Yesterday, the U.S, Chamber of Commerce’s Center for Capital Markets Competitiveness released a set of recommendations for the SEC as the agency considers how to make disclosure more effective. The report contains both near-term and long-term recommendations for improvement, and among the near-term recommendations are suggestions to address identified reporting requirements that are obsolete or duplicative of other disclosures (e.g., Item 101 of S-K disclosure of acquisitions, financial disclosure by geographic region, disclosure of where an investor can get copies of filings). Longer-term improvements suggested by the Center include addressing the problem of duplication among SEC filings, modernizing the presentation and delivery of public company reports, and reforming disclosures for CD&A and MD&A. No doubt we will see other reports along these lines as various groups attempt to provide the SEC with input on where to take its ongoing disclosure effectiveness project.
Why is Disclosure Reform So Hard?
The report from the Center for Capital Markets Competitiveness cites a number of the Commission’s prior efforts toward reforming disclosure, many of which did not yield much in the way of tangible results (remember the 21st Century Disclosure Project?). In fact, during my time at the Commission, I can’t think of any time where disclosure reform wasn’t somewhere on the agenda. Unfortunately for those who have been interested in accomplishing change in this area, other agenda items tend to crowd out the disclosure reform topic (e.g., the Sarbanes-Oxley Act, the Dodd-Frank Act, the JOBS Act), and disclosure reform is usually easy to push to the back burner because no one will squawk when it ends up there. And that leads to yet another problem, which is that there is no one unified voice calling for less or more effective disclosure. Many in the corporate community certainly think that more effective disclosure would be nice to have, while investor groups will sometimes express the view that more disclosure is better. As a result, other than individuals within the Commission who have been interested in this topic, there is no one force pushing forward the efforts. Lastly, a disclosure effectiveness effort is swimming upstream against a current of ever-increasing disclosure about random things that have no relevance whatsoever to what investors want to know (e.g., conflict minerals, Iran sanctions, resource extraction issuer payments), which makes it difficult to focus on real change. Hopefully, this time is different.
More on “The Mentor Blog”
We continue to post new items daily on our blog – The Mentor Blog – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Insider Trading: 2nd Circuit Forces Tipper’s Disgorgement Even When Tippee Had No Direct Economic Benefit
– SEC Grants More Rule 506 Bad Actor Waivers
– Financials: FASB Proposes Decision Process for Determining Notes
– Audit Committee Members’ Failure to Respond to Red Flags Establishes Scienter
– Dave Lynn