The Securities and Exchange Commission has voted to issue a Concept Release seeking public comment on the form and content of disclosures made by public companies.
All three of the SEC’s sitting commissioners − Chair Mary Jo White, Commissioner Kara Stein, and Commissioner Michael S. Piwowar − voted in favor of the proposal. (The president’s nominees for the two vacant seats on the Commission are awaiting Senate confirmation.)
The Concept Release, entitled “Business and Financial Disclosure Required by Regulation S-K,” represents a significant move in the SEC’s “disclosure effectiveness” project, an overarching effort to not only simplify disclosures that are redundant, immaterial, or overly complex, but also to improve the usefulness of disclosures, making them more “effective.”
Weighing in at just over 340 pages, with 340 questions raised for public comment, the Concept Release appears fairly comprehensive. Nonetheless, the commissioners encouraged constituents to raise additional questions and provide information that may go beyond what the questions ask, to assist the SEC in improving the disclosure framework. Constituents who are expected to take great interest in the Concept Release include investors, preparers of financial statements, auditors, audit committee members, securities lawyers, and others.
Seven areas of focus
Within the 340 questions, there are seven areas of overarching focus. Since six of the areas all begin with the phrase “Whether, and if so how,” perhaps we can consider these the “Seven WISHes:”
- Whether, and if so how, specific disclosures are important or useful to making investment and voting decisions and whether more, less or different information might be needed.
- Whether, and if so how, 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.
- Whether, and if so how, we could revise our requirements to enhance the protection of investors.
- Whether our current requirements appropriately balance the costs of disclosure with the benefits.
- Whether, and if so how, we could lower the cost to registrants of providing information to investors, including considerations such as advancements in technology and communications.
- Whether, and if so how, we could increase the benefits to investors and facilitate investor access to disclosure by modernizing the methods used to present, aggregate and disseminate disclosure.
- Any challenges of our current disclosure requirements and those that may result from possible regulatory responses explored in this release or suggested by commenters.
A related project being run parallel to the SEC’s disclosure effectiveness project is the Financial Accounting Standards Board’s disclosure framework project. The International Accounting Standards Board also has a disclosure initiative under way.)
According to the SEC, there will be a 90-day comment period on the Concept Release.