On April 11, 2014, the SEC set up a spotlight page on its website relating to disclosure effectiveness. The SEC indicates that its Division of Corporation Finance is conducting a comprehensive review of the disclosure requirements and will focus initially on the business and financial disclosures in the annual report on Form 10-K, the quarterly report on Form 10-Q and the current report on Form 8-K. Later stages of the review will deal with the compensation and governance information included in proxy materials. The spotlight page includes a comment form that can be used to submit comments relating to this project. Click here to access the SEC’s spotlight page.
In a speech delivered to the ABA the same day the SEC initiated this spotlight page, Keith F. Higgins, the head of the SEC’s Division of Corporation Finance, stated that the goal of the project was to review specific sections of regulations S-K and S-X to determine whether provisions can be updated in a way that reduces costs and eliminates duplicative disclosures, as well as to identify gaps in the disclosure requirements and ways to increase transparency with respect to public disclosures. The speech indicated that the review will include consideration of specific parts of Regulation S-K and the Industry Guides as well as consideration of the possibility of further tailoring the disclosure requirements based on issuer size, which is sometimes referred to as scaling these provisions.
In this speech, Mr. Higgins also stated that the review will include consideration of various issues relating to Regulation S-X, which contains the financial reporting requirements, as well as looking at whether there are ways to improve the manner in which disclosures are delivered, including the possible use of the concept of a core disclosure document.
Mr. Higgins also recommended that reporting companies take steps on their own to improve disclosure, such as reducing repetition, focusing disclosure on material items and eliminating outdated information.
Click here to access the text of Mr. Higgins’ April 11, 2014, speech.
This disclosure review project grew out of the JOBS Act. The JOBS Act established a new category of issuer, the emerging growth company (EGC), and included a number of provisions designed to make it easier for EGCs to raise funds. The JOBS Act also required the SEC staff to review Regulation S-K in order to determine whether there were other ways to simplify the disclosure requirements applicable to EGCs. The SEC staff released its study in December 2013 and recommended a comprehensive review of Regulation S-K (i.e., a review of Regulation S-K in relation to all reporting companies, not just EGCs). Click here to access our January 2014 item, which provides further background on this matter and includes a description of the contents of the SEC staff study of Regulation S-K.