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Study Regarding Financial Literacy Among Investors

Study Regarding Financial Literacy Among Investors

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Published by: Vanessa Schoenthaler on Aug 30, 2012
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Study Regarding Financial Literacy Among Investors
As Required by Section 917 of theDodd-Frank Wall Street ReformandConsumer Protection ActThis is a Study by the Staff of the U.S. Securities and Exchange Commission._________________________________August 2012
This is a Study by the Staff of the Office of Investor Education and Advocacy of the U.S.Securities and Exchange Commission. The Commission has expressed no view regardingthe analysis, findings, or conclusions contained herein.
 
 
i
 
EXECUTIVE SUMMARY
On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reformand Consumer Protection Act of 2010 (the “Dodd-Frank Act” or “Act”).
1
Section 917 of TitleIX of the Act (“Dodd-Frank Act Section 917”) requires the Securities and ExchangeCommission (the “Commission” or “SEC”) to conduct a study (the “Study”) to identify theexisting level of financial literacy among retail investors as well as methods and efforts toincrease the financial literacy of investors.Specifically, Dodd-Frank Act Section 917 directs the Commission to conduct the Studyto identify:(1)
 
the existing level of financial literacy among retail investors, including subgroupsof investors identified by the Commission;(2)
 
methods to improve the timing, content, and format of disclosures to investorswith respect to financial intermediaries, investment products, and investmentservices;(3)
 
the most useful and understandable relevant information that retail investors needto make informed financial decisions before engaging a financial intermediary orpurchasing an investment product or service that is typically sold to retailinvestors, including shares of open-end companies, as that term is defined in
1
Pub. L. No. 111-203, 124 Stat. 1376 (2010).
 
 
ii
 
Section 5 of the Investment Company Act of 1940
2
that are registered underSection 8 of that Act;
3
 (4)
 
methods to increase the transparency of expenses and conflicts of interests intransactions involving investment services and products, including shares of open-end companies described in paragraph (3);(5)
 
the most effective existing private and public efforts to educate investors; and(6)
 
in consultation with the Financial Literacy and Education Commission (“FLEC”),a strategy (including, to the extent practicable, measurable goals and objectives)to increase the financial literacy of investors in order to bring about a positivechange in behavior.The Act requires the Commission to complete the Study within two years after the date of enactment of the Act (
i.e.
, by July 21, 2012). The Study has been prepared by the Staff of theSEC. The Commission has expressed no views regarding the analysis, findings, or conclusions.
Background
The Commission’s Office of Investor Education and Advocacy (“OIEA”) had primaryresponsibility for preparing the Study. Given the array of issues to be considered in the Study,including issues related to, among other things, financial literacy, investor disclosures, financialintermediaries, investment products and services, transparency of expenses and conflicts of interest, and investor education, OIEA relied on a number of different resources, both within andwithout the Commission, to complete the Study. For example, the Commission contracted withthe Federal Research Division of the Library of Congress to conduct a review of the quantitative
2
15 U.S.C. 80a-5.
3
15 U.S.C. 80a-8.

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