Responses summarizes recommendations the IAC

has made since June 2022, and indicates the SEC’s

responses to them. Although we are not required to

report IAC recommendations and SEC responses,

historically, we have done so.

POLICY AGENDA FOR

FISCAL YEAR 2024

The objectives of the Office of the Investor

Advocate (OIAD) 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 investor-focused

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.

Broker and Adviser Conduct

Retail investors typically access the securities

markets through 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

advocates 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.

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 FY 2024:

Broker and Adviser Conduct

Private Markets

Equity Market Structure

Outsourcing by Investment Advisers

Mutual Funds: Transaction Costs and Dilution

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. As our

Office asserted at the time, the elimination of sales

contests, the enhanced disclosures of conflicts of

interest, and other investor-friendly improvements

benefit retail investors.13 We believe that Reg BI

should be enforced rigorously to help ensure that

broker behavior matches customers’ expectations

with respect to receiving investment advice.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

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.14

With more and more discount brokers facilitating

retail investor trading through mobile devices and

applications, there are a host of important policy

questions to consider. Although these technological

developments have increased investor access and

choice, they have also created new business models

and conflicts of interest. These trading platforms

typically offer customers zero-commission trades,

with revenues to the firm often coming from the

market participants who accept the trades in an

arrangement known as “payment for order flow.”

In a sense, because the retail investor is paying

nothing directly to the broker-dealer, the investor

is both the product and the customer. In light of

these developments, it is important 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.15

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

Similarly, to the extent that investment advisers are

now providing 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.16 Registered advisers must also continue to

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.17 We will continue to monitor how

advisers meet their existing fiduciary obligations

in light of technological changes, and we will

continue to advocate for strengthened investor

protection measures should new practices threaten

existing protections.

We were encouraged to see the Commission’s

regulatory agenda, as made public pursuant to

the Regulatory Flexibility Act, include rulemaking

addressing brokers’ and advisers’ digital engagement

practices for retail investors.18 As noted above,

however, the use of predictive data analytics,

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 FY 2024, we intend to engage with

the Commission and interested parties on the

fundamental question of how best to enhance

investor protection in this space.

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.19 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

continues to review the public comments received

on proposed Regulation Best Execution,20 and we

look forward to working with the Commission

to determine the most effective way to improve

investor outcomes.

FINRA, as the SRO 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 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 this year, and will

likely continue to focus on the issue. Thus, other

important issues involving broker and adviser

conduct are included below in the Ombuds’

Report. Ombuds Puente and her staff will continue

to lead our dialogue with the Commission and

FINRA to address these issues on behalf of

investors during FY 2024.

Finally, we are considering the comments received

in connection with the Commission’s cybersecurity

proposals, with a particular focus on amendments

to Regulation S-P proposed in March 2023.21

Cybersecurity breaches seem to have become more

prevalent recently, and the proposed amendments

to Regulation S-P are intended to enhance the

protection of customer information by, among

other things, requiring broker-dealers, investment

companies, registered investment advisers, and

transfer agents (collectively, “covered institutions”)

to provide notice to individuals affected by certain

types of data breaches that may put them at risk

of identity theft or other harm.22 More specifically,

the proposed amendments would: require

covered institutions to adopt written policies and

procedures for an incident response program to

address unauthorized access to or use of customer

information; require covered institutions to have

written policies and procedures to provide timely

notification to affected individuals whose sensitive

customer information was or is reasonably likely to

have been accessed or used without authorization;

and broaden the scope of information covered

under Regulation S-P.23

Private Markets

Over the past 15 years, private markets in the

United States have flourished, with the amount

of capital raised in these markets during this

time far surpassing the amount of capital raised

in public registered offerings.24 According to

one estimate, total global private market assets

under management reached $11.7 trillion as of

June 2022.25 Private markets have become a vital

avenue for companies seeking to raise capital and

REPORT ON OBJECTIVES: FISCAL YEAR 2024

for investors seeking investment opportunities

and portfolio diversification.26 However, investing

in the private markets may involve a number of

heightened risks compared to investing in the public

markets, particularly for retail investors. Those

risks may include reduced, incomplete or unreliable

disclosure, illiquidity, and greater risk of fraud and/

or investment loss.27

Recently, a panel discussion at the Investor

Advisory Committee’s March 2023 meeting

highlighted various factors contributing to the

growth of the private markets, the impact of

regulatory differences between the private and

public markets, and the risks faced by retail and

institutional investors in the private markets.28

Among other things, the panelists explored the

performance of private investments (such as private

equity), the current regulatory environment,

and investor protection concerns in the private

markets.29 The panelists also offered a range of

views on different approaches to improving the

regulation of the private markets.30

In the past, we have expressed concern regarding

the continued shift of capital raising from public

markets to private markets.31 Due to a series of

legislative and regulatory actions over time, a

company arguably can now meet most, if not all,

of its capital-raising needs, as a practical matter,

without ever having to go through the registration

process for securities offerings that is a central

underpinning of the Securities Act of 1933.32

These changes, which include an expansion of the

exemptions from the registration process, have

made it easier for many companies to fund their

growth through capital raising on a much larger

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

scale without necessitating the public disclosure

of information that would otherwise be required

under the securities laws. Some commentators

point to this development as a factor in the decline

in the number of initial public offerings and public

companies in the United States over the years.33

Another reason behind the continued growth

of private markets is the increasing number of

investors who qualify as “accredited investors”

and are thus eligible to invest in private offerings

under a number of offering exemptions.34

Individuals qualify as accredited investors based

on certain wealth35 and income36 thresholds, which

have not been adjusted for inflation since they were

adopted in the 1980s, or through other measures

serving as a proxy for financial sophistication.37

As noted in a prior report,38 however, we recognize

that the accredited investor definition has been

a contested issue, with some commentators

supportive of an expanded definition, others

advocating for a more restrictive definition (such

as higher wealth and/or income thresholds),

and still others suggesting that the definition be

eliminated altogether so that anyone inclined to do

so can invest in private offerings.39

In managing trillions of dollars in private fund

assets, registered private fund advisers also play a

critical role in the private markets.40 In February

2022, the Commission proposed new rules and

amendments intended to enhance the regulation of

private fund advisers and to protect private fund

investors by increasing transparency, competition,

and efficiency in the private fund space.41 The

proposed reforms are designed to protect private

fund investors by increasing their visibility into

certain practices, establishing requirements to

address practices that have the potential to lead to

investor harm, and prohibiting adviser activity that

is contrary to the public interest and the protection

of investors.42

to the disadvantage of investors. To evaluate this

concern, we consider whether the incentives in

the current structure tend to favor or disfavor

long-term investors, and what changes could

improve the investor experience.

During FY 2024, the Office will continue to engage

in outreach to investors and market participants

regarding the issues surrounding the private

markets, such as accredited investor status, the

informational needs of investors, transparency

in these markets, and the interplay between the

private and public markets, and we will continue

to share feedback internally with our Commission

colleagues. The Commission’s Regulatory

Flexibility Act Agenda currently includes several

rulemaking projects relating to private markets and

capital raising,43 and we will endeavor to provide a

voice for investors as the Commission contemplates

potential changes in this area. 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.44

In December 2022, the Commission proposed

a set of four significant rulemaking intended to

improve the environment for retail and institutional

trading in the modern market.45 The rules would:

(1) establish a Commission-level best execution

regulatory framework (as discussed above);

(2) require certain retail orders to be exposed to

competition in open public auctions; (3) amend

existing rules to narrow “tick sizes” for quoting

and trading certain stocks, lower market access

fee caps, and accelerate transparent pricing; and

(4) amend execution quality disclosure

requirements for market centers. Through the

perspective of our overriding concern, we are

considering how these proposed changes could,

in whole or in part, help or harm retail and

institutional investors.

Equity Market Structure

Like others at the Commission, our Office

is sensitive to the fact that equity market

structure issues are complex and require a broad

understanding of statutory requirements, economic

principles, and practical considerations. However,

while competing interests may need to be balanced

for markets to work efficiently, our Office has long

focused on one overriding concern as we examine

these issues: whether the equity market as it exists

today is fair for investors, or whether it prioritizes

the interests of other market participants instead,

Our Office’s analysis can draw from a variety

of sources. The public comment period for these

proposals closed in March 2023, and our Office

continues to consider the helpful input from both

retail and institutional investors in evaluating

what enhancements or amendments could

improve the proposals.

There are also areas that could benefit from our

Office’s own behavioral research, to examine

the ways that investors are able to identify and

incorporate information into their decisions.

The Commission has, for example, asked for

REPORT ON OBJECTIVES: FISCAL YEAR 2024

public thoughts on ways the Commission could

improve the accessibility of the execution quality

disclosure reports, which are intended to increase

transparency for investors and facilitate the ability

to compare. As proposed, this rule could require

over 350 market centers to each publish humanreadable, monthly reports on separate public

websites.46 The search costs for anyone looking

to compare and contrast all of the various reports

could be prohibitive. In this area, we intend to

encourage the Commission to consider not only

how the presentation of the information on these

reports can best facilitate retail investor decisionmaking, but also how centralization of the reports

themselves may factor into their usefulness.47

We also continue to support efforts to modernize

the overall infrastructure for the collection,

consolidation, and dissemination of market data

for stocks.48 Retail investors benefit from the

improved content and competitive infrastructure

for quotation and trading data, either directly

when trading on mobile devices and applications

or indirectly as participants in mutual and pension

funds. In September 2022, the Commission

disapproved an SRO proposal that would

have provided key upgrades to the content and

infrastructure for “core data” consolidated and

widely distributed, but also would have included

fees that commenters, including investors, argued

were flawed and lacked justification.49 The

exchanges and FINRA need to submit another fee

proposal, and our Office will work to ensure that

the final rule addresses commenters’ concerns.

Many retail investors have expressed concern

regarding the practice of short selling. We intend

to support the Commission’s efforts to enhance

transparency in short selling50 as well as the opaque

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

network of stock lending and borrowing that

facilitates the practice.51 Maintaining a repository

of relevant data could improve the Commission’s

ability to monitor this area of the market in real

time. Further, we will consider whether guidance

concerning what constitutes a broker-dealer’s

reasonable basis for the “locate” requirement for

heavily shorted companies should be considered to

address investor concerns in this area.

In addition to evaluating rulemaking by the

Commission during FY 2023, we will continue to

examine the hundreds of rule proposals that are

filed with the Commission by the SROs. Typically,

a number of these filings involve market structure

issues that impact investors. For example, in March

2023, the Commission instituted proceedings to

determine whether to approve or disapprove a

FINRA proposal to allow a new entrant to post

stock quotes on its Alternative Display Facility in

a manner that would allow the information to be

included in consolidated market data.52 Given the

new entrant proposes to use a novel, intentionally

delayed matching process, commenters have

expressed concern about whether the quotations

from the system would be consistent with

Regulation NMS’s definition of an “automated

quotation,” and whether the integration into

national market system would lead to materially

worse executions for investors.53 During the

upcoming fiscal year, we will continue to monitor

this and other SRO filings, and consider how best

to advance the interests of investors during the

public process.

