The U.S. Securities and Exchange Commission ("SEC”) announced on April 15, 2009 that it is reopening the period for public comment on proposed amendments to Regulation S-P, the SEC’s Gramm-Leach-Bliley Act (“GLBA”) implementing regulations. The SEC’s announcement follows the release of a report detailing the results of the second phase of the Interagency Notice Project (“INP”). The report by Drs. Alan Levy and Manoj Hastak, Consumer Comprehension of Financial Privacy Notices, uses the results of a mall-intercept study to compare the performance of a prototype financial privacy notice developed by the Kleimann Communication Group (“KCG”) during the first phase of the INP against three alternative notices. The Levy-Hastak report, among other things, confirms what proponents of the INP suspected – some GLBA privacy notices are largely ineffective in conveying information to consumers that allows them to make rational decisions about the sharing of their personal financial information.

Launched in 2004, the INP is directed to evaluating consumer comprehension of GLBA privacy notices and the communication effectiveness of different notice formats. The INP’s ultimate goal is to facilitate the adoption of a model form which may be used by financial institutions to provide GLBA-required notices. In order to assess the relative effectiveness of different GLBA notice formats, researchers distributed one of four alternative notices to mall shoppers in five locations across the United States. These notice recipients were then asked a series of questions designed to test their ability to (a) compare banks’ information collection and sharing practices, (b) evaluate available “opt-out” choices described in the notices, and (c) make informed and reasoned choices between banks. The Levy-Hastak report used the results of this quantitative study to analyze four different notice formats: 

  • KCG Table Notice: This notice, the Phase I model form, uses a table on page one to describe (1) the types of sharing engaged in by financial institutions; (2) for each type of sharing, whether a particular institution shares personal information; and (3) whether the institution offers the consumer an opportunity to opt out or limit such sharing.
  • KCG Prose Notice: This notice is the prose version of the Phase I model form. This notice differs from the KCG Table notice only in that it replaces the table on page one with a bulleted list that describes the information contained in the table.
  • Current Notice: This notice is a composite notice that is generally representative of GLBA notices currently provided by financial institutions to consumers.
  • Sample Clause Notice: This notice is comprised solely of Sample Clauses that provide only the specific information that relates to the individual financial institution.

The Levy-Hastak report points out the weakness of the Current Notice, but stops short of declaring a clear winner in the battle of forms. The Sample Clause Notice’s strong performance with respect to tasks that merely required respondents to find information within the notice underscores the importance of short forms. But the KCG Table Notice outperformed the other notice formats across “a diverse set of communication effectiveness measures.” Specifically, the survey results demonstrated that the KCG Table Notice helped respondents better understand the information contained in the notice which enabled them to make informed and logical decisions about financial information sharing.

The complete Levy-Hastak report is available here. The SEC’s public comment period will remain open until May 20, 2009.