SEC moves to simplify disclosures

The Securities and Exchange Commission voted to propose a number of amendments to simplify some disclosure requirements for public companies, along with investment advisers and investment companies.

The proposals are in keeping with some of the provisions of the Fixing America's Surface Transportation Act, or FAST Act, which aim to make adjustments to streamline the SEC’s disclosure framework.

“The FAST Act has given the Commission the opportunity to update our rules, simplify our forms, and utilize technology to make disclosure more accessible,” said SEC Chairman Jay Clayton in a statement last week. “An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers, and today's action embodies that goal.”

SEC chairman Jay Clayton
Jay Clayton, chairman of U.S. Securities and Exchange Commission (SEC) nominee for President Donald Trump, testifies during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Thursday, March 23, 2017. Trump tapped Clayton to lead the SEC in January, saying the Sullivan & Cromwell partner would ensure that financial companies thrive and create jobs, while still playing by the rules. Photographer: Zach Gibson/Bloomberg

The SEC plans to consider amendments to modernize and simplify certain disclosure requirements in Regulation S-K, and the related rules and forms, to reduce the costs and requirements for registrants. The amendments also aim to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information.

The proposed amendments would, among other things, revise rules or forms to update, streamline or otherwise improve the SEC’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold.

The changes would also update the rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements; and simplify the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management's Discussion and Analysis that would allow for flexibility in discussing historical periods.

The SEC also wants to use technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

The proposal also encompasses some amendments to several of the rules and forms for investment companies and investment advisers, including requiring some investment company filings to include a hyperlink to each exhibit listed in the index.

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