```

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1815 Referred in Senate (RFS)]

<DOC>
116th CONGRESS
  1st Session
                                H. R. 1815

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            October 21, 2019

Received; read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 AN ACT

 
  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.

            Passed the House of Representatives October 17, 2019.

            Attest:

                                             CHERYL L. JOHNSON,

                                                                 Clerk.
```