Praise for SEC Disclosure Review Amid Disagreement

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By Rob Tricchinelli

July 28 — Lawyers and industry stakeholders praised the Securities and Exchange Commission's willingness to review its disclosure regime even as they disagreed on what the ultimate outcomes should be.

The review is the “most significant step forward in the last 30 years” in the disclosure arena, David M. Lynn, a partner at Morrison & Foerster LLP, said July 28 at a D.C. Bar panel in Washington.

The agency is doing a wholesale analysis of its disclosure rules, with the ultimate goal of eliminating duplication and making them more useful to investors, officials have said.

The SEC recently received a broad range of feedback on Regulation S-K, which governs most non-financial statement disclosures (144 SLD, 7/27/16). Industry groups called for a “principles-based” approach to the disclosure while other investors advocated for more disclosure on sustainability and environmental activities.

‘Smokestacks, Factories.'

Regulation S-K “was written for an economy that doesn’t exist anymore” and conjures up visions of “smokestacks, factories and horse-drawn carts,” Lynn said. It “hasn’t changed to keep up with the changing world around it.”

Panelists representing Congress, institutional investors and the SEC also spoke at the event.

The SEC's Division of Corporation Finance is working on recommendations to change Regulation S-X, which covers financial statements, Karen Garnett, an associate director in the division, said. The agency received comments on that regulation in late 2015 (187 SLD, 9/28/15).

The agency also plans to solicit feedback on executive compensation disclosures and proxy voting, but Garnett told Bloomberg BNA the timing for future releases is uncertain.

More or Less?

A frequently debated point during the agency's review is whether any rule changes should lead to more or less disclosure than current rules provide for.

Industry representatives have said the regime should use principles rather than strict rules, but consumer advocates—including Sen. Elizabeth Warren (D-Mass.)—warn that approach would lead to fewer disclosures and could harm investors.

Ken Bertsch, executive director of the Council of Institutional Investors, said investors don't think disclosures are too long now but issuers' filings could be made more readable with better organization. He also warned that the principles-based approach could frustrate investors' attempts to make side-by-side comparisons of companies.

“The issuer side does not always appreciate it,” Bertsch said, but “it’s valid to want to compare.”

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

For More Information

A survey of proposed revisions to Regulation S-K with a summary of comment letters to the SEC’s latest concept release is available at Bloomberg Law: Corporate Transactions, at

For the comment letters, visit

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