The SEC proposed amendments to certain of its disclosure requirements that "may have become redundant, duplicative, overlapping, outdated, or superseded in light of other SEC disclosure requirements" as well as those of the U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and International Financial Reporting Standards given the "changes in the information environment." The SEC requested comments on certain disclosure requirements that overlap with those of U.S. GAAP, but require information that is incremental to them, in order to determine whether to retain, modify, eliminate or refer the overlapping requirements to the Financial Accounting Standards Board for potential incorporation into U.S. GAAP.
The SEC emphasized that the proposed amendments would apply primarily to public companies (including foreign private issuers), but also would be relevant to requirements that are applicable to other SEC-regulated entities. Those entities include Regulation A issuers, investment advisers, investment companies, broker-dealers, and nationally recognized statistical rating organizations.
The SEC noted that the proposed amendments are part of an initiative by the Division of Corporation Finance to review disclosure requirements that are applicable to issuers in order to improve those requirements for the benefit of investors and issuers. In addition, the SEC noted that the proposed amendments are part of an effort to implement Title LXXII of Fixing America's Surface Transportation ("FAST") Act, which, among other things, requires the SEC to eliminate provisions of Regulation S-K that are duplicative, overlapping, outdated or unnecessary.
Commentary / Steven Lofchie
In her letter to SEC Chair Mary Jo White (See, Senator Warren SEC Letter) Senator Elizabeth Warren proclaims that investor information overload is a problem which "does not exist." Commissioner Michael S. Piwowar's position contrasts sharply with that of Senator Warren. In support of the rule proposal, Commissioner Piwowar stated: "In 2008, our staff conducted a survey of retail investors. More than half of investors responded that they rarely, very rarely, or never read corporate annual reports. Some of the top reasons for not reading annual reports were that they were too complicated or hard to understand, that they were too long and wordy, and that investors were too busy and had no time."
Commissioner Kara M. Stein voted for the proposal, but questioned its "scope, necessity and timing." She also complained that the proposal is so technical that investors "can't make heads or tails of the subject matter," and that SEC staff's fulfillment of her request for "greater clarity" was "not adequately done." The very premise of Commissioner Stein's complaint is that retail investors can't understand what is disclosed currently. If greater clarity is her goal, then she should be quite a bit more enthusiastic about disclosure simplification. She did display enthusiasm later in her statement, when she indicated that it was particularly important for the SEC to focus on disclosure with regard to "sustainability."
By contrast, Chair White offered a clear description of the potential benefits of disclosure simplification.
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