Procedures for Appointments to the Investor Advisory Committee

1 
 
Procedures for Appointments to the Investor Advisory Committee 
I. Introduction 
Section 39 of the Securities Exchange Act of 1934 (the “Exchange Act”)
1
 establishes the 
Investor Advisory Committee (the “Committee”) and requires the Commission to appoint a 
minimum of 10 and a maximum of 20 members to the Committee who: 
 Represent the interests of individual equity and debt investors, including investors in 
mutual funds; 
 Represent the interests of institutional investors, including the interests of pension 
funds and registered investment companies; 
 Are knowledgeable about investment issues and decisions; and 
 Have reputations for integrity.
2
 
In addition to these 10-20 members, Exchange Act Section 39 requires the Commission 
to appoint a representative of state securities commissioners and a “representative of the interests 
of senior cit izens.”
3
  Section 39 also provides that the Investor Advocate shall serve as a member 
of the Committee. 
II. Background of the Investor Advisory Committee 
 
Exchange Act Section 39(a) states that the purpose of the Committee is to advise and 
consult with the Commission on: 
 
 Regulatory priorities of the Commission; 
 Issues relating to the regulation of securities products, trading strategies, fee 
structures, and the effectiveness of disclosure;  
 Initiatives to protect investor interests; and 
 Initiatives to promote investor confidence and the integrity of the securities 
marketplace. 
 
The statute requires the Committee to submit such findings and recommendations to the 
Commission as the Committee determines are appropriate, including recommendations for 
proposed legislative changes.
4
  The statute mandates further that the Commission review the 
findings and recommendations of the Committee and promptly issue a public statement assessing 
                                                
1
 15 U.S.C. § 78pp (2012). 
2
 Exchange Act Section 39(b)(1)(D), 15 U.S.C. § 78pp(b)(1)(D). 
3
 Exchange Act Section 39(b)(1)(B)&(C), 15 U.S.C. § 78pp(b)(1)(B)&(C). 
4
 Exchange Act Section 39(a)(2)(B), 15 U.S.C. § 78pp(a)(2)(B). 

2 
 
each finding or recommendation and disclosing what action, if any, the Commission intends to 
take with respect to the finding or recommendat ion.
5
  
 
Members of the Committee who are not full-time employees of the United States are 
compensated “for each day during which the member is engaged in the actual performance of the 
duties of the Committee” as well as for travel expenses.
6
  Although the Committee is required to 
meet at least two times per year, it typically meets four times per year on a quarterly basis. 
 
The term of service for members of the Committee is four years.
7  
The Committee’s 
charter currently provides that the members of the Committee will elect, from the members of 
the Committee, a chairman and vice-chairman (neither of whom may be employed by an issuer), 
as well as a secretary and assistant secretary.  Each new member is appointed to serve a full four-
year term; the new member does not serve out the unexpired portion of the predecessor’s term.  
Each member serves at the pleasure of the Commission. 
 
III. The Nomination Process 
 
A. Nominations to Fill Member Vacancies 
Upon the resignation, removal, or expiration of the term of any member of the 
Committee, the Nominating Committee, as defined below, will prepare a list of potential 
replacement candidates.  Potential replacement candidates for consideration by the Nominating 
Committee may be suggested by any member of the Nominating Committee or by direct 
submission from the public.
8
 
 
The Nominating Committee will be composed of one staff member from each of the 
following SEC Divisions and Offices: 
 
 Compliance Inspections and Examinations; 
 Corporation Finance;  
 Economic and Risk Analysis;  
 Enforcement;  
 Investment Management;  
 Investor Advocate; 
 Investor Education and Advocacy; 
                                                
5
 Exchange Act Section 39(g), 15 U.S.C. § 78pp(g).   
6
 Exchange Act Section 39(e), 15 U.S.C. § 78pp(e).  The rate of compensation for performance of duties is the 
equivalent of the rate for a level V position of the Executive Schedule under 5 U.S.C. § 5316.  The rate for travel 
expenses is in accordance with 5 U.S.C. § 5703(b).  Pursuant to Exchange Act Section 39(b)(3), members of the 
Committee shall not be deemed to be employees or agents of the Commission solely because of membership on the 
Committee. 
7
 Exchange Act Section 39(b)(2), 15 U.S.C. § 78pp(b)(2).  
8
 The webpage for the Committee has a link to an e-mail box that the public can use for submission of candidates.  
See https://www.sec.gov/spotlight/investor-advisory-committee.shtml
.   

