degree of overlap between Item 305 and U.S. GAAP depends on which of
Item 305's presentations is chosen and on whether information that
is encouraged to be provided by ASC 820, including qualitative
disclosure on risk management, is actually provided. Using a tabular
presentation under Item 305 generally results in greater overlap
with ASC 820 and ASC 815. Item 305 also requires that disclosure be
made outside the financial statement footnotes.
    \506\ See CFA Institute. This commenter did not provide a
suggestion as to how to better link financial statement disclosures
with risk-related disclosure provided elsewhere in a filing.
    \507\ See CCMC. This commenter stated Item 305 is ``one of the
most complicated disclosure requirements to parse in all of
Regulation S-K.''
    \508\ See Hu. In research cited in the comment letter, this
commenter perceived three problems with Item 305's VaR presentation:
(i) Too much ``latitude as to (a) the models, assumptions, and
parameters used, as well as (b) the confidence level and time
horizon [registrants can] choose to report at;'' (ii) no evidence as
to the quality of the VaR model is required; and (iii) VaR ``is not
intended to gauge possible losses in times of high economic
stress.'' See Henry T. C. Hu, Disclosure Universes and Modes of
Information: Banks, Innovation, and Divergent Regulatory Quests, 31
Yale J. on Reg. 565, 598 (2014) (``Hu 2014'').
    \509\ See AFL-CIO. As an example of common exposures, this
commenter cited credit triggers under swaps contracts where ``banks
may require companies to fully collateralize credit exposures under
certain conditions.''
---------------------------------------------------------------------------

b. Discussion
i. Disclosure Objective
    The adequacy of market risk disclosure emerged as an important
financial reporting issue in the 1990s following a substantial increase
in the use of derivatives and other instruments subject to market risk
and the significant, sometimes unexpected, losses registrants
experienced from their use of these instruments.\510\ The Commission
adopted Item 305 in 1997 to improve disclosures about market risk and
help investors better understand and evaluate a registrant's market
risk exposures.\511\ The required disclosures were also intended, where
applicable, to provide a mechanism for registrants to disclose that
their use of derivatives represents risk management rather than
speculation.\512\
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    \510\ See Disclosure of Market Risk Sensitive Instruments
Release.
    \511\ See id. In conjunction with adopting Item 305, the
Commission amended Rule 4-08 of Regulation S-X and Item 310 of
Regulation S-B, which is no longer in effect, to require enhanced
descriptions of accounting policies for derivatives in the footnotes
to the financial statements. These revisions were designed to
address footnote disclosures of accounting policies that were often
too general to convey adequately the diversity in accounting that
exists for derivatives. In contrast to Item 305, which applies to
all financial instruments, the new disclosure requirements under
Rule 4-08 and Item 310 applied only to derivatives; disclosure
requirements for other financial instruments were addressed by
existing U.S. GAAP and Commission guidance. Id. (citing Accounting
Principles Board Opinion No. 22 (April 1972)). SRCs are not required
to provide Item 305 information. Item 305(e) of Regulation S-K [17
CFR 229.305(e)].
    \512\ See Disclosure of Market Risk Sensitive Instruments
Release.
---------------------------------------------------------------------------

    To achieve these goals, the Commission used the following guiding
principles in adopting Item 305:
     Disclosures should make transparent the impact of
derivatives on a registrant's statements of financial position, cash
flows, and results of operations;
     Disclosures should provide information about a
registrant's exposures to market risk;
     Disclosures should explain how market risk sensitive
instruments are used in the context of the registrant's business;
     Disclosures about market risk exposures should not focus
on derivatives in isolation, but rather should reflect the risk of loss
inherent in all market risk sensitive instruments;
     Market risk disclosure requirements should be flexible
enough to accommodate different types of registrants, different degrees
of market risk exposure, and alternative ways of measuring market risk;
     Disclosures about market risk should address, where
appropriate, special risks relating to leverage, option, or prepayment
features; and
     New disclosure requirements should build on existing
requirements, where possible, to minimize compliance costs.\513\
---------------------------------------------------------------------------

    \513\ See id.
---------------------------------------------------------------------------

    Item 305 was designed to address concerns that market risks
associated with derivatives and other market-sensitive instruments were
not adequately disclosed.\514\ In the adopting

release for Item 305, the Commission noted that disclosure about
reported items in the footnotes to the financial statements, MD&A,
schedules and selected financial data may not have adequately reflected
the effect of derivatives on such reported items.\515\ In addition,
disclosures about different types of market risk sensitive instruments
were often reported separately, making it difficult to assess a
registrant's aggregate market risk exposures.\516\ Accordingly, Item
305 was intended to help investors understand a registrant's risk
management activities and to help place those activities in the context
of the registrant's business by requiring enhanced disclosure about
specific market risk sensitive instruments.\517\
---------------------------------------------------------------------------

    \514\ See id. The disclosure issues were noted as part of the
staff's review of more than 500 annual reports in 1994 and 1995 to
evaluate the adequacy of market risk disclosure and assess the
effect of new FAS 119 on market risk disclosure. See id.
    \515\ See id.
    \516\ See id.
    \517\ See id.
---------------------------------------------------------------------------

    Division staff has observed that the instructions to Item 305 may
inadvertently discourage some disclosure. For example, a sensitivity
analysis requires disclosure of the potential loss to the future
earnings, fair values, or cash flows of market risk sensitive
instruments from a hypothetical change in rates or prices.\518\ The
instructions to Item 305(a) state that registrants should select
hypothetical changes in market rates or prices that are expected to
reflect reasonably possible near-term changes in those rates and
prices; however, absent economic justification for the selection of a
different amount, ``registrants should use changes that are not less
than ten percent of end of period market rates or prices.'' \519\ Many
registrants apply the ten percent threshold even when market
conditions, such as persistently low interest rates or volatile
exchange rates, may suggest that a different threshold, or even
multiple thresholds, would be more appropriate.\520\
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    \518\ Item 305(a)(1)(ii) of Regulation S-K [17 CFR
229.305(a)(1)(ii)].
    \519\ Instruction 3A to paragraph 305(a).
    \520\ For example, the prime rate in the U.S. has been 3.5% or
3.25% for a number of months. See http://online.wsj.com/mdc/public/page/2_3020-moneyrate.html?mod=mdc_bnd_pglnk. Many registrants
present their interest rate risk under the sensitivity analysis
showing only a shift of 10% of this amount, or 35 or 33 (rounded)
basis points. Financial services and financial institution
registrants, on the other hand, often provide analyses of various
shifts in interest rates and evaluate shifts of 50, 100, and 200
basis points, both up and down. This more comprehensive presentation
may provide investors with a better understanding of how various
shifts in market risk, both more moderate and more pronounced, might
impact the registrant.
---------------------------------------------------------------------------

