The Securities and Exchange Commission’s Office of the Investor Advocate recently issued its fiscal year 2025 Report on Objectives. The Report is one of two annual reports required to be filed by the Investor Advocate with the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. The Office of the Investor Advocate and the Office of the Ombuds were established ten years ago. The Investor Advocate, in her introduction, highlights the increased incidence of fraud over the last ten years and the role that social media and advanced technology play in facilitating fraud, including the use of Artificial Intelligence (AI) and large language models (LLMs). She notes that, like other agencies and regulators, the Office will be attentive to the use of AI, LLMs, and cryptocurrencies in scaling up fraud. The Report sets out the objectives of the Investor Advocate, which include: assisting retail investors; identifying areas in which investors would benefit from regulatory changes; identifying problems with financial service providers and investment products; analyzing the potential impact on investors of proposed rules and regulations; proposing appropriate changes to the SEC and to Congress; and supporting the SEC’s Investor Advisory Committee.

Specifically, for fiscal year 2025, the Office intends to focus on broker and adviser conduct, especially as more discount brokers facilitate transactions through mobile devices and applications. The Office intends to consider how digital platforms fit within the Regulation Best Interest framework concerning investor recommendations, and to the extent that this new digital engagement does not implicate Reg BI, how other regulatory tools would help ensure that retail investors are the principal beneficiaries of these new technologies. Similarly, with respect to advisers, the Office intends to consider how advisers discharge their advice to retail clients through digital engagement. The Office also intends to continue its focus on the private markets given their growth, with engagement on topics such as accredited investor status, the degree of transparency in the private markets, and the interplay between the public and private markets. The Office will also consider investor testing with a view toward more innovative approaches to disclosure that is retail-friendly. See the full Report.

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