3 
 
 Minorit y and Wo men Inclusio n; and 
 Trading and Markets. 
 
In addition to the SEC staff designated by those Divisions and Offices, the Nominating 
Committee will include, in an ex officio and non-voting capacity, one counsel from each 
Commissioner’s staff (together, the “Nominating Committee”).  Specifically, each 
Commissioner will have the discretion to choose one counsel fro m his or her staff to serve as an 
ex officio member of the Nominating Committee.  The Nominating Committee will select a 
Chair for a term of one year from among its members (other than the ex officio members).  The 
Chair will be responsible for leading the Nominating Committee through the process of 
identifying and nominating candidates when there is a Committee vacancy.  Each Division and 
Office representative will serve a one-year term as Chair of the Nominating Committee until 
each representative has served in that role.  At that point, the rotation among the Division and 
Office representatives will repeat itself.  The representative from the Office of Minority and 
Women Inclusion will serve as the inaugural Chair of the Nominating Committee.   
 
In preparing the list of potential replacement candidates, the Nominating Committee will 
identify candidates based on the functional category of the vacancy; these functional categories 
(“Functional Membership Categories”) are listed on Annex A attached hereto.
9
  The SEC has 
used a selection process based on functional membership categories for other advisory 
committees including the Asset Management Advisory Committee, the Fixed Income Market 
Structure Advisory Committee, and the Small Business Capital Formation Advisory 
Committee.
10
  For example, if the outgoing member represented a particular Functional 
Membership Category (e.g., “Specialized retail: fraud-targeted investor group”), the Nominating 
Committee will seek to identify candidates appropriate for that Functional Membership 
Category.    
 
IV. Appointment of Committee Member 
The authority for appointment of all members of the Committee (other than the Investor 
Advocate, who is statutorily mandated as a result of his or her position) rests with the 
Commission.
11
  After the Commission has voted to approve the appointment of a nominee to the 
Committee, OIAD will contact the new member to offer assistance and provide details regarding 
membership on the Committee.   
                                                
9
  Functional Membership Categories may be modified by the Commission from time to time.  As the purpose of the 
Committee is to provide the Commission with outside views and perspectives, no member of the SEC staff will be 
considered for appointment to the Committee.   
 
10
 For reference, the current functional membership categories for the SEC’s other advisory committees are attached 
as Annex B, C, and D. 
 
11
 For avoidance of doubt, the procedures outlined in this memorandum will apply to the representative of State 
securities commissions and the representative of the interests of senior citizens.  For the representative of State 
securities commissions, we expect that the North American Securities Administrators Association (“NASAA”) will 
provide names of State representatives who indicated to NASAA an interest in serving. 
 

4 
 
New members will be informed that if their personal circumstances change materially 
(e.g., a change in employment or professional affiliation) such that it would be reasonable to 
conclude that they would no longer be a viable candidate for the Functional Membership 
Category that was the basis for the member’s selection, the member would be expected to offer 
to resign from the Committee.  The Nominating Committee will consider and recommend to the 
Commission whether, despite a material change in personal circumstance, the Committee 
member should remain a member of the Committee.  The ultimate decision rests with the 
Commission.        
In addition, new members will be informed that in no event should a member use his or 
her membership on the Committee to obtain a personal financial gain.  For example, a member 
may not advertise his or her position on the Committee to further any financial interest such as 
serving as a consultant on matters related to the work of the SEC.  Failure to meet these 
expectations could result in the member’s removal and replacement.     
 To ensure fresh perspectives on the Committee, existing members who have served one 
full term will not be renominated to serve an additional consecutive term.  Instead, the 
Nominating Committee will select a different candidate for the Functional Membership Category 
that was the basis for the member’s selection in accordance with the process outlined above.   
 
