U.S. stock exchanges and other self-regulatory organizations (SROs) can expect greater scrutiny from the Office of the Investor Advocate of the U.S. Securities and Exchange Commission (SEC), the organization announced on Friday.
In his first official recommendation to the SEC, Investor Advocate Rick Fleming calls on the commission to reject a proposed rule change from the New York Stock Exchange (NYSE). He also recommends that the SEC deny approval of a proposed rule change that would exempt certain early stage companies from having to obtain shareholder approval before selling additional shares to insiders and other related parties.
The Office of the Investor Advocate was created to examine the impact of proposed rule changes by SROs, including the national securities exchanges, on investors; and, to make recommendations to the commission on those proposals.
It is difficult for the public to keep track of all the rule filings from the SROs, Fleming notes, and few individual investors ever submit comments to the commission on these filings.
“The exchanges may have come to expect little scrutiny from investors of their routine proposals. Those days are now over,” Fleming says. “Today I make my first formal recommendation to the commission, and it marks the beginning of my Office’s efforts to shine a brighter light on rule changes by the exchanges, either to oppose proposals that may be detrimental to investors or, conversely, to support the efforts of exchanges to amend their rules in ways that benefit investors.”