    Considering commenters' differing views on the efficacy of Item 305
and the complexity of Item 305's required disclosures, we seek input on
whether, and how, changes to Item 305 would be beneficial to both
investors and registrants.
(a) Request for Comment
    157. Is Item 305 effective in eliciting disclosure about market
risks and risk management practices that investors consider important?
If not, how could Item 305 be improved?
    158. Does Item 305 result in information that allows investors to
effectively assess (1) a registrant's aggregate market risk exposure,
and (2) the impact of market risk sensitive instruments on a
registrant's results of operations and financial condition? If not, how
could we revise Item 305 to achieve these goals?
    159. Do the disclosure alternatives in Item 305(a) elicit adequate
quantitative disclosure about market risk? Do the rules or the
instructions discourage registrants from fully evaluating and
disclosing their market risk exposures, such as in a sensitivity
analysis? Should the rules be more prescriptive? If so, in what ways
should we revise the rules and instructions to Item 305(a)?
    160. Should additional or different principles guide the market
risk disclosure requirements? Should we expand our definition of
``market risk sensitive instruments'' to require registrants to provide
additional disclosure about other risks, including credit risk,
liquidity and funding risk and operational risk?
    161. Should we limit the quantitative disclosure requirement to
certain registrants such as financial institutions or registrants
engaged in financial services? Why or why not?
    162. What types of investors or audiences are most likely to value
the information required by Item 305?
    163. What is the cost of providing the disclosure required by Item
305, including the administrative and compliance costs of preparing and
disseminating this disclosure? How would these costs change if we made
any of the changes contemplated here? Please provide quantified
estimates where possible and include only those costs associated with
providing disclosure under Item 305.
ii. Disclosure Alternatives and Coordination With Financial Statement
Disclosures
    Item 305(a) specifies three disclosure alternatives for registrants
to present quantitative information about market risk: Tabular
disclosure, sensitivity analysis, and VaR.\521\ In adopting Item 305,
the Commission recognized the evolving nature of market risk sensitive
instruments, market risk measurement systems, and market risk
management strategies.\522\ The Commission stated that it expected to
``continue considering how best to meet the information needs of
investors.'' \523\ Accordingly, we are seeking input on whether and how
we should revise Item 305 to reflect changes in market risk exposures
and methods for measuring market risk.
---------------------------------------------------------------------------

    \521\ Item 305(a)(1) of Regulation S-K [17 CFR 229.305(a)(1)].
    \522\ See Disclosure of Market Risk Sensitive Instruments
Release.
    \523\ See id. at 6046.
---------------------------------------------------------------------------

    In response to the proposing release for Item 305, some commenters
suggested greater flexibility and recommended a ``management approach''
to disclosure. As suggested by the commenters, this disclosure would
focus on the information and methods that management actually uses
internally to evaluate, monitor, and manage market risk.\524\ The
Commission did not adopt this approach, believing that a presentation
of market risk using a management approach outside of the framework
articulated in Item 305 could make it difficult for investors to assess
market risk across registrants.\525\ We are interested in whether a
``management approach'' to disclosure is preferable to the alternatives
specified in the current rule.
---------------------------------------------------------------------------

    \524\ See id. at 6055. Commenters believed that ``the approaches
in the proposing release (i) do not appear to allow gap and duration
analyses, which are currently used by some to measure market risk,
and (ii) may become outdated as new measurement approaches are
developed in the market place.'' Id. at 6055.
    \525\ See id. The Commission noted that, in adopting Item 305,
it sought to strike a balance between those seeking a ``management
approach'' and those supporting a more consistent reporting
framework for the sake of comparability. See id.
---------------------------------------------------------------------------

    We are also interested in whether we should modify Item 305 given
accounting developments since the item's adoption. When the Commission
adopted Item 305 in 1997, minimal authoritative literature on the
accounting for options and complex derivatives existed.\526\ Since that
time, accounting requirements have evolved to provide for greater
disclosure of market risk sensitive instruments.\527\ As a result,
there may be redundancies

between the disclosure provided in response to Item 305 and U.S. GAAP.
Commission staff has observed that, the degree of repetition in the
disclosure depends on which Item 305 disclosure alternative a
registrant utilizes and whether a registrant provides information that
is encouraged by U.S. GAAP in addition to the disclosure that is
required.\528\
---------------------------------------------------------------------------

    \526\ See Disclosure of Market Risk Sensitive Instruments
Release.
    \527\ FASB Accounting Standards Update No. 2011-04, May 2011,
Fair Value Measurement (Topic 820). ASC 820 requires the disclosure
of fair value of all financial instruments, including derivatives
and non-derivative financial instruments, but does not require any
expected maturity information.
    \528\ For example, ASC 815 encourages but does not require that
disclosure about a registrant's objectives and strategies for using
derivatives be described in the context of the entity's overall risk
exposures. The standard indicates that if these additional
qualitative disclosures are made, they should include a discussion
of those risk exposures even though the registrant does not manage
some of those risk exposures using derivatives.
---------------------------------------------------------------------------

    Item 305 disclosure also tends to vary among registrants. Many
registrants provide a sensitivity analysis to present market risk
information, while others rely on tabular presentation or VaR. For
large financial institutions, it is not unusual to use some combination
of the three to capture different market risk sensitive instruments.
(a) Request for Comment
    164. How have standard risk management practices and methods of
reporting market risk evolved since the adoption of Item 305 in 1997?
Should we revise Item 305 to reflect those changes and if so, how?
Should we provide for new disclosure alternatives in addition to, or in
lieu of, existing alternatives?
    165. What revisions should we consider to better link disclosure
that identifies, quantifies, and analyzes a registrant's material
market risks to its: (a) Market risk sensitive instruments, (b)
financial statements, (c) capital adequacy, and (d) any other metrics
important to an understanding of market risk exposures?
    166. Should we eliminate the prescribed disclosure alternatives and
allow registrants to discuss market risk according to the methods used
by management to manage the risk? Would allowing a ``management
approach'' provide investors with more insight about the way management
actually assesses market risks, or would this approach unduly hinder
investors' ability to compare market risk disclosures across
registrants?
    167. Is the disclosure required by Item 305 repetitive of the
disclosure required by U.S. GAAP and Rule 4-08 of Regulation S-X?
Conversely, does Item 305 result in disclosure that is important to
investors and is not found elsewhere in a registrant's filing? Even
considering any repetition, do investors benefit from disclosure about
market risk exposure outside of the audited financial statements?
iii. Comparability of Disclosure
    In adopting Item 305, the Commission acknowledged the tension
between approaches to market risk disclosure that favor comparability
and approaches that favor flexibility.\529\ The approach taken in the
final rules sought to strike a balance between different commenters'
perspectives.\530\
---------------------------------------------------------------------------

