On June 25, 2025, the Securities and Exchange Commission's Office of the Investor Advocate submitted its annual Report to Congress, outlining the Office's key policy objectives and areas of focus for Fiscal Year 2026. As retail participation in the markets continues to rise, the Investor Advocate's priorities reflect a broader regulatory shift toward more data-driven investor protection efforts, disclosure modernization, and a closer examination of opaque market structures—including risks tied to private market exposure in retirement accounts and China-based issuers operating through variable interest entities (VIEs).
Summary of Key Priorities
The FY2026 report identifies five primary objectives:
- Investor Research and Disclosure Testing
The Office will continue conducting empirical testing of how investors engage with existing and proposed disclosures. This includes behavioral studies aimed at refining how information is presented to retail investors in areas such as fund fees, investment risks, and broker-dealer obligations. - Data-Driven Policy Recommendations
By leveraging nationally representative investor surveys, the Office seeks to shape SEC rulemaking through objective, investor-focused data. These insights are intended to inform not only disclosure rules but also broader market reforms that impact retail participants. - Combatting Financial Fraud
Through participation in the Interagency Securities Council, the Office is placing renewed emphasis on advocacy for investors affected by financial misconduct. The aim is to strengthen coordination across federal and state enforcement bodies and to elevate retail investor voices in discussions about fraud prevention. - Private Market Investments in Retirement
Plans
The report highlights the increasing exposure of defined contribution retirement accounts to illiquid and complex private market investments. The Office plans to assess how retail investors access these products, the adequacy of disclosures, and the downstream implications for retirement security. - China-Based VIEs on U.S. Exchanges
The Investor Advocate continues to express concern over the use of VIE structures by Chinese issuers to access U.S. capital markets, which can obscure ownership rights and regulatory exposure for investors. The Office will monitor risks associated with these structures and explore whether additional investor protections are warranted.
Our Perspective
The 2026 objectives reflect a maturing regulatory philosophy—one that acknowledges the growing complexity of products and platforms accessible to retail investors, while seeking to modernize the regulatory framework through data and direct investor engagement.
From a legal practitioner's perspective, several developments are particularly noteworthy:
- Disclosure Testing: Firms should anticipate increasing scrutiny of retail-facing materials. If the Commission begins to codify design standards based on behavioral research, traditional compliance checklists may no longer suffice. Forward-thinking firms will proactively revisit disclosures through the lens of investor usability and effectiveness, not just technical accuracy.
- Private Market Access: The growing push to democratize private markets has clear benefits—but also real risks. Firms involved in the offering or administration of private investments within retirement accounts should expect heightened regulatory interest in suitability, liquidity, and disclosure practices.
- VIE Oversight: While not a new issue, the Investor Advocate's continued focus on VIE structures signals that the SEC may be moving closer to regulatory action or rule proposals in this space. Public companies utilizing VIEs and market participants investing in such entities should monitor this closely.
Final Thoughts
The Office of the Investor Advocate plays a unique role in the SEC ecosystem: independent, research-driven, and solely focused on the retail investor experience. Its FY2026 report reinforces several themes that have emerged over recent years—chief among them, that modern investor protection is no longer just about enforcement; it is about informed access, disclosure clarity, and systemic risk mitigation.
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