Just as the industry awaits clarity from Securities and Exchange Commission Chairwoman Mary Jo White on where she stands regarding a uniform fiduciary rule for brokers and advisors, SEC Commissioner Kara Stein said Thursday that the Commission’s Division of Corporation Finance is “spearheading a very important project examining the effectiveness of disclosures.”
Indeed, both Stein and SEC Commissioner Michael Piwowar recently espoused the benefits of “investor testing” as a means to help the agency better disclose broker and advisor standards of care.
The Division of Corporation Finance’s disclosure project, Stein said during a speech at the Consumer Federation of America’s financial services conference in Washington, “presents an opportunity to holistically rethink the disclosure that we offer to investors.”
While the SEC has “at times varied the types of disclosures, summarizing or simplifying certain documents, we still generally take a ‘one-size-fits-all’ approach to disclosure as investor protection. I think we can and should think about whether we can do better.”
Stein, a Democrat, said that the agency “should be smart about requiring disclosures that are genuinely meaningful and useful for different types of investors,” citing the “importance” of investor testing.
“…We know that the private sector is using [investor testing] to understand its consumers, frequently in a highly-refined manner,” Stein told the CFA attendees. “The Commission should seek to better understand its consumers as well,” and consider ways to provide “different ‘layers’ of disclosure to different types of investors.”
Said Stein: “We should formulate a plan to incorporate thorough investor testing into as many of our projects as possible.”
When asked after her remarks at the CFA event if the agency should consider investor testing before moving forward with a uniform fiduciary rulemaking, Stein told reporters: “I think we should look at each rule we do and see where we benefit from it [investor testing].”