    \529\ See Disclosure of Market Risk Sensitive Instruments
Release at 6048 (``The Commission has provided flexibility in the
quantitative and qualitative disclosure requirements . . . even
though such flexibility is likely to reduce the comparability of
disclosures.'').
    \530\ See id.
---------------------------------------------------------------------------

    The Commission designed Item 305 to be flexible by prescribing
three disclosure alternatives without stipulating standardized methods
and procedures specifying how to comply with each alternative.\531\
Registrants may choose which methods, model characteristics,
assumptions, and parameters they use in complying with the item, and
registrants may use more than one disclosure alternative across each
market risk exposure category.\532\
---------------------------------------------------------------------------

    \531\ See id. For example, the terms used to describe two of the
three disclosure alternatives--``sensitivity analysis'' and ``value
at risk''--describe a general class of models. They are not meant to
refer to any one model for quantifying market risk. In addition,
Item 305 permits registrants to change disclosure alternatives or
key model characteristics, assumptions, and parameters used in
providing quantitative information about market risk, with
disclosure if the effects of such a change are material. The
Commission also noted that two methods of measuring market risk then
in use, gap analysis and duration analysis, would, with minor
revisions, satisfy the tabular and sensitivity analysis disclosure
requirements respectively. Id.
    \532\ See id.; Item 305(a)(1)(i)(B) of Regulation S-K [17 CFR
229.305(a)(1)(i)(B)]; Item 305(a)(1)(ii)(B) of Regulation S-K [17
CFR 229.305(a)(1)(ii)(B)]; Item 305(a)(1)(iii)(B) of Regulation S-K
[17 CFR 229.305(a)(1)(iii)(B)].
---------------------------------------------------------------------------

    To address comparability, the Commission included a requirement
that registrants describe the characteristics of the model and the
assumptions used to prepare the quantitative market risk disclosures.
By requiring a description of the model and its assumptions, the
Commission intended to assist investors in evaluating the potential
effect of variations in the model's characteristics and
assumptions.\533\
---------------------------------------------------------------------------

    \533\ See Disclosure of Market Risk Sensitive Instruments
Release.
---------------------------------------------------------------------------

    In 2012, the FASB examined the question of comparability and
considered standardizing liquidity and interest rate risk disclosure as
part of a project that is currently in Exposure Draft form.\534\ The
Exposure Draft would have required all reporting entities to provide
standardized quantitative disclosure about liquidity risk, but only
financial institutions would have been required to provide additional,
standardized quantitative disclosure about interest rate risk.
---------------------------------------------------------------------------

    \534\ See Proposed Accounting Standards Update 2012-200
Disclosure about Liquidity Risk and Interest Rate Risk--Financial
Instruments (Topic 825), Financial Accounting Standards Board
(Issued June 27, 2012), available at http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176160135003.
    This Exposure Draft was partly in response to demand by users
for audited, standardized, and consistent disclosures by public
companies. The Exposure draft noted that, as part of a May 2010
proposed Accounting Standards Update (Accounting for Financial
Instruments and Revisions to the Accounting for Derivative
Instruments and Hedging Activities--Financial Instruments (Topic
825) and Derivatives and Hedging (Topic 815)), the FASB performed
extensive outreach and received feedback that the risks inherent in
a class of financial instruments and the way in which an entity
manages those risks through its business operations should be
instrumental in developing the reporting model for financial
instruments. The important risks identified by users of financial
statements during the FASB's outreach efforts were credit risk,
liquidity risk, and interest rate risk. See also supra note 503.
---------------------------------------------------------------------------

    Although initiated, in part, as a response to comments received
from financial statement users to an earlier FASB release on financial
statements, the majority of respondents to the Exposure Draft, eighty-
four percent of whom were preparers, did not support the proposed
disclosures.\535\ Most respondents stated that standardizing
information about liquidity and interest rate risk is not appropriate
and not achieved by the proposals.\536\ Some commenters questioned
whether standardization is an appropriate objective and if it could
ever be achieved.\537\
---------------------------------------------------------------------------

    \535\ See Accounting for Financial Instruments Disclosures About
Liquidity Risk and Interest Rate Risk Comment Letter Summary,
Financial Accounting Standards Board, available at http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176160500931.
    \536\ See id. These respondents also asserted that institutions
are required by regulation to ensure that risks are monitored using
processes that are commensurate with the complexity of their
business. See id.
    \537\ See id.
---------------------------------------------------------------------------

(a) Request for Comment
    168. Should we revise Item 305 to provide for more standardized
disclosure that would enhance comparability among registrants? How
should we balance standardization with different methods and
assumptions that registrants may use to evaluate, monitor, and manage
market risk? How would standardization affect investors and
registrants?

3. Disclosure of Approach to Risk Management and Risk Management
Process
    Item 503(c) focuses exclusively on disclosure of significant risks
and does not address disclosure of a registrant's strategy for managing
risk. Item 305(b), however, requires disclosure about a registrant's
primary market risks and how those risks are managed. In the past,
Commission staff has discouraged registrants from including mitigating
language in their Item 503 risk factor disclosure because of concern
that mitigating language could dilute investors' perception of the
magnitude of the risk. As a result, registrants typically do not
discuss their efforts to mitigate risk in connection with their risk
factors disclosure, although some registrants describe their risk
management practices elsewhere in their filings, such as in MD&A and as
required by Item 305 for market risk.
    Disclosure about a registrant's approach to risk management could
enhance investor understanding of the possible impact of a disclosed
risk and the registrant's overall risk profile. Division staff has
observed that most large financial institutions have implemented
enterprise risk management programs and currently include detailed
disclosure about those programs in their filings. Additional disclosure
about changes to, or significant deviations from, the stated policies
could provide investors with important information about the
registrant's exposure to risk.\538\ Registrants that do not provide
disclosure about a formal enterprise risk management program may
instead provide disclosure about management's general approach to risk
management as well as specific efforts to mitigate individual
significant risks.
---------------------------------------------------------------------------

    \538\ For an example of a registrant deviating from its stated
risk management policies, see Report of Anton R. Valukas, Examiner,
In Re Lehman Brothers Holdings Inc., et al., Vol. I at 167-168
(discussing evidence that management disregarded its risk controls
with respect to bridge equity and bridge debt).
---------------------------------------------------------------------------

    We are mindful of the potential drawbacks of requiring registrants
to provide risk management or risk mitigation disclosure. Disclosure of
management's efforts to mitigate risk may suggest to investors that the
registrant's risk exposure is not significant. In addition, risk
management strategies could include confidential or proprietary
information and disclosure could result in competitive harm to the
registrant. For example, a registrant may develop and rely on a
proprietary method for hedging financial risk, and disclosure of the
method could allow others to exploit or trade against the method such
that it is no longer effective or becomes too expensive.\539\
---------------------------------------------------------------------------

