Recently, the SEC’s Office of the Investor Advocate released its report on its fiscal 2019 activities.  The report cites staffing challenges that have impaired the ability of the SEC’s Ombudsmen to respond to matters brought by investors, which tripled in number during the fiscal year.

The report reviews the Office’s activities in nine areas: public company disclosure, equity market structure, fixed income market reforms, accounting and auditing, standards of conduct for broker-dealers and investment advisers, exchange traded funds, enhanced disclosure for funds and variable annuities, transfer agents, and the impact of Kokesh v. SEC on enforcement actions.

The Office did not object to the various disclosure effectiveness initiative related rulemakings undertaken during the fiscal year.  However, the Office did raise concerns in its comment letter submitted in July 2019 in response to the SEC’s concept release on exempt offerings questioning assumptions implicit in the release that would in the view of the Office erode securities protections for investors were the SEC to adopt measures broadening the ability of retail investors to invest in exempt offerings.  The Office also raises concerns relating to the SEC’s proposal to amend the definition of accelerated filer (and the impact of such a change on the Sarbanes-Oxley Section 404(b) requirement), urging that the SEC conduct additional economic analysis to address criticisms raised during the comment process.

The Report highlights problematic investment products, which include, among others: initial coin offerings, cryptocurrency and blockchain related investments, real estate related investments, social sentiment investing tools, affinity fraud, and variable annuities sales practices.  The Report also comments on risks associated with dual-share class structures and the LIBOR transition.