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Sen. Warren Blasts SEC Disclosure Initiative as Harmful to Investors

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Sen. Elizabeth Warren, D-Mass., blasted the Securities and Exchange Commission’s disclosure effectiveness initiative, saying it was “ill-conceived” and could limit public companies’ disclosure requirements “in ways that would harm investors.”

Warren, D-Mass., accused White on Thursday in a letter of taking a “narrow” congressional mandate under the Jumpstart Our Business Startups Act and transforming it into a “comprehensive review of disclosure requirements” that “permit publicly traded corporations to disclose less information to their investors and the public.”

Warren’s letter was in response to comments White made at a June 14 Senate Banking Committee hearing that the SEC review “is meant to make disclosure more meaningful to investors” and reduce information that can be “repetitive.”

But Warren countered that instead of moving forward on issues intended to help investors, the SEC has “actually headed in the opposite direction” with its disclosure effectiveness initiative that she said White has “dedicated significant time and resources” to.

Warren told White to tell her by Aug. 1 how the agency will protect investors by implementing the disclosure initiative as well as “the narrower disclosure review” mandated in the Fixing America’s Surface Transportation (FAST) Act that Congress passed in December.

The FAST Act called on the SEC to “eliminate provisions of Regulation S-K,” the rule that lays out reporting requirements for various SEC filings used by public companies, “… for all issuers that are duplicative, overlapping, outdated or unnecessary,” while still “providing all material information to investors.”

White was told to tell Warren by Aug. 1 how the agency will determine what is “material” or “unnecessary” to investors under the initiative as well as how much time and money the agency spent on the disclosure effective initiative between April 2013 and the passage of the FAST Act in December 2015. Warren also asked White to provide evidence of “investor overload.”

Warren told White that she’s “deeply concerned that the SEC has spent significant agency time and resources on this Initiative without a clear congressional directive, while simultaneously failing to finalize congressionally mandated rules” under the 2010 Dodd-Frank Act.

As of June, Warren stated, the SEC had yet to finalize 20 Dodd-Frank mandated rules, many of which would provide investors with additional information.

The SEC has “defied the will of Congress” and “pursued an agenda aligned with the narrow interests of the U.S. Chamber of Commerce and big business,” Warren said in her letter, and has also “attempted to portray this work as a pro-investor effort designed to solve ‘information overload’ – a problem that the Commission has never been able to document and that analysts have described as a ‘myth.’”

Warren pointed to recently released comments by the agency’s Investor Advisory Committee on the disclosure initiative stating that “the reality from an overall market perspective is that the bulk of market participants do not feel they are inundated with useless information.”

Warren told White to work with investors to eliminate redundant disclosures that addresses “legitimate” needs of investors, “not by relying on rationales like ‘information overload’ that have no factual basis.”

— Check out Sen. Warren Tells FINRA Chief to Rein in Broker Misconduct on ThinkAdvisor.


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