Regulation S-K

Regulation S-K Concept Release: Will the SEC Reform the Norm for Corporate Disclosures?

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On April 13, 2016, the SEC published a concept release discussing and seeking public comment on modernizing certain business and financial disclosures required by Regulation S-K, which lays out reporting requirements for various public company SEC filings.   The release focuses on whether the disclosure requirements – many of which have seen little change in decades – continue to elicit the information that investors need for investment and voting decisions, and whether any of the relevant rules have become outdated or unnecessary.  It also seeks input on how registrants can most effectively present material information, including how the Commission can assist with improving the readability and navigability of SEC filings.  As SEC Chair Mary Jo White explained in an April 13, 2016 statement regarding the release, “[w]e want to make sure that [the Commission’s disclosure] rules are facilitating both timely, material disclosure by companies and shareholders’ access to that information.  And we want to make sure that our requirements are as efficient as they can be.”

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Recent SEC Enforcement Actions and Public Commentary Demonstrate the Commission’s Continued Focus on Internal Control Failures

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We have previously written about how, over the past few years, the SEC and other regulatory agencies have devoted substantial resources to investigations regarding allegations that public companies have inadequate internal controls and/or a system for reporting those controls.  See here, here and here.  That effort shows no signs of waning.  As recently as March 23, 2016, the SEC announced a settlement with a multi-national company due in part to the internal controls failures at two foreign subsidiaries.  On March 10, 2016, the SEC announced a settlement of claims against Magnum Hunter Resources Corporation in connection with alleged internal control failures.  And, on February 17, 2016, the SEC announced a settlement of claims against a biopesticide company, Marrone Bio Innovations, based on the company having reported misstated financial results caused in part by internal control failures.[1]

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The SEC is focusing its enforcement and investigation efforts on preparers and auditors of financial statements, Mary Jo White tells accountants

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In a recent address, SEC Chair Mary Jo White stated that the SEC had focused its reinvigorated investigation and enforcement efforts on holding preparers and auditors accountable for their work on financial statements.  She alerted the 2015 American Institute of Certified Public Accountants (“AICPA”) National Conference to the weighty responsibilities and challenges faced by auditors and preparers, as well as audit committee members, standard setters and regulators, when endeavoring to ensure high-quality, reliable financial reporting.

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New House Bill Aims to Reduce Some Dodd-Frank Regulatory Burdens

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On January 14, 2015, the U.S. House of Representatives passed a bill that loosens certain Dodd-Frank requirements and reduces the scope of the SEC’s regulatory authority over certain private equity firms, small businesses, and emerging companies. The bill is part of a larger fight between Democrats and Republicans over the scope of Dodd-Frank and government oversight over financial institutions generally.

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