The Securities and Exchange Commission’s issuance of “mere ‘guidance’ regarding cyber-related disclosures falls short of providing useful and reliable disclosure, and it leaves companies in a state of quandary,” Commissioner Kara Stein said Tuesday.
In a speech to the Council of Institutional Investors on improving information to investors in the digital age, Stein also stated that the agency should “lead by helping to create standards for disclosure, using structured data and taxonomies, where applicable,” as doing so “resolves uncertainty and reduces the cost of information.”
Stein also debunked the popular notion that public companies are “overloading” investors with information.
She cited a U.S. Chamber of Commerce study pointing to complaints that investors are “so inundated that ‘it [is] difficult for investors to focus on the information that is material and most relevant to their decision-making.’”
Moreover, another report, she continued, called information overload a “pressing concern.”
But Stein countered that during her five years at the agency she has “not heard this concern expressed by even one investor. Not one.”
Her experience, she said, has been that investors and others “are asking for more information.”
She pointed to institutional investors, asset managers, state treasurers and others who recently petitioned the SEC to require disclosure of environmental, social and governance (ESG) information by publicly traded companies in a standardized format.
The groups — which included representatives of the California Public Employees’ Retirement System (CalPERS), along with state treasurers from New York, Illinois, Connecticut and Oregon — petitioned the agency for a rulemaking on ESG disclosure.
The commission, Stein continued, “should not be focused on information overload or decreasing the amount or timeliness of information in the market, but rather should be focused on how to organize it and ensure that it is fairly presented.”
The SEC, she stated, “must improve both the end product and the system of disclosure so that our capital markets remain the gold standard.”
Stein noted her previous recommendation that the securities regulator form a Digital Disclosure Task Force “to include investors, analysts, academics, companies and technologists to leverage today’s technology for a modern disclosure system.”
More importantly, she argued, the commission “needs to engage in overseeing, and encouraging, a robust information environment,” and work to set forth acceptable standards that contribute to the provision of useful information to investors. Quite simply, the commission needs to focus on information that is relevant to today’s investors.”
— Check out SEC’s Stein Calls for Presidential Working Group on Retirement Security on ThinkAdvisor.