United States: The SEC Speaks In 2016: Division Of Corporation Finance Panel – Recent Staff Interpretations And Reports

Disclosure Effectiveness

Under the JOBS Act, signed into law on ‎April 5, 2012, the SEC was required to study the disclosure requirements of Regulation S-K. Based on its December 2013 staff report to Congress, the SEC initiated a "disclosure effectiveness" review of the requirements of both Regulations S-K and S-X to identify ways to reduce the costs and burdens on companies while still providing material information to investors. Karen Garnett, associate director in the Office of Disclosure Operations, who has taken over the initiative from Keith Higgins, director of Corp Fin, noted that the scope of the initial disclosure effectiveness analysis has focused on the business and financial disclosure requirements in periodic reports. Garnett stated that, while companies, investors and other market participants have submitted interesting comments on proxy statement and registration statement disclosures, those filings are not the Staff's current focus.

In September 2015, Corp Fin opened a request for comment on Regulation S-X, with a focus on the financial disclosures related to acquired businesses, affiliated entities, and guarantors and issuers of guaranteed securities. Garnett said that the Staff had received 50 comment letters so far, which the Staff will evaluate and use to make recommendations to the commissioners. While no similar request for comment has been posted with respect to Regulation S-K, she noted that the Staff was working to develop recommendations on Regulation S-K for the commissioners, possibly in the form of a concept release.

Garnett asserted that the Staff was exploring disclosure more broadly, including the most effective framework for disclosure requirements (e.g., prescriptive requirements versus principles-based requirements), and considering the pluses and minuses of competing approaches (e.g., standardization versus flexibility). Garnett noted that the Staff was also looking at how companies present and deliver information, with a view to encourage companies to use modern technology to provide information more effectively (e.g., hyperlinks and use of structured data). On this point, she added that the Staff would be requesting input on how structured data can enhance the usefulness and quality of disclosure. The Staff is also looking at industry-specific disclosure in the form of industry guides, building on its experience from 2008 in codifying the oil and gas guides into Item 1200 of Regulation S-K.

In closing, Garnett stated that a main goal of the disclosure effectiveness project is to eliminate overlapping disclosure requirements caused by both internal redundancy (e.g., Regulation S-X versus Regulation S-K) and external redundancy (e.g., SEC rules versus Generally Accepted Accounting Principles). Garnett said that she was excited to see that numerous registrants are participating in the discussion of disclosure effectiveness and that such registrants are engaged in efforts to remove duplicative or outdated disclosure in their filings. She reminded companies that they should not only seek opportunities for removing disclosures, but also concurrently seek opportunities for adding and improving the remaining disclosures.

Accredited Investors

As defined in Rule 501 of the Securities Act, under Regulation D, an accredited investor includes certain natural persons and other entities that are considered financially sophisticated and able to sustain the risk of loss of investment, thereby reducing their need for certain protections provided by the federal securities laws. A natural person qualifies as an accredited investor if such person has:

  • individual income exceeding $200,000 in each of the two most recent years
  • joint income with the person's spouse exceeding $300,000 in each of those years or
  • net worth, excluding such person's primary residence, exceeding $1 million.

As noted by Gomez Abero, Dodd-Frank required the SEC to review the definition of "accredited investor" to determine whether the requirements of the definition should be adjusted or modified. In its Report on the Review of the Definition of "Accredited Investor" (the "Report"), dated December 15, 2015, the Staff described the history of the definition, including the bases for the financial thresholds, which were established as part of the passage of Regulation D in 1982 and have not been adjusted for inflation. Gomez Abero noted that, if the financial thresholds were adjusted for inflation, a natural person would need individual income exceeding $500,000, joint income exceeding $600,000 or $2.5 million of net worth to qualify as an accredited investor.

Per Gomez Abero, in preparing the Report, the Staff considered a variety of comments and analyzed various approaches to modifying the accredited investor definition. The Report provided a number of recommendations for updating the accredited investor definition, including:

  • leaving the current income and net-worth thresholds in place, but subjecting investors to an investment limitation (e.g., 10 percent of prior year income or net worth)
  • creating new inflation-adjusted income and net-worth thresholds that are not subject to investment limitations (e.g., new thresholds of $500,000 of individual income, $750,000 of joint income and $2.5 million of net worth)
  • considering other measures of sophistication for individuals to qualify as accredited investors, such as establishing a minimum amount of investments as another qualifying test
  • considering individuals with certain professional credentials, such as Series 7, 65 or 82 accreditation
  • considering individuals with investment experience
  • considering knowledgeable employees of private funds to qualify for investments in their employer's funds
  • considering designing an accredited investor examination that would enable sophisticated investors to qualify regardless of wealth, educational background or experience.

In closing, Gomez Abero noted that the Report includes a file for comment, and he encouraged interested parties to submit their views.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.