SEC's Disclosure Review Draws Wide Feedback

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By Rob Tricchinelli

July 26 — The Securities and Exchange Commission attracted a wide variety of reaction to its latest step in an ongoing review of the effectiveness of its disclosure rules.

The agency received more than 300 unique comments on Regulation S-K, a broad regime governing disclosures that aren't financial statements (72 SLD, 4/14/16).

Principles-Based

Industry commentary mirrored feedback on other rule proposals. Many stakeholders warned of the compliance costs of regulations they deem overly prescriptive or “one-size-fits-all,” especially when compared to “principles-based” initiatives that bring more flexibility.

The latter approach was generally favored in comments by the Securities Industry and Financial Markets Association, Financial Services Roundtable, U.S. Chamber of Commerce and Grant Thornton LLP.

Overload?

The commentary reflects an ongoing debate over how to best achieve the purpose of disclosure laws. Many argue that more disclosures would be inappropriate considering how little investors read to the disclosures currently available to them.

The agency shouldn't confuse what is material to shareholders' investment decisions with information that could merely be useful, SEC Commissioner Michael Piwowar said in April, when the agency unanimously solicited Reg S-K feedback (72 SLD, 4/14/16).

Whether to expand or contract disclosure rules was a flash point in the rift between SEC Chairman Mary Jo White and Sen. Elizabeth Warren (D-Mass.) that boiled over during a Senate Banking Committee hearing in June (115 SLD, 6/15/16).

Warren warned that the agency’s disclosure effectiveness review could lead to fewer disclosures in a way that would harm investors.

White has said several times that paring back disclosure isn't the agency's primary goal, but making disclosures more meaningful to investors is.

Advocacy

In addition to the hundreds of unique letters, the agency received almost 10,000 copies of a form letter put out by Public Citizen calling for disclosure of political spending, overseas tax payments and sustainability. It also received more than 16,000 copies of a form letter by Americans for Tax Fairness asking for heightened foreign subsidiary and tax disclosures.

Investor advocates also clamored for more required disclosures about environmental, social and corporate governance issues (140 SLD, 7/21/16).

Other commenters asked for more stringent disclosure requirements on how companies are handling climate change (142 SLD, 7/25/16).

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

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

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 https://www.bloomberglaw.com/product/corptrans/document/X6175VS0000000

For the comment letters, visit https://www.sec.gov/comments/s7-06-16/s70616.htm

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