Prepared Remarks Before the 2024 SEC Investor Advocacy Clinic Summit

Chair Gary Gensler, U.S. Securities and Exchange Commission. Image Credit: US SEC

March 1, 2024/US SEC

By Chair Gary Gensler

Good morning. It is good to be with you today. As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking on behalf of my fellow Commissioners or the staff.

I want to give an especially warm hello to those in the audience who have made the time to participate in investor advocacy clinics.

Welcome to Cardozo, Cornell, Fordham, Howard, Northwestern, Pace, Seton Hall, St. John’s, University of Miami, and the University of Pittsburgh law schools’ students and professors.

Today is the fifth Investor Advocacy Clinic Summit, and it features a great set of presentations and panels, including clinic work experiences and community outreach, engagement with underrepresented individuals, and the role of diversity, equity, inclusion, and accessibility in clinical work.

One of the pillars of the SEC’s mission is to protect investors. Fundamental to that pillar is the need to help all investors guard against financial fraud. Our registrants have to comply with investor protections through specific duties — things like fiduciary duty, duty of care, duty of loyalty, best execution, and best interest.

The law school clinics participating in this Summit are important partners in our work. To provide a little history, in 1997, then-SEC Chairman Arthur Levitt announced an initiative to give small investors an avenue to find excellent legal representation.

At the time, Chairman Levitt stated that “small investors get much-needed legal assistance, and students gain valuable learning experience.”[1]

He called the idea of these clinics a “win-win proposition.”

To date, clinics like the ones you are involved with have formally represented hundreds of investors and recovered millions of dollars on their behalf.

This summit affirms what Chairman Levitt understood so well: For investor advocacy clinics like yours, your wholesale involvement helps our agency protect investors.

Beyond your important work to represent small investors who have experienced fraud, we value your outreach and engagement efforts, too.

I want to thank all of the clinic-affiliated members of the audience for the work you do for your clients and for the perspective you provide to our agency.

Victims of fraud, far too often, are older adults. Some have retired, others have neared it, but all have spent decades preparing their nest eggs.

We also are accessing financial services through and with new kinds of technologies—from robo-advisers and brokerage applications to cryptocurrency to adjusting to life conducted over video.

These changes have created new opportunities for scammers to confuse and defraud investors.

Our Division of Enforcement is the cop on the beat for matters like these. One example is affinity fraud, when bad actors target identifiable groups, such as veterans, ethnic communities, members of the same profession, or other groups.

Another area of challenges that new technologies present is in relation to the use of digital engagement practices, including predictive data analytics, behavioral prompts, and differential marketing.

The question is, what are finance platforms optimizing for?

Are they solely optimizing for the investor’s benefits, including risk appetite and returns? Or are they also optimizing for other factors, including the revenues and performance of the platforms?

What happens if the finance platform they use determines that the platform might earn more money for itself if it guides that investor toward a higher-risk profile?

How can we help ensure that new developments in predictive data analytics don’t reinforce societal inequities?

The SEC proposed a rule last year regarding certain potential conflicts across a range of investor interactions.

Every American investor deserve the safeguards of our time-tested securities laws.

I want to thank the Office of the Ombuds, Office of Minority and Women Inclusion, and Office of Investor Education and Advocacy for putting together today’s summit.

With that, I’m happy to turn it over to the first panel.

Leave a Comment

Your email address will not be published. Required fields are marked *