    \539\ Commission concern for protecting proprietary strategies
in connection with Item 305 disclosures is reflected in four
provisions addressing proprietary concerns. See Disclosure of Market
Risk Sensitive Instruments Release. The four provisions are: (i) The
sensitivity analysis and VaR alternatives for quantitative
information; (ii) the option to report average, high, and low
sensitivity analysis and VaR instead of year end information; (iii)
for interim reports, the need for disclosure of material changes
since the end of the most recent fiscal year; and (iv) requiring a
combined, not separate, sensitivity or VaR disclosures for
voluntarily disclosed instruments, positions, or transactions.
---------------------------------------------------------------------------

a. Request for Comment
    169. Should we require registrants to describe their risk
management processes? If so, what level of detail would be appropriate?
If a registrant has no formal risk management approach or process,
should we require it to describe how it monitors and evaluates risk?
    170. Should we require registrants also to describe their
assessment of any risk management process? If so, how often should such
disclosure be required?
    171. Should we require registrants with complex risk management
approaches or processes to provide only an enterprise-level
description, or is a more granular description appropriate for these
registrants?
    172. Should we require registrants to disclose when risk tolerance
limits or other fundamental aspects of its risk management approach are
waived or changed, including any assumptions or relevant changes in
business strategy that underlies the new limits or policies?
    173. Should we require registrants to identify, if material, other
``primary risk exposures'' not already addressed and to disclose
actions taken to manage those risks?
    174. How could we facilitate a more integrated discussion of risk
exposure and risk mitigation? Should we require registrants to disclose
management's view of how material risk exposures are related and how
risk mitigation actions are connected?
    175. To the extent we require disclosure of risk management and
risk management processes, should we move the disclosure about the
extent of a board of directors' oversight of risk from Item 407(h) to
this new requirement? Similarly, should we move compensation risk
disclosure to this new requirement, or should we otherwise provide an
option for compensation risk disclosure to be given in the risk
management discussion rather than in the compensation discussion?
    176. Should we require registrants to disclose their efforts to
manage or mitigate each risk factor disclosed, similar to the risk
management disclosure required for market risk under Item
305(b)(1)(ii)? What are the challenges, including those associated with
preparation and competitive harm, with this disclosure?
    177. Would additional disclosure about risk mitigation inhibit
investors' ability to fully appreciate the significance of the risk?
Would requiring a registrant to explain how it addresses a disclosed
risk discourage registrants from disclosing generic or insignificant
risks? Alternatively, would registrants provide boilerplate disclosure
about how they address less meaningful risks, thereby resulting in even
longer risk factor disclosure?
    178. Should we require registrants to address mitigation or
management of each risk factor as part of the risk management
discussion? If so, should we also clarify that, although references to
the general risk management discussion will not satisfy this
requirement, cross-references to appropriate portions of MD&A or the
financial statements will, if disclosure otherwise would be redundant?
    179. Should we require registrants to disclose their known
uncertainties about their risk management and risk management policies
and how these might affect the registrant?
4. Consolidating Risk-Related Disclosure
    Outside of Items 503(c) and 305, a number of Items in Regulation S-
K elicit risk-related disclosures. These include Item 103, related to
material litigation and certain environmental proceedings; Item
101(d)(3), in connection with risk related to foreign operations; Item
303(a), in that material trends, uncertainties, or events that are
required to be described may also speak to certain risks; and Item
407(h), regarding the extent of a board's role in risk oversight. In
the S-K Study, the staff recommended that we consider whether to
consolidate requirements relating to risk factors, legal proceedings,
and other quantitative and qualitative information about risk and risk
management into a single requirement.\540\ We seek input on whether
investors would benefit from such a consolidation of risk-related
disclosures and whether such a requirement would present any challenges
to registrants.
---------------------------------------------------------------------------

    \540\ See S-K Study at 99.

---------------------------------------------------------------------------

a. Comments Received
    S-K Study. None.
    Disclosure Effectiveness Initiative. One comment letter supported
the suggestion to consider consolidating all risk-related requirements,
positing that consolidation would reduce redundant disclosure and
provide investors with a ``holistic view of risk through the eyes of
management.'' \541\ Another commenter recommended requiring better
integration among the financial statements, business description, risk
disclosures, market risk disclosures and the discussion of results in
MD&A.\542\
---------------------------------------------------------------------------

    \541\ See CCMC.
    \542\ See CFA Institute.
---------------------------------------------------------------------------

b. Request for Comment
    180. Should we require registrants to provide a consolidated
discussion of risk and risk management, including legal proceedings, in
a single section of a filing? If so, what information should be
included? How should this information be presented?
    181. How could investors benefit from a consolidated discussion of
risk factors, legal proceedings and other quantitative and qualitative
information about market risk and risk management? What would be the
challenges of requiring such a presentation?
    182. How would a consolidation of risk-related disclosure affect
the cost of preparing a filing, if at all?

D. Securities of the Registrant

    Disclosure about a registrant's capital stock and transactions by
registrants in their own securities helps inform investment and voting
decisions by providing investors with information about a security that
can be useful in assessing its value. Several items in Regulation S-K
require this and related disclosure about a registrant's securities:
     Item 202 requires a description of the terms and
conditions of securities that are being registered; \543\
---------------------------------------------------------------------------

    \543\ Item 202 of Regulation S-K [17 CFR 229.202]. Item 202
disclosure is not required in Forms 10-Q or 10-K.
---------------------------------------------------------------------------

     Item 701 requires disclosure of recent sales of
unregistered securities and use of proceeds from registered offerings
of securities; \544\ and
---------------------------------------------------------------------------

    \544\ Item 701 of Regulation S-K [17 CFR 229.701].
---------------------------------------------------------------------------

     Item 703 requires tabular disclosure of shares of equity
securities purchased by the registrant and affiliated purchasers.\545\
---------------------------------------------------------------------------

    \545\ Item 703 of Regulation S-K [17 CFR 229.703].
---------------------------------------------------------------------------

    Additionally, Item 201(b)(1) requires disclosure of the number of
holders of each class of a registrant's common equity.\546\ We are
seeking public input on the disclosure requirements of Items
201(b)(1),\547\ 202, 701 and 703 to help assess whether any of the
disclosure requirements should be modified and whether we should add
any new disclosure requirements. In addition, we welcome comment on the
challenges for registrants related to complying with these disclosure
requirements or any new disclosure requirements.
---------------------------------------------------------------------------

