SEC Speech - Note comment on dark pools

Address before the New York Financial Writers’ Association Annual Awards Dinner

Speech by SEC Chairman: Mary L. Schapiro, June 18, 2009

Ms Schapiro first commented on Obama’s financial reform. She thinks it is sweeping, because it seeks to create

• a systemic risk regulator to help reduce the likelihood of a systemic shock;
• an oversight council so that all aspects of financial markets regulation can be taken into account;
• and a financial consumer protection agency that will properly look after the interests of those who purchase credit products.

Then she summarized what rules SEC has proposed in the past five months:

• to better protect investor assets under custody or control of investment advisers.
• to facilitate the ability of shareholders to nominate corporate directors.
• to restrict short selling in declining markets.

She then focussed on four areas that will have a significant impact on individual investors and the readers of the financial press — they include target date funds, municipal securities, fiduciary duties and dark pools.

Target Date Funds

SEC is considering, whether regulation governing a fund’s name should be revised to require clarification when a particular target date is used.

In addition, SEC will engage in a re-consideration of its disclosure requirements to determine whether improvements can be made to enhance investor understanding of target date funds.

Municipal Securities

The information available to municipal securities investors is lacking, compared to the information available to investors in public corporations.

She plans to ask the Commission to take actions improve disclosure to municipal securities investors.

Fiduciary Duty for Professionals Who Give Personalized Investment Advice about Securities

Financial service providers who provide similar services are subject to very different regulatory regimes. And the standards of conduct and legal duties owed to investors under those regimes are not consistent.

All financial service providers that provide personalized investment advice about securities should owe a fiduciary duty to their customers or clients.

Dark Pools

Dark pools can be defined in various ways, but generally refer to automated trading systems that do not display quotes in the public quote stream.

Commission will be taking a serious look at what regulatory actions may be warranted in order to respond to the potential investor protection and market integrity concerns raised by dark pools.