Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Saturday, October 13, 2007

The SEC's Policies on Disclosure

The New York Times has an article today that illustrates the SEC's schizophrenic approach toward disclosure.  Chair Cox is working with Pfizer to design a user-friendly format for executive compensation disclosure, and the company unveiled a mock-up at a conference in D.C. hosted by Chair Cox.  At the same time, Division of Market Regulation was criticizing the substance of Pfizer's disclosure.  Indeed, just this week the SEC staff released a report on companies' compliance with the new executive compensation rules and found many deficiencies.

More generally, Chair Cox has been pushing "plain English" and interactive data in disclosure documents, which makes sense only if it is realistic to expect that most investors will read these documents.  But most investors don't and rely on getting information from other sources -- their brokers, friends, neighbors, etc.  Unless and until the SEC undertakes a serious investor education campaign, most investors won't read these documents and probably shouldn't even bother to try.  Instead, the disclosure should be directed toward those intermediaries, who can understand and transmit the information to the general public.  The information is complicated, and plain English and attractive graphs won't make it less so.  NYTimes, Pfizer’s Attempt at Financial Clarity Gets Blurred.

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