SEC to Tailor Disclosure Regime Under New Chair Clayton

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By Yin Wilczek

The Securities and Exchange Commission is considering new disclosure measures that would improve on the information provided to investors and could ease reporting burdens for companies, Chairman Jay Clayton suggested July 12.

In a speech at the Economic Club of New York, Clayton said that the commission, lawmakers and other regulators have “slowly but significantly expanded the scope of required disclosures beyond the core concept of materiality.”

The increased disclosures and other burdens may have played a role in the decline in public listings, he said.

Clayton said the SEC staff is “making good progress” on preparing rule proposals that would update and simplify the commission’s Regulation S-K rules. The regulation sets out non-financial statement disclosure requirements for various SEC filings used by public companies, such as annual and quarterly reports, and proxy statements.

Clayton has made no secret of the fact that he would like to stem the downward trend in companies going public. He said at a recent SEC Investor Advisory Committee meeting that the decrease in initial public offerings and publicly traded companies is of “great concern.”

Earlier this month, the SEC announced a new policy of allowing all companies to file draft registration documents for IPOs confidentially, a move that attorneys said will spur public listings.

Overhaul Efforts Predated Clayton

Overhaul of the disclosure regime has been on the SEC’s agenda for several years. In April 2016, the agency made a renewed effort by issuing a concept release asking the public to weigh in on how Reg S-K disclosures can be more useful for investors.

The concept release received “tons and tons of comments,” said University of Pennsylvania Law School professor Jill Fisch, who teaches corporate governance and securities law. “Everybody’s been kind of waiting to see if Clayton would take that on.”

Corporate disclosures are a “hot topic” right now, Fisch told Bloomberg BNA. The U.S. Supreme Court has agreed to hear a case— Leidos, Inc. v. Indiana Pub. Ret. Sys.—involving disclosure of trends and uncertainties that could affect a company’s business. At the same time, the Financial Accounting Standards Board has proposed a more restrictive definition of “materiality” that would give companies more leeway to leave out disclosures.

Corporate representatives and investors agree that the current disclosure system is outdated, burdensome and doesn’t focus on what investors want, Fisch said. “They agree there should be changes—the question is what those changes are.”

Elizabeth Ising, a Washington-based attorney who co-chairs Gibson, Dunn & Crutcher LLP’s Securities Regulation and Corporate Governance practice group, said Clayton should focus the SEC’s disclosure rules on providing investors with information that is important in making investment decisions.

“Public companies and companies considering going public eagerly await changes that appropriately tailor costly disclosure requirements that have led to information overload for Main Street investors,” she told Bloomberg BNA in an email.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Seth Stern at

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