SEC proposes simplifying disclosure requirements

Amendments proposed Wednesday by the SEC are designed to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies.

The proposal is intended to make disclosures required in Regulation S-K and related rules and forms more readable and easier to navigate while discouraging repetition and disclosure of immaterial information.

The SEC voted to propose:

• Revising rules or forms in an effort to streamline the SEC’s disclosure framework. This would be accomplished by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold.
• Updating rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements.
• Simplifying disclosure or the disclosure process. The proposal would change exhibit filing requirements and the related process for confidential treatment. Changes to management’s discussion and analysis were proposed that would allow for flexibility in discussing historical periods.
• Requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

The proposal includes parallel amendments to several rules and forms applicable to investment companies and investment advisers. Under the proposal, certain investment company filings would be required to include a hyperlink to each exhibit listed in the exhibit index of the filings. Certain investment company filings would be required to be submitted in HTML format.

“An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers,” SEC Chairman Jay Clayton said in a news release.

Public comments can be submitted for 60 days at sec.gov.

—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.