SEC seeking input on disclosure effectiveness

By Ken Tysiac

The SEC, in its continuing efforts to improve the effectiveness of disclosures in companies’ financial statements, voted Wednesday to issue a concept release seeking comments on potential improvements to Regulation S-K, an SEC spokesman said.

As company financial reports have grown in length over the past several years, regulators and accounting standard setters have wrestled with the question of how to make the reports more effective. Many investors want more information, but some users and preparers of financial statements have become frustrated with disclosures that are not meaningful.

In September, the SEC took its initial action in this review by publishing a Request for Comment on the effectiveness of certain financial disclosure requirements in Regulation S-X, which governs the form and content of financial statements to be included in SEC filings. The SEC staff is considering comments received in response to that request.

On Wednesday, the SEC voted 3–0 to issue a recommendation focused on the business and financial disclosures required by Regulation S-K in companies’ periodic reports, as well as on the optimal manner of providing those disclosures to investors.

As the review continues, the SEC staff also will consider the compensation and governance information required in proxy statements, which may lead to additional requests for comment.

The Regulation S-K concept release reviews existing disclosure requirements to ask what should be kept, modified, eliminated, and added to, according to SEC Chair Mary Jo White. The release asks whether the current requirements provide for the most efficient and effective means of disclosing the required information.

The concept release also asks whether current materiality thresholds are appropriately drawn for investors and issuers and how readability and navigability of information could be improved.

“We need to take account of how various investors actually interact with companies’ disclosures, what matters most to them, and what methods of delivery enhance the accessibility and intelligibility of the information provided,” White said in a prepared statement at the SEC’s open meeting.

Work on disclosure effectiveness will continue as the staff develops recommendations to update and enhance the range of the SEC’s requirements, White said.

Comments can be made for 90 days following the concept release’s publication in the Federal Register and can be submitted through the SEC’s website.

Ken Tysiac ( is a JofA editorial director.


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