Outsourcing by Investment Advisers

In October 2022, the Commission proposed

to prohibit registered investment advisers from

outsourcing certain services and functions to thirdparty service providers without conducting due

diligence and monitoring of the service providers.54

Like businesses in many other industries, investment

advisers have increasingly engaged service providers

to support or perform certain functions or services

traditionally performed in-house.55 The Commission

acknowledges in the outsourcing proposal

referenced above (Outsourcing Proposal) that,

among other benefits, service providers may give

an adviser access to certain specialized expertise,

reduce risks of keeping a function in-house that the

adviser is not equipped to perform, or offer cost

savings that may be passed on to investors.56 The

Commission also notes, however, that an adviser’s

clients could be significantly harmed if the adviser

outsources a function or service without adequate

adviser oversight.57

The Advisers Act establishes a federal fiduciary

duty for investment advisers that comprises a

duty of loyalty and a duty of care and is made

enforceable by the antifraud provisions of the

Advisers Act.58 This combination of obligations

has been characterized as requiring the investment

adviser to act in the best interests of its client at

all times.59 Outsourcing a particular function or

service does not alter or diminish an adviser’s

obligations under the Advisers Act and the other

federal securities laws. Despite investment advisers’

fiduciary obligations, however, the Outsourcing

Proposal cites an increase in issues related to

outsourcing and inadequate adviser oversight.60

In an effort to address these issues, the Outsourcing

Proposal would establish a regulatory framework

requiring advisers to comply with specific elements

as part of a due diligence and monitoring process

to oversee the provision of certain “covered

functions.” The proposal defines a “covered

function” as “(1) a function or service that is

necessary for the adviser to provide its investment

advisory services in compliance with the Federal

securities laws, and (2) that, if not performed or

performed negligently, would be reasonably likely

to cause a material negative impact on the adviser’s

clients or on the adviser’s ability to provide

investment advisory services.” The determination

of what is a covered function would depend on

facts and circumstances, as the proposed rule is

meant to encompass functions or services that are

necessary for a particular adviser to provide its

investment advisory services.61 The proposal lists

examples of potential covered function categories

an adviser may wish to consider, however, such as:

Adviser / Subadviser; Client Services; Cybersecurity;

Investment Guideline / Restriction Compliance;

Investment Risk; Portfolio Management (excluding

Adviser / Subadviser); Portfolio Accounting;

Pricing; Reconciliation; Regulatory Compliance;

Trading Desk; Trade Communication and

Allocation; and Valuation.62

The Outsourcing Proposal would require an

adviser, prior to retaining a service provider

to perform a covered function, to reasonably

identify and determine through due diligence that

outsourcing the covered function to that service

provider would be appropriate by considering:

§ The nature and scope of the covered function;

§ Potential risks resulting from the service

provider performing the covered function,

including how to mitigate and manage

such risks;

REPORT ON OBJECTIVES: FISCAL YEAR 2024

§ The service provider’s competence, capacity,

and resources necessary to perform the

covered function;

§ The service provider’s material subcontracting

arrangements related to the covered function;

§ Coordination with the service provider for

federal securities law compliance; and

§ The orderly termination of the performance

of the covered function.63

The proposal also would require the adviser

to monitor the service provider’s performance

and reassess the selection of the service provider,

and to comply with certain reporting and

recordkeeping requirements.64

The Outsourcing Proposal has encountered

significant criticism, both within and outside

the Commission. For instance, some commenters

have challenged the proposal, indicating,

among other things, that the Commission has

underestimated the cost burden of the Outsourcing

Proposal. These commenters argue that increased

costs are likely to be passed on to adviser clients,

ultimately harming investors.65

While remaining cognizant of investment advisers’

fiduciary duty obligations, we also believe strong

oversight of advisers’ third-party service providers is

necessary to protect investors from the risks detailed

in the Outsourcing Proposal. At the same time, we

are sensitive to, among other things, concerns about

the compliance costs associated with the proposal.

In particular, we are concerned that such cost

burdens could be passed on to investors, especially

retail investors who currently benefit from investing

in mutual funds with low fees and expense ratios.

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

We look forward to working with our Commission

colleagues in FY 2024 to help ensure that investors

are protected against the dangers of adviser

outsourcing without incurring any unnecessary

costs for advisory services.

Mutual Funds: Transaction Costs

and Dilution

In FY 2024, we look forward to working with

our colleagues in the Division of Investment

Management to address investor concerns

regarding the dilution of long-term shareholders’

interests in mutual funds.

Millions of retail investors rely on mutual fund

investments for long-term savings goals such as

paying for college, buying a home, or retiring

comfortably. The value of long-term investors’

mutual fund shares are diluted, however, when the

fund buys portfolio investments to invest proceeds

from purchasing shareholders or sells portfolio

investments to meet shareholder redemptions.66

Mutual fund shares do not trade on exchanges like

exchange-traded funds or closed-end funds, but are

instead purchased and redeemed directly from the

issuer at prices that reflect the next-calculated net

asset value (NAV) of the fund at the end of the day

of the purchase or redemption. Trading activity and

other changes in portfolio holdings associated with

the transactions, however, may occur over multiple

business days following the purchase or redemption

request.67 The costs of the transactions are therefore

borne by all shareholders remaining in the mutual

fund after the purchase or redemption.

Over time, the interests of long-term shareholders

in a fund may be significantly diluted by the

purchase and redemption activity of other

investors in the fund. The less liquid the fund’s

portfolio holdings, the greater this dilution effect

can become, due to the higher transaction costs

associated with less liquid investments. Similarly,

during times of market stress, the dilution effect

may be greater because the fund may be forced to

buy or sell holdings at unfavorable market prices.

fees or swing pricing.70 On November 2, 2022,

the Commission voted to propose amendments

intended to better prepare mutual funds (and

certain other open-end funds) for stressed market

conditions and to mitigate dilution of shareholders’

interests.71 Among other things, the Commission’s

proposal would require mutual funds to implement

swing pricing.72

A mutual fund has a number of tools available to

mitigate dilution under existing Commission rules,

including the fund’s liquidity risk management

program, the option to use swing pricing, and the

ability to impose purchase or redemption fees.68

Effective liquidity risk management programs may

reduce a fund’s need to incur higher transaction

costs associated with less liquid investments, even in

times of market stress. Swing pricing is a fund share

pricing method intended to allocate costs stemming

from inflows or outflows to those investors engaged

in purchasing or selling activity, rather than to other

investors. And redemption fees charged to investors

engaged in selling activity can help protect the

interests of non-redeeming shareholders.

Notwithstanding these avenues for mitigating

dilution, in March 2020 mutual funds faced

significant redemptions and liquidity concerns

in connection with economic shock from the

onset of the COVID-19 pandemic.69 Commission

staff subsequently conducted a review of funds’

current tools for managing liquidity and limiting

dilution, finding weaknesses in funds’ liquidity

risk management programs and limited use of

tools designed to limit dilution such as redemption

While we take no position at this time on the

specific recommendations in the Liquidity and

Swing Pricing Proposal, we are encouraged by the

Commission’s efforts to mitigate dilution. At the

same time, we are sensitive to feedback received

regarding the potential operational challenges that

may accompany a transition to swing pricing and

the impact those challenges may have on retail

investors. We look forward to continuing to discuss

and evaluate the proposal, as well as alternative

anti-dilution approaches suggested by fund industry

participants and observers.

INVESTOR ENGAGEMENT

OIAD 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.73 One of the primary

ways in which OIAD collects this information and

sustains a focus on investors is through ongoing

investor engagement activities.74 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.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

The Office actively seeks input from a broad range

and variety of investors—including individual retail

investors, smaller and regional investor groups

and advocates, public and private pension funds,

and other small and large money managers—as

well as regulatory counterparts, non-profits, and

consumer groups. 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, DC, to lobby

government leaders, or who do not regularly

submit comment letters to the Commission.

Among those whom OIAD especially seeks to hear

from are older investors, new investors, veterans

and military spouses, affinity-connected investors,

investors from historically underserved, rural, or

Native American/First Nations’ communities, and

investors with disabilities. The Office also solicits

and encourages input from a range of stakeholders’

epistemological perspectives and values.

The goals for our investor engagement are twofold:

§ Understand the authentic and unabridged

voices of investors, their perspectives on

policies, rulemaking, 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.

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

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.

OFFICE OF INVESTOR RESEARCH

The Investor Advocate is directed by Congress 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.75 To better identify problems that

investors may have, and analyze the potential

impacts on investors of rules or regulations, the

Office of Investor Research (OIR) within OIAD

conducts research on issues that affect a broad set

of investors. OIR serves the public, OIAD, and the

Commission by providing data and evidence that

can inform policymaking, ultimately aiming to

increase the public’s participation and opportunities

for success in the investment marketplace by

offering research that may lead to better decisionmaking and outcomes.

As detailed in OIAD’s Report on Activities for

Fiscal Year 2022, OIR is focused on high-quality

data collection methods; multi-modality data

collection approaches; studying outcomes that

represent meaningful, positive change for investors;

and ensuring our work is cost-effective and timely.

We collaborate with other SEC divisions and offices

to assist policymakers by contributing technical

expertise and advanced data collection methods on

important investor issues. We also work on deep

knowledge generation projects that allow us to

more thoroughly understand investors’ problems

and test solutions that work for investors. In both

ways we seek to provide actionable insights for

policymakers to tailor effective solutions to the

problems that investors experience.

In the coming year, we will continue to conduct

thoughtful research on issues that affect a broad

set of investors while collecting customized data

through testing, surveys and qualitative methods.

Our research will continue in such important

domains as disclosure effectiveness, financial

advice, and understanding investors. To increase

our policy impact by shortening our project

lead time, and develop and track policy-relevant

metrics over time, we plan to launch a program

of longitudinal investor surveys. Longitudinal

surveys provide an effective method for quickly

recruiting participants with certain characteristics,

and understanding time-sensitive dynamics within

a given household—information that is critical to

understanding investor activity and policy efficacy.

We will also continue to seek opportunities to work

with rulemaking divisions and use our tools to

advocate for investor-centered thinking in policy

design; for example, we are currently working to

inform the Division of Investment Management’s

potential rulemaking on Registered Indexed

Linked Annuities (RILAs). In sum, these efforts

seek to improve our infrastructure for providing

key investor information to the Commission,

increase the knowledge base with which we are

able to advocate for investor interests, and directly

advocate for investors in the policymaking process.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

OMBUDS’ REPORT

As set forth in

Exchange Act

Section 4(g)(8), 15

U.S.C. § 78d(g)

(8), the Ombuds is

required to: (i) 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;

(ii) review and make recommendations regarding

policies and procedures to encourage persons

to present questions to the Investor Advocate

regarding compliance with the securities laws;

and (iii) establish safeguards to maintain the

confidentiality of communications between

investors and the Ombuds.76

The Ombuds is also required to “submit a

semi-annual report to the Investor Advocate

that describes the activities and evaluates the

effectiveness of the Ombuds during the preceding

year” (Ombuds’ Report).77 The Ombuds’ Report

must be included in the semi-annual reports

submitted by the Investor Advocate to Congress.

To maintain reporting continuity, the Ombuds’

Report included in the Investor Advocate’s June

30 Report on Objectives describes the Ombuds’

activities during the first six months of the current

fiscal year and provides the Ombuds’ objectives for

the following full fiscal year. The Ombuds’ Report

included in the Investor Advocate’s December 31

Report on Activities describes the activities and

discusses the effectiveness of the Ombuds78 during

the full preceding fiscal year.

