The U.S. Securities and Exchange Commission has moved a step closer toward lightening the compliance burden on public companies by simplifying disclosure requirements.
The Fixing America’s Surface Transportation (FAST) Act of December 2015 directed the SEC to modernize and simplify the requirements of Regulation S-K. On Wednesday, the commission endorsed a staff proposal that would, among other things, allow companies to omit some references to risk factors and hyperlink to information in the SEC’s EDGAR database.
“The FAST Act has given the Commission the opportunity to update our rules, simplify our forms, and utilize technology to make disclosure more accessible,” SEC Chairman Jay Clayton said in a news release.
“An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers, and today’s action embodies that goal,” he added.
Commissioner Kara Stein, the only Democrat on the three-person SEC panel, also came out in favor of the proposal, saying it would “make some modest and marginal changes to our disclosure framework.”
The SEC is seeking to the costs and burdens on companies, improve the readability of disclosure documents, and discourage repetition and disclosure of immaterial information.
The proposal would eliminate the risk factor examples listed in the disclosure requirement and revise the description of property requirement to emphasize the materiality threshold; eliminate certain requirements for undertakings in registration statements; and change management’s discussion and analysis to allow for flexibility in discussing historical periods.
On the technology side, the commission would require data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.
As the next step in the regulatory process, the public has 60 days to comment on the proposed rules.