Governance | Reporting |
Sec Issues 300-Plus-Page Disclosure Reform RuleBy
The Securities & Exchange Commission (SEC) issued a final rule on disclosure simplification that cancels some current requirements, amends others, and in some instances creates new responsibilities.
In that latter instance, for example, an analysis of changes in stockholders’ equity will now be required for the current and comparative quarter and year-to-date interim periods. The effort to make changes to Regulations S-X and S-K has been in the works since 2016.
In December 2017, the SEC proposed changes to Regulation S-K that touched on such things as Item 102’s use of the term “materiality” with regard to physical properties and Item 303’s yearly comparisons of financial results in the Management’s Discussion and Analysis of Financial Condition and Results of Operations. The final rule amends disclosure requirements in Item 303(a) on trends and uncertainties to add an explicit reference to “geographic areas.” The final rule eliminates the requirements in Item 101(b) focusing on what needs to be included in the description of business section. Those were considered duplicative disclosures.
Jeff Mahoney, general counsel for the Council of Institutional Investors, says the final rule includes changes sought by the CII from the proposed rule, such as keeping (instead of eliminating) disclosure requirements for equity compensation plans, repurchase and reverse repurchase agreements, and legal proceedings.