While the government remains shutdown, the Securities and Exchange Commission (SEC) remains open, and Chairman Mary Jo White opened the final day of the National Association of Corporate Directors Board Leadership Conference with an overview of what the commission has been focused on and where its attention will be directed in 2014.
As a former director who served on an audit committee, White understands the weight of the responsibilities placed on the shoulders of boards—particularly surrounding disclosure requirements. While the core purpose of disclosure is to provide investors with relevant information they need to make informed voting decisions, over time the list of disclosures has grown and become more specific, causing some to raise flags about disclosure becoming too intricate. “I’m not suggesting investors haven’t benefitted from this information—much, if not all, of it could be relevant and necessary, even though some insist investors don’t take advantage of it,” White said. “I am asking if investors need and are served by the detailed disclosures companies currently provide to the SEC. It can lead to info overload.”
Methods of improving disclosure are perennial topics, and White says there is still more to be done from her perspective. “But before we can move to improvements, we need to know why we have the information we have in disclosure today,” White explained, noting that the JOBS Act requires the SEC to review current disclosure requirements and consider how to modernize and simplify them for emerging growth companies. She said the staff is finalizing these rules and expects to make them public soon.
White also noted that some disclosure requirements may be past their prime. “Some requirements that were appropriate in the past may not reflect how investors use this information today,” she said, using the example of when annual reports were what investors looked to for historical closing prices and now this information is available almost immediately online.
“While much of what some term the ‘disclosure overload’ is a result of regulation, there are other sources,” White said. Due to investor demand, some companies made the decision to disclose more information than required to reduce risk of litigation claims of insufficient disclosure. “We think these additional disclosures are a good thing, but we should be careful not to have too much of a good thing,” White said.