SEC Proposes Rule Changes Aimed at Streamlining Disclosure

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By Andrew Ramonas

The SEC is looking to help companies seeking to omit personal information from required disclosures and limit repetitive reporting, under rulemaking proposed Oct. 11.

Securities and Exchange Commission Chairman Jay Clayton and commissioners Michael Piwowar and Kara Stein unanimously proposed amendments to Regulation S-K, which governs companies’ non-financial statement disclosure requirements for periodic reports, proxy statements, and other agency filings.

The 2015 Fixing America’s Surface Transportation (FAST) Act directed the SEC to streamline the rule. The commission’s proposal would allow more hyperlinks in filings, remove outdated requirements, and simplify reporting on companies’ properties. That’s in addition to proposed updates allowing companies to exclude personal information from filings and eliminate repetitive reporting in the Management’s Discussion and Analysis portion of corporate annual reports. The MD&A is a management narrative about a company’s financial performance, trends, prospects, and operations.

“I believe these proposals embrace an approach to disclosure that is important,” Clayton, an independent, said at the open meeting. “Corporate leaders should respond to our disclosure requirements by conveying information to investors in a way that captures how those leaders assess and manage their business. Our approach to disclosure allows this, and issuers should be pursuing it.”

Under the proposed amendment on personal information, companies would be able to omit non-material sensitive or confidential data from contracts attached to filings without requesting confidentiality from the SEC. The SEC disclosed earlier in October that hackers had gained access to two individuals’ names, dates of birth, and social security numbers during the breach of the agency’s Edgar corporate filings database in 2016.

‘A Snip Here, A Snip There’

Stein, a Democrat, asked if the proposed confidentiality update would “impact the substance and quality of the information reaching the marketplace and investors.” She also asked if the proposed MD&A update was “consistent with ensuring that investors have ready access to the fulsome information they need.”

Piwowar, a Republican, said the proposed amendments effectively “prune the regulatory orchard” as the FAST Act directed.

“Today’s amendments are not an exercise in slash-and-burn clearcutting,” he said. “They are incremental changes—a snip here, a snip there—designed to shape and guide the healthy plant so that our disclosure regime will continue to bear fruit.”

David Hirschmann, president and chief executive officer of the U.S. Chamber Center for Capital Markets Competitiveness, said the proposal helps bring “corporate disclosure into the 21st century.”

“The SEC’s disclosure regime has become so cumbersome and complex, it makes it harder for retail investors to find what they need in addition to creating a significant compliance disincentive for companies to go public in the first place,” Hirschmann said in a statement.

The public has 60 days to comment on the proposed updates.

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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