Accordingly, this Ombuds’ Report provides

a look back on the Ombuds’ activities for the

six-month period of October 1, 2022, through

March 31, 2023 (Reporting Period), and discusses

the Ombuds’ objectives and outlook for FY 2024,

beginning October 1, 2023.

OMBUDS ROLE AND STANDARDS

OF PRACTICE

The Ombuds assists retail investors and other

persons with concerns or complaints about the SEC

or the SROs the SEC oversees. The assistance the

Ombuds provides includes, but is not limited to:

§ listening to inquiries, concerns, complaints,

and related issues;

§ helping persons explore available SEC

options and resources;

§ clarifying certain SEC decisions, policies,

and practices;

§ taking objective measures to informally

resolve matters that fall outside of the

established resolution channels and

procedures at the SEC; and

REPORT ON OBJECTIVES: FISCAL YEAR 2024

§ providing periodic updates to SEC

leadership so that they are aware of

trends and significant emerging issues

that are brought to our attention, and

otherwise acting as an alternate channel

of communication between retail investors

and the SEC.

In practice, individuals often seek the Ombuds’

assistance as an initial point of contact to resolve

their inquiries or as a subsequent or ongoing

point of contact when they are dissatisfied with

the outcome, rate of progress, or resolution of

their inquiries.

Like Ombuds at other federal financial regulators, the SEC Ombuds follows three core standards of practice:

Confidentiality

Impartiality

Independence

The Ombuds has established

safeguards to protect

The Ombuds does not

represent or act as an advocate

By statute, the Ombuds

reports directly to the Investor

confidentiality, including the

use of an electronic platform

for receiving inquiries, a

separate email address,

dedicated telephone and fax

lines, and secure file storage.

The Ombuds generally treats

matters as confidential, and

takes reasonable steps to

maintain the confidentiality of

communications. The Ombuds

also attempts to address

matters without sharing

information outside of the

Ombuds staff, unless given

permission to do so. However,

the Ombuds may need to

contact other SEC divisions

or offices, SROs, entities,

and/or individuals and share

information without permission

under certain circumstances

including, but not limited

to: a threat of imminent risk

or serious harm; assertions,

complaints, or information

relating to violations of the

securities laws; allegations of

government fraud, waste, or

abuse; or if otherwise required

by law.

for any individual or entity, and

does not take sides on any

issues. The Ombuds maintains

a neutral position, considers

the interests and concerns

of all involved parties, and

works to resolve questions and

complaints by clarifying issues

and procedures, facilitating

discussions, and identifying

options and resources.

Advocate, who reports

directly to the Chair of the

SEC. However, OIAD and the

Ombuds are designed to

remain somewhat independent

from the rest of the SEC.

Through the Congressional

reports filed every six months

by the Investor Advocate,

the Ombuds reports directly

to Congress without any

prior review or comment

by the Commission or other

Commission staff.

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

The Ombuds’ Challenge

The mission statement of the SEC is to “protect

investors, maintain fair, orderly, and efficient

markets, and facilitate capital formation.”79 A

predictable question we encounter, then, is what

particular role does the Ombuds play in protecting

investors? Among many other things, staff in

our Office submits tips, complaints, and referrals

regarding credible allegations of securities law

violations to the Division of Enforcement. We

conduct independent research and craft tailored

solutions for an investor’s question or problem.

We monitor trends in retail investor complaints to

identify emerging areas of concern.

Sometimes, however, our staff is unable to provide

investors with the assistance or relief they request.

For instance, the Ombuds may not:

§ decide the facts in a dispute that the investor

has with the Commission or an SRO, or in a

dispute before an SRO, such as an arbitration

or mediation;

§ intervene on behalf of, or represent the

interest of, an investor in a formal dispute or

investigation process;

§ provide advice on how the federal securities

laws may impact their particular investments or

legal options; or

§ change formal outcomes, including decisions

about whether to investigate an allegation of

wrongdoing, settle an enforcement action, or

create a Fair Fund.

Given these limitations, when investors contact our

Office with such requests, we may identify other

means to protect their interests and preserve their

legal rights. When appropriate, our staff may direct

investors to other SEC resources that will address

their questions or concerns, or we may direct

investors to external avenues of assistance. For

example, when an investor contacts the Ombuds

with concerns that fall under the purview of

another federal financial regulator, our staff may,

after obtaining consent from the investor, facilitate

communication between the investor and the

Ombuds from the appropriate regulatory agency

to resolve the matter.

In addition to responding to investor complaints,

requests and concerns on an ad hoc basis, Ombuds

staff also stays current on policy issues that affect

retail investors by engaging with investor advocacy

groups and law school securities arbitration clinics

that provide legal services to harmed investors.

Through this engagement, we gain a deeper

understanding of potential legal and structural

difficulties retail investors may face as they interact

with industry professionals and with SROs. This

understanding may prompt broader Ombuds action

and advocacy on behalf of retail investors, such as

research into a particular area of investor concern.

STREAMLINED COMMUNICATIONS

WITH RETAIL INVESTORS

The Ombudsman Matter Management System

(OMMS) is an electronic platform for receiving

inquiries, tracking and analyzing matter and

contact information. It ensures our Office meets all

data management, confidentiality, and reporting

obligations required by statute and the SEC Rules

of Practice. The OMMS Form, a web-based,

mobile-responsive form permitting the submission

of inquiries, complaints, and documents directly

to the Ombuds, guides the submitter through a

series of questions specifically designed to elicit

information concerning matters within the scope

of the Ombuds’ function. In addition, OMMS

allows staff to easily upload and maintain related

documents for review.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

When an OMMS matter record is created,

Ombuds staff can review the matter details and

communicate with the investor via the OMMS

platform. OMMS also enables the Ombuds and

staff to search and analyze matters and contacts

by submitter, primary issue, fiscal year, and a

number of other categories, and to review data

and customize specific reports when a deeper

examination is required.

As noted above in the Message from the Investor

Advocate, this upcoming fiscal year, the SEC’s

Office of Information Technology will deploy

a number of enhancements to OMMS. These

enhancements will improve the accuracy with

which staff classifies complaints, and will track

We review your

information,

determine if

you are a retail

investor and

if your matter

concerns the SEC

or a related SRO,

and confirm that

your matter is

entered in OMMS.

We review

your matter in

detail, including

any related

background

information, laws,

and policies.

The Ombuds may

contact you, SEC

staff, and other

key persons for

more details on

the matter. The

Ombuds will

discuss your

concerns about

confidentiality, if

any, at this point.

The Ombuds and

staff discuss your

matter internally

to determine the

best options for

resolution and

to identify other

resources that

may be helpful

to you.

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

additional information about the disposition of

OMMS matters. The enhancements will also

increase the speed of service to retail investors

by enabling Ombuds staff to more quickly

and accurately process complaints and provide

responses to investors.

While the Ombuds encourages persons to submit

their inquiries via the OMMS Form, persons who

do not wish, or are unable, to use the OMMS Form

may contact the Ombuds by email, telephone, fax,

and mail. The following graphic illustrates the

general lifecycle of what happens when investors

or other interested persons contact the Ombuds

for assistance:

The Ombuds and

staff may contact

you to gather

more information

and to reply

to any interim

correspondence.

This may occur

several times

as we work to

resolve your

matter.

The Ombuds

resolves your

matter or provides

options for you

to consider. You

may be advised

to contact another

SEC division or

office, or another

entity for further

assistance or

resolution options.

We update your

matter records

accordingly. This

provides the

Ombuds with

easy access to

your matter

information

should you

have additional

questions or

concerns.

SERVICE BY THE NUMBERS

To respond to inquiries effectively and efficiently,

Ombuds staff monitors the volume of inquiries

and the resources devoted to addressing the

particular concerns raised. Ombuds staff tracks all

inquiries received by, or referred to, the Ombuds

Office, as well as all related correspondence and

communications to and from Ombuds staff. We

track the status of the inquiry from its receipt to

its resolution or referral, and we monitor the staff

engagement and resources utilized to respond to

the inquiry. This helps our Office identify systemic

or problematic issues, analyze matter volume

and trends, and provide data-driven support for

recommendations to the Investor Advocate.

Inquiry Volume

Inquiry volume is measured in terms of matters

and contacts. A matter is created when an initial

contact—a new, discrete inquiry—is received by or

referred to the Ombuds. When a matter is created,

Ombuds staff reviews the facts, circumstances, and

concerns, and assesses the staff engagement and

resources that may be required to respond to, refer,

or resolve the matter.

To note, a single matter may generate numerous

subsequent contacts—related inquiries and communications to or from the Ombuds staff deriving

from the matter. These contacts often require staff

to answer additional investor questions, to explain

or clarify proposed resolution options, or to discuss

issues with appropriate SEC or SRO staff.

Data across Primary Issue Categories

The Primary Issue Categories identified below are

broad descriptive labels that reflect the nature of

the primary issue raised in a submission, in light of

the information in that submission. From October

1, 2022, through March 31, 2023, retail investors,

industry professionals, concerned citizens, and

other interested persons contacted the Ombuds for

assistance on 1,336 matters covering 12 Primary

Issue Categories.80

Matters by Primary Issue Category

October 1, 2022 – March 31, 2023

11%

16%

11%

13%

31%

Allegations of Securities Law Violations / Fraud (146)

Atypical Matters (109)

Company Disclosures and Information (44)

FINRA Complaints / Questions / Procedures (169)

Investment Products / Retirement Accounts (408)

Non-SEC / Other Matters (152)

Organized Campaigns (10)

SEC Investigations / Litigation / Enforcement Actions (57)

SEC Questions / Complaints (214)

Securities Laws / Rules / Regulations / Procedures (23)

Securities Ownership (3)

SRO Rules / Procedures (1)

REPORT ON OBJECTIVES: FISCAL YEAR 2024

In addition to the 1,336 matters received from

October 1, 2022, to March 31, 2023, Ombuds

staff fielded 1,520 subsequent contacts deriving

from the original matters for a total of 2,855

contacts with the public in the first half of this

fiscal year. The chart that follows displays the

distribution of the additional 1,520 contacts across

the 12 Primary Issue Categories:

Contacts by Primary Issue Category

October 1, 2022 – March 31, 2023

16%

18%

16%

11%

24%

Allegations of Securities Law Violations / Fraud (251)

Atypical Matters (24)

Company Disclosures and Information (50)

FINRA Complaints / Questions / Procedures (240)

Investment Products / Retirement Accounts (366)

Non-SEC / Other Matters (162)

Organized Campaigns (9)

SEC Investigations / Litigation / Enforcement Actions (102)

SEC Questions / Complaints (274)

Securities Laws / Rules / Regulations / Procedures (37)

Securities Ownership (4)

SRO Rules / Procedures (1)

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

This Reporting Period, we observed a significant

decrease in the number of investor matters

involving volatile stocks known as “meme” stocks,

as compared with the same reporting period

last year. At the same time, there has been an

exponential increase in investor matters regarding

the application of SRO rules, as well as matters

regarding the SEC’s supervision of SROs. We

discuss these and other notable trends in Areas of

Importance and Interest to Retail Investors below.

How the Numbers Inform Our Efforts

The Ombuds Office tracks matter and contact

data to maintain a comprehensive view of the

allocation of staff resources and to identify matters

and contacts that significantly alter workflow

volumes, call for the realignment of Ombuds

staff assignments, or require added staff support.