  

5 
 
Annex A –   Functional Membership Categories 
The Functional Membership Categories, except the State Securities Regulator and 
Investor Advocate, shall be construed to include individuals representing the interests of the 
Functional Membership Categories (whether as a representative of an organization or 
individually). 
 Category 
1. Retail investor 
2. Specialized retail: angel investor/investor in private securities  
3. Specialized retail: investor in non-traditional investments (Business Development 
Companies, real estate investment trusts, asset-backed securities, etc.) 
4. Specialized retail: fraud-targeted investor group (e.g., teachers, military, affinity 
groups, etc.) 
5. Claimants’ counsel/victim representative (e.g., receiver) 
6. Retail investment advice provider (preferably a dually licensed investment advisor 
or broker-dealer individual) 
7. Retirement/savings plans, including plan consultants  -- 401(k) 
8. Retirement/savings plans, including plan consultants  -- other non-taxable plan 
9. Large institutional investor 
10. Small inst itutional investor 
11. Financial analyst 
12. Pension fund 
13. Hedge fund/private equity/venture capital 
14. Fund registered under the Investment Company Act of 1940 (e.g., mutual fund, 
exchange-traded fund) 
15. Academic  
16. Market structure/trading expert – equity 
17. Market structure/trading expert- debt 

6 
 
18. Accountant/auditor 
19. Investor education professional 
20. At-large member 
21. Representative of the interests of senior citizens* 
22. State securities regulator* 
23. SEC Investor Advocate* 
 
* Statutorily mandated 
 
  

7 
 
Annex B –   Current Functional Membership Categories for 
Asset Management Advisory Committee 
 
Category* 
Fund Sponsors, such as those with actively-managed, passively-managed, and private funds 
Registered Advisers, such as those with retail clients in separately-managed accounts  
Investors, including retail and institutional investors 
Fund Board Members, such as a board member from a large fund 
Service Providers, such as auditors and distributors 
Exchanges/Electronic Platforms 
Broker-Dealers 
Academics/Economists 
Data Providers/Independent Research Analysts 
Other Market Participants (1-3), such as those focusing on the effects of technology and 
role of globalization 
 
*These categories are subsumed within the categories described in the Asset Management 
Advisory Committee Charter available at:  https://www.sec.gov/files/AMAC-Charter-Filed.pdf
.    

8 
 
Annex C –   Current Functional Membership Categories for 
Fixed Income Market Structure Advisory Committee 
 
 Category* 
1. Committee Chairman 
2. Institutional Dealer (bank affiliated) 
3. Inst itutional Dealer (non-bank affiliated) 
4. Retail Dealer 
5. Regional Municipal Securities Dealer 
6. Retail Investor 
7. Small Inst itutional Investor 
8. Large Inst itutional Investor 
9.  Large Inst itutional Investor 
10. Municipal Market Analysts/Institutional Investor 
11. Proprietary Trading Firm 
12. Proprietary Trading Firm 
13. Small Issuer 
14. Large Issuer 
15. Municipal Issuer 
16. ETF Sponsor 
17. Trading Venue (established) 
18. Trading Venue (emerging) 
19. Evaluated Pricing Service 
20. Academic 
21. Academic 

9 
 
22. FINRA** 
23. MSRB** 
 
*These categories are subsumed within the categories described in the Fixed Income Market 
Structure Advisory Committee Charter available at:  https://www.sec.gov/files/fimsac-
charter.pdf.   
** Non-voting 
  

10 
 
Annex D –   Current Functional Membership Categories for 
Small Business Capital Formation Advisory Committee 
 
 Category 
Small Businesses 
1. Small or emerging co mpany 
2. Small or emerging co mpany 
3. Pre- or recent-IPO company 
4. Smaller public company 
5. Small business service provider, accelerator or incubator 
Small Business Advisors 
6. Attorney with experience on smaller offerings 
7. Attorney with experience on later stage pre-IPO rounds  
8. Investment bank 
9. Accountant 
10. Advisor to pre- and post-IPO companies 
Investors 
11. Early-stage investor 
12. Angel investor group/fund 
13. Venture capital fund  
Marketplace Participants 
14. Online capital raising platform or advisor 
15. Other marketplace participant 
Government Representatives 
16. SEC Advocate for Small Business Capital Formation 

11 
 
17. SEC Investor Advocate Representative* 
18. NASAA Representative* 
19. SBA Representative* 
20. FINRA Observer* 
 
* Non-voting 
 
 

