SEC Disclosure Effectiveness Testing Act
This bill requires the Securities and Exchange Commission (SEC) to assess the usefulness of certain disclosure rules to retail investors. Specifically, the SEC must make these assessments regarding both current and new securities rules and regulations that require the disclosure of documents or information to retail investors.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8462 Introduced in House (IH)]
<DOC>
117th CONGRESS
2d Session
H. R. 8462
To require the Securities and Exchange Commission, when developing
rules and regulations about disclosures to retail investors, to conduct
investor testing, including a survey and interviews of retail
investors, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 21, 2022
Mr. Casten introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To require the Securities and Exchange Commission, when developing
rules and regulations about disclosures to retail investors, to conduct
investor testing, including a survey and interviews of retail
investors, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``SEC Disclosure Effectiveness Testing
Act''.
SEC. 2. DISCLOSURE TESTING.
(a) In General.--Section 23(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78w(a)) is amended by adding at the end the following:
``(4) Investor Testing.--
``(A) In general.--The Commission shall engage in investor
testing prior to issuing any rule or regulation which
designates documents or information to be disclosed under the
securities laws, if such documents or information are required
to be delivered to, and are intended or substantially likely to
be materially relied upon by, a retail investor when--
``(i) selecting a broker-dealer or investment
adviser, evaluating their services and fees, or
materially altering a brokerage or advisory
relationship;
``(ii) assessing a securities recommendation or
investment advice provided by a broker-dealer or
investment adviser;
``(iii) making a decision to purchase or sell a
security; or
``(iv) such other circumstances as the Commission
may, with input from the Investor Advocate, determine
appropriate for the protection of retail investors.
``(B) Exemption for certain disclosures.--This section
shall not apply to--
``(i) disclosures made pursuant to Regulations S-K
and S-X (including Industry Guides), Regulation 14A,
Form N-PX, Form 10-K, Form 10-Q, Form 8-K, Form SD,
Form N-PORT, Form PF, Regulation SBSR, disclosures
mandated by or jointly with the Board of Governors of
the Federal Reserve System or the Financial Stability
Oversight Council, or successors thereto; or
``(ii) any other documents or information that the
Commission, with input from the Investor Advocate,
determines are outside the intended scope and purposes
of this Act.
``(C) Commission authority to conduct additional testing.--
This section shall not be construed to limit the Commission's
ability to conduct any investor testing on any other documents
or information not subject to this section 23(a), provided that
any such investor testing shall not be subject to the
requirements of this section 23(a).
``(D) Contents.--Investor testing conducted pursuant to
subparagraph (A) shall include the following:
``(i) Qualitative testing in the form of one-on-one
cognitive interviews of retail investors about
documents or information, or samples of such documents
or information, to be provided.
``(ii) Such other forms of testing that the
Commission, with input from the Investor Advocate,
deems appropriate for evaluating the effectiveness of
retail disclosures.
``(iii) Analysis and publication in the Federal
Register of the results of the testing.
``(iv) An opportunity for the public to comment on
such results published in the Federal Register.
``(v) A consideration of unique challenges faced by
retail investors age 65 or older.
``(E) Substantive changes.--If the Commission, in the
period between engaging in investor testing and publishing a
final rule, makes substantive changes to such rule that the
Commission determines would have a significant impact on retail
investors, and such changes were not already investor tested,
the Commission shall again engage in investor testing related
to such changes.
``(F) Public availability of retail testing results.--The
Commission shall make the data and results of any investor
testing performed pursuant to this paragraph available to the
public.
``(G) Rules of construction.--
``(i) The determination that some or all of a
document or information is deemed to be subject to this
paragraph shall not forestall the determination that
such document or information may also be used or relied
upon by the public, market participants other than
retail investors, or government agencies.
``(ii) The Commission may, in consultation with the
Investor Advocate, determine which, if any, components
of such document or information are substantially
likely to be relied on by retail investors for the
purposes outlined in paragraph (4)(A) above and focus
testing under this paragraph on those components of the
disclosure.
``(iii) Notwithstanding clause (ii) above, where
any information subject to testing under this paragraph
may be used or relied upon by the public, market
participants other than retail investors, or government
agencies, the results of testing made pursuant to this
paragraph shall not provide grounds for reducing or
eliminating (including any undermining of reliability
of and accountability for) the information that
existing or proposed regulation requires or would
require be made available to the public, market
participants other than retail investors, and
government agencies, whether or not such information is
delivered to retail investors.
``(H) Retail investor defined.--For the purposes of this
paragraph, the term `retail investor' means any investor that
is not an institutional investor.''.
(b) Participation of Investor Advocate.--Section 4(g) of the
Securities Exchange Act of 1934 (15 U.S.C. 78d(g)) is amended--
(1) in paragraph (4)--
(A) in subparagraph (D)(ii), by striking ``and'' at
the end;
(B) by redesignating subparagraph (E) as
subparagraph (F); and
(C) by inserting after subparagraph (D) the
following:
``(E) engage in investor testing--
``(i) to carry out the functions of the
Office; and
``(ii) pursuant to section 23(a)(4), as
appropriate; and'';
(2) by adding at the end the following:
``(9) Publication of data and results of investor
testing.--With respect to any investor testing carried out by
the Investor Advocate pursuant to paragraph (4)(E), the
Investor Advocate may make the data and results of such
investor testing available to the public, without further
review or editing by the Commission.
``(10) Personnel.--If the Investor Advocate decides, within
its sole discretion, to conduct testing under this section, the
Investor Advocate may do so and the Commission shall provide
the Office of the Investor Advocate with sufficient personnel
and funding necessary to carry out such testing. Such testing
may qualify as the testing covered by this section, provided
that all requirements of the section are met.''.
(c) Prior Rules.--
(1) In general.--For any final rule or regulation issued by
the Securities and Exchange Commission (in this subsection
referred to as the ``Commission'') before the date of the
enactment of this Act that would be subject to investor testing
under section 23(a)(4) of the Securities Exchange Act of 1934,
had such rule been issued on or after the date of enactment of
this Act, the Commission shall perform investor testing with
respect to such rule or regulation that includes the contents
described in such section 23(a)(4).
(2) Schedule.--The Commission shall, not later than 6
months after the date of the enactment of this Act, with input
from the Investor Advocate, establish a schedule for completing
any investor testing required under paragraph (1) that
prioritizes testing of any final rules and regulations that
designate documents or information central to retail investor
decision making, and in particular prioritize the testing of
documents or information required to be delivered to retail
investors in the form of summary documents or summary sections
of documents including for the purpose of determining whether
and how such summary documents can achieve the goals of
informed investor decision-making in the circumstances set
forth in section 23(a)(4) of the Securities Exchange Act of
1934 while maintaining full accessibility by retail investors,
the public, other market participants, and government
regulators to the full range of documents and information that
they may utilize or rely on, whether or not such documents or
information are required to be delivered to retail investors.
(3) Report.--The Commission shall, with input from the
Investor Advocate, issue a report to Congress each year
containing the following:
(A) The status of any investor testing required
under paragraph (1) initiated within the last year or
otherwise ongoing.
(B) The results of any investor testing completed
under paragraph (1) within the last year.
(C) Any priorities the Commission has, based on
results of investor testing required by paragraph (1),
for--
(i) revising any proposed or final rule or
regulation based on the results of testing;
(ii) initiating any rulemaking or actions
arising from the results of the testing; and
(iii) the Investor Advocate's views on the
above priorities and any such other matters
arising from the testing or results of testing.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line