The Securities and Exchange Commission’s Office of the Investor Advocate recently released its Report on Activities for the Fiscal Year 2024 to Congress. The Securities Exchange Act of 1934 requires the Investor Advocate to file two reports annually with Congress. The Office is mandated to assist retail investors, identify problems that investors may have, analyze the potential impacts on investors of rules or regulations and make proposals to promote investor interests. The Office also provides operational support to the SEC Investor Advisory Committee.
The Report discusses the Office’s focus on complex investment fraud. Among the problems encountered by investors in 2024, the Report identifies the following challenges, by regulator. (1) The SEC identified as key issues: relationship investment scams; exchange-traded products providing access to ether and bitcoin; fake Form 4 filings; accidental text messages on social media platforms; generation of excitement around emerging AI technology and deploying bots; advertisements of certificates of deposit accounts with supposed high yields; and leverage and inverse ETFs. (2) NASAA identified: digital asset frauds; “pig butchering” schemes; and social media and internet schemes. (3) From FINRA: phantom riches; social consensus; source credibility; scarcity; and reciprocity. In looking ahead at complex fraud, the Report focuses attention on the role that advanced technologies may play in facilitating complex fraud. These technologies may include the use of digital ledger technology, which may enable criminals to deepen the pool of potential fraud victims. It also may include the use of predictive data analytics technologies that have the possibility of increasing the number of fraudulent schemes. Finally, of course, it includes crypto related investment frauds.
The Report discusses the Office’s efforts relating to continuing research and investor testing. The Office had undertaken a series of surveys of investors. This is part of the Thoughtful Households Relating InVesting Experiences (THRIVE) Panel program. The objective of this research is to understand investor preferences related to their investments through the collection of data. The Report also includes an update from the Office of the Ombuds, which is part of the Office of the Investor Advocate. The Office of the Ombuds report describes the types of issues as to which investors contact the office for assistance.