The next steps in a comprehensive rethinking of the Securities and Exchange Commission's disclosure regime should be coming soon and an assessment is underway by the Division of Corporation Finance, according to Chairman Mary Jo White. The biggest hurdle, she said this week, is balancing the needs of retail and institutional investors.
White stressed that the review remains a “high priority” while speaking at the Annual Capital Markets Summit, an event on Wednesday hosted today by the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness. “You'll be hearing more about that soon, at least I hope you will be,” she said.
The JOBS Act required the SEC to “comprehensively analyze” the rules underpinning its disclosure regime, review disclosure requirements for Regulation S-K non-financial disclosures, consider how to modernize and simplify those requirements, and to reduce the costs and burdens for emerging growth companies.
White took the opportunity to address the challenges inherent in meeting the needs of various constituencies. “The objective is less about reducing overload per se, although that is an element of it, but really making our disclosure more effective and more meaningful for investors, and not imposing burdens that shouldn't be there or requiring information from companies that is not optimally meaningful to investors,” she said. She admitted, however, that balancing “what institutional investors want to see with what retail investors can reasonably digest and vet their way through” will prove difficult.
“On pure disclosure issues they are separate audiences,” she added. “If you ask the institutional investors whether they want three years or five years of information, they will tell you they want 10 years and will sort out what we don't need. We are trying to make disclosures meaningful, but retail investors, if there is too much detail, too much mass, they may well seize upon something that is not very important and not very critical. One of the challenges is to figure out how to meet both sets of needs sensibly for issuers.”
White said the desired approach is to distill data into a concise way that is helpful to all investors. Disclosure reform is just the cornerstone of what has to be a broader approach and she is also urging the Commission to look at ways to enhance investor education for retail investors, enhancing broker-dealers' internet platforms, and finding new ways to maximize the use of online resources.