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House Passes Bill Requiring SEC to Test Investor Disclosures

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The full House passed late Thursday afternoon H.R. 1815, the SEC Disclosure Effectiveness Testing Act, which would require the Securities and Exchange Commission “to test any new disclosure intended for retail investors” under the agency’s Regulation Best Interest.

The bill, passed by 229-186 vote, would also require the SEC to review and test its existing disclosures for retail investors, such as trading confirmation statements. H.R. 1815 passed out of the House Financial Services Committee in March.

The bill requires that when developing rules and regulations about disclosures to retail investors, the SEC would have to conduct investor testing, including a survey and interviews of retail investors.

Rep. Sean Casten, D-Ill., who introduced the bill, said in a Thursday video statement that the bill “ensures that brokers would share information in a way that allows you to make the best investment decision for you and your family.”

The SEC Disclosure Effectiveness Testing Act would require that the SEC “do some basic market research on their disclosure documents to make sure you understand how much in fees you’re getting charged, whether your broker has any conflict of interest that would affect your investment and other critical information,” Casten said.