    \546\ Item 201(b)(1) of Regulation S-K [17 CFR 229.201(b)(1)].
    \547\ As part of its work to develop recommendations for the
Commission for potential changes to update or simplify the
requirements, the staff is separately considering paragraphs (a),
(c) and (d) of Item 201 relating to market information, the effect
of an offering or business combination on shareholder ownership,
dividends and securities authorized for issuance under equity
compensation plans. For a description of this project, see Section
I. Item 201(e) (performance graph) falls outside the scope of this
release because this disclosure is required only in proxy
statements.
---------------------------------------------------------------------------

1. Related Stockholder Matters--Number of Equity Holders (Item 201(b))
    Item 201(b)(1) requires disclosure of the approximate number of
holders of each class of common equity as of the latest practicable
date.\548\ Instruction 3 to Item 201 specifies that the number of
holders may be based upon the number of record holders or also may
include individual participants in security position listings, as
provided under Rule 17Ad-8 \549\ of the Exchange Act.\550\ Instruction
3 to Item 201 provides that the method of computation chosen shall be
indicated.
---------------------------------------------------------------------------

    \548\ Id.
    \549\ Exchange Act Rule 17Ad-8 [17 CFR 240.17Ad-8]. The rule
defines ``securities position listing,'' with respect to the
securities of any issuer held by a registered clearing agency in the
name of the clearing agency or its nominee, as a list of those
participants in the clearing agency on whose behalf the clearing
agency holds the issuer's securities and of the participants'
respective positions in such securities as of a specified date. The
rule also states that, upon request, a registered clearing agency
must furnish a securities position listing promptly to each issuer
whose securities are held in the name of the clearing agency or its
nominee.
    \550\ Item 201 of Regulation S-K [17 CFR 229.201].
---------------------------------------------------------------------------

a. Comments Received
    S-K Study. None.
    Disclosure Effectiveness Initiative. One commenter recommended
eliminating the requirement to disclose the number of security holders
under Item 201(b), stating that it does not provide meaningful
information since many stockholders hold their securities through a
nominee.\551\
---------------------------------------------------------------------------

    \551\ See Shearman.
---------------------------------------------------------------------------

b. Discussion
    Several decades ago, most investors of U.S. publicly traded
registrants owned their securities in registered form, meaning that the
securities were directly registered in the name of a specific investor
on the record of security holders maintained by or on behalf of the
registrant. Today, the vast majority of investors own their securities
as a beneficial owner \552\ through a securities intermediary,\553\
such as a broker-dealer or bank.\554\ This is often referred to as
holding securities in nominee or ``street name.'' The Commission first
adopted a requirement to disclose the number of record holders of a
class of securities in 1938, when it adopted the requirement that
registrants submit proxy statements to each shareholder whose proxy is
being solicited.\555\
---------------------------------------------------------------------------

    \552\ We recognize the term ``beneficial owner'' and
``beneficial ownership'' are defined in certain of our rules, such
as under Exchange Act Rules 13d-3, 16a-1 and 14b-2. Our use of the
term here is not intended to suggest that individuals holding in
``street name'' are, or should be, ``beneficial owners'' for
purposes of these Exchange Act rules. [17 CFR 240.13d-3; 17 CFR
240.16a-1; 17 CFR 240.14b-2].
    \553\ For purposes of Commission rules pertaining to the
transfer of certain securities, a ``securities intermediary'' is
defined under Exchange Act Rule 17Ad-20 [17 CFR 240.17Ad-20] as a
clearing agency registered under Exchange Act Section 17A [15 U.S.C.
78q-1] or a person, including a bank, broker, or dealer, that in the
ordinary course of its business maintains securities accounts for
others in its capacity as such.
    \554\ In 1976, the Commission reported to Congress on the
effects of the practice of registering securities in other than the
name of the beneficial owner. In its report the Commission stated
that 23.7% of shares were held in nominee and street name in 1964
and 28.6% of shares were held in nominee and street name in 1975.
Final Report of the Securities and Exchange Commission on the
Practice of Recording the Ownership of Securities in the Records of
the Issuer in Other than the Name of the Beneficial Owner of Such
Securities Pursuant to Section 12(m) of the Securities Exchange Act
of 1934, Dec. 3, 1976. Based on an analysis of available data over
the period 2008 through 2010, the Commission's Division of Economic
and Risk Analysis (``DERA'') estimates that over 85% of the holders
of securities in the U.S. markets hold through a broker-dealer or a
bank that is a DTC participant. More recently, and according to one
study, shares held in street name continue to account for over 80%
of all shares outstanding of U.S. publicly listed companies. See
PricewaterhouseCoopers LLP, Proxy Pulse, Third Edition 2015 at 8.
    \555\ See Amended Proxy Rules, Release No. 34-1823 (Aug. 11,
1938) [3 FR 1991 (Aug. 13, 1938)]. This rule required registrants to
furnish, upon written request of the record holder being solicited,
the approximate number of record holders of any specified class of
securities of which any of the holders had been or were being
solicited.
---------------------------------------------------------------------------

    In 1964, the Commission proposed amending Form 10-K to require
registrants to disclose, in addition to the number of record holders,
the amount of each class of equity securities known by the registrant
to be held ``in street names.'' \556\ Commenters generally opposed the
proposal on the grounds that the required information would be
difficult to obtain and of little use to investors, and the Commission
decided

not to require disclosure of this information.\557\ In 1980, the
Commission adopted Item 4 to Form 10-K, which consolidated disclosures
relating to the market for the registrant's securities, including the
number of holders of common stock, into a single item.\558\ As adopted,
Item 4 to Form 10-K integrated the disclosure requirements of a new
Item 9 in Regulation S-K, which the Commission adopted
concurrently.\559\
---------------------------------------------------------------------------

    \556\ See Annual Reports; Notice of Proposed Amendments, Release
No. 34-7494 (Dec. 31, 1964) [30 FR 346 (Jan. 12, 1965)].
    \557\ See General Form for Annual Reports, Release No. 34-7545
(Mar. 5, 1965) [30 FR 3430 (Mar. 16, 1965)] (``1965 Amendments to
Form 10-K Adopting Release'').
    \558\ See 1980 Form 10-K Adopting Release (noting that the new
item to Form 10-K constituted ``an amalgam'' of various other
existing requirements.).
    \559\ Id. Among other things, Item 9 of Form 10-K required
registrants to ``[s]et forth the approximate number of holders of
common stock securities of the registrant as of the latest
practicable date.'' Instruction 1 to Item 9 provided that the
computation of the approximate number of holders ``may be based upon
the number of record holders or may also include individual
participants in security position listing.'' Id.
---------------------------------------------------------------------------

