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Corp Fin’s Higgins Aims for Improved Disclosure Effectiveness

Speaking at the American Bar Association’s Business Law Section Spring Meeting, the U.S. Securities and Exchange Commission (“SEC”) Division of Corporation Finance’s (“Corp Fin”; “the Division”) Keith Higgins pointed out how the SEC can make the current disclosure regime more effective. In his April 11th speech, the Director of Corp Fin touched on multiple actions the Division may carry out, including:

  • New requirements might be suggested if Corp Fin finds any potential gaps in disclosure or chances to improve the clarity of information given to investors.
  • An examination into whether disclosure documents can be improved upon through use of structured data, hyperlinks or topical indexes is likely.
  • Corp Fin might recommend a “company disclosure” or “core disclosure” system that ensures certain information does not frequently change, such as the business description. Also, other information would be released in a “core” document, and then added by periodic and current reports.
  • Corp Fin will review Regulations S-K and S-X for potential opportunities to update the requirements and lower costs on companies, while also continuing to offer material information and removing duplicate disclosures.
  • In regards to Regulation S-K, Corp Fin hopes to begin its review of disclosure requirements by targeting the business and financial disclosures that are added to periodic and current reports. Corp Fin also plans to evaluate whether or not Industry Guides and form-specific disclosure requirements must be updated and codified in Regulation S-K.
  • In regards to Regulation S-X, Corp Fin will likely review the rules concerning filing separate financial statements for entities aside from the registrant. Corp Fin will consider the various uses for these financial statements, as well as whether the rules should call for bright line tests or a common principle of materiality.

For the full transcript of Higgins’ speech, visit the SEC’s website.