The Securities and Exchange Commission issued a report to Congress on its disclosure rules for U.S. public companies, as part of agency's ongoing efforts to modernize and simplify disclosure requirements and reduce compliance costs.
In the report, required by the JOBS Act, the SEC's provides an overview of the regulations that govern public company disclosure, as well as the staff's preliminary conclusions and recommendations. The SEC is recommending that it undertake a comprehensive review of disclosure requirements to look for areas that are redundant or that don't benefit users of financial statements.
“Although a comprehensive approach would likely be a longer-term project involving significant staff resources across the Commission, the staff believes that a comprehensive approach would be able to achieve the dual goals of streamlining requirements for companies, including emerging growth companies, and focusing on useful and material information for investors,” the SEC said in the report.
It identified disclosure on executive compensation, corporate governance, risk, exhibit requirements, as areas that need further review with an eye toward streamlining some disclosures or getting more feedback on whether the information is useful to investors.
“This report provides a framework for disclosure reform,” said SEC Chair Mary Jo White. “As a next step, I have directed the staff to develop specific recommendations for updating the rules that dictate what a company must disclose in its filings. We will seek input from companies about how we can make our disclosure rules work better for them and will solicit the views of investors about what type of information they want and how it can be best presented. The ultimate objective is for the Commission to improve the disclosure regime for both companies and investors.”
The SEC also suggests in the report that a thorough review of the systems for filing financial statements and disclosures is in order. “The staff believes that any review of the disclosure requirements should include an evaluation of methods of information delivery and presentation, both through the EDGAR system and other means,” the SEC wrote in the report.
“Updating our rules is only one step – albeit an important one – in improving company disclosures,” said Keith F. Higgins, Director of the SEC's Division of Corporation Finance. “For their part, companies should examine how they can improve the quality and effectiveness of their disclosures and how our rules can be improved to facilitate clear and effective communications to investors. Better disclosure benefits everyone in the marketplace, and we plan to work with companies and investors to achieve this common goal.”
As part of this effort, the SEC's Office of the Chief Accountant will coordinate with the Financial Accounting Standards Board to identify ways to improve the effectiveness of disclosures in corporate financial statements and to minimize duplication with other existing disclosure requirements.