SEC Overhauls Certain Disclosure Requirements for Companies

Laveta Brigham

The U.S. Securities and Exchange Commission on Thursday voted to remove certain disclosure requirements for companies, one of the last rule changes to pass under departing Chairman Jay Clayton. The regulator decided to make additional changes to Regulation S-K, which serves as the basis for reporting rules for U.S. public […]

The U.S. Securities and Exchange Commission on Thursday voted to remove certain disclosure requirements for companies, one of the last rule changes to pass under departing Chairman Jay Clayton.

The regulator decided to make additional changes to Regulation S-K, which serves as the basis for reporting rules for U.S. public companies. The SEC proposed the revisions in January.

Thursday’s amendment focuses on the management discussion and analysis section of companies’ financial statements, among other disclosures.

With the changes, companies no longer have to provide the previous five years of selected annual financial data to the SEC. Companies no longer need to disclose their contractual obligations related to leases, purchases and other liabilities in the form of a table.

The SEC’s change also does away with an obligation for companies to carve out a separate section in their disclosures to discuss off-balance sheet arrangements that have or are likely going to have an impact on their financial position. Companies now must discuss off-balance sheet items in the context of managing the overall business, instead of in a separate portion.

The SEC last approved changes to S-K in August, giving companies more flexibility in reporting risk factors and legal proceedings in their financial statements. The moves are part of a broader shift during Mr. Clayton’s term from strict guidance toward more principles-based, company-specific disclosures that aim to simplify information for investors.

“The improved approach to these disclosures reflects the broad diversity of issuers in our public markets and will allow investors to make better capital allocation decisions, while reducing compliance burdens and costs and maintaining strong investor protection,” Mr. Clayton said in a statement on Thursday.

Some companies supported the proposed changes to Regulation S-K. Dan Hines, Costco Wholesale Corp.’s corporate controller, in an April 28 letter to the SEC said the table of contractual obligations was burdensome and required resources from several departments ranging from information technology to real estate to merchandising.

SEC Commissioners Caroline Crenshaw and Allison Herren Lee opposed the amendments, saying they eliminate certain disclosures that provided investors with insight on supply chain and risk management. The changes also failed to address the need for standardized disclosure on climate risk, the commissioners said in a joint statement.

The rule changes will take effect 30 days after publication in the Federal Register.

The SEC on Monday said Mr. Clayton will step down at the end of the year after 3½ years in the role. Mr. Clayton said he intends to remain active on the commission until then.

Write to Mark Maurer at [email protected]

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