SEC disclosure requirements have prompted debate among key stakeholders about the right path forward.
The SEC launched its “disclosure effectiveness” project in 2013, and now the Commission set its sights on revising Regulation S-K and doing away with redundant information. What do experts think about the efforts?
When Congress created the modern corporate disclosure regime in 1933 with the passage of the Securities Act, the lawmakers likely could not fathom the scale to which financial reporting would grow 80 years later. And indeed, it has grown immensely. Yet with the exception of small periodic reforms, the Securities and Exchange Commission (SEC) has rarely made changes to corporate disclosure requirements since then.
But after the JOBS Act of 2012 forced the Commission to consider reporting requirements for “emerging growth companies” and mandated a study on Regulation S-K, their findings suggested a larger project. “The study basically said, ‘Gee, what we really want to do is a more comprehensive review and potential reform of our whole disclosure system,'” explained Robert Herz, a former chairman of the Financial Accounting Standards Board. In April 2016, the SEC voluntarily came out with a 341-page concept release reviewing the requirements for S-K.
As it turned out, people had a lot of opinions on this subject. Two months later, the SEC had received hundreds of comments from lawmakers, officials, academics, and corporate executives. They also received more than 25,000 copies of form letters, many of which asked for more sustainability information. In July 2016, the SEC made a separate proposal to eliminate overlapping provisions on disclosure forms as well.
People in the reporting community have strong and diverse opinions on the subject of disclosure reform. How important is materiality as an element of effective disclosure? Is “less” sometimes “more” when it comes to SEC filings? And should sustainability metrics be made mandatory?
We asked five leading experts to weigh in.