SEC Encourages Companies to Request Modifications to Unduly Burdensome Financial Reporting Requirements
Public companies often complain that certain SEC-mandated disclosure items are unduly burdensome to prepare yet immaterial to investors. Two recent references to the relatively obscure Rule 3-13 suggest that the SEC may be more willing to grant case-by-case modifications to such disclosure requirements than previously thought.
As noted in a previous Ticker report, the SEC recently adopted a policy of permitting all companies to submit draft registration statements relating to IPOs for review on a non-public basis. In a July 12 speech touting the benefits of this policy, SEC Chairman Jay Clayton mentioned Rule 3-13, which also applies to financial statements required to be filed with the SEC after initial registration, not just IPO registration statements:
“There are circumstances in which the Commission’s reporting rules may require publicly traded companies to make disclosures that are burdensome to generate, but may not be material to the total mix of information available to investors. Under Rule 3-13 of Regulation S-X, issuers can request modifications to their financial reporting requirements in these situations. I want to encourage companies to consider whether such modifications may be helpful in connection with their capital raising activities and assure you that SEC staff is placing a high priority on responding with timely guidance.”
Similarly, in its June 29 announcement of the new policy on draft registration statements, the SEC’s Division of Corporation Finance stated that it “will consider an issuer’s specific facts and circumstances in connection with any request made under Rule 3-13.”