SEC looks to cut ‘information overload’ in filings, White says

U.S. Securities and Exchange Commission Chairman Mary Jo White said the agency will review corporate disclosure rules to root out requirements that may be causing “information overload” for investors.

SEC rules, congressional mandates and company efforts to protect against litigation have led to lengthy disclosures that can make it difficult to find the content that is most relevant to people making investment decisions, White said today in a speech in Oxon Hill, Maryland.

“We must continuously consider whether information overload is occurring as rules proliferate and as we contemplate what should and should not be required,” White said in her prepared remarks at the National Association of Corporate Directors annual conference.

The SEC will take a step toward a potential overhaul with the release of a study of company-filing rules that will come “very soon,” White said. The study was mandated by the 2012 Jumpstart Our Business Startups Act, which requires the agency to look for ways to simplify rules for smaller companies.

The widespread availability of information on the Internet has made some disclosure details potentially unnecessary, White said, citing forms that require companies to list historical share prices.

“There are a number of similar examples, such as requirements for dilution disclosure or the ratio of earnings to fixed charges that also may be less relevant now than they may have been in the past,” she said.

Social Media

The ability to share information almost instantly, via social media and other tools, also may call into question the deadlines for disclosing material information such as the buying and selling stock by directors, officers and beneficial owners.

“Given the ever increasing use of technology by virtually everyone, we need to think about whether the current timeframes in our rules and forms continue to be appropriate,” White said. “In some cases, investors may benefit from receiving the information sooner than currently required. But we must also consider whether shorter timeframes would impose an undue burden on companies.”

Reports also have grown too long because businesses have grown more defensive against potential lawsuits, White said. Companies often insert excessive “cautionary language” in the “Risk Factors” annual reports, she said.

She said the SEC has issued guidance on about when to disclose cyber-security intrusions, calling on companies to tell investors about breaches that are material, meaning they could affect willingness to buy, sell or hold shares.

“We’ll be monitoring very closely to see if a rulemaking step is necessary or desirable,” White said in a brief interview after her speech.

The SEC expects to issue a proposal to authorize equity crowd-funding “quite soon,” White told the conference during a question-and-answer session. If approved, the proposal would be issued for public comment before it could be adopted.

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