Last week we lightheartedly posted about the fun of listening to a live webcast of an SEC meeting and being “cool” and “in the know”. The meeting we mentioned is on April 13th and includes this agenda item:
The Commission will consider whether to issue a concept release seeking comment on modernizing certain business and financial disclosure requirements in Regulation S-K.
Concept releases explore issues and very frequently provide insight into the direction that future policy making will take. As an example you could check out the SEC’s recent concept release about audit committee disclosures in this post:
Also, in some words that may be familiar to folks who have attended our SEC Workshops, here is a quote about MD&A from FR 36:
The MD&A requirements are intended to provide, in one section of a filing, material historical and prospective textual disclosure enabling investors and other users to assess the financial condition and results of operations of the registrant, with particular emphasis on the registrant’s prospects for the future. As the Concept Release states:
The Commission has long recognized the need for a narrative explanation of the financial statements, because a numerical presentation and brief accompanying footnotes alone may be insufficient for an investor to judge the quality of earnings and the likelihood that past performance is indicative of future performance. MD&A is intended to give the investor an opportunity to look at the company through the eyes of management by providing both a short and long-term analysis of the business of the company. The Item asks management to discuss the dynamics of the business and to analyze the financials.
Most importantly, the SEC listens and very often thoughtfully takes into account the issues discussed in comment letters in their subsequent rulemaking. All this leads us to the conclusion, especially since the Disclosure Effectiveness process has been underway for quite a while, that this could be an important meeting!
If you would like to learn a bit more after the meeting, PLI will be presenting a One-Hour Briefing titled “SEC’s New Concept Release on Modernizing Regulation S-K” on April 25, 2016. Four speakers, including former CorpFin staffers, will present the briefing to help build a deeper understanding of the process. You can learn more at:
As always, your thoughts and comments are welcome!