SEC Matters

• DOI: http://doi.org/10.1002/jcaf.22214
• Published date: 01 November 2016
• Date: 01 November 2016
• Author: Donald A. Walker

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© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22214

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SEC Matters

Donald A. Walker, Jr.

MODERNIZING BUSINESS

AND FINANCIAL DISCLOSURE

REQUIREMENTS IN

REGULATION S-K

In April 2016, the Securi-

ties and Exchange Commis-

sion (SEC) published Release

Nos. 33-10064 and 34-77599

(together, “Release”). The

Release solicited public com-

ments on possible moderniza-

tion of disclosure require-

ments in Regulation S-K. In

December 2013, as required by

Section 108 of the Jumpstart

Our Business Startups (JOBS)

Act, the staff of the Division

of Corporation Finance pub-

lished the results of a staff

study (“Study”) of the disclo-

sure rules that was undertaken

as aresult of the Disclosure

Effectiveness Initiative under-

taken by Chair Mary Jo White.

That Study led to the analysis

of potential changes provided

in the Release.

The Release and the pre-

vious study, focused on the

disclosure requirements for

periodic reporting on Forms

10-K, 10-Q, and 8-K. Although

the JOBS Act intended to focus

on simplifying the registration

process for emerging growth

companies (EGCs—companies

generally with less than $75

million market capitalization),

the Study focused on improv-

ing disclosure requirements

for companies at all stages of

development and assumed that

company size scaling require-

ments could be adopted to

reduce the burden on smaller

companies. The Study recom-

mended that the Commission

consider certain principles in its

evaluation:

• “Improving and maintain-

ing the informativeness of

disclosure;

• Historical objectives of the

rule and their continued or

recurring relevance;

• Whether the required

information is available on

a non-discriminatory basis

from reliable sources and,

if so, any costs or benefits

from obtaining the infor-

mation other than from the

registrant;

• Administrative and

compliance costs of the

requirements;

• Any competitive or eco-

nomic costs of disclosing

proprietary information;

• Maintenance of the

Commission’s ability

to conduct an effective

enforcement program and

deter fraud;and

• Importance of maintain-

ing investor confidence

in the reliability of regis-

trant information in order

to, among other things,

encourage capital forma-

tion.” (Release, pp. 20–21)

In addition, the Fixing

America’s Surface Transpor-

tation (FAST) Act of 2015

requires that the Commis-

sion consult with the Investor

Advisory Committee and the

Advisory Committee on Small

and Emerging Companies and

to issue a report of findings

and recommendations to Con-

gress (Pub L. No. 114-94).

One way to look at the

Release and the potential out-

come of the release process is

to consider the key types of

change to SEC rules and regu-

lations that could result from

the process:

• Changes in the ways

that information may be

conveyed to users;

• Changes in the information

required;

• Changes in the placement

of information within

disclosure documents;