Maxine Waters

Ms. WATERS

Ms. WATERS. Mr. Chair, I strongly oppose Representative Huizenga's amendment, which would effectively gut H.R. 3624 by exempting the vast majority of public companies from the outsourcing disclosure. The amendment does this indirectly by exempting companies that have to comply with SEC rules requiring disclosure of the pay ratio between the CEO's compensation and that of its median employee or rules requiring disclosures relating to conflict minerals. However, all public companies must comply with those rules, with some narrow exemptions. The CEO pay ratio and conflict minerals disclosures have nothing to do with the new requirement to disclose how many jobs are being outsourced. Taken together with the limited exemption for newly public companies already in H.R. 3624, the amendment would limit the bill's outsourcing disclosures to small reporting companies, foreign private issuers, and certain registered investment companies. What my Republican colleagues do not seem to understand is that investors do care about all of these types of disclosures. They know that when a CEO makes significant multiples of the median employee, the performance of the company is hurt. Investors also know that, if a company sources its minerals to conflict zones, it faces a much higher risk than a company with a stable source of resources. Likewise, investors also want to know whether a company is creating jobs in the United States or overseas. By proposing a huge expansion of exemptions, Representative Huizenga's amendment would effectively negate the bill and allow companies to continue to, quietly and secretly, ship American jobs overseas. Let me just add to these comments, in particular for all of the new Members of Congress: Anytime any company is shipping jobs out of your district, no matter where they are going, you raise questions. You ask why they are doing that. Don't be ashamed to do that. Don't think that something is wrong with doing that. You were elected to represent the people in your district, and Mr. Huizenga would have you believe that, if jobs are being taken from your State to another State, you are supposed to be quiet because something is wrong with that. I don't care whether it is from State to State or overseas or what have you. Representatives who were sent here to speak for their constituents should be concerned about that, they should raise the questions, and they should be involved with everything they can do to preserve those jobs. Mr. Chair, I reserve the balance of my time.

Ms. WATERS. Mr. Chair, I yield the balance of my time to the gentlewoman from Iowa (Mrs. Axne), the sponsor of this important legislation.

Ms. WATERS. Mr. Chair, I yield back the balance of my time.

Ms. WATERS. Mr. Chairman, I claim time in opposition.

Ms. WATERS. Mr. Chairman, let me say to my colleague from Arkansas on the opposite side of the aisle that the need to be concerned about regulations relative to companies that are shipping jobs overseas is something I don't understand. I don't understand why the Members on the opposite side of the aisle could take this precious time to come here in defense of companies that would ship our American jobs overseas for cheap labor. There is no excuse. There is no reason. There is no reason why our colleagues who come here to represent constituents, many of whom are still looking for jobs, and those who get laid off because their companies have taken their jobs and shipped them overseas, would come here and defend some company because they believe that we are being too tough on them, that we are overregulating them. Well, I don't understand it, and there is nothing they could say or do to help me understand that. I strongly oppose Representative Hill's amendment because it would effectively negate the purpose of H.R. 3624 by allowing companies to opt out of this disclosure if they believe that the information is not ``material'' information for investors. As we all know, in practice, companies have interpreted ``material'' only to include information on issues that have a current and easily quantifiable impact. This is exactly what the multinational companies that have been shipping American jobs overseas want, to hide what they are doing. As the AFL-CIO noted before an Investor Protection, Entrepreneurship, and Capital Markets Subcommittee hearing in May, multinational companies ``have increasingly focused job creation in non-U.S. markets and would prefer not to disclose numbers that would lead to reputational risks.'' We must stand with American workers and address this informational barrier to help investors, the public, and policymakers understand the true magnitude of the problem. So I urge my colleagues to vote ``no'' on this amendment. Mr. Chairman, I reserve the balance of my time.

Ms. WATERS. Mr. Chairman, I would ask, does the gentleman have any more speakers?

Ms. WATERS. Mr. Chairman, I reserve the balance of my time.

