The SEC should implement a “robust investor testing program” to help determine whether proposed and existing rules are effective, said SEC Commissioner Michael Piwowar in a speech to the Los Angeles County Bar Association on November 22.
The comments, which were made just over a week before the official comment period on the Commission’s proposed pay ratio rule closed focused on the SEC’s rule making cost-benefit and economic analysis guidance issued by the Division of Economic Risk and Analysis in 2012, which provided that SEC rule makings should always include a “sound economic analysis” including an evaluation of the benefits and costs of the proposed rule.
Commissioner Piwowar further noted that with regard to rule makings involving new disclosures in particular, the Commission should engage in investor testing to provide empirical data on “whether our rules that require the delivery of important investor information in fact service the goals being articulated,” rather than simply relying on the often anecdotal information provided in comments.
The comments build on concerns voiced by SEC Chair Mary Jo White in October that too many disclosures are causing “investor information overload” thereby detracting from the investor protection goals of securities disclosures. If implemented, it would be very interesting to see how investors would respond when asked whether or not they value things like the pay ratio and other executive compensation disclosures.
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