For years, the U.S. Chamber of Commerce has led the discussion on corporate disclosure. Effective disclosure is the cornerstone of capital markets by providing investors with the information they need about publicly traded companies so that they can make informed investment decisions.
However, as the annual and quarterly reports of publicly traded companies grow in size and complexity, the usefulness of current disclosures and the Securities and Exchange Commission (SEC) in reforming existing disclosure rules and proposing new disclosure rules Serious questions have been raised about the role of
What is materiality?
At the heart of corporate disclosure in the United States is a long-standing materiality standard. “Materiality” is an important principle for those who invest their savings in the stock market. Simply put, the standards ensure that investors have the information they need, while also protecting them from “information overload” and allowing regulators and politicians to use company disclosures to make investments. Prevents pursuing objectives that may conflict with the interests of the home.
In 1976, Justice Thurgood Marshall clarified the definition of meaningful and enduring materiality.majority of the Supreme Court TSC Industries, Inc. v. Northway, Inc. Judge Marshall warned that “disclosure policies” under federal securities law “are not without limitations” because investors can be overwhelmed with information that is not central to their decision-making.Court – both TSCMore decision and after Basic, Inc. v. Levinson Decision – Reject the argument that information is material if it “may” be material to investors, stating that “it is material to reasonable shareholders in deciding how to vote or whether to buy” The information is material if there is a good chance that we will consider, sell, or retain the securities.
This court-developed standard helps prevent the politicization of disclosure and emphasizes the original purpose of federal securities laws. The Chamber of Commerce has fought on several fronts to maintain its standards of importance and keep politics out of the open. These efforts include:
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work closely with SEC Efforts to update current regulations and eliminate obsolete or unnecessary disclosure requirements. The Chamber of Commerce released a Disclosure Reform Report in 2014 and a report on materiality standards in 2017. This influenced the final reforms implemented by the SEC.
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advocate meeting Pass legislation to modernize disclosures and strengthen materiality standards, including the Disclosures Modernization and Simplification Act signed in 2015.
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If necessary, the Chamber of Commerce court Where the obligation deviates from the core purpose of the disclosure. For example, the court agreed with the Chamber that some of the “conflict minerals” rules under the Dodd-Frank Act violated the First Amendment.
In early October, Senator Mike Rounds introduced the Essential Materiality Requirement Act of 2022. This requires the SEC to adopt disclosure requirements only if they meet the Supreme Court’s definition of materiality. As the SEC is currently grappling with an unprecedented regulatory agenda that could include a wide range of new disclosure obligations related to climate change, cybersecurity, human capital management, and other issues, the Chamber of Commerce strongly support the
Whatever the agenda, the Chamber will continue to insist that materiality standards remain central to corporate disclosures and investor interests are not jeopardized by politicized agendas and rulemaking.
About the author
Evan Williams
Director, Capital Market Competitiveness Center
