Blog: Tweet Your 10-K? SEC Votes To Issue Concept Release To Modernize Reg S-K

Blog: Tweet Your 10-K? SEC Votes To Issue Concept Release To Modernize Reg S-K

Blog: Tweet Your 10-K? SEC Votes To Issue Concept Release To Modernize Reg S-K

In an open meeting today, the SEC (the 3 of these) dicated to issue an idea release seeking discuss modernizing certain business and financial disclosure needs in Reg S-K, area of the SEC’s disclosure effectiveness review project. Reg S-K is 3 decades old, and evolving business models and the development of new technology, along with alterations in the concerns and interests of investors, have produced the requirement for overview of business and financial disclosures in periodic reporting. Chair White-colored stated that overview of compensation and governance needs can also be around the SEC’s agenda.

Even though the concept release hasn’t yet been published nor have the Commissioners’ remarks, the presentations and discussion in the meeting established that the discharge will address three fundamental topics: framework, line products and presentation and delivery.

Framework. Employees observed that, although there are several prescriptive and structured elements, the present needs are largely concepts-based, with disclosure determined based on “materiality” as defined in TSC Industries, Corporation. v. Northway, Corporation., particularly, whether there’s a considerable likelihood that the reasonable investor would think about the information essential in decision-making and whether an acceptable investor would see the information to considerably affect the “total mix” of knowledge available. However, Chair White-colored also recognized the significance of not burying material information within an avalanche of trivia. Thinking about the expense and benefits, such as the expressed interests of shareholders in receiving more details and also the expressed interests of companies in efficiencies, how if the disclosure needs be structured? Should some degree of investor sophistication be assumed? As Commissioner Stein recommended, if the system be re-imagined? for instance, she asked why the discharge didn’t address concepts as fundamental because the form-based system.

Line products. The discussion established that the discharge addresses six products: core company disclosure, company performance (mainly financial), risk, securities, industry guides and exhibits. The discharge also views if the groups for scaled disclosure work and whether recent topics of great interest and shareholder engagement should be included to the needs, for instance, stock buybacks and sustainability. Additionally, the discharge shows the possibilities of semi-annual, rather of quarterly, reporting.

Presentation and delivery. Here, the discharge will consider various methods to presenting and being able to access the disclosure and the ways to reduce repetition, including mix-references, incorporation by reference, hyperlinks, company websites and standardization versus versatility. Stein expressed the priority that, in thinking about whether the amount of details are excessive, the SEC must balance by using concerns about the caliber of information. Additionally, she observed that the re-imagined delivery system should remember that different generations may prefer to obtain their information delivered diversely, for instance, a more youthful audience may choose to receive information through tweets.

One of the topics that Stein observed, disapprovingly, weren’t addressed were abuses in non-GAAP disclosures and disclosure of ESG (ecological, social and governance) measures, which, she contended, some investors feel are potential indicators of higher financial performance. Regarding the advantages of reduced disclosure open to large companies (e.g., WKSIs), Stein reiterated her concern (formerly expressed regarding the the grant of waivers) these benefits ‘t be readily available for violators.

Commissioner Piwowar emphasized that both JOBS Act and FAST Act needed the SEC to review Reg S-K to simplify reporting and lower costs to companies, and that he expressed disappointment that no such reforms had yet been suggested. For the reason that light, he required problem with any effort to grow the character of disclosure to pay for products which were not strictly “material,” instead of just helpful or interesting with a shareholders, or, because he place it, allowing these shareholders to “hijack corporate sources for everyone their very own agendas.” Presumably, he’s taking direct are designed for sustainability and ESG disclosure.

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Comment ( 1 )
  1. Mattcrwi
    October 28, 2016 at 3:32 am

    Oculus Rift had a component shortage but still manage to ship to retaile1 but not pre-orde1. Interesting priorities.

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