SEC Commissioner Aguilar Speaks about Investor Protection

At the Consumer Federation of America's 26th Annual Conference, SEC Commissioner Luis Aguilar delivered a speech on investor protection, with a specific focus on new private placement rules, proxy voting and Regulation NMS ("Regulation of the National Market System").

Commissioner Aguilar stated that investor protection is fundamental, since investors are the ones who provide the capital that allows companies to grow and expand. According to Commissioner Aguilar, the first step in ensuring investor protection is "facilitating true capital formation" and not merely capital raising. Aguilar stated that to facilitate true capital formation means ensuring that investors have the information to make informed decisions, and that the way to reach that goal is through strong securities regulation. According to Aguilar, strong mandatory disclosure drives capital formation because "disclosure improves the accuracy of share prices, and helps to determine which business ventures should receive society's limited capital." He also mentioned that disclosure is a "public good," in that its benefits are "enjoyed broadly by the public." He urged the SEC to move forward in promptly adopting rules such as the new general solicitation provisions of Rule 506 of Regulation D ("Exemption for Limited Offers and Sales without Regard to Dollar Amount of Offering") (see 78 Fed. Reg. 44806 as to new Reg. D proposals), which originally was enacted "without including the investor protections that many investors, academics, and state regulators recommended."

Additionally, Commissioner Aguilar discussed investors' rights as owners of public companies, stating that proxy rights should be an area of focus for investor protection, since most corporate shareholders exercise their voting rights by proxy. Aguilar encouraged the SEC to examine whether any of its existing rules present obstacles to shareholder voting, citing examples such as the status of "short-slate" election contests and the inability of shareholders to deliver multiple effective proxies for the same election.

Commissioner Aguilar concluded with a discussion of Reg NMS, stating that "immediately revisiting" the rule would allow the SEC to examine the trading markets and assess whether they are fair and efficient for investors. Aguilar noted that the degree to which technology and automation has taken over the markets and the increased fragmentation and complexity of the markets are often-mentioned reasons why investors continue to lack confidence in the capital markets. According to Aguilar, answering questions regarding the effect of Reg NMS and how it should be modified would help to restore investor confidence in the markets.

See: Commissioner Aguilar's Speech, "Seeing Capital Markets through Investor Eyes".