    Item 201(b)'s reference to record holders is consistent with
Section 12(g) of the Exchange Act. Section 12(g) requires issuers that
are not banks, bank holding companies or savings and loan holding
companies and have total assets exceeding $10 million to register a
class of equity securities if the securities were ``held of record'' by
either (i) 2,000 persons, or (ii) 500 persons who are not accredited
investors.\560\ When Congress enacted Section 12(g) in 1964, most
security holders in the United States owned their securities as record
holders.
---------------------------------------------------------------------------

    \560\ 15 U.S.C. 781(g). See also supra note 14.
---------------------------------------------------------------------------

c. Request for Comment
    183. Should we retain or eliminate Item 201(b)(1)? Why? If
retained, should we modify the item and if so, how?
    184. As the vast majority of investors now hold their shares in
street name, does disclosure about the number of record holders
continue to be important to investors? Should we require registrants to
disclose the amount of each class of equity securities held in street
name? Should we require registrants to disclose the number of
beneficial owners? If so, how should we define ``beneficial owner'' for
purposes of Item 201(b)(1)? How would investors benefit from this
additional information? What would be the challenges registrants might
face in tracking the number of beneficial owners?
    185. What types of investors or audiences are most likely to value
the information required by Item 201(b)(1)?
2. Description of Capital Stock (Item 202)
    Item 202(a)-(d) and (f) requires a brief description of the capital
stock, debt, warrants, rights, American Depositary Receipts or any
other securities that are being registered.\561\
---------------------------------------------------------------------------

    \561\ Items 202(a)-(d) and (f) of Regulation S-K [17 CFR
229.202(a)-(d) and (f)]. Item 202(e) is outside the scope of this
release. This item requires that if securities other than common
stock are to be registered and there is an established trading
market for such securities, registrants are required to provide
market information for such securities comparable to that required
by Item 201(a) of Regulation S-K. The staff is separately
considering Item 201(a) in developing its recommendations for
potential changes to update or simplify certain disclosure
requirements. For a description of this project, see Section I.
---------------------------------------------------------------------------

a. Comments Received
    S-K Study. None.
    Disclosure Effectiveness Initiative. None.
b. Discussion
    Item 202 derives from Schedule A of the Securities Act, which
requires disclosure of the capitalization of the registrant, including
a description of the classes of capital stock and funded debt and any
securities covered by options.\562\ These requirements were included in
the earliest forms of registration statements.\563\ As part of revision
and simplification efforts in 1947, the Commission amended this
requirement to eliminate the description of securities that are not
being registered, except to the extent material to an evaluation of the
securities being registered.\564\ In 1982, Item 202 was included in
Regulation S-K \565\ as part of the ``offering-oriented items'' \566\
and is currently required only in registration statements and some
proxy statements.\567\
---------------------------------------------------------------------------

    \562\ Paragraphs 9-12 of Schedule A of the Securities Act [15
U.S.C. 77aa(9)-(12)].
    \563\ See Form A-2, Items 9 through 20. Tabular disclosure
included details about amounts authorized, amounts outstanding,
related balance sheet information, amounts held in treasury, amounts
held by subsidiaries and parent companies, amounts reserved for
officers and employees and amounts reserved for options and
warrants. See S-K Study at footnote 238.
    \564\ See Miscellaneous Amendments, Release No. 33-3186 (Jan. 8,
1947) [12 FR 224 (Jan. 15, 1947)]. See also Notice of Proposed Rules
and Form and Proposed Repeal of Certain Forms, Release No. 33-3171
(Nov. 18, 1946) [11 FR 13764 (Nov. 22, 1946)].
    \565\ See 1982 Integrated Disclosure Adopting Release. In adding
Item 202 of Regulation S-K, the Commission revised the item to
require registrants to discuss the effect on control of the company
of certain charter and bylaw antitakeover provisions. Item 202(a)(5)
of Regulation S-K [17 CFR 229.202(a)(5)].
    \566\ See Reproposal of Comprehensive Revision to System for
Registration of Securities Offerings, Release No. 33-6331 (Aug. 6,
1981) [46 FR 41902 (Aug. 18, 1981)] at 41917.
    \567\ See, e.g., Item 9 of Form S-1, Item 9 of Form S-3 and Item
1 of Form 8-A. Item 202 disclosure is also required in proxy
statements with respect to the authorization or issuance of
securities or the modification or exchange of any class of
securities of a registrant. See Items 11 and 12 of Schedule 14A [17
CFR 240.14a-101].
---------------------------------------------------------------------------

    While registrants are required to file as exhibits complete copies
of their articles of incorporation and bylaws as currently in effect,
registrants are not required to describe these documents or their
registered securities in their periodic filings.\568\ A summary
description of the material terms and conditions of the registrant's
securities, as provided under Item 202, is not required in periodic
reports and most registrants do not include such disclosure. To find
this information, investors typically must locate this disclosure
either in the registrant's exhibits, as amended, or in the registrant's
Form 8-A, which often incorporates by reference from a prior Form S-1.
---------------------------------------------------------------------------

    \568\ See Item 601(b)(3) of Regulation S-K [17 CFR
229.601(b)(3)]. Under ASC 505-10-50-3, registrants are required to
summarize the ``pertinent rights and privileges of the various
securities outstanding.''
---------------------------------------------------------------------------

    Changes in the terms and conditions of registered securities are
disclosed in Form 8-K and Schedule 14A, which require discussion of
modifications to the rights of any class of securities and amendments
to the articles of incorporation or bylaws.\569\ Frequently, these
disclosures report discrete and specific changes to the overall terms
and conditions of the registered securities such as individual
amendments to the articles of incorporation to increase the number of
shares authorized. A Form 8-K filed to report an amendment to the
articles of incorporation or bylaws may be limited to the text of the
amendment, however, the registrant must file a

complete copy of the articles of incorporation or bylaws with its next
Securities Act registration statement or periodic report.\570\ We are
seeking public input on whether a comprehensive discussion of
registered securities in periodic reports would facilitate access to
important disclosure for investors in the secondary market.
---------------------------------------------------------------------------

