It's been more than 14 months since the signing of the Dodd-Frank Act, which directed the Securities and Exchange Commission to establish a new Investor Advisory Committee.
So far, the SEC has not publicly announced a timetable for creating this panel, and Commissioner Luis Aguilar and some investors are asking why. At the same time, the SEC did create a new Advisory Committee on Small and Emerging Companies in mid-September. In the press release on that panel, the commission said it "also is in the process of re-establishing an Investor Advisory Committee," but did not specify a date for action.
In June 2009, the SEC created an investor advisory panel, which met quarterly for more than a year. That panel was formed pursuant to the Federal Advisory Committee Act. This group was disbanded in November 2010, "with the intention that it would be quickly reconstituted to meet the Commission's statutory obligation under the [Dodd-Frank Act]," Aguilar recalled in a recent speech. However, in January, the SEC said the creation of the panel had been deferred because of budget uncertainty.
"In the current environment, revelations of egregious fraudulent conduct and recent market conditions continue to demonstrate the vulnerability of investors. Furthermore, the millions of American families trying to save for retirement, education, and a better life are the same investors most impacted by the wild stock market swings we have witnessed, as the stock market has lost over a trillion dollars in value in the past two months," Aguilar said. "Thus, the need to obtain the views of investors remains critical. I am disappointed that the Investor Advisory Committee has not been re-established."
"The Investor Advisory Committee is essential to the SEC's ongoing work. I strongly urge that the SEC's Investor Advisory Committee be immediately re-established," Aguilar said in his speech.
Section 911 of the Dodd-Frank Act doesn't include an explicit deadline for forming a new panel. The provision does state that the panel should have at least 10 members, including a representative of state securities commissioners, a representative of senior citizen interests, and representatives of individual debt and equity investor interests, including pension funds and registered investment companies. The committee also is to include the "Investor Advocate," a new Dodd-Frank-authorized position that has not been filled.
Shareholder representatives also have expressed concern about the delay. "We have communicated to Chairman [Mary] Schapiro our strong support for the re-establishment of the SEC's Investor Advisory Committee," said Jeff Mahoney, general counsel of the Council of Institutional Investors.
In a letter to Schapiro in June, a representative of the Forum for Sustainable and Responsible Investment wrote: "It will send a troubling message if this new small business advisory group is created while reconstitution of the Investor Advisory Committee . . . [continues] to be delayed."
At the same time, the SEC has been struggling to catch up with other Dodd-Frank Act regulatory efforts and now faces a Republican-controlled House of Representatives that often questions the need for new rules. The agency has completed 16 final rulemakings, missed deadlines for 53 other rules, and not finalized rules for 29 other rulemakings with future (or no) deadlines, according to an Oct. 3 progress report from the law firm of Davis Polk & Wardwell.