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Investors, You Can Change the Rules

If you’re an investor or want to be, you have the right to participate in the process that makes the rules protecting investors and governing markets.

Securities and Exchange Commission building

Counter Wall Street by Making Your Voices Heard 

Rulemaking is a public, (mostly) transparent process at agencies like the Securities & Exchange Commission (SEC), which writes the rules implementing the laws that Congress passes. That doesn’t mean it’s easy for the public to participate in the rulemakings.  But the public must because it’s the only way to change the system, which is often rigged, has too many unfair rules, and too often lets predators get rich ripping off Main Street investors.  That’s because Wall Street’s biggest banks and financial firms have lots of lobbyists and lawyers participating in that process and there are too few investors.

SUBMITTING A COMMENT LETTER

Investors – YOU – have enormous power and the potential for significant influence. If you participate, you could become a counterweight to Wall Street’s biggest banks and financial firms’ lobbyists.

Here’s a quick overview of the rulemaking process: the SEC is required to invite the public to submit letters with comments on their rule proposals.  The SEC is then required to consider each comment letter they receive.  The SEC usually receives lots of letters from Wall Street’s army of lobbyists, lawyers, and political allies to dilute, limit, or kill the rules.  Their goals are to maximize their profits—profits that come from the pockets of everyday investors like yourself!  The SEC rarely hears from the individual retail investors who invest in the stock markets.

That is a huge opportunity for investors!  We want to help investors participate and ensure that the SEC listens to them.  Why? Because Better Markets exists to protect the public interest in the financial markets, including investors’ interests. We are a nonprofit advocacy organization that fights Wall Street every day at the SEC and the other financial regulatory agencies (as well as in Congress and in the courts). We’ve been doing that since we were founded in 2010!

Your views and your engagement are critical!  That’s why we’ve laid out everything you need to know about the rulemaking process below. Don’t let Wall Street’s voice be the only voice the SEC hears! Here are the upcoming rules you can help make a difference on:

Environmental, social, and governance (“ESG”) funds have grown immensely over the past three decades. According to the US Sustainable Investing Forum, investments that incorporate ESG strategies has grown from $639 billion in 1995 to $17.1 trillion in 2020 with a 42% increase from 2018-2020 alone. The rate of investor assets flowing into these types of funds reflects the appetite investors have to align their investment strategies not only with their financial objectives but also with their core values and beliefs. There is ample evidence that investors are increasingly taking into account ESG factors when making investment decisions. A recent Morning Consult survey of investors found that 60 percent of all adults determined ESG ratings important when it came to investment decisions. Despite the sheer amount of assets flowing into these funds, there is no standardized ESG disclosure framework, which has led to confusion and frustration from investors, issuers, and regulators alike. It has also enabled funds and advisers to overemphasize or mislead investors about how their funds incorporates ESG factors.

The SEC has recently proposed a rule intended to enhance disclosures by funds and advisers regarding the use of ESG investment strategies. The Proposal, if adopted, would implement a variety of needed improvements to the current fragmented disclosure framework for ESG investment funds. The Proposal would establish a standardized ESG disclosure framework that would create reliable, consistent, and comparable disclosures by ESG funds based on the extent to which a fund considers ESG factors in its investment selection process. Specifically, the Proposal identifies three types of ESG funds: Integration Funds, ESG-Focused Funds, and Impact Funds, each requiring varying degrees of disclosures that correspond to the extent to which a fund utilizes ESG factors in its investment selection process.

The SEC has a vital and appropriate role to play in ensuring that investor demand for information about how funds and advisers incorporate ESG strategies into their investment selection process. That role is an integral part of the SEC’s classic, tri-partite mission of protecting investors, maintaining fair and orderly markets, and facilitating capital formation. The proposed approach by the SEC to ESG disclosure will assist retail and institutional investors, funds, advisers, and regulators by generating reliable, consistent, and comparable ESG disclosures. That’s what Better Markets is advocating and we encourage all interested stakeholders to weigh in.

Submit your comment letter by August 16, 2022 in one of three ways:

Vanessa Countryman, Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0609

Submitting a Comment Letter—Some Key Points to Remember

  1. There’s no magic formula but there are some things you can do to help your comment letter have the most impact.
  2. Include the File number for the rule. The subject line of your message should include the File Number for the rule. This is the number that begins “S7-” or “SR-” and you can find it at the top of the rule proposal.
  3. Briefly describe who you are and why you care about the rule proposal.
  4. Set forth the points you want to make. For example, you can:
    • Identify weaknesses in the rule that the agency should change
    • Express support for the rule
    • Share or cite any relevant data, research, or reports you think the agency should consider
  5. Attach any documents you think support your arguments.

For a full list of instructions, review the SEC’s How To Submit Comment Letters

 

Want to See Some Examples? Here’s a Select Few to Inspire You

Now, remember, lawyers and specialists work for us, so our work is often long, complicated, dense, and unreadable legal language more than English!  You don’t have to be like that and, in fact, should not!  Put it in your own words, relate it to your investing activities and investments, and offer your views.

Better Markets Work

January 10, 2022 – The SEC Must Bring Short Selling Out of the Shadow

December 27 2021 – Better Markets Urges SEC to Rescind Trump-Era Provisions That Make it Harder for Investors to Receive Independent Advice on Proxy Votes

December 15, 2021 – Better Markets Supports Disclosure of Proxy Voting by Registered Investment Companies

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