1 
 

Procedures for Appointments to the Investor Advisory Committee 

I. Introduction 

Section 39 of the Securities Exchange Act of 1934 (the “Exchange Act”)1 establishes the 
Investor Advisory Committee (the “Committee”) and requires the Commission to appoint a 
minimum of 10 and a maximum of 20 members to the Committee who: 

 Represent the interests of individual equity and debt investors, including investors in 
mutual funds; 

 Represent the interests of institutional investors, including the interests of pension 
funds and registered investment companies; 

 Are knowledgeable about investment issues and decisions; and 
 Have reputations for integrity.2 

In addition to these 10-20 members, Exchange Act Section 39 requires the Commission 
to appoint a representative of state securities commissioners and a “representative of the interests 
of senior citizens.”3  Section 39 also provides that the Investor Advocate shall serve as a member 
of the Committee. 

II. Background of the Investor Advisory Committee 
 

Exchange Act Section 39(a) states that the purpose of the Committee is to advise and 
consult with the Commission on: 
 

 Regulatory priorities of the Commission; 
 Issues relating to the regulation of securities products, trading strategies, fee 

structures, and the effectiveness of disclosure;  
 Initiatives to protect investor interests; and 
 Initiatives to promote investor confidence and the integrity of the securities 

marketplace. 
 

The statute requires the Committee to submit such findings and recommendations to the 
Commission as the Committee determines are appropriate, including recommendations for 
proposed legislative changes.4  The statute mandates further that the Commission review the 
findings and recommendations of the Committee and promptly issue a public statement assessing 

                                                
1 15 U.S.C. § 78pp (2012). 

2 Exchange Act Section 39(b)(1)(D), 15 U.S.C. § 78pp(b)(1)(D). 

3 Exchange Act Section 39(b)(1)(B)&(C), 15 U.S.C. § 78pp(b)(1)(B)&(C). 

4 Exchange Act Section 39(a)(2)(B), 15 U.S.C. § 78pp(a)(2)(B). 



2 
 

each finding or recommendation and disclosing what action, if any, the Commission intends to 
take with respect to the finding or recommendation.5  

 
Members of the Committee who are not full-time employees of the United States are 

compensated “for each day during which the member is engaged in the actual performance of the 
duties of the Committee” as well as for travel expenses.6  Although the Committee is required to 
meet at least two times per year, it typically meets four times per year on a quarterly basis. 

 
The term of service for members of the Committee is four years.7  The Committee’s 

charter currently provides that the members of the Committee will elect, from the members of 
the Committee, a chairman and vice-chairman (neither of whom may be employed by an issuer), 
as well as a secretary and assistant secretary.  Each new member is appointed to serve a full four-
year term; the new member does not serve out the unexpired portion of the predecessor’s term.  
Each member serves at the pleasure of the Commission. 

 
III. The Nomination Process 
 
A. Nominations to Fill Member Vacancies 

Upon the resignation, removal, or expiration of the term of any member of the 
Committee, the Nominating Committee, as defined below, will prepare a list of potential 
replacement candidates.  Potential replacement candidates for consideration by the Nominating 
Committee may be suggested by any member of the Nominating Committee or by direct 
submission from the public.8 

 
The Nominating Committee will be composed of one staff member from each of the 

following SEC Divisions and Offices: 
 
 Compliance Inspections and Examinations; 
 Corporation Finance;  
 Economic and Risk Analysis;  
 Enforcement;  
 Investment Management;  
 Investor Advocate; 
 Investor Education and Advocacy; 

                                                
5 Exchange Act Section 39(g), 15 U.S.C. § 78pp(g).   

6 Exchange Act Section 39(e), 15 U.S.C. § 78pp(e).  The rate of compensation for performance of duties is the 
equivalent of the rate for a level V position of the Executive Schedule under 5 U.S.C. § 5316.  The rate for travel 
expenses is in accordance with 5 U.S.C. § 5703(b).  Pursuant to Exchange Act Section 39(b)(3), members of the 
Committee shall not be deemed to be employees or agents of the Commission solely because of membership on the 
Committee. 

