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SEC Commissioner discusses investor protection

  • Speech — gray Image

Dec 09, 2013

At the Consumer Federation of America's Annual Conference held on December 5 in Washington, D.C., SEC Commissioner Luis A. Aguilar spoke on the importance of investor protection. His speech focused on true capital formation, corporate governance, and trading markets.

Mr. Aguilar emphasized the fundamental role of investors in the economy and the importance of a fair, functioning investment environment for all big- and small-time investors. He explained that the difference between "capital raising" and "capital formation" is that while capital raising is the act of raising money, "capital formation is the 'expansion of capital or capital goods through savings, which leads to economic growth,'1 . . . all those activities that have the effect of increasing the productive capacity of our economy, like improving infrastructure, building plants, and hiring workers." He noted that true capital formation occurs when potential investors are informed — when investors have all the information they need to make informed investment decisions.

Mr. Aguilar went on to discuss the importance of securities regulations and expressed his dismay that Rule 506 of Regulation D was enacted without including proper investor protection from general solicitation. He urged the Commission to promptly adopt recently-proposed amendments that would enhance the Commission's ability to evaluate the development of market practices and address concerns regarding the use of general solicitation and advertising.

Mr. Aguilar also talked about shareholder rights, insisting that the SEC address proxy reform and examine whether any of its existing rules present an obstacle to shareholder voting. He also discussed a recommendation by the Commission's Investor Advisory Committee to allow shareholders to vote by proxy for the election of directors as they see fit, regardless of whether the candidate is nominated by management or outside shareholders.

Next, Mr. Aguilar called for the Commission to examine the trading markets and assess whether they are fair, efficient, and appropriately serve all investors. He cited increased growth, complexity, speed of the trading markets, as well as market disruptions as reasons why investors lack confidence in the capital markets. He suggested that the Commission revisit the contentious Regulation NMS, the 2005 regulation adopted to modernize and strengthen the national market system for equity securities.

The full text of this speech is available on the SEC's Web site.


1, Capital Formation,

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