Rick Fleming Urges Investors to Be More Vocal

The Center for Accounting Ethics, Governance, and the Public Interest welcomed Rick Fleming, Investor Advocate, U.S. Securities and Exchange Commission, to LMU on the evening of March 4. In his lecture, titled “How Investors Become Road Kill on the Path of Least Resistance,” Fleming discussed the influence of industry in the regulatory system, and argued that investors need to be more vocal in order to avoid becoming road kill in the rulemaking process.

Fleming leads an office charged with promoting the interests of investors by analyzing the impact of proposed rules and regulations, identifying problems investors have with financial service providers and investment products, and proposing regulatory changes.

Fleming kicked off his presentation by demonstrating via an actual ladder the steps needed to achieve economic success. Step 1 is get an education; Step 2 is get a job; Step 3 is save money; and Step 4 is invest in yourself or other businesses. The problem is investors are at risk of losing their nest egg because they are in a vulnerable position and considered attractive targets for scams. After the Great Depression, the government set out to protect investors and boost the economy by initiating federal securities laws.

The same thing happened after the 2008 financial crisis. Median household income fell almost 40% as a result of falling home values, plunging stock values and high unemployment. As a result, Congress enacted the Dodd Frank Act to enhance regulation of financial firms and restore faith in the economic system.

Fleming walked the audience through the evolution of a rule – the SEC issues a proposed regulation followed by a comment period and ending with the SEC adopting the final rule. A trend he’s noticed is that rules tend to be more favorable to industry.

“I’m trying to figure out why this keeps happening,” said Fleming. “I think it’s human nature to follow the path of least resistance. Most arguments come from powerful law firms representing industry. There needs to be less rational apathy on the part of investors.”

So how do we fix this? According to Fleming, two things need to happen: 1) investors need to be more vocal in the process and 2) the SEC has to stop counting comment letters like they’re votes.

“I’m genuinely concerned about Americans’ outlook on the future,” said Fleming. “Half of Americans expect future generations to be worse off and over half say political/economic systems are stacked against people like them. I’m setting out to change these perceptions.”

Prior to joining the SEC, Mr. Fleming spent 15 years as a state securities regulator, including more than a decade as General Counsel for the Office of the Kansas Securities Commissioner. He moved to Washington, D.C. in 2011 to become the Deputy General Counsel for the North American Securities Administrators Association (NASAA), where he provided assistance to state securities regulators and supported the activities of various project groups, primarily in matters involving enforcement and corporation finance.