SEC Commissioner Piwowar Discusses Improving IFRS, Interactive Data and Corporate Disclosures
Commentary by Steven Lofchie
SEC Commissioner Michael S. Piwowar addressed the future of international financial reporting standards ("IFRS") for documents filed with the SEC. He discussed improving the quality of interactive data in reports filed with the SEC, the SEC's efforts to improve corporate disclosures, and concerns that "special interests have corrupted the disclosure process to the detriment of investors."
Commissioner Piwowar made the following recommendations:
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IFRS "should be investor-driven, not regulator-driven";
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regulators should consider an "incremental approach" to IFRS that would "allow, but not mandate, IFRS reporting as a supplement without reconciliation" to Generally Accepted Accounting Principles;
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the SEC should address problems with the accuracy of interactive data filings by moving "away from the current model of filing the interactive data as a separate exhibit" and moving toward inline eXtensible Business Reporting Language; and
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the SEC should stop allowing itself to be "used as a pawn of the union and social justice power brokers" and instead focus on "making sure that material information, with a substantial likelihood of being considered important to reasonable investors, is quickly and efficiently distributed to the market."
Commissioner Piwowar delivered his remarks at the 34th Annual Current Financial Reporting Issues Conference.
Commentary
The SEC may want to consider this approach to disclosure: (i) make various social disclosures (e.g., compensation ratios and political contributions) optional, but (ii) require issuers to allow proxy voting periodically on the topics. If proponents of these disclosures are correct in asserting that shareholders want them, too, then the shareholders will support them. If the critics are correct, then shareholders will reject them. Such an approach would be consistent with Commissioner Piwowar's suggestion that the use of IFRS standards should be driven by investors instead of regulators.
Commissioner Piwowar's passing remark that an accountant might (or should) become an SEC Commissioner one day is worth noting. Should SEC Commissioners almost always be drawn from the ranks of lawyers? Why shouldn't SEC Commissioners be accountants, or economists, or perhaps actual business people or investors? After all, the first Chair of the SEC was a rather savvy business operator.