Corp. Fin. Staff Weighing Changes to Disclosure Method

By Phyllis Diamond

Nov. 5 — In its ongoing disclosure effectiveness project, the Securities and Exchange Commission Division of Corporation Finance is looking at how companies provide disclosure in their corporate filings, associate director Karen Garnett said Nov. 5.

One possibility, Garnett said, “is the notion of a company file on EDGAR.” She spoke at a Practising Law Institute gathering.

More Topical Disclosure

In the wake of a staff study on Regulation S-K mandated by the Jumpstart Our Business Startups Act, SEC Chairman Mary Jo White directed Corp. Fin. to develop specific recommendations to update the commission's disclosure regime. In April, division director Keith Higgins said the staff first would look at disclosures in issuers' periodic and current reports and whether industry guides and form-specific disclosure obligations should be updated.

At the PLI gathering, Garnett noted that companies are required to make their filings via EDGAR, a “pretty straightforward way” of distributing information in a chronological manner. However, she said in a panel discussion, that may not be the most intuitive way for investors to identify the information they're actually looking for.

With a company-file approach, Garnett explained, companies would continue to make their filings on EDGAR, but there also would be a company file on EDGAR that would display information in a more topical fashion. So there might be tabs for business information, financial information and information about management or subsidiaries, Garnett related.

Financial Filings

In the project, the division also is looking at Regulation S-X, which sets out the specific format and content of financial filings. According to Garnett, the staff initially is focusing on specific requirements for including the financial statements of entities other than the registrant in company filings, such as acquired business, guarantors and subsidiaries.

In other disclosure updates, Garnett said the staff is considering industry-specific disclosure requirements and whether there are some industries in which companies and investors would benefit from additional disclosure guidance.

With respect to Regulation S-K scaled disclosure requirements, she said, the staff is looking at whether $75 million is the right threshold for permitting scaled disclosure by SRCs—smaller reporting companies. “We're also thinking about other disclosure requirements where scaling might make sense for certain categories of registrants.”

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com