The data also informs staff resource allocation

considerations related to proposed program

development, training, and outreach efforts. By

tracking data across primary issue categories, the

Ombuds may more easily identify potential areas of

concern for retail investors, and may act as an early

warning system about the impact of particular

issues or policies on retail investors and others.

While the numbers above capture the volume and

categories of submissions our Office receives, the

data does not capture the full value of the services

that Ombuds staff provides to the investing public.

Assisting just one investor with one issue can

make a significant difference to that investor, and

at times, may inform our Office’s approach as we

examine SEC or SRO policies and rulemakings.

AREAS OF INTEREST AND

IMPORTANCE TO RETAIL INVESTORS

During the Reporting Period, Ombuds staff

received 1,336 matter submissions, and initiated

over 1,500 more contacts by telephone and

email with persons who came to our office

for assistance. The summaries that follow are

composite descriptions of inquiries and complaints,

with details generalized, modified, or removed to

avoid the disclosure of nonpublic or confidential

information. The summaries should help inform

the reader about the variety of submissions we

receive and how we respond to those submissions.

Fraudulent Online Entities

Ombuds staff handled many matters involving

investments made through unregistered online

brokers and exchanges, most offering high-yield

investment plans or trading in digital assets

and advertised via social media. These investors

believed the online brokers or exchanges were

legitimate, only to later find themselves unable

to access their funds. Investors generally

contacted the Ombuds after receiving demands

for “advance fee” payments,81 sometimes by an

SEC or FINRA impersonator.

When appropriate, Ombuds staff submitted

complaints involving alleged securities law

violations to the SEC’s tips, complaints, and

referrals (TCR) system. Staff also referred matters

involving SEC or FINRA impersonators to staff

in the SEC’s Office of Inspector General (OIG),

Office of the General Counsel (OGC), or

appropriate FINRA staff, and provided harmed

investors with information about advance fee

fraud, as well as public information about the

potentially fraudulent entities. In some cases,

through these efforts, our staff was able to prevent

the further loss of investor funds.

Rules on Equity Market Structure

Many investors expressed concern about the effect

of current SEC and SRO market structure rules on

their personal interests or on market fairness. For

instance, some investors questioned the legality

or fairness of short sales conducted through

alternative trading systems known as “dark pools,”

which allow users to price orders without publicly

displaying the size or price to other participants.

Other investors expressed concern about payment

for order flow and other issues involving order

routing. Investors often alleged the current market

structure rules enabled market makers and

institutional investors to profit at the expense

of retail investors.

Among other things, Ombuds staff provided

these investors with educational materials about

the relevant market structure regulations and

SEC or SRO rules. After the SEC announced

sweeping proposed reforms to its market structure

rules on December 14, 2022, Ombuds staff

directed investors to the proposed rules and

encouraged them to submit comment letters

expressing their concerns.82

Digital Assets Issuers and Exchanges

The Ombuds received complaints regarding

problems with digital assets issuers and the

unregistered exchanges that trade digital assets.

During the last fiscal year, many of these exchanges

and issuers declared bankruptcy and investors

found themselves unable to access their assets.

Ombuds staff helped educate these investors on

the status of digital assets regulation, including

the SEC Chair’s calls for issuers and exchanges to

staff directed investors to civil and criminal actions

instituted by the SEC and U.S. Department of

Justice against certain issuers and exchanges.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

FINRA Trading Halt—Rule 6440(a)(3)

Many retail investors have contacted our office

to express concerns regarding a December 2022

trading halt implemented by FINRA pursuant to

FINRA Rule 6440(a)(3). This rule permits FINRA

to halt trading and quotations in over-the-counter

(OTC) equity securities where FINRA determines

that “an extraordinary event has occurred or

is ongoing that has had a material effect on the

market for the OTC Equity … or has caused or

has the potential to cause major disruption to

the marketplace or significant uncertainty in the

settlement and clearance process.”83 We appreciate

the gravity of these concerns, as well as the impact

the trading halt has had on many retail investors.

We will continue to monitor developments in this

matter, and to provide assistance and information

to interested parties in accordance with SEC

policies and procedures.

Ombuds as a Resource

During this Reporting Period, Ombuds staff

reviewed, analyzed, and evaluated over a thousand

investor matters. We researched applicable laws,

rules, and regulations, and engaged in discussions

with staff across the Commission to appropriately

address and resolve investor concerns. The majority

of our processing involves, on the one hand,

internal referrals to or consultation with staff in

other divisions or offices such as the Office of

Investor Education and Advocacy, OIG, OGC,

Enforcement/TCR/Whistleblower, Distributions/

Collections, Corporation Finance, Trading and

Markets, and Investment Management. On

the other hand, for matters outside the SEC’s

jurisdiction, Ombuds staff provide resources and

referral information for the appropriate SROs or

other regulatory entities, such as the Consumer

Financial Protection Bureau (CFPB), Commodity

Futures Trading Commission (CFTC), Federal

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

Deposit Insurance Corporation (FDIC), the Federal

Reserve Board, Federal Trade Commission (FTC),

and Departments such as Justice, Labor, and

Treasury. Through our Office’s collaboration with

colleagues throughout the Commission, we are

able to provide retail investors the information and

resources they need to address a given issue.

ACTING IN THE INTERESTS OF

RETAIL INVESTORS

To address issues that affect retail investors,

our Office may participate in, or undertake an,

analysis of those issues and, when possible,

identify ways to improve existing SEC and SRO

policies or processes.84

In FY 2024, Ombuds staff will focus efforts

on highlighting issues surrounding mandatory

arbitration in the investment advisory context.

We will continue our study of the incidence and

potential effects of discovery disputes in the

FINRA Dispute Resolution Services (FINRA DRS)

forum, and will review SRO rulemakings for

their potential impact on retail investors. We will

monitor market events that affect the retail investor

experience and, where necessary, raise awareness of

those effects within the Commission.

Mandatory Arbitration Clauses in Investment

Advisory Agreements

The Ombuds Office has previously acknowledged

growing concerns about the use of mandatory

arbitration clauses in investment advisory

agreements among SEC-registered advisers.85 In our

2022 Report on Activities, we noted the completion

of a preliminary study on the frequency with which

mandatory arbitration clauses and related terms

appear in advisory agreements.86

Ombuds and OIAD staff have since then broadly

expanded the scope of the preliminary study and

identified additional methods of obtaining more

data regarding mandatory arbitration clauses. Staff

reviewed a broad, diverse sample of investment

advisory agreements, and compiled data regarding

the occurrence of mandatory arbitration clauses,

as well as the occurrence of other terms that

would have an impact on the affordability and

accessibility of arbitration for retail investors.

Given the significance of mandatory arbitration for

investors harmed by their advisers, our Office will

continue its efforts to objectively study the issue

and inform the public of relevant findings.

Potential Discovery Abuse in

FINRA Arbitration

The requirement that investors arbitrate disputes

with brokerage firms in the FINRA dispute

resolution forum is nearly a universal feature of

broker-dealer agreements.87 Mandatory arbitration

has traditionally been justified on the basis that it is

a faster and less expensive alternative to litigation.88

Nevertheless, investor advocates and practitioners

have reported that investors have greater difficulty

obtaining necessary documents and information

from brokers during discovery arbitration than in

traditional litigation.89

Accordingly, in late 2022, the Ombuds Office

initiated a study of FINRA arbitration cases to

estimate the frequency with which discovery

disputes take place in FINRA arbitrations, as

well as the effects such disputes have on arbitral

outcomes for brokerage customers. Ombuds staff

will continue its focus on this issue in FY 2024.

Proposed Procedural, Technical, and

Clarifying Changes to the FINRA Code—

FINRA 2022-033

On January 6, 2023, FINRA filed SR-FINRA2022-033 (“FINRA 2022-33” or the “Procedural

Proposal”), which would implement various

procedural, technical and clarifying changes to

the existing Code of Arbitration Procedure for

Customer Disputes (the “Code”).90 Portions of the

Procedural Proposal stem from recommendations of

independent counsel following a review and analysis

of the FINRA DRS arbitrator selection process.91

If approved, FINRA 2022-33 would modify

existing rules and practices to provide greater

transparency and consistency to the arbitrator

selection process. For instance, the Procedural

Proposal would codify the FINRA DRS Director’s

current practice of excluding arbitrators from

arbitrator lists based on a manual review of

conflicts of interest 92 authorizing the Director to

remove an arbitrator upon a party’s request or

upon the Director’s initiative,93 and requiring the

Director to provide a written explanation to the

parties of the decision to remove an arbitrator.94

In addition to the proposed changes regarding

arbitrator selection, the Procedural Proposal would

codify various procedural, technical and clarifying

changes to the Code.95 According to FINRA, these

proposed changes would increase efficiency and

expedite processes for prehearing conferences

and hearing sessions, initiating and responding to

claims, motion practice, claim and case dismissals,

and providing a hearing record.96 For instance, the

Procedural Proposal would, among other things:

make video conference the default option for

REPORT ON OBJECTIVES: FISCAL YEAR 2024

prehearing conferences97 and special proceedings

in simplified arbitrations;98 require participants

in simplified arbitrations to redact personal

confidential information (PCI) in filings to FINRA

DRS;99 and codify arbitrators’ authority to combine

cases.100 The Procedural Proposal would also clarify

various aspects of motion practice, amendment of

pleadings and filing third party claims in FINRA

DRS.101

Commenters largely supported the proposed rule

changes.102 However, several commenters suggested

a number of modifications, such as providing

additional guidance to parties about redacting

PCI;103 permitting pro se investors to waive PCI

redaction or allowing FINRA DRS to redact PCI on

their behalf;104 and requesting further clarification

about arbitrators’ authority to combine cases.105

In response to commenters,106 FINRA amended

the Procedural Proposal to further clarify when

arbitrators may combine cases, and agreed to

provide additional guidance for redacting PCI.107

On April 12, 2023, the SEC solicited additional

comments on the amended Procedural Proposal

and instituted proceedings to determine whether

to approve or disapprove the proposed changes as

modified by the amendment.108

Our Office generally believes these proposed rule

changes will benefit parties in FINRA DRS by

increasing transparency, consistency, efficiency,

and clarity of FINRA DRS procedures. We will

continue to monitor the progress of the Procedural

Proposal, as well as commenters’ views on the

proposed changes.

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

Newly Proposed Revisions to FINRA’s

Expungement Rules: FINRA 2022-24

Access to accurate historical information about an

individual broker’s disputes with customers may

inform investor decisions about whom to hire, and

help regulators identify candidates for examination

or enforcement action. The expungement, or

removal, of a broker’s customer dispute information

from the Central Registration Depository system

and from FINRA’s BrokerCheck® may therefore

lead to less-informed investor behavior, and weaken

regulators’ ability to detect and deter misconduct.