    \569\ Item 3.03 of Form 8-K requires disclosure of material
modifications to rights of security holders while Item 5.03 requires
disclosure of amendments to the articles of incorporation or bylaws
for amendments not disclosed in a proxy or information statement.
Item 5.03 of Form 8-K also requires disclosure of changes in fiscal
year other than by means of a submission to a vote of security
holders through the solicitation of proxies (or otherwise) or an
amendment to the articles of incorporation or bylaws [17 CFR
249.308].
    Item 12 of Schedule 14A requires disclosure if action is to be
taken regarding the modification of any class of securities of the
registrant, or the issuance or authorization for issuance of
securities of the registrant in exchange for outstanding securities.
Section (b) of Item 12 requires disclosure of any material
differences between the outstanding securities and the modified or
new securities in respect of any of the matters concerning which
information would be required in the description of the securities
in Item 202 of Regulation S-K. Item 19 of Schedule 14A requires
disclosure of amendments to the charter, bylaws or other documents.
    \570\ See Item 601(b)(3) of Regulation S-K [17 CFR
229.601(b)(3)].
---------------------------------------------------------------------------

c. Request for Comment
    186. How do investors in the secondary market access information
about the terms and conditions of a registrant's securities? Do
investors rely only on the bylaws and articles of incorporation filed
as exhibits to the registrant's Form 10-K?
    187. In addition to the disclosure requirements in registration
statements and certain proxy statements, should we require registrants
to provide Item 202 disclosure each year in Form 10-K? Would requiring
this information in the annual report facilitate investor access to
important disclosure? Should we require registrants to disclose in
their quarterly and annual reports whether changes have been made to
the terms and conditions of their securities during the reporting
period? Why? Are the Form 8-K requirements sufficient?
    188. What types of investors or audiences are most likely to value
the information required by Item 202?
    189. What is the cost of providing the disclosure required by Item
202, including the administrative and compliance costs of preparing and
disseminating this disclosure? How would these costs change if we made
any of the changes contemplated here? Please provide quantified
estimates where possible and include only those costs associated with
providing disclosure under Item 202.
    190. What are the benefits of providing the disclosure required by
Item 202? How could the benefits change if we made any of the changes
contemplated here? Please provide quantified or qualitative estimates
where possible relating to disclosure under Item 202.
3. Recent Sales of Unregistered Securities (Items 701(a)-(e))
    Item 701(a)-(e) requires disclosure of all sales of unregistered
securities sold by the registrant within the past three years and
specifies disclosure of: The date, title and amount of securities sold;
the principal underwriters and other purchasers, if the securities were
not publicly offered; the aggregate offering price for securities sold
for cash and the nature of the transaction and the nature and aggregate
amount of consideration received by the registrant; the exemption from
registration claimed; and the terms of conversion or exercise.\571\
These disclosure requirements also apply to securities issued in
exchange for property, services, or other securities.\572\
---------------------------------------------------------------------------

    \571\ Item 701(a)-(e) of Regulation S-K [17 CFR 229.701(a)-(e)].
For a discussion of Item 701(f), see Section IV.D.4.
    \572\ Id.
---------------------------------------------------------------------------

a. Comments Received
    S-K Study. Two commenters stated that disclosure of Item 701
information is not meaningful for investors.\573\ They also stated that
such disclosure should not be required in registration statements
because, to the extent recent sales of securities are material to
investors, registrants would be required to disclose that information
in their discussion of liquidity and capital resources under MD&A
pursuant to Items 303(a)(1) and (2).\574\
---------------------------------------------------------------------------

    \573\ See Silicon Valley and M. Liles (also stating that cash
flow statements would contain ``more detailed information'' about
the proceeds of securities issuances in those periods, as would the
statements of stockholders' equity for the sales of equity
securities).
    \574\ See id. Both commenters also noted that registrants would
be required to disclose the terms of any material sales of
securities made to related persons pursuant to Item 404.
---------------------------------------------------------------------------

    Disclosure Effectiveness Initiative. One commenter recommended that
the disclosure of sales of unregistered securities be limited to sales
that are material to the issuer.\575\ This commenter also suggested
reconciling the disclosure requirements of Item 701, which requires
disclosure of all unregistered sales of common equity, with those of
Item 3.02 of Form 8-K, which does not require disclosure of sales of
less than one percent of the number of shares outstanding of the equity
securities being sold. Another commenter recommended eliminating Item
701, noting overlap with Form 8-K and also stating that, for a material
sale of securities, registrants typically discuss the transaction in
MD&A.\576\
---------------------------------------------------------------------------

    \575\ See SCSGP.
    \576\ See CCMC.
---------------------------------------------------------------------------

b. Discussion
    Item 701's requirement to disclose recent sales of unregistered
securities is based, in part, on Schedule A.\577\ A disclosure
requirement in Form S-1 \578\ of sales of unregistered securities for
the past three years predated Regulation S-K.\579\ The requirement was
moved to Regulation S-K in connection with adoption of the integrated
disclosure system, but it continued to apply only to certain
registration statements.\580\
---------------------------------------------------------------------------

    \577\ Paragraph 19 of Schedule A of the Securities Act is
broader than Item 701 because it calls for the net proceeds derived
from any security sold by the issuer during the two years preceding
the filing of the registration statement, including the price at
which such security was offered. See Securities Act of 1933 Schedule
A Paragraph 19 [15 U.S.C. 77aa(19)]. Other differences include Item
701's three-year timeframe, as opposed to two years in Schedule A,
and the fact that Item 701 is limited to unregistered sales of
equity securities while Schedule A contains neither of these
limitations.
    \578\ 17 CFR 239.11.
    \579\ See, e.g., Adoption of Amendments to Form S-1, Release No.
33-3434 (Jan. 31, 1952) [17 FR 1177 (Feb. 7, 1952)] (adopting
disclosure requirements to Form S-1 substantially similar to current
Item 701(a)-(e) of Regulation S-K). See also 1980 Proposed Revisions
(noting that the requirement to disclose sales of unregistered
securities during the past three years in proposed Form C was the
same as in Item 25 of Form S-1 at that time).
    \580\ See 1982 Integrated Disclosure Adopting Release. When Item
701 was moved to Regulation S-K, this disclosure was required in
Forms 10-Q, S-1, S-11 and 10. The Commission had adopted a similar
requirement for Forms 10-K and 10-Q in 1972. See Adoption of
Amendments to Annual Report Form 10-K and Quarterly Report Form 10-Q
Under the Securities Exchange Act of 1934, Release No. 34-9443 (Jan.
10, 1972) [37 FR 601 (Jan. 14, 1972)]. The Commission eliminated
this requirement from Form 10-K in 1980, consistent with
recommendations by the Sommer Report. See 1980 Form 10-K Adopting
Release. According to the Sommer Report, the requirement was
unnecessary in Form 10-K because the same information was available
in the financial statements and required to be disclosed in Form 10-
Q. See Sommer Report at 486.
---------------------------------------------------------------------------

    In 1996, the Commission adopted amendments to require timely
disclosure of unregistered equity offerings and amended Forms 10-K and
10-Q to include Item 701(a)-(e).\581\ This amendment was intended to
address concerns that unregistered offerings were frequently
undisclosed and such offerings could materially affect the financial
condition of registrants or result in significant dilution to existing
shareholders.\582\ The Commission also expanded Item 701 to require
registrants to disclose terms of conversion or exercise for convertible
or exchangeable equity securities.\583\
---------------------------------------------------------------------------

