[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2497 Introduced in Senate (IS)]
108th CONGRESS
2d Session
S. 2497
To amend the securities laws to provide for enhanced mutual fund
investor protections, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 3, 2004
Mr. Lieberman introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the securities laws to provide for enhanced mutual fund
investor protections, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Investor Protection Act of
2004''.
SEC. 2. DEFINITIONS.
In this Act--
(1) the term ``Chairman'' means the Chairman of the
Securities and Exchange Commission;
(2) the terms ``broker'', ``dealer'', and ``securities''
have the same meanings as in section 3 of the Securities
Exchange Act of 1934;
(3) the term ``Commission'' means the Securities and
Exchange Commission; and
(4) the term ``individual investors'' means
nonprofessional, noninstitutional investors, as a class,
including small investors.
SEC. 3. DIVISION OF THE INVESTOR.
(a) Establishment.--There is established within the Commission the
Division of the Investor.
(b) Director.--
(1) Appointment.--The Division of the Investor shall be
headed by a Director, who shall be appointed by the Commission
from among individuals who have--
(A) a demonstrated commitment to the rights and
interests of individual investors and to the public
interest;
(B) experience in advocating for, educating, or
otherwise assisting individual investors; and
(C) knowledge of the financial markets.
(2) Report to chairman.--The Director of the Division of
the Investor shall report directly to the Chairman.
(c) Duties of the Division.--The duties of the Division of the
Investor shall be--
(1) to serve as an advocate for individual investors by--
(A) assessing and advocating for the interests of
individual investors;
(B) providing views to the Commission and
Commission staff as to whether policy proposals and
proposed rules effectively serve, and, if appropriate,
how they can better serve, the interests of individual
investors;
(C) identifying areas of concern to individual
investors that may warrant or benefit from Commission
action;
(D) conducting qualitative and quantitative
research to determine the information and other needs
of individual investors; and
(E) serving as a liaison between investor advocacy
organizations and the Commission, and developing
processes to receive meaningful input from such
organizations and from individual investors;
(2) to assist and educate individual investors by
performing the functions performed on the day before the
effective date of this Act by the Director of the Office of
Investor Education and Assistance (previously known as the
Office of Consumer Affairs), as set forth in section 200.24a of
title 17 of the Code of Federal Regulations, as in effect on
the effective date of this Act, including--
(A) developing and disseminating educational
materials to individual investors;
(B) receiving, tracking, and analyzing complaints
from individual investors about entities regulated by
the Commission, and transmitting to other offices and
divisions within the Commission and to the Commission
itself relevant information from such individual
investors; and
(C) providing information to individual investors
concerning entities regulated by the Commission, the
operation of the securities markets, and the functions
of the Commission; and
(3) to perform other functions to promote the interests of
individual investors, as the Chairman determines appropriate.
(d) Small Investors.--In carrying out this section, the Division of
the Investor shall pay particular attention to the needs and interests
of small investors.
(e) Views on Proposed Rules.--Whenever the Commission proposes a
new rule or an amendment to an existing rule, or otherwise solicits
public comment on a matter of importance to individual investors, the
Director of the Division of the Investor shall prepare a written
summary of the Division's views on the proposed rule or other matter,
and the Commission shall include the summary in its Notice of Proposed
Rulemaking or other public solicitation of comments.
SEC. 4. OFFICE OF RISK ASSESSMENT.
(a) Establishment.--There is established within the Commission the
Office of Risk Assessment.
(b) Director.--
(1) Appointment.--The Office of Risk Assessment shall be
headed by a Director, who shall be appointed by the Commission
from among individuals who have--
(A) demonstrated experience in public and private
risk analysis or in uncovering and investigating
financial fraud or other financial misconduct, or both;
(B) knowledge of the financial markets; and
(C) demonstrated commitment to the public interest.
(2) Report to chairman.--The Director of the Office of Risk
Assessment shall report directly to the Chairman.
(c) Duties of the Office.--The duties of the Office of Risk
Assessment shall be--
(1) to assess industry practices within the jurisdiction of
the Commission to identify any risks associated with those
practices that could most likely harm investors and the public;
(2) to develop strategies to address and mitigate any such
risks, and prevent or lessen the potential harm to investors
and the public;
(3) to coordinate risk assessment and risk management
activities throughout the Commission; and
(4) to prepare annual reports to the Commission assessing
areas that potentially pose the most significant risks to
investors during the 3-year period following submission of each
such report.
(d) Use of Information.--In performing its duties under this
section, the Office of Risk Assessment shall seek and make use of
information from a wide range of sources, both within and outside of
the Commission, including securities filings, information gathered in
compliance inspections and examinations, consumer complaints, tips from
individuals working within publicly traded corporations or the
securities industry, academic research, and relevant information from
industry and other sources, consistent with applicable privacy and
other laws.
SEC. 5. CONSUMER RESEARCH.
(a) In General.--Whenever it considers requiring significant
disclosures to investors, whether in advertising, on web sites, or in
documents required by law or regulation, the Commission shall consider
and give weight to empirical evidence as to whether the proposed
disclosure as a whole, including its wording, its format, the context
and location in which it appears, and the timing and manner of its
dissemination, is likely to meaningfully improve understanding by
individual investors to assist them in making wise financial decisions,
and whether alternative disclosures would be more effective in
improving investor understanding.
(b) Types of Evidence.--Empirical evidence referred to in
subsection (a)--
(1) may be qualitative or quantitative;
(2) should be of a type that relevant experts would
consider competent and reliable evidence of the understanding
of average investors; and
(3) may include evidence developed by the Commission or by
others.
SEC. 6. FUND SUMMARIES.
(a) Summaries Required.--
(1) In general.--Section 12 of the Investment Company Act
of 1940 (15 U.S.C. 80a-12) is amended by adding at the end the
following:
``(h) Summaries Required for Open-End Companies.--It shall be
unlawful for an open-end registered investment company to offer its
securities for sale, unless, prior to completion of the sale, it
provides to investors a summary of relevant characteristics of the
investment, including information on expenses, risk, and
diversification, and any other information that the Commission
determines will assist investors in making wise financial decisions.''.
(2) Effective date.--Section 12(h) of the Investment
Company Act of 1940, as added by paragraph (1) of this
subsection, shall become effective on the earlier of--
(A) the effective date of regulations issued under
subsection (c); or
(B) 1 year after the date of enactment of this Act.
(b) Study.--The Commission shall conduct a study, including
usability testing where appropriate, to determine--
(1) the information most likely to assist average mutual
fund investors in making wise financial decisions; and
(2) the best media and format in which to present such
information so as to ensure that it is readily accessible and
understandable to average investors.
(c) Implementing Regulations.--Not later than 1 year after the date
of enactment of this Act, the Commission shall issue final regulations
implementing the requirements of section 12(h) of the Investment
Company Act of 1940, as added by subsection (a), and specifying the
content and format of the summary required under that section 12(h),
consistent with the findings of the Commission in the study conducted
under subsection (b), except that such summary shall not exceed in
length the equivalent of 4 printed pages of text.
<all>