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Statement at Open Meeting on Modernization of Regulation S-K 101, 103, and 105

Aug. 26, 2020

Today’s final amendments to the description of business, legal proceedings, and risk factor disclosure requirements are common sense reforms that continue the Commission’s efforts to modernize, simplify, and update public company disclosure requirements.  The release represents another step in the right direction by making the rules more principles-based and rooted in materiality, which provides registrants with sufficient flexibility to tailor disclosures to their unique circumstances. 

I would have preferred to eliminate the remaining vestiges of a prescriptive approach, such as the requirement to disclose the number of employees.  That metric—like others some advocated for inclusion under the human capital rubric—might be material for some companies under some circumstances, but not for others.  Investors are likely to receive more meaningful disclosure about a registrant’s workforce from the principles-based requirements adopted today.  Regardless, I am encouraged by the incremental reforms in this release, including the modified disclosure threshold for environmental proceedings to which the government is a party that provides registrants with flexibility to select an appropriate threshold.  I view one reform as a bit of an experiment.  We are requiring summary risk factor disclosure if the risk factor section exceeds fifteen pages in length.  Will the penalty of having to prepare a summary be sufficient to overcome the fear of litigation that pushes companies to disclose many pages of risks? 

Thank you to the Chairman, Director Hinman, the staff of the Divisions of Corporation Finance, Economic and Risk Analysis, and the Office of General Counsel for your contributions to this rule. 

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