Reimagining SEC Regulation S-K

In April, the SEC took another step in the long and winding road of its disclosure effectiveness project, which can be traced as far back to the JOBS Act of 2012. It issued a 341-page concept release, recently summarized for subscribers of The Analyst’s Accounting Observer.

It’s not a thrilling document for investment management practitioners, but it’s an important one nonetheless. The SEC is considering a major rewrite of its financial reporting disclosure requirements and medium, and that will have an effect on anyone who uses financial statements for a living. And they want to learn as much as they can from issuers, investors and analysts – the document is more or less a gigantic questionnaire, stocked with one question per page.

They’re not just tinkering with minor issues in the financial reporting system, which is why it’s important for investors to give feedback to the Commission on the issues nearest and dearest to their hearts. Some existing reporting features that investors might take for granted, but are on the table for reconsideration:

  • Should quarterly reporting be eliminated and replaced with less frequently issued information – perhaps semi-annual?
  • Should the five-year summary of “selected financial information” – handy when retrospective accounting changes occur – be shortened?
  • Should firms be allowed to keep some financial information only on their websites instead of filing everything centrally with the SEC?
  • Should there be more “scaling” of disclosures so that firms of a certain size are exempt from some disclosures?
  • Should XBRL tagging – an SEC reporting requirement just beginning to bear fruit for investors - be reduced for firms?

Like I said: it’s easy to take these things for granted – but you’d miss them if they changed. They might change for the better, too, but the Commission needs to hear from investors. I put together a letter of my own, posted to the SEC’s comment letter page for the concept release; you can access it here.

Don’t be afraid to disagree – or agree – with my own thoughts, but I’d encourage you to submit even just a paragraph or two to the SEC. You can riff off of my own comments, either agreeing or disagreeing. They’ve made it easy for you to respond – as easy as filling out an online form. Here’s where you can go to put in your two cents. A year or two from now, you might be glad you did. Hurry! The comment period ends on July 21.


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