Members of the Securities and Exchange Commission have taken up the banner of “disclosure simplification.” In October 2013, SEC Chair Mary Jo White addressed “information overload” in SEC disclosures and called for “meaningful review” of SEC disclosure requirements. (Her speech is discussed in an earlier post.) In December 2013, as required by the JOBS Act, the SEC staff issued a Report on Review of Disclosure Requirements of Regulation S-K. The staff recommended that the Commission undertake a comprehensive review of current SEC disclosure requirements. Based on this report, Chair White directed the staff to develop specific recommendations for updating the disclosure rules and to seek input from both companies and investors. The SEC’s Office of Chief Accountant will coordinate with the Financial Accounting Standards Board (FASB) to identify ways to improve the effectiveness of disclosures in corporate financial statements and to minimize duplication with other disclosure requirements.
Chair White and other members of the SEC continued to emphasize disclosure simplification in recent speeches:
- In a keynote address at the 41st Annual Securities Regulation Institute on January 27, Chair White emphasized that she envisioned a comprehensive review of the disclosure system, not just revision of particular rules: “We can all probably identify particular disclosure requirements that we might eliminate or modify, but that is not the kind of review and reform I am primarily focused on—and it certainly is not the kind of thoughtful and comprehensive review that I think our disclosure rules demand. I believe we should rethink not only the type of information we ask companies to disclose, but also how that information is presented, where and how that information is disclosed, and how we can take advantage of technology to facilitate investors’ access to information and make it more meaningful to them.”
- In a speech to the US Chamber of Commerce, also on January 27, Commissioner Michael Piwowar expressed concerns about “disclosure overload” and endorsed a “top-to-bottom” review of the SEC’s disclosure regime, though he focused particularly on identifying “special-interest disclosures that may have crept into our present disclosure regime and are counterproductive to creating informed investors.”
- Commissioner Daniel Gallagher also spoke out in favor of disclosure simplification in a January 24 speech to the Forum for Corporate Directors. In contrast to Chair White, Commissioner Gallagher does not favor a comprehensive review of the disclosure system. Rather, he “would prefer to address discrete issues now rather than risk spending years preparing an offensive so massive that it may never be launched.”
Notwithstanding these public statements, any comprehensive disclosure reform will be a long-term project and may be constrained by the SEC’s available resources, which may have to be dedicated, among other things, to completion of pending Dodd-Frank and JOBS Act rulemakings and other priorities.
Along the same lines, the Financial Accounting Standards Board is also re-emphasizing its disclosure framework project. In December 2013 remarks at an AICPA conference, FASB Chair Russell Golden stated that the goal of the disclosure framework project “is to both improve disclosure content—make it more useful to investors—and at the same time, where we can, reduce the amount of disclosure content.” In January, the FASB added a “simplification initiative” to its research agenda.