SEC looking to update Regulation S-K disclosures

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The Securities and Exchange Commission (SEC) is seeking to update the disclosures that registrants are required to make under Regulation S-K.

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Regulation S-K is a rule that provides requirements for public company disclosure. The proposed amendments are intended to simplify compliance efforts for registrants and improve disclosures for investors.

“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. Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future,” SEC Chairman Jay Clayton said. “I applaud the staff for their efforts to modernize and improve our disclosure framework, including recognizing that intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy. The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens.”

Specifically, the proposed amendments would revise Items 101(a) (description of the general development of the business), 101(c) (narrative description of the business), and 105 (risk factors) to emphasize a more principles-based approach. This is because businesses differ in terms of which aspects of these disclosures are material to them. A more flexible approach may elicit more relevant disclosures, the SEC says. There is also a proposed amendment of Item 103 (legal proceedings).

“We invite further engagement from market participants on these proposals and any other areas where our approach to ensuring investors have the appropriate mix of information to make investment decisions can be improved,” Clayton said.

The proposal will be open for public comment for 60 days after it is published in the Federal Register.

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