The U.S. Securities and Exchange Commission (SEC) has published an outline of its strategic plan for the 2018 to 2022 time period.
According to SEC Chairman Jay Clayton, the plan is meant to provide a forward-looking framework for making the SEC “even more effective.” As Clayton says, the goals and initiatives included in the strategic planning document span five divisions of the SEC and 25 regional offices.
Among other broad objectives, the SEC says it will be focusing strongly for the foreseeable future on protecting the long-term interests of “Main Street investors.”
Explaining the push, Clayton says that significant numbers of Americans are nearing retirement age and living longer in retirement. This has put increased importance on the investment products that retirees rely on for stable income, he says. In addition, the “continuing evolution away from company-managed retirement plans to 401(k) plans also means that today’s workers must shoulder more responsibility for saving and investing for retirement compared to prior generations.”
According to the SEC’s strategic outline, when Main Street investors seek professional advice, their choices “all too often are not as clear as they should be.” Simply put, the distinction between investment professionals who sell securities and those who provide investment advice has become less clear. Addressing this challenge, Clayton says, is a big driver behind the SEC’s Regulation Best Interest proposals.
“This lack of clarity makes it challenging for investors to understand what standards of conduct govern the investment professionals who assist them,” the SEC document says. “Contemporaneously, the number of companies raising capital through the public securities markets has declined, and those that are joining our public disclosure and offering regime are doing so later in their life cycle. This dynamic has reduced the number of opportunities our Main Street investors have to invest in companies, including those in the emerging and growth sectors of our economy.”
Clayton says market developments such as these make the SEC’s vigilance more important than ever.
“They also require us to reassess the tools, methods, and approaches used in the past and adapt them to ensure their continued effectiveness,” he says. “Most importantly, as our markets change, we should deploy our resources in the way that most benefits the long-term interests of our Main Street investors.”
Fleshing out the Main Street focus
In its strategy document, the SEC has identified five initiatives in pursuit of its strategic goal and our efforts to mitigate and respond to the challenges facing Main Street investors.
First, the SEC will “enhance our understanding of the channels retail and institutional investors use to access our capital markets to more effectively tailor our policy initiatives.” The stated goal here is to gain “deeper insight into how different types of investors participate in our capital markets.” Armed with this information, SEC says it will be able to “better deploy the agency’s resources to address new or emerging risks to investors, which could facilitate additional investment opportunities that address investor needs and goals.”
Beyond this, SEC will “enhance our outreach, education, and consultation efforts,” including in ways that are reflective of the diversity of investors and businesses.
“Our regulatory programs should reflect the reality that not all investors, businesses, and securities markets are the same,” the strategy outline says. “Through this initiative, the SEC will expand outreach to retail investors and small businesses to better enable the agency to hear their various perspectives, and to ensure we provide investors and businesses timely and relevant guidance.”
Important to the defined contribution (DC) retirement plan adviser audience, SEC says it will “pursue enforcement and examination initiatives focused on identifying and addressing misconduct that impacts retail investors.” In this context, “retail investor” can be taken to include retirement plan participants and individual retirement account owners.
The SEC document says the agency will work to “modernize design, delivery, and content of disclosure so investors, including in particular retail investors, can access readable, useful, and timely information to make informed investment decisions. … The SEC will continue to reexamine business and accounting disclosure requirements and modernize EDGAR, the information technology system that filers use to make critical public disclosures for the benefit of current or prospective investors. These initiatives should make it easier for investors to find key information, while also making the system more efficient and secure for filers.”
Finally, SEC says it will work to identify ways to increase the number and range of long-term, cost-effective investment options available to retail investors, including by expanding the number of companies that are SEC-registered and exchange-listed.
“Through this initiative, the SEC will focus attention on facilitating vibrant public securities markets, which offer a growing array of investment choices so that retail investors have access to investment opportunities appropriate to their personal financial goals,” the document says.
Latter parts of the strategy document point to the need for SEC to recognize cybersecurity threats and to boost its own analytical and investigative capabilities.