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June 05, 2009

SEC Forms Investor Advisory Committee
    by Robert Kropp

Commission invokes its mandate to protect investors as a factor in the formation of the Committee, which includes in its membership representatives of the social investment community. -- In a marked departure from many of its activities under the previous Administration, the US Securities and Exchange Commission (SEC) announced on June 3 the formation of an Investor Advisory Committee to give investors a greater voice in the Commission's work. Commissioner Luis Aguilar will be the SEC's primary sponsor of the Committee.

In January, Commissioner Aguilar called for the formation of a retail investors advisory committee. In a February speech by SEC Chairman Mary Schapiro, she said, "The investor community needs to feel that they can go to the SEC to seek redress, or to have their opinions heard. To that end, we will form an Investor Advisory Committee to ensure that the Commission hears first hand about the issues most concerning to investors."

The stated mission of the SEC is to "protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

Asked by about the factors recommending the formation of the Committee, Commissioner Aguilar replied, "The Commission has, on numerous occasions in the past few years, created advisory committees designed to receive input from various participants in the capital markets or on particular regulatory topics. None of those efforts, however, were targeted at hearing from investors – the very group that the SEC is charged with protecting. After Chairman Schapiro came into office, she moved quickly to establish an advisory committee."

Stephen Davis, Senior Fellow and incoming Executive Director at Yale University School of Management’s Millstein Center for Corporate Governance and Performance, has been involved with corporate governance issues for twenty years. He told, "The formation of the Committee sends an important signal that the SEC is open to accomplishing its real mission, which is to be an advocate for investors. Opening such channels to the investment community is long overdue, and I hope it will lead to better policies."

"What we are seeing is movement by the SEC on issues important to the members of the Social Investment Forum" said Lisa Woll, CEO of the nonprofit association dedicated to the practice and growth of socially responsible investing (SRI). "The Committee provides a wonderful opportunity to ensure that the principles and priorities of the SRI community are heard."

And Adam Kanzer, Managing Director and General Counsel of Domini Social Investments and a Committee member, told, "That the SEC now believes it needs to hear from SRI firms is a new development."

The Investor Advisory Committee will advise the SEC on matters of concern to investors, provide the SEC with the perspectives of its members on regulatory issues, and offer recommendations from the viewpoints of investors on the SEC's regulatory programs. The Committee will be co-chaired by Richard Hisey of AARP Financial and Hye-Won Choi of Teachers Insurance and Annuity Association, College Retirement Equities Fund (TIAA-CREF).

The Committee represents a broad range of investor perspectives, and includes three members of the Social Investment Forum. The three are Kanzer, Mellody Hobson of Ariel Capital Management, and Choi of TIAA-CREF.

Commissioner Aguilar said, "Under the Federal Advisory Committee Act, membership on these types of committees must be broad and diverse. We were advised that the committee members ought to represent the views of large and small investors; institutional and individual investors; investors from different geographic regions and with different investment philosophies and strategies. We worked hard to try to accomplish this."

Woll said, "Commissioner Aguilar's statements indicate that the staff and Commissioners of the SEC really want to get input from a broad cross-section of the investment community."

Speaking about the makeup of the Committee, Kanzer said, "While Domini is the only focused SRI investment advisor on the Committee, it does include plenty of sympathetic voices from different perspectives."

Of the agenda that he and others plan to bring before the committee, Kanzer said, "With the new Administration in place, now is the time to make a push for mandatory reporting. Things have been changing globally during the last ten years, and governments have stepped in to mandate environmental, social, and governance (ESG) reporting. There are a lot of models out there to look at. We need to have better data."

Commissioner Aguilar seemed to second this direction for the Committee's agenda when he told, "We expect to discuss the issue of enhanced disclosure with the committee; this is an area in which the social investment community has been intensely interested for several years."

And Davis said, "I hope the work of the Committee will help the SEC provide important tools that investors need to make their decisions, and I expect that the Committee will provide advice on such matters as enhanced ESG disclosure."

According to Commissioner Aguilar, the Committee will meet 3-4 times per year. Its meetings will be public and its agenda noticed in advance. As of this writing, a date for the first meeting has not been announced.

Referring to his appointment to the Committee, Kanzer said, "It's an honor to be asked, and it will be fascinating to get an inside view of the SEC at this important point in its history."

"We need a strong and well-funded SEC," Kanzer continued. "The formation of the Committee signals a more shareholder-friendly Commission, at the very least."

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