NAM to SEC: Here’s How to Reduce Disclosure Burdens
The Securities and Exchange Commission can reduce reporting costs for smaller publicly traded manufacturers and other public companies by implementing commonsense reforms to the SEC’s disclosure rules, the NAM recently told the agency.
What’s going on: “Over time, Regulation S-K has become an unwieldly amalgam of prescriptive rules that reflect the one-time disclosure priorities of SEC chairs in the past and stray from the U.S. Supreme Court’s concept of materiality,” the NAM said last week in response to a call for public comment on modernizing Regulation S-K.
- Created in 1982, Regulation S-K details nonfinancial disclosure rules for public companies.
- But “[t]oday … Regulation S-K does not always reflect information that a reasonable investor would consider important in making an investment or voting decision,” SEC Chairman Paul Atkins said in a January statement announcing the solicitation of feedback on the rule.
What should be done: The SEC can streamline disclosure and help businesses save money by making several changes, the NAM said. These include:
- Modernizing the SEC’s outdated classifications of public company issuers;
- Scaling the disclosure rules to give relief to small and mid-cap companies;
- Simplifying Regulation S-K’s cybersecurity-related disclosures;
- Offering a safe harbor for generic risk disclosures in Regulation S-K’s Item 105(b); and
- Modernizing the executive compensation disclosure rules.
Why it’s important: Some SEC disclosure requirements—including Regulation S-K—often result in unnecessary and immaterial disclosures and additional costs to companies, the NAM continued.
- In addition, “the NAM has long advocated for principles-based disclosure that helps investors focus on the material risks to a company’s business and prospects,” NAM Senior Director of Corporate Finance Policy Ted Allen and NAM Vice President of Domestic Policy Jake Kuhns said.
- “Manufacturers also believe that corporate disclosures should not be cluttered with immaterial topics, static historical information or unneeded information that may confuse investors,” they said.