IIB 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘SEC Disclosure Effec3 tiveness Testing Act’’. 

4 SEC. 2. DISCLOSURE TESTING. 

5 (a) IN GENERAL.—Section 23(a) of the Securities 

6 Exchange Act of 1934 (15 U.S.C. 78w(a)) is amended by 

7 adding at the end the following: 

8 ‘‘(4) INVESTOR TESTING.— 

9 ‘‘(A) IN GENERAL.—The Commission shall 

10 engage in investor testing prior to issuing any 

11 rule or regulation which designates documents 

12 or information to be disclosed under the securi13 ties laws, if such documents or information are 

14 required to be delivered to, and are intended or 

15 substantially likely to be materially relied upon 

16 by, a retail investor when— 

17 ‘‘(i) selecting a broker-dealer or in18 vestment adviser, evaluating their services 

19 and fees, or materially altering a brokerage 

20 or advisory relationship; 

21 ‘‘(ii) assessing a securities rec22 ommendation or investment advice pro23 vided by a broker-dealer or investment ad24 viser; 

25 ‘‘(iii) making a decision to purchase 

26 or sell a security; or 


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1 ‘‘(iv) such other circumstances as the 

2 Commission may, with input from the In3 vestor Advocate, determine appropriate for 

4 the protection of retail investors. 

5 ‘‘(B) EXEMPTION FOR CERTAIN DISCLO6 SURES.—This section shall not apply to— 

7 ‘‘(i) disclosures made pursuant to 

8 Regulations S–K and S–X (including In9 dustry Guides), Regulation 14A, Form N– 

10 PX, Form 10–K, Form 10–Q, Form 8–K, 

11 Form SD, Form N–PORT, Form PF, 

12 Regulation SBSR, disclosures mandated by 

13 or jointly with the Board of Governors of 

14 the Federal Reserve System or the Finan15 cial Stability Oversight Council, or succes16 sors thereto; or 

17 ‘‘(ii) any other documents or informa18 tion that the Commission, with input from 

19 the Investor Advocate, determines are out20 side the intended scope and purposes of 

21 this Act. 

22 ‘‘(C) COMMISSION AUTHORITY TO CON23 DUCT ADDITIONAL TESTING.—This section shall 

24 not be construed to limit the Commission’s abil25 ity to conduct any investor testing on any other 


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1 documents or information not subject to this 

2 section 23(a), provided that any such investor 

3 testing shall not be subject to the requirements 

4 of this section 23(a). 

5 ‘‘(D) CONTENTS.—Investor testing con6 ducted pursuant to subparagraph (A) shall in7 clude the following: 

8 ‘‘(i) Qualitative testing in the form of 

9 one-on-one cognitive interviews of retail in10 vestors about documents or information, or 

11 samples of such documents or information, 

12 to be provided. 

13 ‘‘(ii) Such other forms of testing that 

14 the Commission, with input from the In15 vestor Advocate, deems appropriate for 

16 evaluating the effectiveness of retail disclo17 sures. 

18 ‘‘(iii) Analysis and publication in the 

19 Federal Register of the results of the test20 ing. 

21 ‘‘(iv) An opportunity for the public to 

22 comment on such results published in the 

23 Federal Register. 


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1 ‘‘(v) A consideration of unique chal2 lenges faced by retail investors age 65 or 

3 older. 

4 ‘‘(E) SUBSTANTIVE CHANGES.—If the 

5 Commission, in the period between engaging in 

6 investor testing and publishing a final rule, 

7 makes substantive changes to such rule that the 

8 Commission determines would have a signifi9 cant impact on retail investors, and such 

10 changes were not already investor tested, the 

11 Commission shall again engage in investor test12 ing related to such changes. 

13 ‘‘(F) PUBLIC AVAILABILITY OF RETAIL

14 TESTING RESULTS.—The Commission shall 

15 make the data and results of any investor test16 ing performed pursuant to this paragraph avail17 able to the public. 

18 ‘‘(G) RULES OF CONSTRUCTION.— 

19 ‘‘(i) The determination that some or 

20 all of a document or information is deemed 

21 to be subject to this paragraph shall not 

22 forestall the determination that such docu23 ment or information may also be used or 

24 relied upon by the public, market particiVerDate Sep 11 2014 21:47 Oct 21, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1815.RFS H1815

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1 pants other than retail investors, or gov2 ernment agencies. 

3 ‘‘(ii) The Commission may, in con4 sultation with the Investor Advocate, deter5 mine which, if any, components of such 

6 document or information are substantially 

7 likely to be relied on by retail investors for 

8 the purposes outlined in paragraph (4)(A) 

9 above and focus testing under this para10 graph on those components of the disclo11 sure. 

