In his January 24, 2014 speech Securities and Exchange Commission (“SEC”) Commissioner Daniel M. Gallagher stated that “two issues that…should be at the very top of the SEC’s agenda”, a “revamping” of the SEC’s corporate disclosure system and a series of “much needed reforms” for the proxy advising industries. In this blog post, we will summarize the primary points that Gallagher addressed in his speech about the first of these two issues: the topic of disclosure.

In his speech, Commissioner Gallagher identified disclosure as the “bedrock premise” and “foundation” of federal securities law. That said, accurate disclosure of financial information by firms to their clients and to the public should be “core responsibilities” of all issuers, Gallagher conceded that an abundance of disclosure – provided in lengthy documents that primarily aim to avoid shareholder lawsuits, and do not communicate relevant information clearly – can also cause unintended consequences: “more disclosure…may not always yield better disclosure.” To this effect, Gallagher outlined a few “examples” of focus that the SEC may seek to pursue towards disclosure reform:

• “Layering disclosure” so that “inherently material” information, such as a company’s financial statements, is separated from other details that are not inherently material, such as pay-ratio calculations;
• “Streamlining” Form 8-K disclosure;
• Reducing “redundancy” by defining required information separately from recommended or superfluous information; and
• Revisiting the “potential of technology to improve corporate disclosure,” including creating a standardized, online disclosure system that retains basic information from year to year.

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