The Securities and Exchange Commission proposed rule amendments Thursday to simplify publicly traded companies' disclosure filings.
The amendments would "modernize" the description of business, legal proceedings and risk-factor disclosures that companies are required to make pursuant to Regulation S-K.
By modernizing these the SEC believes it would result in "improved disclosure, tailored to reflect registrants' particular circumstances, and reduce disclosure costs and burdens," the proposed rule says.
"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 SEC Chairman Jay Clayton in a news release. "(This) proposal reflects these significant changes, as well as the reality that there will be changes in the future."
The proposed changes are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material, the SEC noted.
Among the proposed amendments, a more "principles-based approach" will be emphasized because "businesses differ in terms of which aspects of these disclosures are material to them," an SEC summary said. "Such a flexible approach, as opposed to prescriptive requirements, may elicit more relevant disclosures about these items."
Laura D. Richman, counsel at Mayer Brown LLP in Chicago, said any time changes are made to disclosure filings there is more work involved for companies initially but these proposed changes could offer a better final product.
"It makes for a more readable document," Ms. Richman said of using a more principles-based approach. Companies have been asking, "Why should we be using the real estate of our annual report to talk about something that's not important to this particular company?" she said.
The proposal will have a 60-day public comment period following its publication in the Federal Register.
"We invite further engagement from market participants on these proposals and any other areas where our approach to ensuring investors have the appropriate mix of information to make investment decisions can be improved," Mr. Clayton said.
