SEC Issues Financial Literacy Study Mandated by the Dodd-Frank Act

The Securities and Exchange Commission has issued a staff study with findings on what investors want to know about financial professionals and investment products and services, and when and how investors want to receive such information.

“Understanding the needs of investors is critical to carrying out the Commission’s investor protection mission,” said SEC Chairman Mary L. Schapiro. “The study provides important data and insights that will assist the Commission in its ongoing efforts to help retail investors make informed investing decisions.”

Mandated by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the study draws on numerous sources, including online survey research, focus group research, public comments to the SEC, and a Library of Congress review of studies of financial literacy among U.S. retail investors.

The study identifies investor perceptions and preferences regarding a variety of investment disclosures. The study shows that investors prefer to receive investment disclosures before investing, rather than after, as occurs with many investment products purchased today.

The study identifies information that investors find useful and relevant in helping them make informed investment decisions. This includes information about fees, investment objectives, performance, strategy, and risks of an investment product, as well as the professional background, disciplinary history, and conflicts of interest of a financial professional. Investors also favor investment disclosures presented in a visual format, using bullets, charts, and graphs.

“From methods to improve disclosures to best practices for investor education programs, the study addresses a wide range of areas related to investor literacy,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “It is a ‘must read’ for any individual or organization dedicated to educating investors.”

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