WASHINGTON (Reuters) - U.S. regulators said Friday they plan to update the rules that dictate what public companies must disclose to investors, in an effort to simplify filings and lower compliance costs for small companies.
“I have directed the staff to develop specific recommendations for updating the rules that dictate what a company must disclose in its filings,” SEC Chair Mary Jo White said in a statement.
“We will seek input from companies about how we can make our disclosure rules work better for them and will solicit the views of investors about what type of information they want and how it can be best presented.”
White announced her plans at the same time that SEC staff on Friday released a 106-page study that reviewed “Regulation S-K” which are the rules that set forth disclosure requirements other than financial statements for companies.
That study was required by the Jumpstart Our Business Startups (JOBS) Act, a 2012 law that relaxes securities regulations to help small businesses raise capital and go public.
One major provision of the law, for example, creates a new category of public company known as an “emerging growth company.”
If a company meets the criteria to be an emerging growth company, it can file draft initial public offering documents with the SEC and faces less stringent disclosure requirements.
The new study released Friday presents two possible avenues for the SEC to explore: a broad comprehensive review of disclosures or a more targeted review looking topic by topic.
If the SEC opts for the broader review, however, the staff said it would “likely be a longer-term project involving significant staff resources.”
The SEC said that in proceeding with a review, staff should be mindful about how new changes to disclosure rules would apply to large companies, as opposed to small companies and emerging growth companies.
Among some of the areas the study said should be reviewed include whether risk-related disclosures such as legal proceedings should all be consolidated into a single requirement.
Other possible changes could be made to the current requirements for companies to provide a description of their properties, the SEC said.
“Information about principal properties, mines and plants was relevant when all businesses needed a physical presence, but is no longer as relevant for businesses that do not require physical locations to operate,” the study said.
The study also points to possible updates on corporate governance disclosures to ensure they are “material to investors” and executive compensation, an area that the SEC said many experts often complain is too “lengthy” and “technical.”
A copy of the new study can be found here: here
Reporting by Sarah N. Lynch