How the SEC is making life easier for corporates
Under the Trump administration, the Securities and Exchange Commission (SEC) has taken more than two dozen measures — including trimming rules — that make life easier for corporate America, according to a Reuters analysis of SEC announcements and interviews with more than a dozen lawyers, academics and advocacy groups.
Here are highlights of some of the changes which the SEC hopes will encourage more companies to go public.
CONFIDENTIAL IPOS: In July 2017, the SEC allowed companies of all sizes to confidentially file with the agency for initial public offerings. The move effectively extended a provision created by the 2012 Jumpstart Our Business Startups, or JOBS Act that had allowed companies of $1 billion in revenues or less to file in private.
The change allows firms more flexibility to work out kinks with the SEC before subjecting their finances to public scrutiny.
WHISTLEBLOWER REWARD CAPS: In June 2018, the agency proposed revamping a programme that rewards corporate whistleblowers, whose original information leads to an enforcement penalty, up to 30 per cent of the settlement.
The programme, which was created by Congress in the wake of the 20082009 financial crisis, is widely regarded as a major success, leading the SEC to levy more than $1.4 billion in fines on malfeasant companies.
QUARTERLY REPORTING: Quarterly public reporting has long been a controversial subject, with many corporate governance experts arguing it leads companies to be too short-termist in their outlook.
In December 2018, the SEC opened a public consultation on ways to ease the reporting burden, including by potentially moving to a semiannual cycle.
Some investors and analysts have said less frequent reporting could encourage companies to think more long-term, but others say quarterly reports provide critical information.
SARBANES-OXLEY ROLLBACK: In May 2019, the SEC proposed exempting
The Securities and Exchange Commission has taken more than two dozen measures — including trimming rules — that make life easier for corporate America
public companies with less than $100 million in revenues from a requirement to get an external auditor to sign off on the adequacy of their internal financial reporting controls. The proposal would ease a rule introduced by the 2002 Sarbanesoxley Act in the wake of the Enron and Worldcom accounting scandals. The SEC said such an exemption should help reduce small companies’ compliance costs.
But opponents of the proposal, including Jackson and Harvard University academics, say it could lead to more corporate fraud.
TESTING THE WATERS: In September, the agency finalised a new rule that allows all companies to privately sound out prospective institutional and certain accredited investors before filing for a stock exchange listing, expanding another provision of the 2012 JOBS Act.
The so-called “testing-the-waters” rule, which previously applied only to smaller firms, helps companies to gauge broader market interest in the deal before committing to time-consuming and expensive paperwork and SEC review.
DISCLOSURE MODERNISATION: The SEC’S disclosure regime has not been updated in three decades and most experts agree it is in need of a refresh. Clayton’s SEC has taken several modernisation measures, with a focus on reducing redundancy and making material disclosures more easily identifiable for investors.