SEC Solicits Public Comment on Business and Financial Disclosure Requirements in Regulation S-K

The Securities and Exchange Commission voted on April 13 to publish a concept release discussing and seeking public comment on modernizing certain business and financial disclosure requirements in Regulation S-K.  The Commission is interested in receiving input on whether the disclosure requirements continue to elicit the information that investors need for investment and voting decisions and how registrants can most effectively present the information.  The Commission is also seeking comment on the costs and benefits of the disclosure requirements for companies and investors. 

The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based staff review of the requirements, and the presentation and delivery of disclosures that companies make to investors. 

“Timely, relevant and material information is critical to investors and companies,” said SEC Chair Mary Jo White.  “The concept release establishes a thoughtful framework for better understanding investors’ and companies’ experiences with the disclosure requirements and whether investors are receiving the information they need to make informed investment decisions.”

In addition to discussing and seeking input on the disclosure requirements for business and financial information in Regulation S-K, the concept release explores how the Commission could improve the readability and navigability of company disclosures.  The Commission invites comment on various formats used to present information, such as tables and structured data, as well as different tools used to deliver disclosure, including cross-referencing, incorporation by reference, hyperlinks and company websites. 

The public comment period will remain open for 90 days following publication of the concept release in the Federal Register. 

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FACT SHEET

SEC Open Meeting

April 13, 2016

Action

The Commission issued a concept release that comprehensively reviews business and financial disclosure requirements in Regulation S-K applicable to periodic reports.  The concept release, which arises out of the staff’s work on the Disclosure Effectiveness Initiative, would consider ways to enhance the disclosure requirements for the benefit of investors and companies.  The release seeks public comment on how the Commission could update its disclosure requirements to facilitate timely, material disclosure by registrants and investors’ access to that information.  The concept release also seeks comment on the presentation and delivery of disclosure by reporting companies. 

Highlights of the Concept Release

The concept release requests comment on the business and financial disclosure required in periodic reports filed by companies.  The concept release would cover:

·         The Commission’s framework for company disclosure, including the nature of the disclosure requirements, statutory mandates, and the audience for disclosure

·         Existing and potential disclosure requirements, including principles-based and line-item disclosure requirements in Regulation S-K, industry-specific disclosure, information relating to public policy and sustainability matters, and scaled disclosure requirements

·         Alternative methods of presenting disclosure that could improve readability and investor access to information.

For each of these topics, the concept release would consider the regulatory history, public input received, the administrative and compliance costs of disclosure requirements, and present specific questions for public comment.

Background                                                                              

The Commission’s framework for company disclosure derives from the Securities Act of 1933 and the Securities Exchange Act of 1934.  The Commission first introduced its current system of integrated disclosure in 1977, in which a centralized set of rules apply to both registered public offerings and periodic reports.   Regulation S-K is the central repository for the Commission’s rules covering the business and financial information outside the financial statements that companies must provide in their filings. 

What’s Next?

The concept release will be published on the Commission’s website and in the Federal Register.  The comment period will remain open for 90 days.