For these and other reasons, expungement was

intended to be an “extraordinary remedy,” granted

in accordance with FINRA rules to remove clearly

inaccurate customer dispute information from the

record of individual brokers.109 However, continued

reports that arbitrators awarded expungement relief

for a vast majority of expungement requests110 made

clear that modifications to the existing expungement

rules were likely necessary to restore expungement

to its “extraordinary remedy” status. Our Office

has closely monitored FINRA’s previously proposed

revisions to the expungement rules, with a focus on

preserving retail investor interests and regulatory

access to customer dispute information.111

FINRA filed its most recent expungement proposal

—SR-FINRA 2022-24—(“FINRA 2022-24” or the

“Expungement Proposal”) with the Commission

on July 29, 2022.112 Following a period of public

comment and two partial amendments,113 on April

12, 2023, the Commission announced its intent to

approve FINRA 2022-24, as amended by the two

partial amendments, on an accelerated basis.114

FINRA 2022-024, as amended, will significantly

modify FINRA’s existing expungement rules, in

part, by:

§ requiring expungement requests filed by

associated persons outside of customer

arbitrations (straight-in requests), to be decided

by a three-arbitrator panel, randomly selected

from a roster of experienced public arbitrators

with enhanced expungement training (Special

Arbitrator Roster);

§ prohibiting parties to a straight-in request from

agreeing to fewer than three arbitrators to

consider their expungement requests, striking

any of the selected arbitrators, stipulating to an

arbitrator’s removal or stipulating to the use of

pre-selected arbitrators;

§ notifying state securities regulators of all

expungement requests, providing more

opportunity for state securities regulators to

attend and participate in expungement hearings

in straight-in requests;

§ imposing time limits for filing straight-in

requests; and

§ requiring unanimous agreement of the arbitrator

panel to grant expungement relief.115

FINRA additionally expressed its intent to observe

the effects of these rule changes and to make

further adjustments to the expungement process

if needed.116

We believe these changes will enhance the

investor protections afforded by FINRA’s

existing expungement rules, helping ensure

that expungement remains an “extraordinary

remedy.”117 We further believe that, by promoting

the accuracy of the information publicly available

in BrokerCheck®, these changes strike an

appropriate balance between the reputational

interests of registered representatives and the

interests of investors and regulators.

While additional efforts may be needed to ensure

expungement relief is reserved for factually

impossible, clearly erroneous or false allegations,118

the Expungement Proposal reflects an important

and necessary step in protecting investors and in

safeguarding the markets. We encourage retail

investors and interested parties to contact our

Office upon implementation of these rules, if

further modification to the rules may be required.

OMBUDS OUTREACH AND

ENGAGEMENT EFFORTS

Ombuds Outreach—Investor

Advocacy Clinics

In 1997, then-SEC Chairman Arthur Levitt, Jr.

announced the creation of two pilot law school

investor advocacy clinics to help retail investors

with small claim cases obtain quality legal

representation.119 Today, 11 law school investor

advocacy clinics across the United States provide

free legal counseling and representation to retail

investors in securities industry disputes. Under the

supervision of their professors, clinic students also

comment on rule proposals that might affect their

clients’ interests, and participate in other forms

of public outreach—such as community-based

presentations and dissemination of informational

materials tailored to retail investors.120

REPORT ON OBJECTIVES: FISCAL YEAR 2024

Since 2016,121 the Ombuds Office has actively

engaged with investor advocacy clinic students and

professors, exchanging information, experiences

and ideas about how to protect the interests of

retail investors. Each year, the Ombuds hosts

an annual summit where clinic students give

presentations on issues of specific interest to their

clients. The summit provides a unique opportunity

for students and regulators to learn about their

respective work and practices, providing both

with a more a well-rounded perspective on retail

investor concerns.

2023 SEC Investor Advocacy Clinic

Summit Overview

On Wednesday, March 29, 2023, the Ombuds

Office and the SEC Division of Enforcement’s

Retail Strategy Task Force (RSTF) hosted the

fourth annual SEC Investor Advocacy Clinic

Summit (Summit) as a virtual event. For the second

consecutive year, the Summit was a joint endeavor

between the Ombuds and RSTF. The event,

livestreamed on the SEC’s website, was intended

to highlight the work of the law school clinics

and raise public awareness of the services they

provide. Students discussed the origin of the clinics

and nature of their work, the role of mandatory

arbitration in resolving brokerage disputes, two

representative cases, resource allocation, and other

challenges to the viability of the clinics. Over 1,800

viewers tuned in to the outreach event.

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

The event featured remarks and Q&A with

SEC Chair Gary Gensler, Commissioners Hester

Peirce, Caroline Crenshaw, Mark Uyeda, and

Jaime Lizárraga, as well as remarks from Cristina

Martin Firvida, the SEC’s new Investor Advocate.

All 11 active law school investor advocacy clinics

from across the country shared their perspectives

and engaged with SEC subject matter experts on

pressing issues currently facing retail investors.

Participating law schools included (in alphabetical

order): Benjamin N. Cardozo School of Law,

Cornell Law School, Fordham University School

of Law, Howard University School of Law, New

York Law School, Northwestern Pritzker School

of Law, Pace University School of Law, Seton Hall

University School of Law, St. John’s University

School of Law, University of Miami School of Law,

and the University of Pittsburgh School of Law.

Given the success of this and prior summits, we

look forward to hosting future summits—whether

as in-person, virtual, or hybrid events—as a

signature feature of the Ombuds’ commitment

to retail investors and the work of the law

school clinics.

Additional Engagement Activities

During this Reporting Period, Ombuds staff

attended and participated in select securities

industry events with the goal of improving our

service to retail investors and educating external

groups about the services our Office can provide.

These events included informational meetings and

listening sessions with the American Association

of Justice, the American Association of Retired

Persons, directors of the law school investor

advocacy clinics, and the SEC’s international

regulatory counterparts. Ombuds staff also

met periodically with the Coalition of Federal

Ombudsmen, as well as the Public Investors

Arbitration Bar Association (PIABA), FINRA,

and the FINRA Ombudsman. Pursuant to the

Office’s study of mandatory arbitration among

SEC-registered investment advisers, the Ombuds

conducted interviews and engaged in discussions

about mandatory arbitration with PIABA,

FINRA, the American Association of Individual

Investors, the Securities Industry and Financial

Markets Association, the North American

Securities Administrators Association, Better

Markets, Financial Services Institute, the American

Arbitration Association, and JAMS.

In FY 2024, we will continue to expand

the footprint of this Office by more actively

participating in external securities industry

activities, by establishing new relationships

and fortifying existing relationships across

the Commission through enhanced internal

engagement efforts.

OBJECTIVES AND OUTLOOK

This Reporting Period marks the beginning of my

service as the SEC Ombuds. I am humbled by this

appointment, and grateful to our Investor Advocate

for trusting me to serve the investing public in

this capacity. However, none of the Office’s work

would be possible without the tireless efforts of

Ombuds staff or their commitment to helping those

in need of our assistance. Within the SEC, our

Office performs a distinct function that requires

a unique combination of skills and traits. In that

regard, this year we have been fortunate to add

Senior Counsel Richard E. Dominguez to our team

of professionals. We hope to expand our team in

the next fiscal year to meet the ever-growing need

to aid retail investors.

During my time in this Office, I have learned

much from discussions with colleagues across

the Commission, by engaging with stakeholders

interested in investor protection, and by listening to

the concerns of the investors we serve. I am proud

of our Office’s efforts to protect and promote retail

investor interests, but recognize there is much more

work to do.

In FY 2024, I look forward to further fostering

our connection with retail investors, with the

law school investor advocacy clinics, and other

interested groups that share their views with

our Office. I hope our work may reach those

populations that most need a voice, so we may

be their voice within the Commission.

Stacy A. Puente

Ombuds

REPORT ON OBJECTIVES: FISCAL YEAR 2024

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

SUMMARY OF

INVESTOR ADVISORY COMMITTEE

RECOMMENDATIONS AND

SEC RESPONSES

Congress established the Investor Advisory

Committee (IAC) to advise and consult with the

Commission on regulatory priorities, initiatives to

protect investor interests, initiatives to promote

investor confidence and the integrity of the

securities marketplace, and other issues.122 As

an independent advisory committee, the IAC is

independent not only of the Commission, but also

of OIAD, even though the Investor Advocate is a

statutory member of the IAC. The IAC is composed

of the Investor Advocate; a representative of state

securities commissions; a representative of the

interests of senior citizens; and not fewer than

10, nor more than 20, members appointed by the

Commission to represent the interests of various

types of individual and institutional investors.123

Exchange Act Section 39 authorizes the IAC

to submit findings and recommendations for

review and consideration by the Commission.124

The statute also requires the SEC “promptly” to

issue a public statement assessing each finding or

recommendation of the IAC and disclosing the

action, if any, the Commission intends to take

with respect to the finding or recommendation.125

While the Commission must respond to the IAC’s

recommendations, it is under no obligation to agree

with or act upon the recommendations.126

As presented below, this report summarizes

recommendations the IAC has made since

June 2022, and the SEC’s responses to them.127

Although we are not required to report IAC

recommendations and SEC responses, historically,

we have done so. In reviewing the summaries

below, it is important to understand that the

Commission currently may be pursuing initiatives

that are responsive to IAC recommendations

but that have not yet been made public. Because

Commission staff—including the staff of this

Office—are prohibited from disclosing nonpublic

information,128 any pending initiatives are not

reflected in this Report.

For a complete list of recommendations of the

IAC, please see the Spotlight on Investor Advisory

Committee webpage at SEC.gov/spotlight/investoradvisory-committee.

CUSTOMER ACCOUNT STATEMENTS129

On March 2, 2023, the IAC recommended

surveying investors about statement use and utility;

amending FINRA Rule 2231 to improve contents,

format, and presentation; standardizing terms for

comparable performance measures in statements;

requiring investment advisers to provide statements

at least quarterly; and continuing paper as a default

delivery method with an option for electronic

delivery. A response from the SEC is pending.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

ACCOUNTING MODERNIZATION130

On September 21, 2022, the IAC recommended

establishing an advisory committee on Accounting

Modernization that can assist the Financial

Accounting Standards Board (FASB) in its

standard-setting process; requiring that the

FASB study the costs of delayed rulemaking;

and urged the FASB to create a single searchable

database of its authoritative literature that would

be freely available to the public. On February

27, 2023, the Financial Accounting Foundation

announced free access to online accounting

standards codification.131

CLIMATE-RELATED DISCLOSURE132

In response to the Commission’s March 2022

proposed rules on public company climaterelated disclosure,133 on September 21, 2022,

the IAC recommended adding a requirement of

“Management Discussion of Climate-Related

Risks & Opportunities;” requiring disclosure of

material facility locations; and eliminating the

disclosure requirement around board expertise.

Further SEC action on the proposed rules is

pending, as reflected in the SEC’s Regulatory

Flexibility Agenda.

CYBERSECURITY DISCLOSURE134

In response to the Commission’s March 2022

proposed rules on public company cybersecurityrelated disclosure,135 on September 21, 2022, the

IAC recommended requiring companies to disclose

key factors used to determine the materiality

of a cybersecurity incident; extending certain

disclosure provisions to registration statements; and

reconsidering the disclosure requirement around

board cybersecurity expertise. Further SEC action

on the proposed rules is pending, as reflected in the

SEC’s Regulatory Flexibility Agenda.

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

PROTECTING OLDER ADULT

INVESTORS136

On June 9, 2022, the IAC recommended proposing

various reforms to improve the deterrence and

prosecution of investment fraud against older

adults. These recommendations included shifting

the foundational values that reinforce harmful

victim-blaming practices; helping to decrease victim

shame, deprioritization, and dehumanization;

strengthening the system for reporting, addressing,

and preventing investment fraud; improving

efforts to encourage investors to conduct robust

background checks before entrusting a firm or

professional; strengthening investor protection

for self-directed IRAs; developing a plan to

strengthen the training of investment professionals;

and encouraging the identification of a trusted

third-party contact on all financial accounts.

