SEC underlines importance of Disclosures in fight against Covid-19

Posted on April 24, 2020 by Editor

“Forward Looking Statements” have a specific meaning in securities law and regulation. Academic, regulatory and market literature is filled with the pros and cons of companies providing information in their financial statements that help users understand what might impact future earnings and cashflows and that isn’t based on historical facts.

If in January you had suggested to the Chair of the US Securities and Exchange Commission (SEC) and Director of the SEC’s all-important Corporations Finance Division that they would be making a broad appeal to companies to provide significantly more forecasting information in their Q1 reports  — even in the face of potential legal risks to issuers in doing so — they would likely respond that you were mad.

But that was, of course, before Covid-19 swept the world. On 8 April, SEC Chairman Clayton and Corporations Finance Director Hinman, published a statement about the importance of disclosure in the effort to build a meaningful and responsible increase in economic activity in the wake of Covid-19.

Inter alia, these SEC leaders:

  • Recognise that Q1 disclosures will not be routine.
  • Recognise that investors are interested in the impact of the pandemic, rather than historical data that is for many (perhaps most) companies no longer relevant.
  • Urge (in their personal capacities) companies to provide as much detail as possible about their current status and plans for addressing Covid-19; and
  • “Recognize that Producing Forward-Looking Disclosure Can be Challenging and Believe that Taking On that Challenge is Appropriate.” 

These are extraordinary and extraordinarily difficult times for public market participants – and regulators.  Earnings — and Q1 filings are now well under way. Time to search the notes to the accounts using your favourite XBRL data providers and analytic tools to dig into some of the details and consider what this means for companies — and regulators of all kinds — around the world.

Read the statement here.

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