Bill to Require SEC Investor Testing Is Revived

By Melanie Waddell

News July 21, 2022 at 12:42 PM

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Rep. Sean Casten, D-Ill., reintroduced Thursday the SEC Disclosure Effectiveness Testing Act, legislation to require the Securities and Exchange Commission to conduct investor testing prior to issuing any rule or regulation that designates documents or information to be disclosed under the securities laws to retail investors.

The bill, according to Casten, would require the "SEC to ensure main street investors — including those on day trading apps like Robinhood — have the information they need to invest their savings safely."

The bill was last floated in 2019 and passed the full House on Oct. 17, 2019, by a 229-186 vote.

The bill would also require the SEC to review and test its existing disclosures for retail investors.

Casten said he reintroduced the bill "to protect young investors like Alex Kearns, the 20-year-old Naperville native who died by suicide after Robinhood showed an incorrect negative balance of more than $750,000 to his account."

The bill would require the SEC to engage in usability testing of its new and existing disclosures intended for retail investors in the form of qualitative interviews and surveys.

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