On June 12, 2023, the SEC’s Office of Investor

Education and Advocacy announced a public

service campaign encouraging financial literacy

among older investors. The campaign provides

older investors with tools and resources to protect

their investments and retirement assets.137 A further

response from the SEC is pending.

FUNDING INVESTOR ADVOCACY

CLINICS138

On June 9, 2022, the IAC recommended

renewing a 2018 IAC recommendation regarding

financial support for law school clinics that

represent investors. The IAC recommended that

the SEC support the Investor Justice Act of 2022,

which, if enacted, would provide authority to

the SEC to establish a grant program to fund

qualified investor advocacy clinics with the SEC’s

Congressional-appropriated funds. A response

from the SEC is pending.

ENDNOTES

Exchange Act § 4(g)(6), 15 U.S.C. § 78d(g)(6).

Exchange Act § 4(g)(6)(A)(i), 15 U.S.C. § 78d(g)(6)(A)

(i).

Exchange Act § 4(g)(6)(B)(i), 15 U.S.C. § 78d(g)(6)(B)

(i).

Exchange Act § 4(g)(4)(A), 15 U.S.C. § 78d(g)(4)(A).

Exchange Act § 4(g)(8)(A), 15 U.S.C. § 78d(g)(8)(A).

Exchange Act § 4(g)(8)(D), 15 U.S.C. § 78d(g)(8)(D).

Exchange Act § 4(g)(4)(B), 15 U.S.C. § 78d(g)(4)(B).

Exchange Act § 4(g)(4)(C), 15 U.S.C. § 78d(g)(4)(C).

Exchange Act § 4(g)(4)(D), 15 U.S.C. § 78d(g)(4)(D).

Exchange Act § 4(g)(4)(E), 15 U.S.C. § 78d(g)(4)(E).

Exchange Act § 39, 15 U.S.C. § 78pp.

Exchange Act § 39(b)(1)(A), 15 U.S.C. § 78pp(b)(1)(A).

See Statement Regarding the SEC’s Rulemaking

Package for Investment Advisers and Broker-Dealers,

Rick A. Fleming, Investor Advocate (June 5, 2019),

available at https://www.sec.gov/news/public-statement/

statement-regarding-sec-rulemaking-packageinvestment-advisers-broker-dealers.

See Staff Bulletin: Standards of Conduct for BrokerDealers and Investment Advisers Care Obligations

(Apr. 20, 2023), available at https://www.sec.gov/tm/

standards-conduct-broker-dealers-and-investmentadvisers.

See, e.g., Request for Information and Comments

on Broker-Dealer and Investment Adviser Digital

Engagement Practices, Related Tools and Methods, and

Regulatory Considerations and Potential Approaches;

Information and Comments on Investment Adviser

Use of Technology To Develop and Provide Investment

Advice, Exchange Act Rel. No. 92766, 86 Fed. Reg.

49067, 49075 (Sept. 1, 2021), available at https://www.

federalregister.gov/d/2021-18901 (“The use of a DEP

by a broker-dealer may, depending on the relevant facts

and circumstances, constitute a recommendation for

purposes of Reg BI.”)

See id. at 49077.

See id. at section II.C.2.

See Proposed Rules, Office of Management and

Budget, SEC Agency Rule List, Digital Engagement

Practices for Broker-Dealers, RIN 3235-ANOO,

available at https://www.reginfo.gov/public/do/

eAgendaViewRule?pubId=202210&RIN=3235-AN00,

and Digital Engagement Practices for Investment

Advisers, RIN 3235-AN14, available at

https://www.reginfo.gov/public/do/eAgendaViewRule?

pubId=202210&RIN=3235-AN14.

See Proposed Rule, Regulation Best Execution,

Exchange Act Release No. 96496, 88 Fed. Reg. 5440

(Jan. 27, 2023), available at https://www.federalregister.

gov/d/2022-27644.

See Comment File S7-32-22, Regulation Best

Execution, available at https://www.sec.gov/comments/

s7-32-22/s73222.htm.

See Proposed Rule, Regulation S-P: Privacy of

Consumer Financial Information and Safeguarding

Customer Information, Exchange Act Release

No. 97141, 88 Fed. Reg. 20616 (Apr. 6, 2023),

available at https://www.federalregister.gov/

documents/2023/04/06/2023-05774/regulation-sp-privacy-of-consumer-financial-information-andsafeguarding-customer-information.

Press Release. SEC Proposes Changes to Reg S-P to

Enhance Protection of Customer Information (Mar.

15, 2023), available at https://www.sec.gov/news/pressrelease/2023-51.

Fact Sheet, SEC, Proposed Enhancements to Regulation

S-P (Mar. 15, 2023), available at https://www.sec.gov/

files/34-97141-fact-sheet.pdf.

For example, in 2019, the estimated amount of capital

reported as raised in private offerings under Rule

506(b) of Regulation D was $1.5 trillion, compared

to a total of $1.2 trillion raised in registered offerings.

SEC, Staff Report to Congress on Regulation A

/ Regulation D Performance (2020) [hereinafter

“Report on Regulation A and Regulation D”], at 16,

available at https://www.sec.gov/files/report-congressregulation-a-d.pdf.

See McKinsey & Co., McKinsey Global Private

Markets Review 2023: Private markets turn down

the volume (Mar. 2023), available at https://www.

mckinsey.com/industries/private-equity-and-principalinvestors/our-insights/mckinseys-private-marketsannual-review#/ (last visited June 1, 2023).

REPORT ON OBJECTIVES: FISCAL YEAR 2024

See, e.g., Report on Regulation A and Regulation D,

at 40.

See, e.g., SEC, Investor Bulletin, Private Placements

under Regulation D (Aug. 17, 2022), available at

https://www.sec.gov/oiea/investor-alerts-and-bulletins/

private-placements-under-regulation-d-investorbulletin; Rachita Gullapalli, SEC, Div. of Econ. and

Risk Analysis, Misconduct and Fraud in Unregistered

Offerings: An Empirical Analysis of Select SEC

Enforcement Actions (Aug. 2020), available at https://

www.sec.gov/files/misconduct-and-fraud-unregisteredofferings.pdf; Caroline A. Crenshaw, Commissioner,

SEC, Big “Issues” in the Small Business Safe Harbor:

Remarks at the 50th Annual Securities Regulation

Institute (Jan. 30, 2023), available at https://www.

sec.gov/news/speech/crenshaw-remarks-securitiesregulation-institute-013023.

SEC Investor Advisory Committee, Meeting Agenda

(Mar. 2, 2023), available at https://www.sec.gov/

spotlight/investor-advisory-committee/iac030223agenda.htm.

See Webcast, SEC Investor Advisory Committee

Meeting (Mar. 2, 2023), available at https://www.

youtube.com/watch?v=v7t3vwxHwvg.

Id.

See SEC, Office of the Investor Advocate, Report

on Activities, Fiscal Year 2020, available at https://

www.sec.gov/files/sec-investor-advocate-reportactivities-2020.pdf at 6 (Amendments to the Securities

Act Registration Exemptions).

See, e.g., Elisabeth de Fontenay, The Deregulation of

Private Capital and the Decline of the Public Company,

68 Hastings Law Journal 445-502 (2017).

See, e.g., id.; Better Markets, Fact Sheet, Expanding

Private Markets Undercuts Public Markets, Investor

Protections, and Capital Formation (2023), available at

https://bettermarkets.org/wp-content/uploads/2023/04/

Better_Markets_Private_Markets_Investor_Protection_

Fact_Sheet_4-14-23.pdf (last visited June 1, 2023).

The number of IPOs in the U.S. fell from an annual

average of 310 during 1980–2000 to an average of 108

during the 2001–2016 period. Jay R. Ritter, Executive

Summary: Where Have All the IPOs Gone?, Univ.

of Fla. (Mar. 17, 2017), available at https://site.

warrington.ufl.edu/ritter/files/2017/03/Where-Have-Allthe-IPOs-Gone_exec-sum.pdf.

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

For example, under Rule 506(b) of Regulation D,

an issuer may sell securities to an unlimited number

of accredited investors and up to 35 non-accredited

investors who are financially sophisticated.

An individual is an accredited investor based on wealth

when that person, either alone or together with a

spouse or spousal equivalent, has a net worth that

exceeds $1 million, excluding the value of the person’s

primary residence.

An individual is an accredited investor based on

income when that person has had an annual income

that exceeded $200,000 (or $300,000 with a spouse

or spousal equivalent) in each of the prior two years

and has a reasonable expectation of the same for the

current year.

An individual can also qualify as an accredited investor

through other measures of financial sophistication,

for example, by holding in good standing certain

professional certifications or designations. Entities

can qualify as accredited investors by meeting certain

criteria under the accredited investor definition.

See SEC, Office of the Investor Advocate, Report

on Activities, Fiscal Year 2021, available at https://

www.sec.gov/files/FY21_OIAD_SAR_ACTIVITIES_

REPORT_FINAL_508.pdf at 47 (Ombudsman’s

Report: Areas of Interest and Importance to

Retail Investors).

See, e.g., letter from the North American Securities

Administrators Association, Inc. to Erik F. Gerding,

Director, Division of Corporation Finance, SEC,

RE: Private Market Reforms (Mar. 7, 2023),

available at https://www.nasaa.org/wp-content/

uploads/2023/03/2023-03-07-Letter-to-Erik-GerdingRegarding-Private-Market-Reforms.pdf (last visited

May 19, 2023); Sophistication or Discrimination? How

the Accredited Investor Definition Unfairly Limits

Investment Access for the Non-wealthy and the Need

for Reform, Hearing Before the Subcomm. on Capital

Markets, H. Comm. on Fin. Serv., 118th Cong. (2023),

available at https://financialservices.house.gov/calendar/

eventsingle.aspx?EventID=408510.

See Private Fund Advisers; Documentation of

Registered Investment Adviser Compliance Reviews,

Investment Adviser Act Rel. No. 5955, 17 C.F.R.

pt. 275 (Feb. 9, 2022), available at https://www.sec.

gov/rules/proposed/2022/ia-5955.pdf, at n. 6 and

accompanying text.

See Id. See also SEC, Office of the Investor Advocate,

Report on Objectives, Fiscal Year 2023, at 8, available

at https://www.sec.gov/files/sec-office-investoradvocate-report-objectives-fy2023.pdf.

Id. at note 42 and accompanying text. The

Commission also recently adopted amendments to

Form PF, the confidential reporting form for certain

SEC-registered investment advisers to private funds,

designed to enhance the ability of the Financial Stability

Oversight Council to assess systemic risk and to bolster

the Commission’s oversight of private fund advisers

and its investor protection efforts. See Amendments to

Form PF to Require Event Reporting for Large Hedge

Fund Advisers and Private Equity Fund Advisers and

to Amend Reporting Requirements for Large Private

Equity Fund Advisers, Investment Adviser Act Rel. No.

6297 (May 3, 2023), available at https://www.sec.gov/

rules/final/2023/ia-6297.pdf.

These include rulemakings pertaining to Regulation

D and Form D; the definition of securities held of

record under Exchange Act Section 12(g); and the

holding period for restricted securities under Securities

Act Rule 144. See Regulatory Flexibility Agenda,

Securities Act Release No. 11118, Exchange Act

Release No. 96009, Investment Advisers Act Release

No. 6165; Investment Company Act Release No.

