What are you doing at lunchtime on August 26? The SEC has announced that it will hold a webcast public meeting to discuss its broader efforts to (1) modernize and improve the SEC's disclosure framework in light of the changes in our capital markets and domestic and global economy, and (2) simplify, harmonize, and improve the exempt offering framework under the Securities Act to promote capital formation and expand investment opportunities while maintaining and enhancing appropriate investor protections.
More specifically, the SEC will consider:
1. Whether to adopt amendments to modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K. These disclosure items, which have not undergone significant revisions in over 30 years, would be updated to account for developments since the rules' adoption or last revision, to improve disclosure for investors, and to simplify compliance for registrants. Specifically, the amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and the disclosure of information that is not material. These changes to Items 101, 103 and 105 of S-K were proposed in August 2019 (see our prior Monitor post here). Of particular interest is whether the proposals to use a “principles-based approach" to the Business section and to add “human capital" disclosures will be addressed.
2. Whether to adopt amendments to the definition of “accredited investor" in Commission rules and the definition of “qualified institutional buyer" in Rule 144A under the Securities Act to update and improve the definition to identify more effectively investors that have sufficient financial sophistication to participate in certain private investment opportunities. The changes to these definitions were proposed in December 2019 by a 3-2 vote of the SEC (see proposed rules announcement here) following a concept release published in June 2019 (see our prior Monitor post here). The proposed amendments to the “accredited investor" definition would expand the number of investors eligible for that status by allowing individuals to qualify based on their professional knowledge, experience or certifications. The proposed amendments also would expand the type of entities that qualify as accredited investors. Chairman Jay Clayton has commented that “The current test for individual accredited investor status takes a binary approach to who does and does not qualify based only a person's income or net worth…. Modernization of this approach is long overdue."
The meeting will be held on Wednesday, August 26, 2020 at 10:00 a.m. Eastern Time. The meeting will be open to the public via audio webcast only on the SEC's website at www.sec.gov.
We will provide our insights from the meeting in a subsequent Monitor post.