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Ex-SEC Commissioners Blame Companies for Long Disclosures

As the U.S. Securities and Exchange Commission (“SEC”) continues its project on simplifying corporate disclosure requirements, two of the agencies’ former commissioners say companies shoulder some of the blame for the disclosures’ length. At a U.S. Chamber of Commerce conference on July 29th, ex-SEC head Cynthia Glassman commented that the documents are often more for protection from litigation than educating investors, especially if the disclosure is in electronic form. Glassman said if a company had an executive summary that could link to additional disclosures, then a lawsuit could be created since it was considered incomplete. While companies try to cover themselves with this approach, Glassman also commented that it causes long disclosures that make it difficult for investors to detect potential risks.

Backing Glassman’s comments, fellow former SEC commissioner Roel Campos said that companies filing lengthy disclosures relate to their concerns about legal liabilities. With attorneys advising to minimize their risks, companies react by disclosing additional yet unnecessary information to investors. As a result, Campos declared more disclosure occurs and further protects companies in litigation.

For additional information on the SEC’s disclosure simplification project, read our blog post on Keith Higgins’ remarks from the July 29th conference. Also visit our SEC Audit page to see how Cherry Bekaert can help your business.

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