Tag: materiality
Commissioner Uyeda warns: the SEC “has gone astray”
In remarks at PLI’s SEC Speaks, SEC Commissioner Mark Uyeda expressed his concern that the SEC “has gone astray”: instead of focusing on “its narrow mission,” Uyeda fears, the SEC is acceding to the pressure of political activists who “seek to transform the agency’s authority to achieve policy objectives that are outside of its statutory mandate.” To illustrate, Uyeda highlights two examples: the climate disclosure rules, just adopted by the SEC, and the conflict minerals rules, which were adopted by the SEC over a decade ago and are here presented as a cautionary tale. While the conflict minerals rules were actually mandated by Congress, the climate disclosure rules are something different: the SEC has “acted on its own volition,” Uyeda contends, in adopting “a climate disclosure rule that seeks to exert societal pressure on companies to change their behavior. It is the Commission that determined to delve into matters beyond its jurisdiction and expertise.” To Uyeda, “this action deviates from the Commission’s mission and contravenes established law.”
SEC Commissioner Lee dispels myths about materiality
Earlier this week, SEC Commissioner Allison Lee delivered keynote remarks at the 2021 ESG Disclosure Priorities Event hosted by the AICPA, the Chartered Institute of Management Accountants, SASB and the Center for Audit Quality. Her topic: “Myths and Misconceptions about ‘Materiality.’” In the context of the discussion about potential mandatory ESG disclosures, Lee observed, there has been a lot of attention to the concept of materiality, which is fundamental to our securities laws. The public company disclosure system “is generally oriented around providing information that is important to reasonable investors,” and “the viewpoint of the reasonable investor is the lens through which we all are meant to operate.” Since investors are the ones who make the investment choices, “investors are also the ones who decide what information they need to make those choices.” But, in the course of the ongoing discourse about ESG, Lee has found that a number of myths have proliferated about the role and meaning of materiality; her purpose in these remarks is to dissect and dispel those myths, which she believes have hampered the “important debate on how best to craft a rule proposal on climate and ESG risks and opportunities.”
It’s been eons since the SEC last did this—brought a Reg FD enforcement action, that is
Reg FD prohibits selective disclosure of material, nonpublic information by public companies (or by its senior officials or specified other employees) to securities market professionals and shareholders reasonably likely to trade on the information. If a public company does make a disclosure of that kind, the company is required under Reg FD to disclose the information to the public. Information is considered “material” if there is “a substantial likelihood that a reasonable investor would consider the information important in making an investment decision or if the information would significantly alter the total mix of available information.” And that’s where the thorny part comes in. Judgments about materiality of disclosures are often complicated and muddy and frequently made in real time.
With a 341-page concept release, the SEC seeks to simplify and modernize the business and financial disclosure requirements of Reg S-K
by Cydney Posner The SEC has issued a new concept release, as part of its Disclosure Effectiveness Initiative, seeking comment on modernizing certain business and financial disclosure requirements in Reg S-K. The release, which weighs in at a hefty 341 pages, focuses on business and financial disclosures in periodic reports […]
SEC’s Investor Advisory Committee takes on FASB
by Cydney Posner At Thursday’s meeting of the SEC’s Investor Advisory Committee, the Committee approved the submission of a comment letter urging FASB to reconsider its proposal to make changes to the concept of “materiality” embodied in FASB’s Conceptual Framework for Financial Reporting and FASB’s guidance on Notes to Financial […]
FASB proposes amendments regarding the concept of “materiality” in the context of disclosure requirements
by Cydney Posner FASB has issued two exposure drafts as part of its disclosure framework project, which is intended to facilitate clearer communication of GAAP information required in notes to financial statements. The two proposals are intended to “clarify the concept of materiality.”
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