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SEC Investor Advocate Launches Investor Research Initiative

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Securities and Exchange Commission Investor Advocate Rick Fleming said Friday that his office is launching the Policy Oriented Stakeholder and Investor Testing for Innovative and Effective Regulation (POSITIER) initiative, which will utilize surveys, focus group tests and other tools to better assess investor needs as well as the efficacy of competing rules.

With the support of the commission, Fleming said during remarks at the Practising Law Institute’s SEC Speaks event in Washington, “my office is already taking steps to do this type of research.”

Under the direction of Dr. Brian Scholl, the principal economic advisor in the investor advocate’s office, and with the assistance of the SEC’s Office of Acquisitions, Fleming said that the agency has “fashioned a much more nimble process” to keep investors informed, adding that he believes “this type of research has the potential to transform the way the SEC approaches rulemaking and, in turn, to enhance the overall effectiveness of regulation.”

Fleming noted that Scholl will unveil more details about the program at the upcoming Investor Advisory Committee meeting on March 9.

Fleming noted that the recommendation floated by the SEC Investor Advisory Committee that the commission consider ways to enhance the disclosure of fees borne by mutual fund investors is an example of the type of research the POSITIER initiative will pursue.

“Instead of speculating about the best ways to convey this information to investors, we can design controlled tests that will tell us, first of all, whether investors lack awareness of these fees and, if so, which disclosure methods are most effective,” Fleming said.

In fact, he added, “we are beginning to study this very issue.” In designing the research projects, Fleming said his office would first review the existing data and engage with leading researchers in order to leverage the existing knowledge base to the fullest and optimize the use of resources.

The Investor Advocate Office “in-person” research reviews — or “evidence summits” — will also “become routine,” Fleming continued, with the kickoff public summit on March 10.

The event, he said, will discuss “how disclosure impacts decision-making and how to make disclosure effective for a wide variety of users, before turning to the more specific question of how to improve mutual fund disclosures.”

Besides investor outreach and investor research, the commission should “increase its engagement” with the Investor Advisory Committee, Fleming advised, noting the members are a diverse group of “experienced and knowledgeable investors who bring different perspectives, and the very purpose of the committee is to provide advice to the commission. Importantly, it can use its public meetings to air important and controversial issues and increase public discourse.”


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