7 Exchange Act Section 39(b)(2), 15 U.S.C. § 78pp(b)(2).  

8 The webpage for the Committee has a link to an e-mail box that the public can use for submission of candidates.  
See https://www.sec.gov/spotlight/investor-advisory-committee.shtml.   

https://www.sec.gov/spotlight/investor-advisory-committee.shtml


3 
 

 Minority and Women Inclusion; and 
 Trading and Markets. 

 
In addition to the SEC staff designated by those Divisions and Offices, the Nominating 
Committee will include, in an ex officio and non-voting capacity, one counsel from each 
Commissioner’s staff (together, the “Nominating Committee”).  Specifically, each 
Commissioner will have the discretion to choose one counsel from his or her staff to serve as an 
ex officio member of the Nominating Committee.  The Nominating Committee will select a 
Chair for a term of one year from among its members (other than the ex officio members).  The 
Chair will be responsible for leading the Nominating Committee through the process of 
identifying and nominating candidates when there is a Committee vacancy.  Each Division and 
Office representative will serve a one-year term as Chair of the Nominating Committee until 
each representative has served in that role.  At that point, the rotation among the Division and 
Office representatives will repeat itself.  The representative from the Office of Minority and 
Women Inclusion will serve as the inaugural Chair of the Nominating Committee.   
 

In preparing the list of potential replacement candidates, the Nominating Committee will 
identify candidates based on the functional category of the vacancy; these functional categories 
(“Functional Membership Categories”) are listed on Annex A attached hereto.9  The SEC has 
used a selection process based on functional membership categories for other advisory 
committees including the Asset Management Advisory Committee, the Fixed Income Market 
Structure Advisory Committee, and the Small Business Capital Formation Advisory 
Committee.10  For example, if the outgoing member represented a particular Functional 
Membership Category (e.g., “Specialized retail: fraud-targeted investor group”), the Nominating 
Committee will seek to identify candidates appropriate for that Functional Membership 
Category.    
 

IV. Appointment of Committee Member 

The authority for appointment of all members of the Committee (other than the Investor 
Advocate, who is statutorily mandated as a result of his or her position) rests with the 
Commission.11  After the Commission has voted to approve the appointment of a nominee to the 
Committee, OIAD will contact the new member to offer assistance and provide details regarding 
membership on the Committee.   

                                                
9  Functional Membership Categories may be modified by the Commission from time to time.  As the purpose of the 
Committee is to provide the Commission with outside views and perspectives, no member of the SEC staff will be 
considered for appointment to the Committee.   
 
10 For reference, the current functional membership categories for the SEC’s other advisory committees are attached 
as Annex B, C, and D. 
 
11 For avoidance of doubt, the procedures outlined in this memorandum will apply to the representative of State 
securities commissions and the representative of the interests of senior citizens.  For the representative of State 
securities commissions, we expect that the North American Securities Administrators Association (“NASAA”) will 
provide names of State representatives who indicated to NASAA an interest in serving. 
 



4 
 

New members will be informed that if their personal circumstances change materially 
(e.g., a change in employment or professional affiliation) such that it would be reasonable to 
conclude that they would no longer be a viable candidate for the Functional Membership 
Category that was the basis for the member’s selection, the member would be expected to offer 
to resign from the Committee.  The Nominating Committee will consider and recommend to the 
Commission whether, despite a material change in personal circumstance, the Committee 
member should remain a member of the Committee.  The ultimate decision rests with the 
Commission.     

In addition, new members will be informed that in no event should a member use his or 
her membership on the Committee to obtain a personal financial gain.  For example, a member 
may not advertise his or her position on the Committee to further any financial interest such as 
serving as a consultant on matters related to the work of the SEC.  Failure to meet these 
expectations could result in the member’s removal and replacement.     

 To ensure fresh perspectives on the Committee, existing members who have served one 
full term will not be renominated to serve an additional consecutive term.  Instead, the 
Nominating Committee will select a different candidate for the Functional Membership Category 
that was the basis for the member’s selection in accordance with the process outlined above.   
 
  



5 
 

Annex A – Functional Membership Categories 

The Functional Membership Categories, except the State Securities Regulator and 
Investor Advocate, shall be construed to include individuals representing the interests of the 
Functional Membership Categories (whether as a representative of an organization or 
individually). 

