On December 13, 2016, the FINRA Investor Education Foundation published Investors in the United States 2016 (the “Report”), which includes the results of its investor survey of 2,000 individuals from across the United States who hold investments in non-retirement accounts. The purpose of the survey was to analyze investor behaviors and attitudes.

The Report includes statistics on investor demographics, types of investment holdings, use of brokers and advisers, and attitudes toward investing and the U.S. economy. Generally, the respondents were white (79%), over the age of 55 (45%) and had household incomes over $50,000 (75%).

One of the main areas of focus of the Report is investor literacy. In order to gauge investor literacy, the survey utilized a 10-question quiz covering various investment-related concepts such as the relationship between risk and return, the difference between stocks and bonds, the difference between nominal and real returns, and questions about buying on margin and selling short.

Of the 2,000 individuals surveyed, only 10% were able to answer eight questions or more correctly, with the majority (56%) answering fewer than half the questions correctly. Questions related to nominal vs. real returns, buying on margin and short selling received the lowest scores. Based on these results, the Report concludes that there is room for improvement in investor literacy, particularly in these low-scoring areas.

The survey also demonstrated that awareness of investment information tools was very low. Only 7% of respondents reported that they had ever used FINRA’s BrokerCheck tool, and less than a quarter of respondents had heard of sites such as Investor.gov or the SEC EDGAR database (24% and 21%, respectively). Although more than half the respondents (51%) said they at least skim investment disclosures they receive, the usefulness of such investment disclosures may be placed in doubt when 88% of respondents did not know the difference between nominal and real returns. Although 56% of respondents reported using a broker or investment adviser, the other 43% are making investment decisions on their own.

These findings are likely to be cited by FINRA as supporting its programs for protection of retail investors and for upholding market integrity. Market participants may also want to consider these findings and simplify disclosures in documents furnished to retail investors, particularly in the “summary” sections of prospectuses, or other summary materials that retail investors are more likely to review.