The SEC last month published a concept release that is soliciting comments on the financial filing requirements stipulated in Regulation S-K. The release is part of the Disclosure Effectiveness Initiative through the Jumpstart Our Business Startups (JOBS) Act and is aimed at modernizing and improving filing requirements, addressing whether the requirements continue to elicit the information investors need to make investment and voting decisions, what information should be required and how it should best be presented by registrants, and the costs and benefits of disclosure for both the companies filing them and the investors utilizing them. Additionally, the SEC is investigating alternative methods of presenting disclosure to the public that could improve readability and investor access to information.
Regulation S-K lays out financial filing requirements under the US Securities Act of 1933 and has often been studied and reviewed by the SEC to assess its effectiveness and impact as a means of financial disclosure for investors and companies. This regulation reflects the Commission’s efforts to harmonize disclosure requirements under both the Securities Act and the Exchange Act by creating a single repository for regulation that applies to registrants under both statutes. Numerous previous task forces and advisory committees have addressed the impact of Regulation S-K’s requirements, and this latest examination was prompted by the JOBS Act and the Fixing America’s Surface Transportation Act of 2015 (the FAST Act).
Given previous comments and staff experiences with the disclosure requirements, the SEC’s goal with this Concept Release is to generate comments from investors and companies alike on the following topics:
| 1) | The effects of new rules, temporary or otherwise, and provisions. This includes integrating sunset provisions into future disclosure requirements. It also includes how and when new rules and requirements should be studied to allow these provisions to adapt to future market changes and technological advancements. |
| 2) | The nature of the disclosure requirements. This includes if the SEC should better balance current disclosure requirements between a more prescriptive, consistent disclosure threshold and a principles-based system. |
| 3) | The disclosure audience. This includes adapting the types of information required by disclosure regulation, including the breadth and complexity of such information, to a more sophisticated investment audience. This also includes addressing the needs of other members of the audience rather than investors. |
| 4) | Compliance and competitive costs. This includes investigating if and how the costs of disclosure impact companies and whether that cost is commensurate with the gain to the investment community. This also includes discussion of whether the SEC’s current methods of evaluating costs are adequate, particularly when the cost is difficult to quantify. |
| 5) | Information for investment and voting decisions. This includes the effectiveness and continued utility to investors of the general business development information as part of Item 101(a)(1), the narrative description of business as part of Item 101(c) of Regulation S-K, and exhibits as part of Item 601, among numerous other items. These are specifically detailed with requests for comments for each item. |
| 6) | Scaled requirements. This includes better elucidating which types of registrants are eligible for scaled requirements, which disclosure requirements should be scaled, and how the scaling should occur. |
| 7) | Presentation and delivery of important information. This includes soliciting ideas to reduce the amount of repetitive data, such as allowing and improving cross-referencing, allowing the use of hyperlinking to external sources within filings, allowing registrants to include information from company websites within filings, and weighing the standardization of filing requirements against flexibility. |
The SEC is interested in public comments on any and all of these topics. The complete set of comment solicitations can be read in the full Concept Release. The public comment period is open for 90 days following the April 15th publication of the Concept Release. You can submit comments using the form available on the SEC’s website or by e-mailing rule-comments@sec.gov with File Number S7-06-16 in the subject line. You can also use the Federal eRulemaking Portal to submit comments or send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, be sure to reference File Number S7-06-16.
Comments that have already been submitted can be read here.
Sources:
SEC Solicits Public Comment on Business and Financial Disclosure Requirements in Regulation S-K
Business and Financial Disclosure Required by Regulation S-K (Release No. 33-10064)
