The SEC and the discussion of modernizing corporate disclosure

Last week, the SEC issued a 341-page concept release looking for public views via questions about the disclosure requirements for “periodic reports” (including earnings).

The focus/goal is reforming both the actual content of corporate disclosures as well as the manner these disclosures are presented and delivered. The SEC first tickled these ideas at the end 2013 in their JOBS Act recommendations to Congress.


The SEC’s summary: 

“The Commission is publishing this concept release to seek public comment on modernizing certain business and financial disclosure requirements in Regulation S-K.”

  • How (and if) specific disclosures are important or useful to making investment and voting decisions and whether more, less or different information might be needed
  • How (and if) we could revise our current requirements to enhance the information provided to investors while considering whether the action will promote efficiency, competition, and capital formation
  • How (and if) we could revise our requirements to enhance the protection of investors
  • How (and if) our current requirements appropriately balance the costs of disclosure with the benefits
  • How (and if) we could lower the cost to registrants of providing information to investors, including considerations such as advancements in technology and communications
  • How (and if) we could increase the benefits to investors and facilitate investor access to disclosure by modernizing the methods used to present, aggregate and disseminate disclosure

For the next 90-days, the public can respond to 340 questions sorted into three buckets:

  1. S-K disclosure framework
  2. Information for investment and voting decisions
  3. Presentation and delivery of important information

This discussion is fundamental to next-gen investor relations practitioners and, gulp, to service providers.

From ReedSmith LLP:

“The concept release re-examines some of the most basic foundations of the U.S. disclosure regime and raises fundamental questions about whether the materiality standard is still the best approach to crafting disclosure and whether public companies should write their disclosure for sophisticated, institutional investors rather than for the individual investor. All of the questions posed by the SEC consider the need to balance investor protection with the cost to public companies of preparing disclosure.”

Some of the 340 questions address these points:

  • Principles-based or prescriptive approach to disclosure rules
  • Provide disclosure “layers” to different audiences based on their needs
  • Line item over-disclosure on non-financial matters
  • The materiality of sustainability matters
  • Periodic report exhibit filing requirements of Regulation S-K
  • Scaling requirement by market-cap or sector
  • The fate of the 10-Q
  • Readability and navigability of disclosure documents
  • Recognizing how digital technology has changed the way in which investors consume information

I guess we know what will be on the agenda at the 2016 NIRI Annual Conference this June.

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