Ms. WATERS. Mr. Chairman, I would say to the gentleman from Arkansas to use your time to deal with the burden that you claim multinationals have just for doing this reporting. We will use our time to support the workers and the people of this country. Mr. Chairman, I yield the balance of my time to the gentlewoman from Iowa (Mrs. Axne), the sponsor of this important legislation.

Ms. WATERS. Mr. Chairman, I would like to take this moment to thank my colleague, a new Member of the Congress of the United States who serves on the Financial Services Committee, for introducing, supporting, and working for this legislation. I urge all of my colleagues to vote ``no'' on this amendment. I yield back the balance of my time.

Ms. WATERS. Mr. Speaker, on that I demand the yeas and nays.

Ms. WATERS

Ms. WATERS. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days to revise and extend their remarks on H.R. 1815, and to insert extraneous material thereon.

Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I rise in support of H.R. 1815, the SEC Disclosure Effectiveness Testing Act crafted by Representative Casten from Illinois, a new Member of Congress and member of the Financial Services Committee. H.R. 1815 requires the Securities and Exchange Commission to test its disclosure documents with retail investors through one-on-one interviews and surveys to ensure that these documents are actually understood by their target audience. The SEC's approach to protecting retail investors from conflicts of interest and other risks has been based on informing them through disclosure. This is a problem when those disclosures are written in a way that retail investors don't understand. Since at least 2012, when the SEC conducted a financial literacy study, we have known that many of the disclosures intended for retail investors are not well-understood by those investors. While the public has the opportunity to comment on most rulemakings or new disclosures, these comments are largely from well-funded industry representatives, rather than the mom-and-pop investors who will be receiving these new disclosures. H.R. 1815 ensures that the SEC gets the input it needs from retail investors on disclosure forms by requiring the SEC to test those forms and engage in qualitative one-on-one interviews and nationwide surveys. Investor testing has been embraced by both Democratic and Republican commissioners at the SEC. In addition, the SEC itself has been engaged in investor testing in several instances, including most recently in 2018, when it tested a proposed disclosure for brokers and investment advisers to provide to retail investors known as Form Client Relationship Summary, that is, CRS. This proposed five-page disclosure was intended to help retail investors understand the obligations owed and services provided by investment professionals, as well as the fees and costs that could affect their investment accounts. To ensure that retail investors are able to use Form CRS as intended, the SEC conducted a nationwide online survey of 1,800 individuals and 31 qualitative, in-depth interviews in Denver and Pittsburgh. The mixed results of the SEC's testing of Form CRS showed that changes and possibly more testing were necessary. Unfortunately, in that instance, the SEC did not engage in the robust, iterative investor testing that H.R. 1815 would require, and finalized a vague disclosure. H.R. 1815 would require the SEC to go back and review and test existing disclosures like Form CRS and determine whether changes should be made. This review of existing documents is particularly important as the capital markets, investor behaviors, and investing trends change. In addition to the SEC, other regulators like the Consumer Financial Protection Bureau and the Federal Trade Commission also engage in usability testing of their disclosures. H.R. 1815 builds on the efforts of the SEC by requiring the Commission to engage in a similar iterative process for all existing or future disclosure, intended to help retail investors make informed investment decisions. I thank Representative Casten for putting forth this commonsense piece of legislation that will help investors make better informed financial decisions regarding their hard-earned earnings. Mr. Chair, I reserve the balance of my time.

Ms. WATERS. Mr. Chair, I yield 4 minutes to the gentleman from Illinois (Mr. Casten), who will correct all the misstatements that were just made by the gentleman from Michigan. Representative Casten is the sponsor of the bill.

Ms. WATERS. Mr. Chair, I yield the gentleman an additional 1 minute.

Ms. WATERS. Mr. Chair, I yield 2 minutes to the gentlewoman from New York (Mrs. Carolyn B. Maloney), who is the chairwoman for the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.

Ms. WATERS. Mr. Chair, I yield an additional 1 minute to the gentlewoman from New York.

Ms. WATERS. Mr. Chair, I yield 2 minutes to the gentleman from Illinois (Mr. Foster).

Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, H.R. 1815 is a commonsense bill that is supported by our Nation's seniors, investment advisers, and investor advocates. Here is what they have said about the bill: According to AARP, they wrote: ``AARP, on behalf of our nearly 38 million members and all older Americans nationwide, is pleased to endorse H.R. 1815, which would require the Securities and Exchange Commission to conduct investor testing when developing rules and regulations about disclosures to retail investors. Robust investor testing of retail investor disclosures will assist investors in getting the information they need to make informed choices about their hard- earned savings.'' According to the Financial Planning Coalition: ``The coalition believes that H.R. 1815 would provide the statutory framework necessary for the SEC to ensure to Congress and Main Street investors that disclosures required under SEC rules have been thoroughly and adequately tested by the SEC and are reasonably effective in achieving their intended purpose.'' According to the Consumer Federation of America: ``Disclosure is both an important investor protection tool and a regulatory requirement that imposes significant cost on industry. We, therefore, have an obligation to make those disclosures as effective as possible. H.R. 1815 would help to achieve that goal by updating the SEC's approach to disclosure development. Anyone who supports commonsense, evidence-based regulation should support this legislation.'' Mr. Chair, before reserving the balance of my time, I include in the Record correspondence from the Financial Planning Coalition, the AARP, and the CFA, that is the Consumer Federation of America. Financial Planning Coalition, October 11, 2019. Re Support for H.R. 1815, the ``SEC Disclosure Effectiveness Testing Act''. Dear Member of Congress: On behalf of the Financial Planning Coalition (Coalition), we are writing to express our strong support for H.R. 1815, the ``SEC Disclosure Effectiveness Testing Act.'' We encourage you to support the legislation when it is considered on the House floor in the coming week. A fundamental public policy goal of the federal securities laws is to ensure full and adequate disclosure of ``material'' information to American investors. The expectation is that the disclosure will assist investors in making an informed investment decision. Given this, we appreciate the work the U.S. Securities and Exchange Commission's (SEC) Office of the Investor Advocate has done to identify and confront the challenges to improve investor disclosure. Research conducted on behalf of AARP, Consumer Federation of America and the Coalition organizations, as well as separate research conducted by the SEC, all highlight the challenges and difficulties in developing clear, understandable investor disclosures. Information about financial issues and investments is often complex and technical in nature, and investor comprehension of this information typically is poor. All too often, mandated disclosures contain technical language and concepts that, as research confirms, are confusing to or misunderstood by investors. Indeed, research studies prove time and again how difficult it is to convey even the most basic financial and investment concepts in a way that typical Main Street investors understand. To determine whether proposed investor disclosures would be effective at achieving their regulatory purpose of informing investor decision-making, it is not enough simply to survey investors generally on their likes or preferences. Thorough and adequate investor testing must go beyond that and, more importantly, must assess investors' ability to integrate information and synthesize it into a rational evaluation. This involves a more complex and higher-level cognitive skill. Conducting thorough one-on-one cognitive testing is the only proven way to determine whether a proposed disclosure document will achieve its intended purpose. For these reasons, we are particularly pleased that the proposed legislation includes a requirement for qualitative testing in the form of one-on-one cognitive interviews of investors. A deeper look into the way investors analyze and synthesize information is necessary to determine the usefulness and effectiveness of any disclosure document in an investor's decision-making process. The Coalition believes that H.R. 1815 will provide the statutory framework necessary for the SEC to ensure to Congress and Main Street investors that disclosures required under SEC rules have been thoroughly and adequately tested by the SEC and are reasonably effective in achieving their intended purpose. The legislation to be considered on the House floor appropriately clarifies that the scope of testing is limited to those disclosures that are intended to be used by retail investors in choosing a financial professional or investment product. The modified legislation to be considered on the House floor makes additional important clarifications that the Coalition supports. We urge a ``Yes'' vote when the legislation comes up for a vote on the House floor. Sincerely, Kevin R. Keller, CAE, Chief Executive Officer, CFP Board. Lauren Schadle, CAE, Executive Director/CEO, FPATM. Geoffrey Brown, CAE, Chief Executive Officer, NAPFA.

