The SEC Aims To Lighten Several Disclosure Obligations In Regulation S-K

On January 30, 2020, the United States Securities and Exchange Commission (“SEC”) proposed amendments to Regulation S-K that are intended to modernize, simplify, and enhance certain financial disclosure obligations imposed upon companies registered with the SEC.  

Based upon recommendations in the Report on Review of Disclosure Requirements in Regulation S-K, Commission staff initiated a comprehensive evaluation of the SEC’s disclosure requirements.      

As a result of this initiative, the SEC is proposing to eliminate Item 301, Selected Financial Data, and Item 302, Supplementary Financial Information, and to amend certain sections of Item 303, which requires disclosure of information relevant to assessing a registrant’s financial condition, changes in financial condition, and results of operations.  SEC Chairman Jay Clayton explained that the proposal “reflect[s] the staff’s wealth of experience” and “would improve the quality and accessibility of registrants’ presentation of financial results and performance metrics[.]”

The SEC was not united over the proposal, and only agreed to release the plan for public comment on a 3-2 vote as Democratic commissioners Robert Jackson and Allison Herren Lee dissented.  Commissioner Lee expressed her concern that the proposal affords companies too much flexibility, stating: “[w]ithout a mandatory standardized framework, not all issuers will disclose, and disclosure will continue to vary greatly by issuer, making it difficult if not impossible for investors to compare companies[.]”  Lee is concerned that the “disclosures may lack sufficient third party verification, and also may leave investors with inadequate remedies for inaccurate and incomplete disclosures.”

The public comment period will close 60 days after the proposal’s publication in the federal register.  As of Tuesday, February 11, 2020, no comments had been submitted.