Skip to main content

The SEC’s new investor advocate takes on tough assignment


It seems ironic that a federal agency with a longstanding mandate to protect investors would need a new advocate to do just that.

Nonetheless, Rick Fleming, the first head of the U.S. Securities and Exchange Commission’s Office of Investor Advocate, is busy setting up shop, staffing a six-person office and setting priorities.

The 2010 Dodd-Frank financial reform law called for the post at a time when the SEC was under attack for numerous failures. Among them: missing red flags that would have revealed Bernard Madoff’s multibillion-dollar Ponzi scheme years before he wiped out investors. The SEC, critics said, had paid too much attention to its other mandate: clearing the way for businesses to raise capital through securities offerings.

Consumer advocates and other critics of the agency remain concerned. A nearly four-year delay between Dodd-Frank’s 2010 enactment and Fleming’s appointment in February is one indication how low investors rank, they say. An SEC spokeswoman declined to comment on the delay.

Fleming is undeterred. In a recent interview in his downtown Washington office, decorated with pictures of his six children, he said he hopes that regular involvement with the agency’s commissioners will help accomplish his goals.

“I want this office to be involved early while the rule is being considered and hopefully sway things in the way of investors,” he said. “I don’t want to sit back and wait until a rule is proposed or finalized to squawk about it.”

Fleming, whom former colleagues say has a no-nonsense, down-to-earth style, was a lawyer for the Kansas Securities Commissioner for nearly 16 years. He served as deputy general counsel for the North American Securities Administrators Association, an organization of state securities regulators, from 2011 until his SEC appointment.

He wants to ensure that consumer voices are heard as frequently as industry arguments at the SEC, he said. Firms have “plenty of resources to make their case known,” he said. Wall Street advocates drop in frequently at the agency to meet with commissions and other regulatory staff. While the industry’s views of how rules may work are helpful, they far outnumber the opinions of typical investors, Fleming said.

Among the issues Fleming expects to focus on early are a review of how high-frequency trading affects investors and the fairness of fees and disclosures in the municipal bond market. Wall Street’s mandatory arbitration system, where investors must fight legal disputes that arise against their firms, is another concern. But studying it may need to wait until next year, given the office’s other responsibilities, he said.

His work will include reporting to commissioners about the financial impact of new regulations on retail investors. An ombudsman in the office will field complaints about the SEC itself and self-regulatory organizations, such as the Financial Industry Regulatory Authority, as well as collecting data about those complaints to analyze trends.

Fleming will also be involved in a more immediate undertaking: helping the agency to review income and net-worth thresholds required for investors who want to buy certain high-risk privately issued securities. Dodd-Frank requires the agency to review the standards every four years, a deadline that is approaching in August.

It remains to be seen just how much sway Fleming will have within the agency and on Capitol Hill. “There are two ways of looking at this: window dressing, or a legitimate response that is necessary to get an independent, investor-oriented view,” said a lawyer in Beverly Hills, California, who represents investors. “I hope it accomplishes something.”


Fleming reports directly to the agency’s highest official: Chairwoman Mary Jo White. But that isn’t a guarantee that he will be heard, said Denise Voigt Crawford, former Texas Securities Commissioner. White’s office is one of the busiest in Washington, with dozens of issues constantly competing for attention, Crawford said.

And Fleming will have to pick his battles. “One of the challenges is to come up with a short enough list so that we can do an effective enough job of digging down deep and having a constructive role in policymaking,” he said. He will lay out his priorities in a report to Congress on June 30, one of two such reports that he must make each year.

There’s another catch: No one has to listen to Fleming. Dodd-Frank gives the SEC three months to respond to each of Fleming’s recommendations, but even then, there are no guarantees that the agency will adopt them.