“It is clear that a 1930s-based disclosure system cannot keep up
with the needs of 21st century investors, businesses, or markets.”
Financial Reporting. The CCMC is calling on the SEC to adopt a comprehensive approach to modernizing financial reporting policies. Recommendations to facilitate this include:
- Making definitions of materiality consistent between SEC, FASB, PCAOB, and federal securities laws.
- Developing a disclosure framework to address investor information overload that results from overlapping and often contradictory reporting and disclosure standards.
- Creating new business and auditor advisory groups to help ensure that the PCAOB and other stakeholders appropriately identify and address problems, resulting in better oversight of audits.
- Encouraging the FASB, PCAOB, and their advisory groups to follow the same rules of procedure as the SEC, including publishing economic analysis that is subject to public comment.
To read the full discussion and a complete list of CCMC recommendations, see page 55
of the plan.
“... the number of public companies in the United States has fallen in 19 of the past 20 years,
leaving the country with less than half of the public companies it had in 1996.”
Corporate Governance. The CCMC also expresses concern that the unintended consequence of imposing “one-size-fits-all” governance reform rules has been a substantial decline in the number of public companies during the past 20 years. To reverse
this trend and make the public company model attractive again, CCMC made a number of recommendations, including:
- Developing 14A-8 reforms, reinstituting the SEC’s policies to act as a gatekeeper for shareholder proposals.
- Providing additional proxy advisory firm oversight by requiring transparent processes and communication around voting policies and recommendations.
- Repealing rules unrelated to the SEC’s mission, including corporate disclosures used to promote social or political agendas unrelated to the growth of shareholder value. This includes repealing the Conflict Minerals Rule, Resource Extraction
Rule, and Pay Ratio Rule.
- Re-proposing or repealing Pay-for-Performance and Claw-Back proposals, as they do not currently meet their intended purpose.
- Repealing incentive compensation rules, as the government should not decide compensation.
To read the full discussion and a complete list of CCMC recommendations, see page 58
of the plan.
“In rethinking the disclosure regime, the guiding principle of disclosure reform should
be materiality. As investors become inundated with information, they struggle to
identify what is material.”
Disclosure Effectiveness. The CCMC considers materiality a “touchstone” for determining disclosure and emphasizes that materiality should be considered through a reasonable shareholder’s perspective, reducing the risk that disclosure documents
reflect idiosyncratic interests of particular investors in issues that have no bearing on the financial soundness of an investment. To promote a more focused disclosure regime, CCMC made a number of recommendations, including:
- Removing obsolete disclosures that are relics of the paper-based disclosure system of the past, when reliable information took hours, days, or weeks to deliver and there was no immediate access to free analytical tools.
- Prioritizing material disclosures so ordinary investors can read and understand disclosure documents. In the short term, all redundant and antiquated disclosures should be modified or repealed.
To read the full discussion and a complete list of CCMC recommendations, see page 60
of the plan.
The plan also outlines policy recommendations and reforms related to structural regulatory reform, international coordination, systemic risk, retirement savings, capital formation and FinTech.
Read the Center for Capital Markets Competitiveness full action plan here >>