SEC Investor Advisory Committee Approves Recommendation on Minority and Underserved Inclusion

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[author: Carlos Juarez]

During its recent meeting, the Securities and Exchange Commission’s Investor Advisory Committee (the “Committee”) approved a recommendation to the SEC regarding minority and underserved community inclusion in investment and financial services. The Committee previously held a panel discussion on September 24, 2020, which focused on how minority community inclusion in investment and financial services is critical to closing the wealth gap in the United States. The recommendation can be found here, in draft form.

The Committee finds that minorities lag significantly behind white Americans and other groups in the areas of acquisition of homeownership and financial assets. For example, the recommendation cites a Federal Reserve study noting that only 6.5% of Black Americans own stocks, bonds, and mutual funds, and the average retirement account of Black Americans is $24,520, compared to $75,200 for white Americans. FINRA’s “African American and Hispanic/Latino Responses to Pandemic Related Volatility in the Stock Market” report shows that respondents that identified as white more frequently owned both retirement and taxable accounts compared to respondents who identified as African American and Hispanic/Latino.

The Committee set out its recommendation in four parts.

  1. The Committee recommends the Commission support regulations, legislation, programs and other steps that increase acquisition of financial assets and services by minority communities. The report notes that specific programs, such as the US Department of the Treasury’s “myRA” (my Retirement Account) program, can encourage investor communities with traditionally lower assets and financial to establish savings and investing accounts.
  2. The Committee recommends that the Commission enable a more hospitable environment for investment by minority communities through regulatory oversight of financial services. Specifically, the Committee suggested the review of disclosure requirements and disclosure documents, such as prospectuses, to make these easier to understand and to provide useful, consistent information. The CFPB’s TRID rule, which simplified home mortgage disclosures forms, was highlighted as a good example of disclosure simplification.
  3. The Committee recommends that the Commission continue and build upon its programs that are directed toward increasing financial literacy and supporting investments by minority communities. The SEC’s Office of Investor Education and Advocacy, the recommendation highlighted, is currently engaged in a number of activities designed to improve financial literacy and engagement in investing by minority communities.
  4. Finally, the Committee recommends that the Commission help registered financial services firms expand and improve their ability to encourage investment by under-represented communities.

Acting SEC Chair Allison Herren Lee reacted positively to the detailed recommendation, acknowledging specifically the suggestion that the SEC analyze the effects its policies on investments by minority and underserved communities.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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