Early in my career, I would saddle up the horse and carriage, go to the office, call a company of interest and ask for them to please send me an annual report and 10-k, and then hang around the mail slot for the apparently fantastic work of the US Postal service to perform its magic. I would then read the 35 page 10-k in about an hour, hand-plug some numbers into Lotus (okay, it was Excel by then), and off we went.

A few big fat frauds later,  things started to change, both at the SEC level and with technology, and we are now able to instantly download 465 pages of disclosures for some fireside reading with your feet upon the Golden Retriever. And spend money for services that can instantly compare changes in one filing vs another in order to more quickly ascertain if something material is changing and being lawyered before our eyes. Because even those who are blessed with wicked fast reading habits are being pummeled.

So the SEC just announced its first changes in 30 years to the production of a 10-k last week, moving to more of a “principles based” set of disclosure rules and “the amendments are also intended to improve the readability of disclosure documents, as well as discourage repetition and reduce the disclosure of information that is not material.”

Sounds good. We have an internal saying here that part of our job is to figure out who is stealing with us rather than stealing from us, but that is…mostly tongue and cheek. And careful reading of these legal documents often have clues that can point us in the right direction. But there simply HAS to be some middle ground between 465 pages and 30 pages, and with pages and pages of new disclosure being clamored for on any progressive topic one can imagine, the pages seem destined to mount. So we are hopeful these changes will on the margin enable some cutting of the chaff to make the wheat more find-able. Maybe.

Because here is the juicy tidbit that explains our world: “Amend Item 105 by requiring summary risk factor disclosure of no more than two pages if the risk factor section exceeds 15 pages.”  Yes, that is right—demand more legal disclosure of obviousness so that your risk factor section can run dozens of pages to the point at which you need a summary section for fear that no one is reading the risk factors.

– JB

SEC Adopts Rule Amendments to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors