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New SEC Strategic Plan Takes Main Street Tact

The Securities and Exchange Commission has announced a new four-year strategic plan with a distinctive focus on Main Street – and an acknowledgement that the line between investment advice and security sales needs clarity.

While the plan does not specifically reference the agency’s work on its proposed Regulation Best Interest, it does note that, when Main Street investors seek professional advice, their choices often are not as clear as they should be. “The distinction between investment professionals who sell securities and those who provide investment advice has become less clear. This lack of clarity makes it challenging for investors to understand what standards of conduct govern the investment professionals who assist them,” the plan states.

Within this section of the strategic plan, the SEC identifies five initiatives it will pursue:

  • Enhancing its understanding of the channels retail and institutional investors use to access capital markets to more effectively tailor policy initiatives.

  • Enhancing outreach, education and consultation efforts, including in ways that are reflective of the diversity of investors and businesses.

  • Pursuing enforcement and examination initiatives focused on identifying and addressing misconduct that impacts retail investors, including expanding efforts into securities custody and penny stock trading.

  • Modernizing design, delivery and content of disclosures, including reexamining business and accounting disclosure requirements and modernizing EDGAR.

  • Identifying ways to increase the range of long-term, cost-effective investment options available to retail investors, including the number of companies that are SEC-registered and exchange-listed.

Overall, the strategic plan is divided into three goals, the first of which is to protect the interests of Main Street investors, followed by identifying and adjusting to trends in capital markets, and enhancing the agency’s analytical capabilities and human capital development.

“For the investing public and the various market participants and regulatory authorities who interact with the SEC, we hope this Strategic Plan will inspire your full confidence in our ability to innovate in response to evolving markets,” SEC Chairman Jay Clayton stated in the plan.

Market Developments

As to capital markets, the SEC says it will embrace innovation by analyzing market developments, evaluating existing rules and procedures, gaining a better understanding of the cyber-landscape and ensuring appropriate resources are dedicated to each area.

To that end, the agency notes that Main Street investors are relying less on traditional personalized advisory services and are increasingly seeking advice and pursuing trades that are informed by data analytics and executed via algorithms on electronic platforms. At the same time, however, the agency notes that increased reliance on technology has introduced new risks and amplified better known market risks, such as cybersecurity threats.

The SEC also will seek to elevate its performance by investing in data and technology to leverage “the experience, knowledge, creativity, leadership and teamwork of the SEC’s staff and its leaders.”