12 ‘‘(iii) Notwithstanding clause (ii) 

13 above, where any information subject to 

14 testing under this paragraph may be used 

15 or relied upon by the public, market par16 ticipants other than retail investors, or 

17 government agencies, the results of testing 

18 made pursuant to this paragraph shall not 

19 provide grounds for reducing or elimi20 nating (including any undermining of reli21 ability of and accountability for) the infor22 mation that existing or proposed regulation 

23 requires or would require be made avail24 able to the public, market participants 

25 other than retail investors, and government 


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1 agencies, whether or not such information 

2 is delivered to retail investors. 

3 ‘‘(H) RETAIL INVESTOR DEFINED.—For 

4 the purposes of this paragraph, the term ‘retail 

5 investor’ means any investor that is not an in6 stitutional investor.’’. 

7 (b) PARTICIPATION OF INVESTOR ADVOCATE.—Sec8 tion 4(g) of the Securities Exchange Act of 1934 (15 

9 U.S.C. 78d(g)) is amended— 

10 (1) in paragraph (4)— 

11 (A) in subparagraph (D)(ii), by striking 

12 ‘‘and’’ at the end; 

13 (B) by redesignating subparagraph (E) as 

14 subparagraph (F); and 

15 (C) by inserting after subparagraph (D) 

16 the following: 

17 ‘‘(E) engage in investor testing— 

18 ‘‘(i) to carry out the functions of the 

19 Office; and 

20 ‘‘(ii) pursuant to section 23(a)(4), as 

21 appropriate; and’’; 

22 (2) by adding at the end the following: 

23 ‘‘(9) PUBLICATION OF DATA AND RESULTS OF

24 INVESTOR TESTING.—With respect to any investor 

25 testing carried out by the Investor Advocate pursuVerDate Sep 11 2014 21:47 Oct 21, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1815.RFS H1815

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1 ant to paragraph (4)(E), the Investor Advocate may 

2 make the data and results of such investor testing 

3 available to the public, without further review or ed4 iting by the Commission. 

5 ‘‘(10) PERSONNEL.—If the Investor Advocate 

6 decides, within its sole discretion, to conduct testing 

7 under this section, the Investor Advocate may do so 

8 and the Commission shall provide the Office of the 

9 Investor Advocate with sufficient personnel and 

10 funding necessary to carry out such testing. Such 

11 testing may qualify as the testing covered by this 

12 section, provided that all requirements of the section 

13 are met.’’. 

14 (c) PRIOR RULES.— 

15 (1) IN GENERAL.—For any final rule or regula16 tion issued by the Securities and Exchange Commis17 sion (in this subsection referred to as the ‘‘Commis18 sion’’) before the date of the enactment of this Act 

19 that would be subject to investor testing under sec20 tion 23(a)(4) of the Securities Exchange Act of 

21 1934, had such rule been issued on or after the date 

22 of enactment of this Act, the Commission shall per23 form investor testing with respect to such rule or 

24 regulation that includes the contents described in 

25 such section 23(a)(4). 


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1 (2) SCHEDULE.—The Commission shall, not 

2 later than 6 months after the date of the enactment 

3 of this Act, with input from the Investor Advocate, 

4 establish a schedule for completing any investor test5 ing required under paragraph (1) that prioritizes 

6 testing of any final rules and regulations that des7 ignate documents or information central to retail in8 vestor decision making, and in particular prioritize 

9 the testing of documents or information required to 

10 be delivered to retail investors in the form of sum11 mary documents or summary sections of documents 

12 including for the purpose of determining whether 

13 and how such summary documents can achieve the 

14 goals of informed investor decision-making in the 

15 circumstances set forth in section 23(a)(4) of the 

16 Securities Exchange Act of 1934 while maintaining 

17 full accessibility by retail investors, the public, other 

18 market participants, and government regulators to 

19 the full range of documents and information that 

20 they may utilize or rely on, whether or not such doc21 uments or information are required to be delivered 

22 to retail investors. 

23 (3) REPORT.—The Commission shall, with 

24 input from the Investor Advocate, issue a report to 

25 Congress each year containing the following: 


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1 (A) The status of any investor testing re2 quired under paragraph (1) initiated within the 

3 last year or otherwise ongoing. 

4 (B) The results of any investor testing 

5 completed under paragraph (1) within the last 

6 year. 

7 (C) Any priorities the Commission has, 

8 based on results of investor testing required by 

9 paragraph (1), for— 

10 (i) revising any proposed or final rule 

11 or regulation based on the results of test12 ing; 

13 (ii) initiating any rulemaking or ac14 tions arising from the results of the test15 ing; and 

16 (iii) the Investor Advocate’s views on 

17 the above priorities and any such other 

18 matters arising from the testing or results 

19 of testing. 

Passed the House of Representatives October 17, 

2019. 

Attest: CHERYL L. JOHNSON, 

Clerk. 


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