34725, 88 Fed. Reg. 11376-01 (Feb. 22, 2023);

Office of Info. and Regulatory Affairs, Office of

Mgmt. and Budget, Agency Rule List—Fall 2022,

SEC available at https://www.reginfo.gov/public/

do/eAgendaMain?operation=OPERATION_GET_

AGENCY_RULE_LIST&currentPub=true&agencyCo

de=&showStage=active&agencyCd=3235&Image58.

x=18&Image58.y=15&Image58=Submit (last visited

May 19, 2023).

For example, there are a number of bills that, if

enacted, would modify the accredited investor

definition as well as other bills pertaining more

generally to the regulation of private offerings under

the Securities Act.

See SEC, Newsroom, SEC Proposals: Market Structure,

available at https://www.sec.gov/newsroom/marketstructure-proposals-december-2022.

See Proposed Rule, Disclosure of Order Execution

Information, Exchange Act Rel. No. 96493, 88 Fed.

Reg. 3786 at 3826 (Jan. 20, 2023).

See, e.g., Proposed Rule, Disclosure of Order Execution

Information, 88 Fed. Reg. 3786 at 3825 (“Would it be

preferable for the Plan to establish the required format,

including an associated schema, for the summary

reports? … Should the Commission require that

summary Rule 605 reports be posted in a centralized

location?”).

See Market Data Infrastructure, Exchange Act Release

No. 90610, 86 Fed. Reg. 18596 (Apr. 9, 2021),

available at https://www.federalregister.gov/d/202028370.

See, e.g., Consolidated Tape Association, Order

Disapproving the Twenty-Fifth Charges Amendment

to the Second Restatement of the CTA Plan and

Sixteenth Charges Amendment to the Restated CQ

Plan, Exchange Act Release No. 95851, 87 Fed. Reg.

58613 (Sept. 27, 2022), available at https://www.

federalregister.gov/d/2022-20833.

See Proposed Rule, Short Position and Short Activity

Reporting by Institutional Investment Managers,

Exchange Act Release No. 94313, 87 Fed. Reg.

14950 (Mar. 16, 2022), available at https://www.

federalregister.gov/d/2022-04670.

See Proposed Rule, Reporting of Securities Loans,

Exchange Act Release No. 93613, 86 Fed. Reg. 69802

(Dec. 8, 2021), available at https://www.federalregister.

gov/d/2021-25739.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

See Financial Industry Regulatory Authority,

Inc.; Order Instituting Proceedings To Determine

Whether To Approve or Disapprove a Proposed Rule

Change Relating to Alternative Display Facility New

Entrant, Exchange Act Rel. No. 97195, 88 Fed. Reg.

19173 (March 30, 2023), available at https://www.

federalregister.gov/d/2023-06557.

See id., 88 Fed. Reg. at 19175.

Outsourcing by Investment Advisers, Advisers Act

Rel. No. 6176 (Oct. 26, 2022), 87 Fed. Reg. 68816

(Nov. 16, 2022), available at https://www.govinfo.

gov/content/pkg/FR-2022-11-16/pdf/2022-23694.pdf.

(“Outsourcing Proposal”).

See Outsourcing Proposal at 68817.

See id.

See Outsourcing Proposal at note 21 and

accompanying text.

See Outsourcing Proposal at note 22 and

accompanying text.

See Outsourcing Proposal at 68819 (“We have

observed an increase in such outsourcing and issues

related to the outsourcing and advisers’ oversight. One

recent example is an enforcement action for alleged

violations of section 206 of the Advisers Act against

investment advisers that used models and volatility

guidelines from a third-party subadviser without first

confirming that they worked as intended. In another

recent action, an adviser allegedly failed to oversee a

third-party vendor that did not properly safeguard

customers’ personal identifying information. . . . In

response to our staff’s requests for documents, some

advisers have not provided the information necessary

to demonstrate compliance with the Advisers Act and

its rules because of outsourcing. For example, some

advisers that use client relationship management

providers have asserted that they have complied with

rule 204–3 because brochure delivery is programmed

into the providers’ software, though they cannot

produce records to evidence that delivery took place.”)

(internal citations omitted).

See Outsourcing Proposal at section II.A.1.

See id.

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

See SEC Fact Sheet, Outsourcing by Investment

Advisers, available at https://www.sec.gov/files/ia-6176fact-sheet.pdf.

See id.

See, e.g., Comment Letter from Gail C. Bernstein,

General Counsel, Investment Adviser Association, to the

Commission re: Outsourcing by Investment Advisers

(Dec. 23, 2022), available at https://www.sec.gov/

comments/s7-25-22/s72522-20153667-320948.pdf.

See Investment Company Swing Pricing, Investment

Company Act Rel. No. 32316 (Oct. 13, 2016), 81 Fed.

Reg. 82084 (Nov. 18, 2016), available at https://www.

federalregister.gov/documents/2016/11/18/2016-25347/

investment-company-swing-pricing (“Swing Pricing

Adopting Release”) at section II.A.1.

See id.

See id at text accompanying note 11 (“Commission

rules currently provide open-end funds with several

tools to mitigate dilution from shareholder purchase

or redemption activity and facilitate a fund’s ability

to meet shareholder redemptions in a timely manner.

These tools include a fund’s liquidity risk management

program, the option to use swing pricing for certain

funds, the ability to impose purchase or redemption

fees, and/or the ability to redeem in kind.”).

See id.

See Open-End Fund Liquidity Risk Management

Programs and Swing Pricing; Form N-PORT

Reporting, Investment Company Act Release No.

34726 (Nov. 2, 2022), 87 Fed. Reg. 77172 (Dec.

16, 2022), available at https://www.federalregister.

gov/documents/2022/12/16/2022-24376/open-endfund-liquidity-risk-management-programs-andswing-pricing-form-n-port-reporting, at note 67 and

accompanying text (“Today, no fund has implemented

swing pricing, and funds rarely use redemption fees to

address dilution other than in the case of short-term

trading of fund shares, meaning shareholders may

experience dilution both in normal and stressed

conditions, particularly when purchases or redemptions

are large or when funds invest in markets with high

transaction costs relative to other markets.”).

See SEC, Press Release, SEC Proposes Enhancements

to Open-End Fund Liquidity Framework (Nov. 2.

2022), available at https://www.sec.gov/news/pressrelease/2022-199.

Many commenters on the Commission’s Liquidity and

Swing Pricing Proposal strongly oppose the proposed

swing pricing requirement and an accompanying

“hard close” requirement the Commission proposed

to help effect swing pricing. See, e.g., Comment Letter

of Investment Company Institute (Feb. 14, 2023),

available at https://www.sec.gov/comments/s7-26-22/

s72622-20157306-325651.pdf (“We strongly oppose

the hard close on mutual fund orders (typically set by

most funds at 4:00 p.m. ET) and mandatory swing

pricing for mutual funds. Neither fund experience

nor the proposal’s economic analysis establishes that

such costly measures are warranted. The harm and

disruption for everyday mutual fund investors resulting

from them would be far too high. Implementing a

hard close would require significant systems rebuilds

across the industry, affecting the entire fund ecosystem,

including intermediaries such as broker-dealers

and retirement plan recordkeepers, administrators,

custodians, transfer agents, and the industry utility

(DTCC). The cost, resources, and effort to build these

systems would be enormous and lead to lost processing

efficiencies.”).

Exchange Act § 4(g)(4), 15 U.S.C. § 78d(g)(4).

See SEC’s Performance Goal #6: Investor Engagement

Activities, available at https://www.sec.gov/files/

fy-2024-congressional-budget-justification_final-3-10.

pdf#page=117 (last visited June 1, 2023).

§ 78d(g)(4), supra note 73.

Exchange Act § 4(g)(8)(B), 15 U.S.C. § 78d(g)(8)(B).

Exchange Act § 4(g)(8)(D), 15 U.S.C. § 78d(g)(8)(D).

As used in this report, the term “Ombuds” may

refer to the Ombuds, the Ombuds and staff in the

Ombuds Office, and, at times, to staff, contractors, and

interns in the Office of the Investor Advocate directly

supporting the Ombuds function.

See SEC, About the SEC, available at https://www.sec.

gov/about.shtml (last visited June 1, 2023).

To note, matters categorized as “Non-SEC/Other

Matters” refer to matters outside the jurisdiction of

the SEC, which fall within the jurisdiction of another

regulatory agency. Matters characterized as “Atypical

Matters” refer to matters where the submitter’s

characterization or description of the issue makes it

difficult to determine the nature of the complaint.

Advance fee frauds ask investors to pay a fee up

front—in advance of receiving any proceeds, money,

stock, or warrants—in order for the deal to go through.

The advance payment may be described as a fee, tax,

commission, or incidental expense that will be repaid

later. Some advance fee schemes target investors who

already purchased underperforming securities and

offer to sell those securities if an “advance fee” is paid,

or target investors who have already lost money in

investment schemes, see Investor.gov, Protect Your

Investments, Advance Fee Fraud, available at https://

www.investor.gov/protect-your-investments/fraud/

types-fraud/advance-fee-fraud.

The SEC’s Office of Investor Education and Advocacy

has published a number of investor publications about

advance fee fraud schemes on its website, available at

https://www.investor.gov/.

The SEC issued a press release regarding the market

proposals, see SEC, SEC Proposals: Market Structure,

available at https://www.sec.gov/newsroom/marketstructure-proposals-december-2022. The proposed rules

are Regulation Best Execution; Order Competition

Rule; Regulation NMS: Minimum Pricing Increments,

Access Fees, and Transparency of Better Priced Orders;

and Disclosure of Order Execution Information.

FINRA Rule 6440(a)(3), available at https://www.

finra.org/rules-guidance/rulebooks/finra-rules/64400#the-rule (last visited June 1, 2023).

Exchange Act § 4(g)(8)(B)(ii), 15 U.S.C. § 78d(g)(8)(B)

(ii).

See SEC, Office of the Investor Advocate, Report

on Activities, Fiscal Year 2022 (Dec. 2022), available

at https://www.sec.gov/files/fy22-oiad-sar-activitiesreport.pdf.

REPORT ON OBJECTIVES: FISCAL YEAR 2024

Id.

See FINRA Rule 13200, available at https://www.finra.

org/rules-guidance/rulebooks/finra-rules/13200 (last

visited June 1, 2023).

See generally FINRA, Arbitration-Mediation Overview,

available at https://www.finra.org/arbitrationmediation/overview (last visited June 1, 2023).

See, e.g., Petition for Rulemaking, George Brunelle,

Brunelle & Hadjikow, P.C., Rulemaking Petition

Regarding Complex Securities Arbitrations (Jul.

19, 2016), available at https://www.sec.gov/rules/

petitions/2016/petn4-702.pdf.

See SEC, Exchange Act Rel. No. 34-96607, File No.

SR-FINRA-2022-033 (“FINRA 2022-033”), 88 Fed.

Reg. 2144 (Jan 12, 2023), available at https://www.

federalregister.gov/documents/2023/01/12/2023-00425/

self-regulatory-organizations-financial-industryregulatory-authority-inc-notice-of-filing-of-a.

Id.

See id. To note, FINRA currently describes this process

on its website and in SEC filings.

103 See Fairbridge Letter, supra note 102 at 2-3.

Id. at 2145.