 Category 

1. Retail investor 

2. Specialized retail: angel investor/investor in private securities  

3. Specialized retail: investor in non-traditional investments (Business Development 
Companies, real estate investment trusts, asset-backed securities, etc.) 

4. Specialized retail: fraud-targeted investor group (e.g., teachers, military, affinity 
groups, etc.) 

5. Claimants’ counsel/victim representative (e.g., receiver) 

6. Retail investment advice provider (preferably a dually licensed investment advisor 
or broker-dealer individual) 

7. Retirement/savings plans, including plan consultants  -- 401(k) 

8. Retirement/savings plans, including plan consultants  -- other non-taxable plan 

9. Large institutional investor 

10. Small institutional investor 

11. Financial analyst 

12. Pension fund 

13. Hedge fund/private equity/venture capital 

14. Fund registered under the Investment Company Act of 1940 (e.g., mutual fund, 
exchange-traded fund) 

15. Academic  

16. Market structure/trading expert – equity 

17. Market structure/trading expert- debt 



6 
 

18. Accountant/auditor 

19. Investor education professional 

20. At-large member 

21. Representative of the interests of senior citizens* 

22. State securities regulator* 

23. SEC Investor Advocate* 

 

* Statutorily mandated 

 

  



7 
 

Annex B – Current Functional Membership Categories for 
Asset Management Advisory Committee 

 

Category* 

Fund Sponsors, such as those with actively-managed, passively-managed, and private funds 

Registered Advisers, such as those with retail clients in separately-managed accounts  

Investors, including retail and institutional investors 

Fund Board Members, such as a board member from a large fund 

Service Providers, such as auditors and distributors 

Exchanges/Electronic Platforms 

Broker-Dealers 

Academics/Economists 

Data Providers/Independent Research Analysts 

Other Market Participants (1-3), such as those focusing on the effects of technology and 
role of globalization 

 
*These categories are subsumed within the categories described in the Asset Management 
Advisory Committee Charter available at:  https://www.sec.gov/files/AMAC-Charter-Filed.pdf.    

https://www.sec.gov/files/AMAC-Charter-Filed.pdf


8 
 

Annex C – Current Functional Membership Categories for 
Fixed Income Market Structure Advisory Committee 

 

 Category* 

1. Committee Chairman 

2. Institutional Dealer (bank affiliated) 

3. Institutional Dealer (non-bank affiliated) 

4. Retail Dealer 

5. Regional Municipal Securities Dealer 

6. Retail Investor 

7. Small Institutional Investor 

8. Large Institutional Investor 

9.  Large Institutional Investor 

10. Municipal Market Analysts/Institutional Investor 

11. Proprietary Trading Firm 

12. Proprietary Trading Firm 

13. Small Issuer 

14. Large Issuer 

15. Municipal Issuer 

16. ETF Sponsor 

17. Trading Venue (established) 

18. Trading Venue (emerging) 

19. Evaluated Pricing Service 

20. Academic 

21. Academic 



9 
 

22. FINRA** 

23. MSRB** 

 

*These categories are subsumed within the categories described in the Fixed Income Market 
Structure Advisory Committee Charter available at:  https://www.sec.gov/files/fimsac-
charter.pdf.   

** Non-voting 

  

https://www.sec.gov/files/fimsac-charter.pdf
https://www.sec.gov/files/fimsac-charter.pdf


10 
 

Annex D – Current Functional Membership Categories for 
Small Business Capital Formation Advisory Committee 

 

 Category 

Small Businesses 

1. Small or emerging company 

2. Small or emerging company 

3. Pre- or recent-IPO company 

4. Smaller public company 

5. Small business service provider, accelerator or incubator 

Small Business Advisors 

6. Attorney with experience on smaller offerings 

7. Attorney with experience on later stage pre-IPO rounds  

8. Investment bank 

9. Accountant 

10. Advisor to pre- and post-IPO companies 

Investors 

11. Early-stage investor 

12. Angel investor group/fund 

13. Venture capital fund  

Marketplace Participants 

14. Online capital raising platform or advisor 

15. Other marketplace participant 

Government Representatives 

16. SEC Advocate for Small Business Capital Formation 



11 
 

17. SEC Investor Advocate Representative* 

18. NASAA Representative* 

19. SBA Representative* 

20. FINRA Observer* 

 

* Non-voting