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H.R.5970 - Modernizing Disclosures for Investors Act

To require the Securities and Exchange Commission to carry out a cost benefit analysis of the use of Form 10-Q and for other purposes.

You might favor this bill if:
►  You believe the quarterly financial disclosure process utilized by publicly traded companies should be analyzed and simplified with the purpose of increasing transparency and costs for investors, companies, and the market.

You might oppose this bill if:
►  You believe that changing the process publicly traded companies use to disclose financial information might lead to misinformation and can ultimately hurt the investor.

The Modernizing Disclosures for Investors Act would require the Securities and Exchange Commission (SEC) to allow issuers of securities traded on a national securities exchange to meet quarterly financial disclosure requirements via an alternative method, such as through a press release, instead of the usual quarterly 10-Q form.

According to the Congressional Budget Office, under current law, every quarter, publicly traded companies must file a form with the Securities and Exchange Commission (SEC) disclosing financial information. The legislation would require the SEC to analyze and report on alternative versions of the form for use by certain small companies, assess the uses of the current form and the costs to companies to complete it, and identify the effects of alternative versions of the form for the securities markets. The SEC would then report to the Congress with a proposed revision of the form.

The CBO report estimates that implementing the legislation would cost about $2 million to cover the analysis and preparation of the required reports. However, the SEC is authorized to collect fees sufficient to offset these costs, therefore the CBO final estimation of costs would be minimal.

The analysis of the "10-Q form" is to include the costs and benefits of:
- emerging growth companies;
- in terms of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation;
- alternative formats for quarterly reporting;
- the expected impact of the use of alternative formats of quarterly reporting on overall market transparency and efficiency; and
- the overall costs of other reporting companies, investors, market researchers, and other market participants, including:
- the public availability of information;
- the use of a standardized reporting format across all classes of reporting companies; and
- the quarterly disclosure by some companies of financial information in formats other than Form 10–Q, such as a quarterly earnings press release.

Rep. Wagner believes reporting requirements is a burden on companies wanting to go public.

“In the recent years, annual and quarterly reporting requirements have grown in size and complexity. Making it more difficult for investors to determine relevant information, often leaving them overwhelmed and unable to make sound investment decisions. Furthermore, some companies believe that current reporting requirements have become a barrier to registering as publicly traded companies, as noted by a 2011 report by the IPO task force," said sponsor of the bill Rep. Ann Wagner. "The report found that 92% of public company leaders said that the administrative burden of public reporting was a significant challenge to completing IPO and becoming a public company."

According to Rep. Wagner, at a recent SEC oversight hearing, Chairman Clayton highlighted the importance of modernizing the current reporting system.

"We should regularly review whether we have disclosure requirements that are outdated, duplicative, or can otherwise be improved," said SEC Chairman Clayton during his testimony.

Some worry the simplification of information disclosed by companies might lead to misinformation and might ultimately hurt investors.

Not later than 180 days after the legislation is passed, the SEC is to issue a report to Congress with the results of the analysis and recommendations for decreasing costs, increasing transparency, and increasing efficiency of quarterly financial reporting.

The legislation has passed the House and has been received in the Senate. The bill currently sits on the committee on Banking, Housing, and Urban Affairs of the Senate.


Sponsored by: Rep. Wagner, Ann [R-MO-2].

Cosponsored by: 0 Rep / 0 Dem.

See list of cosponsors.

Passed House

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