2017 was a year of significant change at the SEC as Jay Clayton, a veteran transactional lawyer, was appointed to lead the agency. Chairman Clayton set the tone for his priorities early on with a clear focus on capital formation while maintaining important investor protections. Toward that end, he has expressed significant interest in making US public markets more attractive so main street investors can invest for a better future and companies (particularly those considering an IPO) have access to capital to grow and create jobs.
The focus on IPOs and capital formation quickly came to the forefront when the SEC’s Division of Corporation Finance, under the leadership of its new director, William Hinman, expanded on popular provisions of the JOBS Act to give all companies (not just emerging growth companies) the opportunity to submit IPO registration statements for non-public review. By providing opportunities for all companies to take advantage of non-public review for their IPO documents, the SEC is hoping to encourage more companies to sell their shares in the US public markets and for those IPOs to take place at an earlier stage in their development. Additionally, the Corp Fin staff built on a popular element of the FAST Act by reducing the financial statement requirements in non-public IPO submissions (although there were no changes to the requirements for the publicly filed documents used by investors).
Clayton, Hinman, and the Corp Fin staff have also emphasized the SEC’s openness to talking with any public company (not just IPO companies) if the financial statement requirements of Regulation S-X require disclosure of information that is costly and difficult to provide but would not be material to investors.
This past year was certainly a time of change at the SEC, and the next 12 months will likely bring significant activity as two new Commissioner nominees (Hester Peirce and Robert Jackson) make their way through the Senate confirmation process; the Commission works to identify new board members for the PCAOB; and the agency pursues its rulemaking agenda, which could include movement on their disclosure effectiveness project (e.g., following up on the Regulation S-K study submitted to Congress in 2016) and other areas to enhance the readability and navigability of disclosures. All this is taking place while the agency continues its active examinations and enforcement agendas and is laser-focused on the successful implementation of the new revenue accounting standard with the leases and credit losses standards following close behind. We hope you find the analysis that follows helpful as you navigate the upcoming reporting season.
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