The SEC aims to launch a comprehensive study of its own disclosure rules to weed out redundant or ineffective regulations.
The commission has proposed a wide-ranging review of its regulations aimed at determining the benefits to investors of the various disclosure rules and the degree of burden they imply for reporting companies, according to a press release following the SEC’s annual report to Congress about transparency.
The report, which is required by Congress under the 2012 Jumpstart Our Business Startups (JOBS) Act, identifies a particular need to review disclosure rules regarding corporate governance, risk, executive compensation, offerings and other areas.
‘I have directed the staff to develop specific recommendations for updating the rules that dictate what a company must disclose in its filings,’ SEC chairman Mary Jo White says. ‘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 report to Congress states that executive compensation disclosure has been amended more often than any other category of disclosure but is still ‘pointed to by companies and practitioners as an area with lengthy, technical disclosure. The executive compensation requirements should be evaluated in light of these concerns. ’
A review should also consider requiring corporate governance disclosure only when changes occur, and evaluate whether several categories of risk-related disclosure requirements could be consolidated into a single category. Requirements related to offerings, such as the information provided in prospectuses, should be reviewed to ensure they reflect the shift in recent years to electronic delivery instead of paper-based disclosure.
The report says a comprehensive review of disclosure rules was last undertaken in 1996 by the Task Force on Disclosure Simplification. Since then, the dot-com boom and bust, the collapse of Enron, enactment of the Sarbanes-Oxley Act, the financial crisis of 2008 and the enactment of the Dodd-Frank Act and JOBS Act have all affected disclosure rules.
