WASHINGTON Dec 6 A top U.S. securities
regulator on Friday called for reforms to streamline the
disclosures that public companies are required to file, saying
he is concerned that some company filings may not actually be
helpful to investors.
"I often hear from investors that disclosure documents are
lengthy, turgid, and internally repetitive," Securities and
Exchange Commission Republican member Daniel Gallagher said in
prepared remarks before the Annual Institute for Corporate
Counsel in New York.
"They are ... not efficient mechanisms for transmitting the
most critically important information to investors."
Gallagher is the second SEC commissioner in recent months to
call for reforms to public company disclosures.
In October, SEC Chair Mary Jo White said she was afraid
investors are facing "information overload," and noted that some
disclosures may be duplicative or obsolete.
She cited several examples of areas that could be ripe for
review, noting that some information required to be disclosed,
such as historical share prices, is already readily accessible
on the Internet and may bog investors down.
The SEC is close to releasing the results of a study
mandated by Congress that examines the regime governing
corporate disclosures, known as "Regulation S-K," which could
help pave the way for changes to the current rules.
Gallagher said he believes the SEC should take a targeted
approach to reform, rather than a comprehensive one.
"With disclosure reform it is better to start addressing
discrete issues now rather than risk spending years preparing an
offensive so massive that it may never be launched," he said.
LIABILITY ISSUES AND 8-K REFORMS
Gallagher said he believes the SEC should focus on a handful
of areas, including legal liability that can accompany certain
filings, and streamlining 8-K filings, a document that companies
use to disclose material information that arises outside of
annual and quarterly reports.
Under federal law, companies could be held liable if they
omit or misrepresent critical, material information from
investors in certain documents such as financial statements.
But upcoming rules stemming from the 2010 Dodd-Frank Wall
Street reform law require a slew of new information, such as the
ratio of a company's chief executive to the median worker pay.
Gallagher said these types of disclosures are not
"inherently material" and should potentially be filed in
separate documents to give companies some legal cover.
As for 8-K filings, Gallagher said the list of information
that they require has grown and should perhaps be scaled back
because some is already routinely disclosed in company proxies
and quarterly reports.
"There has ... been a creeping incursion of financial
reporting traditionally made in quarterly and annual reports
into Form 8-K filings," he said, noting that the SEC should
question whether investors "really need" all of this information