The Financial Planning Coalition encouraged the House Financial Services Committee to approve H.R. 1815, the “SEC Disclosure Effectiveness Testing Act.” A fundamental public policy goal of the federal securities laws is to ensure full and adequate disclosure of “material” information to American investors. The expectation is that the disclosure will assist investors in making an informed investment decision.
Yet, information about financial issues and investments is often complex and technical in nature, and investor comprehension of this information typically is poor. Not surprisingly, recent research conducted on behalf of AARP, Consumer Federation of America and the Coalition organizations, as well as separate research conducted by the SEC, all highlight the challenges and difficulties in developing clear, understandable investor disclosures. In order to increase disclosure effectiveness, H.R. 1815 would require the SEC to engage in cognitive, one-on one interviews with investors to determine if the disclosure assists in their decision-making prior to finalizing any disclosure document primarily used by retail investors.