Fordham Law


SEC Chairman: New Rules Could Lead to ‘Information Overload’

Fordham Law in Wall Street Journal, October 04, 2013

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New rules from Congress that require companies to disclose details on conflict minerals and government payments venture far afield from the traditional expertise of U.S. regulators, Securities and Exchange Commission Chairman Mary Jo White said on Thursday in a speech at Fordham Law School in New York.
 
The proliferation of these new rules could start to limit the usefulness of corporate disclosures overall, she said.
 
“When disclosure gets to be too much or strays from its core purposes, it can lead to ‘information overload’ – a phenomenon in which ever-increasing amounts of disclosure make it difficult for investors to focus on the information that is material and most relevant to their decision-making as investors in our financial markets,” Ms. White said.
 
The Dodd-Frank Act of 2010 has required U.S. securities regulators to write a series of rules that will make companies produce disclosures about whether their products use so-called “conflict minerals” blamed for fueling violence in the Democratic Republic of the Congo, the ratio of the median global employee pay to CEO pay, and payments made to foreign governments by oil, gas and minerals companies. Many of these disclosures are new areas for the SEC, and similar disclosures have even been avoided by the SEC in the past, Ms. White said.
 
“Seeking to improve safety in mines for workers or to end horrible human rights atrocities in the Democratic Republic of the Congo are compelling objectives, which, as a citizen, I wholeheartedly share,” Ms. White told the audience. “But, as the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals.”
 
The SEC has occasionally been required to set rules that deviate from its “core mission” of protecting investors, Ms. White explained. But the most recent laws from Congress have been more “prescriptive,” leaving little room for the SEC to use its expertise and judgment in setting the regulations.
 
“I think that everyone’s best off if the SEC can use its expert judgment independently on mandatory disclosure,” Ms. White said in comments to reporters following her speech. Though Congress has the right to enact rules to require more corporate disclosure and the SEC must follow the law, the SEC also has “to proactively urge that we be given maximum flexibility,” Ms. White said.
 
Despite the forthcoming corporate disclosures, Ms. White says the feedback from investors on these rules has been mixed so far.  “Some people think it’s enormously important for investors to know that information, others say it’s not,” Ms. White said.