- Disclosures by public companies about their business are simplified in amended rules the U.S. Securities and Exchange Commission proposed this week.
- The goal is to make disclosures easier for people to read and to give companies more flexibility in what they disclose based on what's of material importance to their business rather than complying with rigid requirements imposed by the government.
- "The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies," SEC Chairman Jay Clayton said in a statement. "Today's proposal reflects these significant changes, as well as the reality that there will be changes in the future."
Human capital and other intangible assets, which have become more important in recent years because of the nature of the digital economy, would be a more prominent part of companies' disclosures under the proposal.
At the same time, what companies disclose would be less prescriptive and left more to their discretion based on a set of principles the SEC provides. This is the case for the sections of Regulation S-K that govern the description of the development of the business, the narrative description of the business, and the risk factors the business faces.
The section governing legal proceedings, however, would remain prescriptive, because "that requirement depends less on the specific characteristics of registrants," the SEC said.
In other changes, companies would only have to provide an update on material developments of the business once the company has completed its initial filing, and companies would have to add a disclosure on human capital that wasn't required before.
"The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in ... the elimination of unnecessary costs and burdens," Clayton said.
The SEC is taking comments for 60 days. Access the proposed amendments.