SEC proposes revised corporate disclosure rules
The US financial markets regulator has proposed amendments to corporate disclosure rules in a bid to improve information for investors and ease compliance by public companies.
More specifically, the Securities and Exchange Commission (SEC) said, the proposed changes were intended to make disclosure documents easier to read and to discourage repetition or disclosure of information that was not material.
“The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies,” said Jay Clayton, chairman of the commission, in a statement yesterday.
“Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future.
“The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens.”
The proposed changes included dropping a requirement for companies to disclose the “most significant” risks to their business and replacing this with a requirement to disclose the most “material” risk factors.
Clayton highlighted that the SEC’s proposal recognised that “intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy”.
According to the commission, its proposed amendment of the rule relating to companies’ “narrative description of the business” would also “refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic”.
Company disclosure of environmental, social and corporate governance (ESG) topics has become a topic of debate in Washington recently.
In October, a coalition of asset managers, public pension funds, lawyers and responsible investment organisations filed a petition with the SEC to request that it develop a comprehensive ESG disclosure framework. Last month US lawmakers in the House Financial Services Committee debated five draft bills that would require public companies to disclose information on certain ESG topics.