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Opening Remarks at the Open Commission Meeting to Adopt Amendments to Items 101, 103, and 105 of Regulation S-K

Aug. 26, 2020

Thank you, Chairman Clayton, for taking the long overdue step of presenting the Commission with the opportunity to amend Items 101, 103, and 105 of Regulation S-K.  The amendments we are voting on today will modernize some of the most pertinent disclosure that we require our public reporting companies to provide to investors and potential investors.  These items of Regulation S-K mandate disclosure of a company’s description of its business, its pending legal proceedings, and the factors that make an investment in the company speculative or risky.  This is the narrative disclosure that allows investors to assess a particular company’s prospects for success, including whether the company has an understanding of the risks it faces and how it plans to address them. 

Over thirty years have passed since the Commission last significantly revised these disclosure requirements.[1]  The world has changed considerably since then, and the universe of our public reporting companies has followed suit.  For example, today, many more public companies rely on intangible assets and key employees rather than on manufacturing activities and availability of raw materials.  Such changes were likely not anticipated the last time the Commission voted to amend these rules.  The result is that some of the current disclosure requirements, effectuated during that time, no longer make sense for many companies. 

The amendments we are considering will allow our public reporting companies to present more clearly the information that they consider material in running their businesses.  Such a shift away from dated, prescriptive disclosure requirements to a more principles-based disclosure regime will have tremendous benefits for investors who will now be able to focus their attention on material information that better captures the circumstances of each particular company.

The expert staff in the Division of Corporation Finance has been working to modernize these rules for many years, long before I joined the Commission.  Thank you to everyone in the Division who contributed countless hours to the wholesale review of our disclosure requirements.  Your expertise, gained through years of overseeing the entire universe of public company reporting, gives me great confidence in how beneficial this rulemaking will be for both investors and public companies.  I know that you are continuing to review other items of Regulation S-K, and I look forward to your future recommendations.  Thank you also to the Division of Economic and Risk Analysis and the Office of the General Counsel for your work on this rulemaking.  Your input and support are invaluable.

Lastly, thank you to those who submitted comments for this rule proposal and over the years; your views were instrumental in our final result.  I am happy to vote in support of the recommendation. Thank you. 

[1] See Adoption of Integrated Disclosure System, Release No. 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)].

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