The Securities and Exchange Commission (SEC)'s Advisory Committee on the Investor held its quarterly meeting on July 25 at the Washington office and discussed several topics that might be of interest to readers.

For some, this article may serve as an introduction to the role advisory committees play in helping a couple of influential interest groups keep in regular touch with the SEC and try to affect its policies.

For the SEC, advisory committees provide a means of keeping in touch with emerging issues in order to manage and channel the energy of experts toward outcomes that are constructive from the agency's point of view. In addition to this advisory committee, there is an Advisory Committee on Small and Emerging Companies, which performs a similar function for that community.

This article will also help to introduce readers to a hearing the Senate Banking Committee held Tuesday on systemic risk where both Commodity Futures Trading Commission Chairman Gary Gensler and SEC Chairman Mary Jo White testified. What used to be the Gary and Mary [Schapiro] show has morphed into the Gary and Mary Jo show.

While advisory committee meetings may sometimes look like bull sessions, they operate under a set of formal rules established by the Advisory Committees Act and the Administrative Procedures Act to make sure that agencies cannot simply ignore these committees. For example, federal regulators are required to take public comments into account in formulating regulations and to explain, when they issue releases on new regulations, how they have done this.

The agencies are also required to respond to recommendations the advisory committees make, and this requirement led to a testy exchange between one of the members and Chairman White at this meeting.

The rest of this article will briefly discuss the remarks of White and of the chairs of the four subcommittees that constitute the committee.

Remarks of White: She began by proclaiming that while every part of the SEC's mission is crucial, "One of my top priorities is completing the congressionally mandated rulemakings," then added, "but we must focus on our other priorities, and an overarching priority is to protect investors, and that's why this group is so important." (Thus, the overall impression she left is that the SEC lacks focus.)

The body of the speech was devoted to a defensive presentation of the SEC's recent action to implement Title II of the Jumpstart Our Business Startups (JOBS) Act, which lifts the ban on general solicitation and allows new ways of advertising by small companies. She acknowledged that concerns remain regarding the potential for more fraudulent conduct, and she left open the possibility that the SEC could provide further investor protection through a subsequent "discretionary" rulemaking.

White further assured the committee that she carried the committee's recommendations around with her throughout the process and that she "appreciates that there is some disappointment on all sides."

She concluded with an important reference to the committee's recommendation on target date funds, "which have played a critical role, that people will be placed by default in, and workers need to understand the risks and features, and your recommendations are under consideration by [the Department of Labor] and by us."

Timeliness of Commission Response: Immediately after White's remarks, Craig Goettsch, vice chairman of the Investor Advisory Committee, stated that the Dodd-Frank Act requires the SEC to give a prompt response to recommendations by the advisory committee, but he added, "There are limitations."

Barbara Roper, a securities lawyer and chair of the Investor as Purchaser Subcommittee, then bluntly admonished White that Dodd-Frank required a formal response, "and it is not adequate to do it through rulemaking." She added, "I thought this was understood, because we had gone through this before with Commissioners Walter and Aguilar, and I'm disappointed with the form the rule took in bifurcating it, and I don't think the passing of the deadline justified treating the investor protection aspects as of lesser importance."

White responded to Roper by stating, "Obviously, we have a difference," but she concluded that she is open to studying the issue further, and she will. (This is an example of the value of following the advisory committee's activities, because for anyone who is interested in the implementation of the JOBS Act, either from the promotional or the investor protection standpoint, the Chairman's comments would be very significant.)

Recommendation on Data Tagging: The Investor as Owner Subcommittee, chaired by Anne Sheehan, offered a three-part recommendation to establish "a culture of smart disclosure" to consider the impact on smaller issuers and to list specific data for priority. The purpose of the recommendation is to make data more accessible to investors at a reasonable cost, and the recommendation was approved unanimously.

Recommendation on Universal Proxy: The Investor as Owner Subcommittee also presented a recommendation to adopt a universal proxy form. This is an idea that would only be of significant interest to large institutional investors and activist investors. The SEC might hold a roundtable this fall to air the arcane issues as to how voting for boards of directors would be structured. This recommendation was also adopted unanimously.

Pending Recommendation on Fiduciary Duty: There was extended discussion of a recommendation to establish a single standard for both broker-dealers and investment advisers, because investors are confused and tend not to realize what the standard is, as broker-dealers have migrated into the investment adviser space. The industry claims to support a single standard, but all sides realize this is an extremely controversial topic now under consideration by both the Department of Labor and the SEC.

Market Structure Subcommittee: Former SEC Commissioner Steven Wallman chairs this subcommittee, and he reported that the subcommittee is waiting for a recommendation from the Depository Trust & Clearing Corporation on how to shorten the settlement time from three days to two. He observed that it would be "more reasonable" to move to one day and then to real time, but this would take "a half decade, if not more." Even more controversial are proposals on behalf of smaller public companies to increase the tick size for trading.

Investor Education Subcommittee: The chairman of this subcommittee, Roger Ganser, reported that the subcommittee is focusing on using public service announcements to direct educational messages to older investors and also on crowdfunding, but the committee doesn't know how this would be funded and wants to make sure that outcomes are measurable. (I recommend that readers have the mute button handy if this idea ever comes to fruition.)

The advisory committee is scheduled to meet again in the fall and it and its subcommittees are able to meet by phone in the interim if necessary, a device that is occasionally used in order to meet deadlines for commenting on regulations. Readers, perhaps to their surprise, might find it interesting to follow the work of the advisory committee.

In conclusion, I recommend that readers consider paying close attention to the activities of the Investor as Purchaser and Market Structure Subcommittees and little or no attention to the other two subcommittees. Future articles will seek to keep readers informed in line with these priorities.