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SEC moves to simplify disclosures in investor communications

A new rule for corporate compliance may be on the way for publically traded companies. The U.S. Securities and Exchange Commission has issued a new proposed rule that would simplify the disclosures such companies would have to make to investors. These disclosures are commonly made in annual reports, stock prospectuses and other required filings.

The rule was officially proposed on Oct. 11 and is entitled "FAST Act Modernization and Simplification of Regulation S-K."

The Trump administration's new SEC chair has endorsed the rule, which were developed during the Obama administration.

According to Reuters, part of the rule would allow online references to be incorporated by hyperlinks, which could reduce repetition and paperwork. Overall, the SEC says the new rules are "intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information."

Will the new rule mean less information for investors?

The rule is not intended to reduce the amount or quality of information provided to investors. According to the SEC's summary, it is meant to reduce "costs and burdens on registrants while continuing to provide all material information to investors."

That said, any change in the construction or formatting of required disclosures could potentially lead to confusion among investors. If you have an opinion on the rule, you have 60 days from Oct. 11 to comment.

The rules are said to have broad support. Indeed, the only Democrat on the three-person SEC panel also endorsed them. "I am supportive of today's proposal because it would make some modest and marginal changes to our disclosure framework," she said.

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