Corporate Disclosures: SEC Adopts Position That Less Is More

Corporate Disclosures: SEC Adopts Position That Less Is More

In a recent report to Congress, the Securities and Exchange Commission (SEC) outlined a new initiative intended to streamline disclosure requirements for U.S. public companies under Regulation S-K. The report, which was mandated by the 2012 Jumpstart Our Business Startups (JOBS) Act, reflects the agency’s view that the updated corporate disclosure requirements should stress that the quality of the information shared is far more important than the quantity.

“Although a comprehensive approach would likely be a longer-term project involving significant staff resources across the Commission, the staff believes that a comprehensive approach would be able to achieve the dual goals of streamlining requirements for companies, including emerging growth companies, and focusing on useful and material information for investors,” the SEC said in the report.

In addition to providing a comprehensive overview of current corporate disclosure requirements under Regulation S-K, the SEC report also outlines the following as issues that warrant further review:

• Exhibit requirements
• Offering-related requirements
• Executive compensation requirements
• Corporate governance disclosure requirements
• Risk-related requirements
• Requirements for description of business and description of properties

According to SEC Chair Mary Jo White, the next step is for SEC staff to develop specific recommendations for updating the rules governing what a company must disclose in its filings. “We will seek input from companies about how we can make our disclosure rules work better for them and will solicit the views of investors about what type of information they want and how it can be best presented. The ultimate objective is for the Commission to improve the disclosure regime for both companies and investors,” she stated.

The SEC’s Office of the Chief Accountant also plans to work with the U.S. Financial Accounting Standards Board’s (FASB) to identify ways to improve effectiveness of disclosures and eliminate duplication.

Given that corporate disclosures have become one of the most costly and time-consuming compliance tasks for many corporations, the SEC efforts are certainly welcome news. However, given the number of other important issues on the agency’s regulatory agenda, it may be some time before companies actually see relief.

If you have any questions about the SEC’s latest report or would like to discuss your company’s corporate disclosures, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.