105 See id.

Id.

106 See Comment Letter from Kristine Vo, Assistant

General Counsel and Office of General Counsel,

FINRA (April 11, 2023) (“FINRA Letter”), available

at https://www.sec.gov/comments/sr-finra-2022-033/

srfinra2022033-20164047-333995.pdf.

Id. at 2146. Investors may request that special

proceedings be conducted telephonically with 60 days

advance notice.

Id. Parties in simplified arbitrations are currently

exempt from complying with this requirement.

100 Id. at 2149. Because the dismissal of all of a claimant’s

claims would dispose the case, it is the current practice

to require the issuance of an award in such dismissals.

See also FINRA, Dispute Resolution Services

Arbitrator’s Guide (2023), available at https://www.

finra.org/sites/default/files/arbitrators-ref-guide.pdf.

101 See generally id. at 2147-8.

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

102 See Comment Letter from Hugh Berkson, President,

Public Investors Advocate Bar Association (“PIABA”)

(Feb. 1, 2023), available at https://www.sec.gov/

comments/sr-finra-2022-033/srfinra202203320156362-324502.pdf (“PIABA Letter”); Comment

Letter from William A. Jacobson, Esq., Director,

Cornell Securities Law Clinic, Dustin Hartuv, Erik

Olson and Jianing Zhao (Feb. 2, 2023), available at

https://www.sec.gov/comments/sr-finra-2022-033/

srfinra2022033-20156446-324602.pdf (“Cornell

Letter”); Comment Letter from Elissa Germaine,

Supervising Attorney, Fairbridge Investor Rights Clinic,

and Carolina Carasa, Roberto Quiroga (Feb. 2, 2023),

available at https://www.sec.gov/comments/sr-finra2022-033/srfinra2022033-20156445-324601.pdf

(“Fairbridge Letter”); Comment Letter from Christine

Lazaro, Director of the Securities Arbitration Clinic, St.

John’s University, and Gavriel Rosenbaum, Julia Shea,

Jacob Wetter (Feb 2. 2023), available at https://www.

sec.gov/comments/sr-finra-2022-033/srfinra202203320156450-324629.pdf (“St. John’s Letter”).

104 See St. John’s Letter, supra note 102 at 2.

107 See FINRA Letter, supra note 106, at 8. See also SEC,

Exchange Act Rel. No. 34-97291, File No. SR-FINRA2022-033, 88 Fed. Reg. 23720, 23723 (Apr. 18,

2023), available at https://www.federalregister.gov/

documents/2023/04/18/2023-08145/self-regulatoryorganizations-financial-industry-regulatory-authorityinc-notice-of-filing-of.

108 See generally SEC, Exchange Act Rel. No. 34–97291;

File No. SR–FINRA– 2022–033 (Apr. 12, 2023); 88

Fed. Reg. 23720 (April 18, 2023), available at https://

www.finra.org/sites/default/files/2023-04/sr-finra-2022033-app-disapp.pdf.

109 See FINRA, Expungement of Customer Information,

available at https://www.finra.org/rules-guidance/

key-topics/expungement (last visited June 1, 2023)

(“Expungement, as an extraordinary remedy, should be

recommended only in circumstances in accordance with

FINRA rules to remove clearly inaccurate customer

dispute information from the record of an individual

broker that is associated with a broker-dealer firm.”).

110 See, e.g., PIABA and The PIABA Foundation,

2021 Updated Study on FINRA Expungements, at

5 (May 18, 2021), available at https://piaba.org/

system/files/2021-05/REPORT%20-%202021%20

Updated%20Study%20on%20FINRA%20

Expungements.pdf, (“Arbitrators have continued to

grant expungement requests 90% of the time. . . .”).

114 See FINRA 2022-024 Order, supra note 113, at 24282.

115 See id.

111 See e.g., SEC, Office of the Investor Advocate, Report

on Activities, Fiscal Year 2022 (Dec. 2022), at 52–54,

available at https://www.sec.gov/files/fy22-oiad-saractivities-report.pdf.; SEC, Office of the Investor

Advocate, Report on Objectives, Fiscal Year 2022

(June 2022), at 31–34, available at https://www.

sec.gov/files/sec-office-investor-advocate-reportobjectives-fy2022.pdf.

112 See SEC, Exchange Act Rel. No. 34-95455; File No.

SR-FINRA 2022-024 (Aug. 9, 2022); 87 Fed. Reg.

50170 (Aug. 15, 2022), available at https://www.

federalregister.gov/documents/2022/08/15/2022-17430/

self-regulatory-organizations-financial-industryregulatory-authority-inc-notice-of-filing-of-a.

113 FINRA 2022-024 was published for comment in the

Federal Register on Aug. 9, 2022. On Sept. 27, 2022,

FINRA consented to an extension of the period in

which the Commission must approve the proposed

rule change, disapprove the proposed rule change, or

institute proceedings to determine whether to approve

or disapprove the proposed rule change to Nov. 11,

2022. On Nov. 10, 2022, FINRA responded to the

comment letters received in response to the Notice

and filed an amendment to the proposed rule change

(“Amendment No. 1”). On Nov. 10, 2022, the

Commission published a notice of filing of Amendment

No. 1 and an order instituting proceedings to determine

whether to approve or disapprove the proposed rule

change, as modified by Amendment No. 1. On Dec.

8, 2022, FINRA consented to an extension of the

period in which the Commission must approve or

disapprove the proposed rule change to Apr. 12, 2023.

On Apr. 3, 2023, FINRA responded to the comment

letters received in response to the Order Instituting

Proceedings and filed a second amendment to the

proposed rule change (“Amendment No. 2”). On Apr.

19, the Commission published notice of approval of

the proposed rule change, as modified by Amendments

Nos. 1 and 2, on an accelerated basis, and solicited

comments on Amendment No. 2 from interested

persons. See SEC, Exchange Act Rel. No. 34-97294;

File No. SR-FINRA-2022-024 (Apr. 12, 2023)

(“FINRA 2022-24 Order”); 88 Fed. Reg. 24282 (Apr.

19, 2023).

116 See Comment Letter from Mignon McLemore,

Associate General Counsel, FINRA at 18-19,

(Apr. 3, 2023), available at https://www.sec.gov/

comments/sr-finra-2022-024/srfinra202202420163319-333785.pdf.

117 See FINRA, Expungement of Customer Information,

supra note 109.

118 FINRA Rule 2080(b)(1), available at https://www.finra.

org/rules-guidance/rulebooks/finra-rules/2080 (last

visited June 1, 2023).

119 Press Release, SEC, SEC Announces Pilot Securities

Arbitration Clinic to Help Small Investors—Levitt

Responds to Concerns Voiced at Town Meetings,

97-101 (Nov. 12, 1997), available at https://www.sec.

gov/news/press/pressarchive/1997/97-101.txt.

120 For more information on the significance of law school

investor advocacy clinics to retail investors, see SEC,

Office of the Investor Advocate, Report on Activities,

Fiscal Year 2019, at 33-34 (Dec. 2019), available at

https://www.sec.gov/files/sec-investor-advocate-reportactivities-2019.pdf.

121 For an overview of the Ombuds’ involvement with

the law school clinics, see SEC, Office of the Investor

Advocate, Report on Objectives, Fiscal Year 2023, at

29 (June, 2022), available at https://www.sec.gov/files/

sec-office-investor-advocate-report-objectives-fy2023.

pdf.

122 Exchange Act § 39(a), 15 U.S.C. § 78pp(a).

123 Id.

124 Exchange Act § 39(a)(2)(B), 15 U.S.C. § 78pp(a)(2)(B).

125 Exchange Act § 39(g), 15 U.S.C. § 78pp(g).

126 Exchange Act § 39(h), 15 U.S.C. § 78pp(h).

127 According to Exchange Act Section 4(g)(6)(B)(ii), 15

U.S.C. § 78d(g)(6)(B)(ii), a Report on Activities must

include several enumerated items, and it may include

“any other information, as determined appropriate by

the Investor Advocate.”

128 17 C.F.R. §§ 200.735-3(b)(2)(i), 230.122 (2014);

Exchange Act § 24(b), 15 U.S.C. § 78x; 5 U.S.C.

§ 552a(i)(1); SECR18-2, Section 8.5 (Nonpublic

Information)

(July 31, 2005).

REPORT ON OBJECTIVES: FISCAL YEAR 2024

129 SEC, Recommendation of the SEC Investor Advisory

Committee to Improve Customer Account Statements

to Better Inform Investors (Mar. 2, 2023), available at

https://www.sec.gov/files/20230302-recommendationcustomer-account-statements.pdf.

130 SEC, Recommendation of the SEC Investor Advisory

Committee Regarding Accounting Modernization

(Sept. 21, 2022), available at https://www.sec.gov/

spotlight/investor-advisory-committee-2012/20220921accounting-recommendation.pdf.

131 See Financial Accounting Foundation Debuts

Enhanced Free Access to Online Accounting Standards

Codification and Governmental Accounting Research

System, Financial Accounting Foundation (Feb. 27,

2023), available at https://accountingfoundation.org/

page/getarticle?uid=faf_MediaAdvisory-02-27-23.

132 SEC, Recommendation of the SEC Investor Advisory

Committee Related to Climate-Related Disclosure

Rule Proposals (Sept. 21, 2022), available at https://

www.sec.gov/spotlight/investor-advisory-committee2012/20220921-climate-related-disclosurerecommendation.pdf.

133 See Proposed Rule, The Enhancement and

Standardization of Climate-Related Disclosures for

Investors, Securities Act Release No. 11042, Exchange

Act Release No. 94478 (Mar. 21, 2022), 87 Fed. Reg.

21334 (Apr. 11, 2022), available at https://www.

federalregister.gov/documents/2022/04/11/2022-06342/

the-enhancement-and-standardization-of-climaterelated-disclosures-for-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

134 SEC, Recommendation of the SEC Investor

Advisory Committee Regarding Cybersecurity

Risk Management, Strategy, Governance, and

Incident Disclosure (Sept. 21, 2022), available at

https://www.sec.gov/spotlight/investor-advisorycommittee-2012/20220921-cybersecurity-disclosurerecommendation.pdf.

135 See Proposed Rule, Cybersecurity Risk Management,

Strategy, Governance, and Incident Disclosure,

Securities Act Release No. 11038, Exchange Act

Release No. 94382, Investment Company Act Release

No. 34529 (Mar. 9, 2022), 87 Fed. Reg. 16590 (Mar.

23, 2022), available at https://www.federalregister.gov/

documents/2022/03/23/2022-05480/cybersecurityrisk-management-strategy-governance-and-incidentdisclosure.

136 SEC, Recommendation of the SEC Investor Advisory

Committee to Better Protect Older Adult Investors

(June 9, 2022), available at https://www.sec.gov/

spotlight/investor-advisory-committee-2012/20220609protecting-older-investor-recommendation.pdf.

137 Press Release, SEC, SEC Unveils New Public Service

Campaign Encouraging Older Investors to Never Stop

Learning (June 12, 2023), available at https://www.sec.

gov/news/press-release/2023-106.

138 SEC, Recommendation of the SEC Investor Advisory

Committee Regarding Investor Advocacy Clinic

Funding (June 9, 2022), available at https://www.

sec.gov/spotlight/investor-advisory-committee2012/20220609-investor-clinic-recommendation.pdf.

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.