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SEC's White Pushes for Disclosure Relief

Strategic Finance
December 2013

The SEC is readying a congressionally-authorized study looking at potential financial reporting requirements which can be eliminated. Securities and Exchange Commission Commissioner Mary Jo White has been talking up the notion of relieving corporations of having to disclose information no longer deemed "material" so that investors have an easier job of understanding 10ks and other financial reports. Congress included Section 108 in the JOBS Act in 2012 which requires the SEC to comprehensively analyze the rules that form the underpinnings of the SEC's disclosure regime. The JOBS Act included provisions aimed at making it easier for emerging companies to go public, in part by reducing their disclosure requirements, such as those having to do with reports on internal controls. The SEC Division of Corporation Finance is finalizing this report and White says the agency expects to make it public very soon. The odds are that those recommendations will focus on going beyond the JOBS Act provisions for "emerging" companies; but reporting relief for big corporations may be in the offing as well. Of course, Congress would have to turn any SEC recommendations into legislation, which would have to pass both houses.
White has been talking up the need for corporate reporting simplification and slimming. In a speech in mid-October to the National Association of Corporate Directors, White said: "But the study is only the first step in any potential review effort. Such a review will need to be guided by answers to a host of questions that will move us forward on the path to more optimal disclosure. It is an important priority for me."
She singled out the Industry Guides the agency issues for various sectors as being ripe for review. The oil and gas industry guide was updated in 2008. But those pertaining to the mining industry, bank holding companies--that one originally published in the 1960s--and others are in the on-deck circle. "An update to these guides could take a variety of forms," White explained in her NACD speech. "We could merely update them as guidance, or we could adopt actual rules.  We would need to consider whether and how companies and investors would benefit from these options."
White's intentions are hardly revolutionary; but she has also been sounding something of a radical notion in another area, to a polite degree decrying congressional mandates which seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions. That soft criticism refers to a Dodd-Frank mandate that companies disclose involvement in extracting "conflict minerals" that originated in the Democratic Republic of the Congo (DRC) or an adjoining country. She added, " I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals."