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This article examines rule amendments issued by the US Securities and Exchange Commission in November 2020, as part of the SEC’s ongoing “disclosure effectiveness initiative”, that revise in significant respects the requirements for financial disclosures presented in SEC filings as Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This article provides an in-depth analysis of the rule amendments in the context of contrasting perspectives expressed by the SEC, individual SEC Commissioners who dissented from adoption of the amendments, and market participants regarding the merits of the SEC’s movement away from prescriptive disclosure requirements towards a more principles-based approach to disclosure.

Although the SEC’s rules have long reflected a mix of principles-based and prescriptive disclosure elements, the principles-based emphasis in this latest stage of the SEC’s disclosure modernization project accords the managements of filing companies greater latitude to determine whether financial information is material to investors and how such information should be presented.

This article provides expert guidance on a major new SEC disclosure development from an experienced securities lawyer.

The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing profession, but also in international law. The Acts raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas. Its uniqueness is also due to the fact that the USA is the first country to pioneer such a legislation that impacted foreign trade, international law and codes of ethics. The research traces the history of the FCPA before and after its enactment, the role played by the various branches of the United States Government – Congress, Department of Justice, Securities Exchange commission (SEC), Central Intelligence Agency (CIA) and the Internal Revenue Service (IRS); the contributions made by professional associations such as the American Institute of Certified Public Accountants (AICFA), the Institute of Internal Auditors (IIA), the American Bar Association (ABA); and, finally, the role played by various international organizations such as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the International Federation of Accountants (IFAC). A cultural, ethical and legalistic background will give a better understanding of the FCPA as wll as the rationale for its controversy.

The United States Securities and Exchange Commission (SEC) issued an interpretative release ostensibly mandating the disclosure of the impact that climate change may have on the registrant. One means of enforcement for this release is through the use of comment letters. Prior empirical studies have supported the argument that the SEC oversight through issuing comment letters is effective in enhancing the quality of firms’ disclosures (Asthana & Boone, 2009; Johnston & Petacchi, 2017). With a total of 27 comment letter cases (34 comments based on the topics) regarding climate change disclosure, we do not find clear evidence strongly supporting that the SEC implements its oversight process through systematic procedures and that SEC comment letters enhance the quality of firms’ climate change disclosure. Although some firms responded to the comments proactively, qualitative analysis reveals that the firm’s revisions were not sufficient to provide useful information for market participants in general. The overall finding suggests that the current oversight mechanism for climate change disclosure needs to be significantly improved to enhance the quality of firms’ climate change disclosure.

In February 2010, the US Securities and Exchange Commission (SEC) issued an interpretive release clarifying the information that registrants should disclose about climate change in their annual filings. Based on the industries the European Union targeted for its cap-and-trade carbon trading mechanism, this study investigates climate change disclosures for Fortune 500 firms operating in these same sectors. Using an equal-weighting scheme for content analysis of Form 10-Ks from 136 firms, we completed a comparative analysis on the extensiveness of climate change disclosures for the pre- and post-periods surrounding the SEC pronouncement. We observed a statistically significant increase in the disclosure of information related to climate change in 2010 compared to 2008, but no similar effect when comparing 2010–2009 reporting. There was a significant disclosure increase in 2009 compared to 2008. We conclude – based on a hypothesized anticipation of the SEC actually mandating climate change information in filings – that firms augmented their disclosures during 2009 in advance of the official guidance being published. This is a rather significant outcome given the historical lack of environmental disclosure subsequent to previous SEC mandates.

This paper analyzes the impact of increased federal regulatory enforcement from the SEC's Municipalities Continuing Disclosure Cooperation (MCDC) initiative on municipal debt issuers continuing disclosure practices.

We analyze the changes in continuing disclosure practices by estimating a series of difference-in-differences regressions based on variables representing issuers' changes in regulatory risk after the MCDC. The continuing disclosure data are hand-collected for 827 cities over a seven-year period.

The empirical findings indicate that increased regulatory enforcement has a significant impact on continuing disclosure compliance. We find increased enforcement has no impact on issuers that already have a higher probability of being monitored by federal regulators. We also find that an increase in continuing disclosure compliance does not automatically increase continuing disclosure timeliness.

The MCDC lacks monetary penalties for noncompliant bond issuers and no direct regulatory consequences exist for untimely disclosure. Our findings suggest that regulatory enforcement should be followed by adequate sanctions to emphasize the credibility of the enforcement threat and the SEC should consider requiring bond issuers to commit to the timely disclosure of significant information in offering documents.

