Newly proposed reforms to the U.S. Securities and Exchange Commission’s (SEC) disclosure regime would have a dramatic impact on public companies’ current disclosure obligations.
Last week during her keynote at the 48th annual Rocky Mountain Securities Conference in Denver, SEC Commissioner Kara Stein called on the SEC to create a new digital platform. These reforms connect to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), where Congress mandated that the SEC establish a Disclosure Effectiveness Initiative. In connection with the initiative, the SEC released a report documenting the failings of the current disclosure system, which has not been systematically reviewed and updated since 1996. The SEC staff argued that the current regime could be improved to make disclosure requirements more “flexible” to adapt to investor demands. To facilitate these improvements, the SEC staff recommended that the disclosure regime be evaluated with particular economic considerations in mind, including “the extent to which a given disclosure requirement entails high administrative and compliance costs,” and “whether the information provided by a given rule is available to existing security holders, potential investors, and the marketplace on a non-discriminatory basis from reliable sources.
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