SEC eyes ‘information overload’ in filings

Publicly traded U.S. firms could soon face less-inclusive public disclosure requirements, a top securities regulator signaled Tuesday.

The number and type of issues companies must disclose has grown "more and more detailed," Securities and Exchange Commission Chairwoman Mary Jo White said in a speech to the National Association of Corporate Directors. She questioned whether investors need or are well-served by all of that information.

"When disclosure gets to be 'too much' or strays from its core purpose, it could lead to what some have called 'information overload' — a phenomenon in which ever-increasing amounts of disclosure make it difficult for an investor to wade through the volume of information she receives to ferret out the information that is most relevant."

The SEC's staff is studying the disclosure issue in compliance with a mandate under the 2012 federal Jumpstart Our Business Startups Act. A recommendation is expected soon, White said.

A 1976 U.S. Supreme Court decision requires U.S. publicly traded companies to disclose "material" information — which the ruling defined as matters where "there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote."

White used her appearance at the Maryland conference to question whether firms could meet the court mandate without continuing to disclose information that's now easily available via the Internet, such as historical share-closing prices, share dilution data and the ratio of earnings to fixed charges.

She also questioned whether there's a need for duplicate disclosures, noting that many companies report information about significant pending lawsuits under the "Legal Proceedings' portion of SEC filings, and again under "Risk Factors."

"Accountants say that lawyers insist on the repetition and the lawyers blame the accountants," said White. "Rather than focus on who may be perpetuating this, we should simply figure out what investors want and whethe! r such repetition is really such a burden for companies."

As investors come to expect nearly-instantaneous information on their smartphones and computers, White also said the SEC should consider whether the agency's reporting deadlines should be shorter, and examine whether such a change would "impose an undue burden" on companies.

"Clearly, there is no one system of disclosure that will satisfy everyone," said White. "Too much information for some is not enough for others. Too little for some may be too much for others. And what some investors might want may not be what reasonable investors need."