Corp Fin’s Higgins Discusses Disclosure Rules Project
Looking to improve company filings and other information important to investors, the U.S. Securities and Exchange Commission’s (“SEC”) Division of Corporation Finance’s Keith Higgins announced that the agency will continue work on its long-term project to simplify disclosure rules by tackling smaller changes first. At a U.S. Chamber of Commerce-hosted (“the Chamber”) event on July 29th, the director of the SEC’s Division of Corporation Finance (“Corp Fin”) remarked that his staff is currently brainstorming smaller changes that are clear and can be completed faster than more complicated items.
Made a top priority by SEC Chair Mary Jo White, the disclosure project is in response to companies criticizing the burden of disclosure requirements. From their perspective, some requirements offer little value and must be eliminated. Meanwhile, investors seek information that is useful to them, but do not want company filings to provide fewer disclosures than they currently receive.
While Higgins did not reference which changes would be made, he previously noted at a July 25th congressional hearing that investors’ preferred use of online sources for historical stock prices than a company’s filings. In terms of specific recommendations, the Chamber suggested the SEC remove a rule requiring a company disclose duplicate information in multiple locations. According to its report, the Chamber believes disclosures like material acquisitions, dispositions or bankruptcies are posted in other filings and would be considered redundant in succeeding reports.
In addition to simplifying disclosures, Higgins said the SEC will also examine how comment letters are sent to businesses when their filing information is deemed inadequate or unclear. Per Higgins, the SEC wants to stress that its comment process is to improve company disclosures and provide investors material information they care about. The Corp Fin director also stressed that a lengthy disclosure in a filing is not the best way to get rid of a comment, and companies should not feel obligated to include information in every quarterly or annual filing after receiving one comment letter out of fear of possibly receiving a new comment.
As for the more complicated items of the project, Higgins expects some portions to take years to complete. Such items include the EDGAR filing system, and 10-K and 10-Q filings.
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