Ms. WATERS. I reserve the balance of my time.

Ms. WATERS. Mr. Chair, I am prepared to close.

Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I must admit that I am a bit surprised at this opposition. I am a bit surprised at this opposition because, first of all, everyone must understand that the SEC is our cop on the block. This agency has, as its basic mission, to protect investors. Who best to be protected than the small, retail investors? We have so many schemes, so much fraud that we witness every day that is being brought forth to basically take advantage of the most vulnerable people in our society, many of them who don't have a lot of resources, who don't have money that they could lose. So, we believe that they must understand in what they are investing. This is not about the big, institutional investors. This is about your retail investors. This is about the little guy. This is about those people who are depending on the information that they get and their investment advisers to help guide them so they can have enough money in retirement, for example. Why is it we would have any elected official coming to represent the people from their districts who would be opposed to making sure that these small investors are represented, that they are protected, that they are cared about? So, I am surprised at this opposition, and I don't know why there would be so much time spent saying that the SEC does not need to do additional kinds of testing, that they don't need to be concerned about these disclosures. What is it you need to protect about the SEC from doing its basic job? I don't understand that. But, however, let me just say that H.R. 1815 is a commonsense bill that benefits mom-and-pop investors by putting a process in place to ensure that the SEC's disclosures are clear and comprehensible for those investors. A disclosure is only useful if it can be understood by its audience, and this legislation ensures that disclosures are tested in a robust way so that they are clear. This bill is supported, again, by groups such as the AARP, our seniors; the Financial Planning Coalition; and the Consumer Federation of America, looking out for consumers. I, again, commend Representative Casten for putting forth this important legislation, and I thank him for his work. But, more than that, I thank him as a new Member of Congress who understands that his job, his responsibility, is to look out for his constituents and for the small investors, the little people, those people who need some protection, those people who don't need to be ripped off, those people who need to have clear information and disclosure about what they are getting into. I thank Representative Casten for his vision, for his foresight, and for understanding the responsibility of the SEC. Mr. Chair, I urge all Members to vote ``yes'' on this bill, and I yield back the balance of my time.

Ms. WATERS. Mr. Chairman, I claim the time in opposition to the amendment.

Ms. WATERS. Mr. Chair, this amendment is unnecessary and could undermine the investor understanding of how retail investors relate to brokers. H.R. 1815, the SEC Disclosure Effectiveness Testing Act, simply requires the Securities and Exchange Commission to test its documents with retail investors through one-on-one interviews and surveys to ensure that disclosure documents intended for retail investors are actually understood by their target audience. H.R. 1815 is in no way intended to repeal Regulation Best Interest, a rule adopted by the SEC in June to change the standard of conduct for brokers when providing retail investors with personalized investment advice. And, to be clear, the bill does not require testing of the standard imposed by the SEC under Regulation Best Interest. Instead, it requires testing of how well retail investors understand the standard and how it impacts the advice they receive, along with any other disclosures. In addition, the bill contemplates that the SEC, in consultation with the investor advocate, would develop a schedule of disclosures that it intends to test and report to Congress. There is nothing in the bill that requires investor testing of disclosures related to Regulation Best Interest on day one of enactment. But this amendment would say that the SEC should never test these disclosures, regardless of changes to the markets, investment product offerings, investor behaviors, and investment trends. This makes little sense, particularly considering the rise of riskier products like cryptocurrencies that are being targeted to retail investors. I would also point out that, to the extent that the SEC, in consultation with the investor advocate, determines that it should make substantial changes to the disclosures that would have a significant impact on retail investors, H.R. 1815 would simply require the SEC to test new and existing disclosure forms to ensure that they are actually understood by the intended audience. Mr. Chair, I oppose this amendment, I ask all of my colleagues to do so, and I reserve the balance of my time.

Ms. WATERS. Mr. Chairman, I would like to inquire how much time I have remaining.

Ms. WATERS. Mr. Chair, I yield the balance of my time to the gentleman from Illinois (Mr. Casten), the sponsor of this important legislation.