iMembers of the Securities and Exchange Commission have recently given several speeches in which they expressed their views (sometimes inconsistent) as to investor protection and disclosure to investors in SEC filings.
Investor Protection
In a February 22 speech at The SEC Speaks in 2013, SEC Chairman Elisse Walter discussed investor protection. She stressed that regulation minimizing risks both to the larger financial system and to investors is necessary, but also noted that all investment involves risk inherent to the business in which the investment is made. Ms. Walter remarked that the SEC should work to give investors access to information and protect them from unnecessary risks such as fraud, market manipulation, insider trading and market structure failures, but should not discourage all risk-taking, in order to allow for continued growth in public offerings.
Click here to read the full text of the speech.
Disclosure to Investors
In a February 22 speech at The SEC Speaks in 2013, SEC Commissioner Troy A. Paredes discussed the philosophy behind disclosure regulation. He focused on the importance of disclosure and transparency in SEC filings in order to allow investors to appropriately evaluate the performance of companies and incentivize directors and officers to run businesses in a way that is beneficial to investors. However, he expressed concern that the increasing quantity of complex disclosure in SEC filings may result in “information overload,” which could cause investors to be unable to separate valuable information from information that is less useful. He suggested that shorter SEC filings with simpler presentation of information could be more useful to investors, and that it may be beneficial to allow some current disclosures to be more narrowly focused, scaled back or excluded and to limit the expansion of disclosure requirements so that companies are not required to include information that is not material to evaluating their businesses.
Click here to read the full text of the speech.
In a February 20 speech, SEC Commissioner Luis A. Aguilar encouraged companies to provide better and more comprehensive disclosure in their proxy statements. He focused primarily on disclosure provisions added or enhanced by the 2009 amendments to Regulation S-K. He suggested that companies include thoughtful and specific disclosure on items such as compensation policies and practices relating to risk management, the relationship between compensation and the company’s long-term performance, the board’s role in risk oversight and the effect of that on board leadership, and board nominating policies relating to diversity. He also expressed support for enhanced disclosure relating to political spending by companies, which some companies already provide voluntarily, and noted that a rulemaking petition was filed with the SEC seeking rules requiring such disclosure.
Click here to read the full text of the speech.
