The SEC and NAF

Kathy FloydOffice of Investor Education and Advocacy

NAF InstituteJuly 18, 2011

2

SEC Disclaimer

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed in this presentation do not necessarily reflect the views of the SEC, its Commissioners, or other members of the SEC’s staff.

3

The Mission

The SEC’s Mission: • Protect Investors • Maintain Fair, Orderly, & Efficient

Markets, and• Facilitate Capital Formation

4

The SEC

Five CommissionersFive Divisions: • Division of Corporation Finance• Division of Enforcement• Division of Investment Management• Division of Trading and Markets• Division of Risk, Strategy & Financial

Innovation

Ten Key Messages for Students

You control your financial future Set a financial goal Understand compound interest Know your asset classes Diversification is key

6

Ten Key Messages for Students

Know your risks Indentify Fees Research, Research, Research Fraud can happen to you Never too early (or late) to save for

retirement

7

Students should know:

You are ultimately responsible for accumulating and

managing your own wealth

Financial Goals

Set a Financial Goal

Short Term, Medium Term, Long TermUnderstand Your Risk Tolerance

Financial Goals

Understand Your Risk ToleranceYour ability to handle declines or swings in the

value of your portfolio

More About RiskAll investments involve some degree of riskThe potential for greater returns typically comes

with greater risk

10

Compound Interest

The interest you earn on interestKnow the Rule of 72

Remember: Compound Interest can work for you or against you

11

Compound Interest

At age 20, you start investing $2000 a year at 8%. But you stop after 10 years.

At age 40, your friend starts investing $2000 a year at 8% and keeps investing until you’re both 65.

12

Who comes out ahead?

You!

You have $462,647Your friend has only $157,908

Asset Classes

Common Types:CashBonds Stock

Types of Investments

Certificates of Deposit Money Market Funds Treasuries (Bills, Notes, Bonds, TIPS) Corporate Bonds Municipal Bonds Mutual Funds Exchange Traded Funds (ETFs) Stocks

15

Rates of Return

– Treasury Bills 3.7%– Long-Term Treasuries 5.4%– Long-Term Corp. Bonds 5.7%– Large Co. Stocks 9.6%– Small Co. Stocks 11.7%

Source: Computed using data from Stocks, Bonds, Bills, and Inflation 2009 Yearbook, Ibbotson Associates, Chicago, a Morningstar subsidiary.

Compound Annual Rates of Return* 1926 – 2008* Nominal

Diversification

The Magic of Diversification. The practice of spreading money among different investments to reduce risk. By picking the right group of investments, you may be able to limit your losses without sacrificing too much potential gain.

17

Retirement – Never to early to start

Retirement Plans: Defined Benefit Plans Defined Contribution Plans

401(k), Roth 401(k), 403(b) Individual Retirement Plans – IRAsUS Department of Labor, Employee Benefits

Security Administration, www.dol.gov

18

Know your risks

Volatility Purchasing Power/Inflation Business Specific Interest Rate Accumulation

Understand Fees

Per Transaction Beware inactivity fees

Assets Under Management As your wealth increases, their revenue

increases

Mutual Fund Fees

Ask: How are you being paid?

Research, Research, Research

Ask Questions…Is this product registered with the SEC or

my state regulator?Why is this investment suitable for me?How will this investment make money?

(Dividends? Interest? Capital gains?)What are the total fees?How do I sell this product?

21

Research, Research, Research

Check out brokers and investment advisersUnderstand the fee structureKnow the companies you buy – use EDGARReview Mutual Fund Prospectuses (485

filings)Use trusted websites

www.SEC.govwww.investor.govwww.mymoney.gov

2222

Research, Research, ResearchCheck out Brokers and Investment Advisers

Call State Regulators, visit www.nasaa.org

Call FINRA at 1-(800) 289-9999 or visit FINRA’s Broker Check at www.finra.org

Guidance from the SEC staff www.sec.gov/investor/brokers.htm

SEC Investment Adviser Public Disclosure page: www.adviserinfo.sec.gov

23

Avoid Fraud

Fraud TypesOn-line Fraud“Free” LunchPump & DumpPyramid/Ponzi SchemesAffinity FraudRed Flag Sales Techniques

24

How to work with the SEC

School visits – Washington, DC Headquarters

SEC/AOF Shadowing program Regional Offices: – Boston New York– Salt Lake City Ft. Worth– Philadelphia Chicago – Atlanta Miami– Denver LA/SFO

25

Teaching tools:

NYSE-SEC Summer Teachers’ WorkshopsThree one-week workshops in NY SEC Graduate Program in DC NYSE Euronext Graduate Program in NY

Saving and Investing for Students Free classroom sets

Investor.gov In the Classroom

27

SEC contact information

Website: www.Investor.gov; www.sec.gov

Toll free number: 1-(800) 732-0330

Mail: U.S. Securities and Exchange Commission100 F Street NEWashington, DC 20549

Name: Kathy Floyd FloydK@sec.gov

202-551-6394