Based on encouraging remarks from SEC Chair Clayton and Corp Fin Director Bill Hinman consistent with the SEC's capital formation and investor protection objectives, and EY's own positive experiences with Corp Fin Staff, the firm's latest "To the Point" advocates companies seeking relief from Staff on the basis of Rule 3-13 of Regulation S-X for exceptions to financial statement disclosure requirements in appropriate circumstances. Generally, Rule 3-13 provides the SEC with discretion to allow issuers to omit or substitute burdensome financial statement disclosure requirements where "consistent with investor protection" - a standard that reportedly is based on Staff judgments as to what is material to investors.
EY notes that Staff has been responding promptly to requests for relief (presumably based on Chair Clayton's sincere and vocal support), and that companies have been particularly successful when their requests address considerations identified in the Financial Reporting Manual (FRM) for those situations that the Manual specifically addresses (i.e., the most common requests).
Even in situations for which disclosure relief is sought under Rule 3-13 that are not called out in the FRM, EY encourages companies to consider seeking relief in appropriate circumstances, i.e., where generating the disclosure is burdensome and the company believes based on its analysis that the information required for disclosure is not material to investors.
This post first appeared in the weekly Society Alert!