CalPERS Chief Investment Officer Joe Dear Wednesday was named chairman of the Securities and Exchange Commission's new investor advisory committee. Why? If you really want to protect retail investors, why appoint a huge institutional investor that's so engrained in the current Wall Street regulatory regime?
According to FINalternatives, the 21-member committee replaces a committee disbanded after the Dodd-Frank Act became law. It will advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.
At its inaugural meeting, the committee was urged by SEC Commissioner Luis Aguilar to focus its attention on retail investors, who he said lack confidence in the financial markets and increasingly feel that Wall Street is “rigged against” them, Investment News reported.
But Aguilar is gives little more than lip service to addressing investor protection issues. If investors are truly facing a crisis of confidence, appointing the head of CalPERS does little to change the situation. CalPERS has carried the torch for investor protection for many years and what do investors have to show for it? Is Wall Street cleaned up?
CalPERS is a huge institution that has its heart in the right place. It is a good institution. But it is too engrained in Washington politics to represent retail investors. Apart from the obvious fact that CalPERS itself is an institutional investor, another investor protection advocates could have been called upon to chair this key investor protection committee — someone without so much baggage and who has not played such a central role in the current institutional framework.
If Aguilar and the Commission want to do more than just flap their lips about strengthening investor confidence in the markets, we’d see more change in the institutional leadership around the SEC, which includes CalPERS. To change the system that created the problem, you can’t expect the very institutions that helped create the current system to lead the charge.
The irony of naming CalPERS to head the new SEC investor protection committee is poignantly on display in a comment on a discussion board at the website for The Sacramento Bee, which posted a five-sentence story about the SEC Investor Advisory Committee’s inaugural meeting earlier this week:
“Let's see how Dear explains CalPERS' extraordinary losses in FNMAE and Freddie Mac- Bought at $50 to $70 per share, but held all the way down to $1.00.
“It only cost CalPERS members $300,000,000 or so.
CalPERS told me those stocks were part of an index they needed to track and so they couldn't sell--what insanity!!
The problem is, those stocks are only the tip of the iceberg....”