Sec Disclosure Effectiveness Testing Act

Floor Speech

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Mr. FOSTER. Mr. Chair, I thank the gentlewoman from California (Ms. Waters), the chairwoman, for yielding.

Mr. Chair, I rise in support of H.R. 1815, which would simply require the SEC to conduct investor testing when developing rules and regulations about disclosures to retail investors.

Creating effective disclosures is often a difficult task and requires developmental testing with consumers. It is a complex and technical task in its nature. These disclosures are meant to be clear and concise so that retail investors understand the scope of their relationships with brokers and investment advisers and important decisions regarding their investments.

The SEC has had evidence since at least 2012, when it conducted a financial literacy study, that many of the disclosure documents that we currently rely on are not well understood by those investors. This includes cost disclosures that don't clearly convey costs, risk disclosures that don't clearly convey risks, and conflict disclosures that do not clearly convey the nature and the impact of these conflicts.

Effective disclosure testing is imperative for facilitating informed decisionmaking on the part of consumers who are trying to save and invest their hard-earned money, and that is why the AARP and many other groups have endorsed H.R. 1815.

By requiring qualitative testing in the form of one-on-one cognitive interviews of investors, it provides a deeper look into how typical retail investors synthesize information. If investors understand key differences in firms' conflicts, obligations, and revenue streams, then more retail investors will receive and interpret correctly the professional guidance that is right for them.

The framework laid out here will increase transparency and access to critical and understandable information, as well as facilitate informed decisionmaking for Americans making investment decisions and saving for their retirement. This should be accomplished without delay.

Mr. Chair, I urge a ``yes'' vote on H.R. 1815.

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