SEC Director of Corporation Finance (Corp Fin), William Hinman, recently discussed efforts by Corp Fin to implement SEC priorities and provided insight into future areas of focus. Hinman indicated that SEC Chairman Jay Clayton “has made clear that our efforts must extend to all investors, especially Main Street investors, and that our capital formation efforts should benefit them by enabling businesses to grow and increasing investment opportunities.”
Regarding future areas of focus, Corp Fin is “looking for ways to make our internal processes more efficient, thereby benefitting us and registrants. For example, we are considering areas such as filing reviews and no-action requests and examining whether we may be able to better our response times. We are working to update our Financial Reporting Manual and our Compliance and Disclosure Interpretations to make sure they are current, transparent, and easy to use. We want to collaborate with registrants to address challenges they face while still maintaining a disclosure regime that results in capital markets that generate global confidence, trust, and respect.”
Hinman noted that possible areas of future Corp Fin guidance or rulemaking includes:
- Cybersecurity Disclosures. Corp Fin is working on recommendations for the SEC for further guidance on the disclosure requirements that may be implicated by cybersecurity risk and incidents, such as risk factors, MD&A, and board risk oversight.
- Resource Extraction Disclosure. Corp Fin is preparing recommendations for a proposal to implement the resource extraction issuer disclosure provision of the Dodd-Frank Act.
- Simplifying Disclosures. Corp Fin continues to identify disclosure requirements that can be simplified and made more effective, without reducing investor protections. Corp Fin is expected to make recommendations for final rules to update and simplify disclosure requirements that are outdated, or are overlapping or duplicative with other SEC rules or U.S. GAAP.
- Smaller Reporting Company Threshold. In the coming months, Hinman anticipates that the SEC will consider rulemaking to raise the threshold companies need to stay below to qualify for smaller reporting company eligibility.
- Disclosures for Acquired Entities. Corp Fin is preparing recommendations for proposals to amend the rules for financial information required for acquired entities (Regulation S-X Rule 3-05), as well as Regulation S-X Rule 3-10 for disclosures by guarantors and issuers of guaranteed securities.
- Industry Guide 3. Corp Fin is developing recommendations for updating Industry Guide 3 to modernize the disclosure requirements for financial institutions.
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