August 21, 2018

Disclosure Simplification: The SEC Cleans Out the Garage

My wife recently announced that we’re having a garage sale – which bums me out because now I have to help her clean the garage so the strangers who stop by to peruse our junk won’t think less of us. Anyway, last Friday, the SEC announced some garage cleaning of its own – in the form of this 314-page release adopting amendments to certain “redundant, duplicative, overlapping, outdated, or superseded” disclosure requirements.

There’s a lot to digest in the release, but this Steve Quinlivan blog provides a helpful guide to the changes. Here’s an excerpt summarizing the revisions to Item 101 of S-K:

The amendments revise Item 101 of Regulation S-K to eliminate required disclosures in the business description regarding:

– Financial information about segments
– Research and development spending
– Financial information about geographic areas, such as revenues from external customers in the issuers country of domicile and foreign countries, but where material must be covered in the MD&A
– Risks attendant to the foreign operations and any dependence on one or more of the registrant’s segments upon such foreign operations, but where material should be covered in risk factors

The SEC’s press release notes that the rule changes are part of Corp Fin’s initiative to review & improve disclosure requirements for the benefit of investors and issuers. We’re posting memos about this in our “Fast Act” Practice Area.

Beyond “Bedbugs”: More Corp Fin Actions to be Posted on Edgar

While this doesn’t appeal to the prurient interest nearly as much as the recent decision to post “bedbug” letters on Edgar, Corp Fin announced yesterday that it has decided to post more Staff actions on Edgar.  Here’s an excerpt from the announcement:

Starting October 1, 2018, the Division will begin to release through EDGAR orders we issue granting or denying regulatory relief on behalf of the Commission, as identified below. We intend to continue our efforts to enhance transparency in subsequent phases by releasing additional types of documents, including those memorializing actions or positions taken by the Division staff, such as interpretive guidance and no-action relief.

Orders that will soon become available include Reg A & 1934 Act orders of effectiveness, orders declaring 1933 Act registration statements abandoned, and orders granting exemptions under the tender offer rules. This is pretty prosaic stuff, but stay tuned – availability of interpretive guidance & no-action relief on Edgar could be more interesting.

PCAOB Seeks Comment on Draft Strategic Plan For 1st Time

The PCAOB recently issued a draft of its 5-year Strategic Plan – and the accompanying press release notes that for the first time, it’s soliciting comments from the public. Here’s an excerpt from the press release with an overview of the key goals of the plan:

After its own careful study and a survey of PCAOB staff and the public, the new Board intends to:

– Broaden its approach to driving improvement in the quality of audit services and more clearly communicate how it is driving that improvement.

– Ensure that its inspections and standard-setting activities are responsive to and do not impede technological innovations.

– Engage proactively more often and directly with investors, audit committees, and other stakeholders to encourage relevant and timely conversations about the quality of audit services.

– Optimize PCAOB operations to more efficiently and effectively use resources.

– Reinforce the PCAOB’s culture of integrity, excellence, effectiveness, collaboration, and accountability.

So what’s behind the PCAOB’s decision to seek public input on its strategic plan? Here’s some insight from a recent Gibson Dunn blog:

Coming on the heels of a complete turnover of the Board and the subsequent departure of numerous senior personnel, the process by which the Board is crafting its strategic plan provides further evidence—if any were necessary—that this Board intends to seek out new ways to operate and to fulfill the PCAOB’s mission.

John Jenkins