Today, the Securities and Exchange Commission adopted amendments to certain disclosure requirements that have become duplicative, overlapping, or outdated. In July 2016, the Commission proposed amendments for this purpose and also solicited comments on disclosure requirements that overlap with, but require information incremental to, U.S. GAAP. The Commission also was required pursuant to title LXXII, section 72002(2) of the Fixing America’s Surface Transportation (FAST) Act to undertake a review and make certain recommendations to addressed outdated disclosure requirements. In its adopting release, the Commission notes that it is adopting most of the proposed amendments substantially as proposed in 2016. The adopting release notes that in certain instances the Commission is making modifications to the 2016 proposed amendments, and in other cases, the Commission is not adopting the proposed amendments. In a few instances, the Commission is adopting additional changes to make technical corrections. The amendments will be effective 30 days from publication in the Federal Register. The full text of the adopting release is available here. The fact sheet is available here.
Chair Clayton recently provided Congressional testimony in connection with the review and approval of the Securities and Exchange Commission’s funding. In his prepared remarks, Chair Clayton focused on a number of the initiatives undertaken by the Commission to promote investor education and address investor protection issues. For example, he pointed to the Commission’s new tool, the SEC Action Lookup for Individuals, or SALI, which provides another means to identify bad actors. He identified the Commission’s areas of focus, which include: (1) leveraging technology and enhancing cybersecurity and risk management; (2) facilitating capital formation; (3) protecting Main Street investors, including through enforcement actions targeting insider trading, market manipulation and accounting fraud; and (4) maintaining market oversight. The Chair also noted that funds will be allocated to strengthening the Commission’s cybersecurity efforts and announced the creation of a new position, the Chief Risk Officer. Turning to capital formation, Chair Clayton noted as continuing priorities taking action on the definition of smaller reporting companies and completing the FAST Act-required rulemakings. The full prepared testimony may be found here.
The recently updated Securities and Exchange Commission agenda (see here and here) provides some insight on what to expect in upcoming months. The amendments to the smaller reporting company definition, which were widely supported when proposed, remain in the “final rule stage.” Likewise, the amendments to implement the FAST Act report and disclosure update and simplification (to eliminate outdated, redundant and otherwise repetitive requirements) remain in the final rule stage. It will be interesting to see whether the Commission takes action on these measures before Commissioner Piwowar’s departure. Consistent with Corporation Finance Division Director Hinman’s recent Congressional testimony about which we previously blogged, the agenda now includes in the “proposed rule stage” extending the test-the-waters provision to non-EGCs. Also in the proposed rule stage are changes to Industry Guide 3 (disclosures for banks and other financial institutions), disclosure of payments by resource extraction issuers, and additional changes to the Regulation S-K disclosure requirements. A new item was added that is referenced as “amendments to financial disclosures for registered debt security offerings.” It is not clear to what this relates. Sadly, the changes to various communications safe harbors and other Securities Act rules for business development companies are in the “long-term actions” category. The long-term actions category also includes a number of measures that have been the subject of recommendations by the Commission’s Investor Advisory Committee, such as disclosures regarding board diversity and changes to the accredited investor definition. Consistent with recent comments by representatives of the Commission, a measure relating to harmonizing private placement rules is added to the long-term actions list.