As a starting point in this post, we want to be clear, the SEC continuously focuses on making disclosure effective. This is an important part of their mission, to provide information to investors. Over the years projects like Plain English and the MD&A guidance in FR 72 have clearly helped improve disclosure.
And, in large part thanks to the JOBS Act, disclosure effectiveness is a formal initiative at the SEC right now. This, of course, is why we included it as a hot topic on our 2016 Form 10-K Tune-Up, which is now available on-demand with CLE and CPE credit at:
The JOBS Act formalized this process with its requirement to study various S-K disclosures. Going beyond the JOBS Act, the SEC has sought comment on other matters including certain parts of Regulation S-X. Late last year the FAST Act created required next steps in this process. All of these projects, and the others that will come, will hopefully result in a modernization and refocusing of the whole disclosure process. You can read about all the different parts of this initiative at the Disclosure Effectiveness section of the SEC’s web page:
www.sec.gov/spotlight/disclosure-effectiveness.shtml
(If you would like to read more about the FAST Act check out this post:
These elements of the SEC’s process are clearly longer-term, and the regulatory steps involved need time for constituent input and careful consideration of the impact of possible change. This does not mean that there are not steps you can take right now to help make information better for investors. In fact, in numerous public forums the SEC Staff has consistently focused on three themes you can use right now to improve disclosure. They are:
Reduce repetition
Focus disclosure
Eliminate outdated and immaterial information
You can get the SEC’s perspective on these issues in this speech by Corp Fin Director Keith Higgins:
www.sec.gov/News/Speech/Detail/Speech/1370541479332
And this speech from December 2015 by Chief Accountant James Schnurr touches on things to do now, particularly using judgment:
www.sec.gov/news/speech/schnurr-remarks-aicpa-2015-conference-sec-pcaob-developments.html
One last issue – if you have questions about something such as a whether to continue a disclosure related to an SEC comment from prior years that is immaterial today, the staff actually encourages that you call them to discuss the issue!
As always, your thoughts and comments are welcome!