Fact Sheet: SEC Proposes Rules to Simplify Disclosure Requirements

The Securities and Exchange Commission proposed rules today to streamline and simplify certain disclosure requirements to “eliminate redundant, overlapping, outdated, or superseded provisions.”

mary jo white November 2015SEC Chair Mary Jo White commented on the proposal;

“The proposed amendments address outdated and redundant disclosure requirements while continuing to require companies to provide investors with what they need to make informed decisions. We are keenly interested in investors’ views on all aspects of the proposal and look forward to receiving their input as we continue to consider changes and enhancements to our disclosure requirements.”

The proposal is part of the “disclosure effectiveness review” and also part of the Commission’s task to implement the FAST Act which required the SEC to eliminate outdated and duplicated rules.

There is a public comment period on the proposal that will remain open for 60 days following release in the Federal Register.


Disclosure Update and Simplification

SEC Open Meeting.

July 13, 2016

 Action

The Commission will consider whether to propose amendments to update and simplify certain disclosure requirements by eliminating redundant, overlapping, outdated and superseded requirements due to changes in disclosure rules, accounting principles, and technology.  The Commission also will consider issuing a related request for comment on whether other requirements should be modified, eliminated, or included in U.S. Generally Accepting Accounting Principles (U.S. GAAP).

The proposal under consideration arises out of the staff’s work on the disclosure effectiveness review, which is intended to update and modernize the Commission’s disclosure requirements for the benefit of investors and companies.  The proposal also would implement certain provisions of the Fixing America’s Surface Transportation (FAST) Act.

Highlights

The proposal would be primarily applicable to public companies (including foreign private issuers), but also would involve requirements applicable to other entities the Commission regulates, including Regulation A issuers, investment advisers, investment companies, broker-dealers, and nationally recognized statistical rating organizations.

The proposing release covers:

  • Duplicative requirements, which require substantially the same disclosures as U.S. GAAP, International Financial Reporting Standards (IFRS), or other Commission disclosure requirements.  The Commission will consider whether to propose to delete these requirements in light of the requirements elsewhere.
  • Overlapping requirements, which are related to, but not the same as U.S. GAAP, IFRS, or other Commission disclosure requirements.  For these requirements, the Commission will consider whether to:
  • Delete Commission disclosure requirements that:  require disclosures that convey reasonably similar information to or are encompassed by the disclosures that result from compliance with the overlapping U.S. GAAP, IFRS, or Commission disclosure requirements, or require disclosure incremental to the overlapping U.S. GAAP, IFRS, or Commission disclosure requirements and may no longer be useful to investors;
  • Integrate Commission disclosure requirements that overlap with, but require information incremental to, other Commission disclosure requirements; or
  • Solicit comment on certain Commission disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to determine whether to retain, modify, eliminate, or refer them to the Financial Accounting Standards Board (FASB) for potential incorporation into U.S. GAAP.
  • Outdated requirements, which have become obsolete as a result of the passage of time or changes in the regulatory, business, or technological environment.  The Commission will consider whether to propose to amend these outdated requirements. The Commission will consider whether to propose to require additional disclosure of information to reduce any loss of information or increased burdens for investors.
  • Superseded requirements, which are inconsistent with recent legislation, more recently updated Commission disclosure requirements, or more recently updated U.S. GAAP.  The Commission will consider whether to propose to amend these superseded disclosure requirements to reflect, as applicable, the more recently updated requirements.

Background

The proposal is the result of the staff’s work on the disclosure effectiveness review, which is a comprehensive evaluation of the Commission’s disclosure requirements with the objective of improving the disclosure regime for both investors and companies.

The work is focused on considering the type of information the rules require issuers to disclose, how the information is presented, where and how the information is disclosed, and how technology can be leveraged for improving disclosure to investors’ access to the information.

The Commission has issued several releases in connection with the disclosure effectiveness review.  The Commission is seeking public comment on modernizing certain business and financial disclosure requirements in Regulation S-K and on proposed amendments to its disclosure requirements for registrants involved in mining activities. The Commission also requested comment on financial disclosure requirements in Regulation S-X for certain entities other than the issuer.

What’s Next?

The Commission will seek public comment on the proposed rules for 60 days.

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