SEC Proposes to Modernize and Simplify Regulation S-K Disclosure Requirements
Commentary by Steven Lofchie
The SEC voted to propose amendments to simplify disclosure requirements for public companies and investment companies. The proposal is derived from recommendations presented in the SEC Report on Modernization and Simplification of Regulation S-K.
Pursuant to a FAST Act mandate, the SEC proposed simplifying certain aspects of Regulation S-K to "reduce the costs and burdens on registrants while continuing to provide all material information to investors." The amendments are intended to streamline requirements to reduce the repetition and disclosure of immaterial information. Specifically, the amendments propose to:
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amend rules or forms in order to eliminate risk factor examples listed in the disclosure requirement;
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change the description of property requirements to emphasize the materiality threshold;
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revise exhibit filing requirements and the related process for confidential treatment requests;
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change the "Management's Discussion & Analysis" requirements to allow registrants flexibility in reporting old data that is no longer material; and
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require (i) data tagging for items on the cover page of certain filings and (ii) the use of hyperlinks for certain information available on EDGAR.
In addition, the SEC proposed similar amendments to rules and forms for investment companies.
At the meeting to consider the proposals, both SEC Chair Jay Clayton and Commissioner Michael Piwowar expressed support for the proposed amendments.
Commentary
These proposals aim to improve the U.S. public capital markets so that more issuers may be willing to raise money in these markets. It is now the task of both issuers and investors to review the proposals carefully: (i) issuers to determine whether the rule changes would continue to provide required information and do so at a reasonable cost, and (ii) investors to consider whether the proposed rule changes would result in the loss of information that is material to an investment decision.