This paper extends prior studies by analyzing regulatory risk in the market, and the ability of regulation to reduce disclosure compliance deficiencies in the municipal market. By focusing on the MCDC, this study is able to disentangle the impact of regulatory enforcement from the changes in accounting regulation.

To analyze the SEC’s newly adopted Rule 498 A, the variable contract summary prospectus rule, and concurrently adopted prospectus disclosure requirements in order to propose to insurance companies issuing variable contracts a project implementation plan for companies seeking SEC approval for summary prospectuses compliant with the new rules.

Discusses the history, requirements, effects, and expected implementation timeline of the new rules, then offers a detailed project plan and timeline for compliance.

The Rule does not require insurers to use summary prospectuses, but there are several compelling reasons for doing so. The Rule allows insurers to use a new concise and brief selling document, and by so doing to begin generating very significant cost savings as soon as May 1, 2021. The article provides a detailed implementation plan for insurance companies that want to comply with the new prospectus disclosure requirements and implement policies and procedures to begin using summary prospectuses.

A coordinated project implementation plan like that outlined in the article might assist insurance companies to make the requisite statutory prospectus revisions and prepare and obtain SEC approval of summary prospectuses by May 1, 2021.

Analysis from experienced attorneys who frequently advise insurance companies issuing fixed and variable annuities, and assist clients in navigating the complex regulatory requirements governing insurance and securities products.

Multinational resource companies (MRCs) are under pressure to become responsible corporate citizens. In particular, stakeholders are demanding more information about the deals these companies negotiate with the host governments of resource-rich nations, and there is general agreement about the need for industry commitment to transparency and the benefits that a mandatory disclosure regime would bring. This paper examines the production of one attempt to regulate disclosures related to payments between MRCs and the governments of nations with resource wealth: Section 1504 of the Dodd–Frank Act.

Drawing on Boltanski and Thévenot's (2006) Sociology of Worth, the authors examine the comment letters of participants in this process with a view to revealing how stakeholder groups produce justifications to promote their positions vis-à-vis transparency to regulators.

The authors show how justifications were mobilised by various constituents in an effort to shape the definition of transparency and the regulatory architecture that governs disclosure practices. In this case, the collective recognition of desirability of transparency enabled the SEC to suture together the views of constituents to create a shared understanding of the role of the common good as it relates to transparency.

This paper explores an alternative approach to the consideration of comment letters advanced during the process of disclosure-related rule-making. The authors show how a sophisticated regulator may be able to draw together elements stemming from different constituents in a way that appeals to a shared sense of the “common good” in order to produce Final Rules.

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial statements. This part also includes a detailed critical review of the recent Practice Statement on materiality, the FASB’s proposed ASU on the notes and the amendments to the Conceptual Framework proposed by the IASB and the FASB.

The part expands to issues that are typical of Management Commentary, including the SEC guidance on materiality in Management Discussion and Analysis.

It informs about the complexities and subtle differences between financial statements and bookkeeping and the different standards of reasonableness versus materiality.

A section moves from materiality to material misstatements and covers the application of materiality in auditing.

Another section goes in depth on internal control over financial reporting, showing the linkages between materiality and risk appetite and risk tolerance and the related application guidance.

To describe the modernization and simplification amendments of certain disclosure requirements of Regulation S-K and related rules and forms recently adopted by the US Securities and Exchange Commission (SEC).

This article provides an overview of the amendments, their effective dates and related practical considerations for companies.

The amendments cover many provisions within Regulation S-K and affect various forms that rely on the integrated disclosure requirements of Regulation S-K. The amendments are designed to enhance the readability and navigability of SEC filings, to discourage repetition and disclosure of immaterial information and to reduce the burdens on registrants, all while still providing material information to investors. The amendments contain several changes relating to confidential information contained in exhibits. For consistency, parallel amendments have been adopted to rules other than Regulation S-K, as well as to forms for registration statements and reports.

Most of the amendments are effective May 2, 2019. The amendments relating to the redaction of confidential information in certain exhibits became effective April 2, 2019. Given these dates, companies should review the rule changes implemented by the amendment now and consider how they will impact their disclosure in upcoming SEC filings.

Practical guidance from experienced lawyers in the Corporate & Securities practice.