Last month the Securities and Exchange Commission announced the formation of a new Investment Advisory Committee.  Section 911 of the Dodd-Frank Act created the committee to advise the SEC on:

  • regulatory priorities,
  • 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.

The new committee is comprised of 21 members.  California’s two big retirements systems, the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS), each have representatives on the committee.  Section 911 of the Dodd-Frank Act provides committee members are entitled to compensation.

This raises the question of whether these appointments violate Article VII, Section 7 of the California Constitution which provides that with certain exceptions ”A person holding a lucrative office under the United States or other power may not hold a civil office of profit.”  The purpose of the provision is to prevent “dual office-holding by one person under two separate and distinct governments, and the separation of the allegiance justly due one by its officers from that due to another power.” McCoy v. Board of Supervisors, 18 Cal.2d 193, 196 (1941).

Interestingly, Congress expressly exempted the committee from the Federal Advisory Committee Act (FACA), 5 U.S.C. app.  You may not be familiar with the FACA, but it was the law at issue when former President Clinton established the President’s Task Force on National Health Care Reform and named his wife as its chairman.  Ass’n of American Physicians & Surgeons, Inc. v. Hillary Rodham Clinton, 997 F.2d 898 (D.C. Cir. 1993).  It was also the law at issue a few years later when Public Citizen challenged presidential consideration of evaluations by the American Bar Association’s Standing Committee on the Federal Judiciary of potential judicial nominees.  Public Citizen v. U.S. Dept. of Justice, 491 U.S. 440 (1989).

President Nixon signed the FACA into law in 1972 to create a structured process for the creation, operation and termination of advisory committees.  For example, the FACA requires that advisory committees:

  • File a charter with the Administrator of the General Services Agency containing specified provisions (§ 9);
  • Make their meetings open to the public (§ 10(a)(1));
  • Give interested persons the opportunity to attend, appear before, or file statements with the committee (§ 10(a)(3));
  • Keep and publish minutes of each meeting (§ 10(c)); and
  • Allow public inspection of their records (§ 10).

I also wasn’t able to find the committee in the FACA database supported by the General Services Administration’s Committee Management Secretariat even though other SEC committees are included.  The FACA database provides a wealth of information about federal advisory committees, including information about meetings, reports, members, and costs.