July 14, 2016

Disclosure Effectiveness: SEC Proposes to Simplify & Remove Redundant Stuff

Over the past six months, the SEC has issued two different concept releases relating to its disclosure effectiveness project – the first one dealing with Regulation S-X and the second one regarding Regulation S-K. As the Staff continues to analyze the comments submitted on those, the SEC decided yesterday to issue this 318-page proposing release in an effort to update & simplify certain disclosure requirements with the goal of eliminating redundant, overlapping, outdated & superseded requirements. The proposing release also seeks the same type of input for US GAAP. There is a 60-day comment period. Here’s the press release – and this is a “demonstration” version of the proposed redlined rule changes, which is another 193 pages by itself…

This is the piece of the SEC’s disclosure effectiveness project that has stirred up Senator Elizabeth Warren. Here’s an angry letter that Sen. Warren wrote to Chair White last week. I don’t believe that criticism is warranted as the SEC has said all along that the project is likely to elicit more disclosure than reduce it on balance – this just happens to be the part of the project that would reduce the volume of repetitive or useless disclosure. And based on the reactions of members that quickly perused this new proposing release last night, there probably ain’t gonna be as much reduction as one might hope for…

S-K Concept Release: The Comments So Far

Comments are due on the S-K concept release by next Thursday, July 21st – here’s the list of comment letters. Other than 7000 form letters and a few dozen other brief comment letters, there aren’t too many comprehensive comment letters submitted – at least so far. Most comment letters tend to come in at the deadline – or shortly thereafter. Here are a few of the more substantive ones:

SEC Investor Advisory Committee
Jack Ciesielski
FACT Coalition

The Future of Disclosure: Looking Beyond Disclosure Effectiveness

I found this recent speech by SEC Commissioner Kara Stein to be pretty interesting. Kara looks beyond the ongoing projects to upgrade Edgar & improve disclosure effectiveness in an attempt to further modernize how disclosure is delivered & consumed. Here are some of Kara’s main points – followed by my ten cents in brackets:

– Creation of a “Digital Disclosure Task Force” comprised of investors, analysts, academics, companies and technologists (I’m dubious about this. Sometimes a committee doesn’t create a better soup; it just creates red tape. I think it’s better to just find the right people that truly understand how information is consumed today)
– Conducting “investor testing” rather than the SEC simply relying on comments on its proposals (Hopefully, this is the concept of usability testing – something I have been hammering for two decades.)
– Presenting disclosure in different formats (There is mention of “company profiles” & structured data, as well as different formats to match the different platforms by which disclosure is consumed today – which is already permissible under Example 7 of this 1996 interpretive release. There is no mention of virtual reality.)

It’s great that Kara is pushing this important topic – something that has been bandied about as far back as when browsers first came into our life twenty years ago – because it’s a tough one and is easy for the SEC to push aside as they handle the immediate crises of the day…

Speaking of disclosure effectiveness, here’s a fuller description of the contentious Senate Banking Committee that I blogged about earlier…

Broc Romanek