SEC Investor Advocate Rick Fleming described continuing progress on the SEC Disclosure Effectiveness Initiative, an effort intended to review and modernize public company reporting requirements in Regulation S-K and Regulation S-X. In an address given at a NASAA Corporation Finance Training event in Texas, Mr. Fleming emphasized that meeting the informational needs of investors should be the guiding principle of the Initiative moving forward. He added that the methods for determining those needs are “as outdated as some of the disclosure rules.”
Mr. Fleming noted that the initiative is responsive to congressional mandates found in the JOBS Act and the FAST Act, but is broader in its objectives and scope than the mandates require (as is outlined in an SEC concept release dated April 2016). To the degree to which the FAST Act addresses “duplicative, overlapping, or outdated” provisions, Mr. Fleming stated, it reflects the fair criticism that the SEC has not done a “very good job of updating or streamlining its rules.”
Even so, he argued, the disclosure requirements serve as a crucial foundation upon which businesses raise capital. He stated that the success of the requirements should be measured primarily in terms of the “enhanced utility of corporate disclosures for the investing public.” Mr. Fleming stressed the importance of maintaining fairness in the evolving markets:
“[W]e are in the midst of a generational shift that will change the securities marketplace. But one thing will not change – investors will still count on those markets being fair. The challenge, particularly for regulators, will be to simultaneously think bigger and more creatively while exercising an appropriate level of caution to protect investors in an evolving world.”
Lofchie Comment: It is notable that Mr. Fleming did not focus on disclosures of political and political-interest issues, such as those favored by Senator Elizabeth Warren (D-MA). Instead, Mr. Fleming concentrated on disclosures that facilitate investment decisions.