    \581\ See Periodic Reporting of Unregistered Equity Sales,
Release No. 34-37801 (Oct. 10, 1996) [61 FR 54506 (Oct. 18, 1996)]
(``Periodic Reporting of Unregistered Equity Sales Release'').
    \582\ See, e.g., Streamlining Disclosure Requirements Relating
to Significant Business Acquisitions and Requiring Quarterly
Reporting of Unregistered Equity Sales, Release No. 33-7189 (Jun.
27, 1995) [60 FR 35656 (July 10, 1995)] (expressing concern about
the lack of disclosure in the context of addressing issues with
Regulation S offerings); Periodic Reporting of Unregistered Equity
Sales Release.
    \583\ See id. See also Item 701(e) of Regulation S-K [17 CFR
229.701(e)].
---------------------------------------------------------------------------

    In 2004, the Commission sought more timely disclosure of
unregistered equity offerings and added Item 3.02 to Form 8-K. Item
3.02 requires registrants to

disclose, within four business days,\584\ the information specified in
paragraphs (a) and (c) through (e) of Item 701 \585\ when aggregate
equity securities sold are equal to or exceed one percent of the number
of shares outstanding of the class of equity securities sold.\586\ The
Commission initially proposed to move the Item 701 disclosure
requirement out of Forms 10-Q and 10-K and into Form 8-K.\587\ This
proposal was based on the Commission's belief that more timely
disclosure of this information would benefit investors due to the
potentially significant dilutive effect on existing investors'
holdings.\588\ In response to comments on the proposing release, the
Commission adopted the one percent threshold for disclosure on Form 8-
K, noting that registrants would still be required to report all other
unregistered sales of equity securities in their periodic reports.\589\
Concurrently, the Commission revised Forms 10-K and 10-Q to require
disclosure only of unregistered sales of equity securities not
previously disclosed on Form 8-K.\590\
---------------------------------------------------------------------------

    \584\ See Item 3.02(a) of Form 8-K (stating the registrant has
no obligation to disclose information under this Item 3.02 until the
registrant enters into an agreement enforceable against the
registrant, whether or not subject to conditions, under which the
equity securities are to be sold. If there is no such agreement, the
registrant must provide the disclosure within four business days
after the occurrence of the closing or settlement of the transaction
or arrangement under which the equity securities are to be sold).
    \585\ See 2004 Form 8-K Adopting Release.
    \586\ Item 3.02(b) of Form 8-K. SRCs are not required to file a
Form 8-K if the securities sold, in the aggregate, constitute less
than five percent of the number of shares outstanding of the class
of equity securities sold.
    \587\ Additional Form 8-K Disclosure Requirements and
Acceleration of Filing Date, Release No. 33-8106 (June 17, 2002) [67
FR 42914 (June 25, 2002)] (``2002 Form 8-K Proposing Release'').
    \588\ See id. The Commission solicited comment on whether there
was value to requiring the ``aggregate listing'' of sales made
during quarterly and annual periods even though Form 8-K would
report each sale as it occurred. The Commission also solicited
comment on the question of whether the Form 8-K disclosure should be
limited to large unregistered sales and suggested possible
disclosure thresholds equal to a percentage of the company's
outstanding shares or a percentage of the company's market float.
See id. at 42923.
    \589\ See 2004 Form 8-K Adopting Release at 15603 (``In response
to concerns raised by commenters, we have limited the disclosure of
sale of unregistered equity securities required to be filed on Form
8-K. Under the new item, no Form 8-K need be filed if the equity
securities sold in the aggregate since the company's last report
filed under this item or last periodic report, whichever is more
recent, constitute less than 1% of the company's outstanding
securities of that class.'').
    \590\ See id. Item 701 information need not be disclosed in a
Form 10-K if it has been previously included in a Form 10-Q or Form
8-K. See Item 5(a) of Form 10-K. Similarly, Item 701 information
need not be disclosed in a Form 10-Q if it has been previously
disclosed in a Form 8-K. See Item 2(a) of Part II of Form 10-Q.
---------------------------------------------------------------------------

    Some of the disclosure required by Item 701(a)-(e) may overlap with
disclosure in the statement of stockholders' equity, which is required
in the annual financial statements,\591\ or in the notes to the
financial statements. For example, under U.S. GAAP, registrants must
disclose the number of shares sold, title of class of stock sold and
net proceeds.\592\ Registrants are also required to discuss the rights
and privileges of the securities outstanding, such as conversion or
exercise prices and pertinent dates.\593\ On the other hand, U.S. GAAP
does not require disclosure of underwriters, underwriting discounts,
the exemption claimed or the identity of the purchasers, as required by
Item 701. In addition, accounting standards do not distinguish between
registered and unregistered sales of securities.
---------------------------------------------------------------------------

    \591\ Rule 3-04 of Regulation S-X [17 CFR 210.3-04]. Registrants
are not required to provide a statement of stockholders' equity with
their interim financial statements.
    \592\ See ASC Topic 505-10-50-2. Registrants are not required to
disclose the aggregate offering price.
    \593\ See ASC Topic 505-10-50-3. ASC Topic 470-10-50-5 requires
the same information for debt securities. While the date of sale is
not required, registrants usually include it in their discussions of
the rights and privileges of securities sold.
---------------------------------------------------------------------------

c. Request for Comment
    191. Should we retain or eliminate Item 701(a)-(e)? Why? Does the
disclosure required under Item 701(a)-(e) provide important information
that is not available in either MD&A or the financial statements?
    192. Does the Item 3.02 of Form 8-K disclosure requirement for
issuances of one percent or greater and the Item 701 requirement for
all issuances strike the right balance between disclosing larger
issuances promptly and all others quarterly? Is one percent an
appropriate threshold? If not, what would be an appropriate threshold
and why?
    193. Should we revise Forms 10-K and 10-Q to require disclosure of
all unregistered sales of securities during the reporting period,
including those already reported on Form 8-K? What would be the
benefits to investors? Alternatively, should we require registrants to
cross-reference or include a hyperlink to any previously filed Form 8-K
containing Item 701 information for the reporting period or incorporate
such forms by reference? What would be the advantages or disadvantages
associated with either of these approaches?
    194. Should we remove the Item 701 disclosure requirement from
Forms 10-K and 10-Q? If so, should we revise Item 3.02 of Form 8-K to
remove the one percent threshold and require registrants to disclose
all unregistered sales of securities on Form 8-K? Alternatively, should
we eliminate Item 3.02 of Form 8-K and instead require disclosure only
in Forms 10-K and 10-Q?
    195. Disclosure provided in response to Item 701(a)-(e) can range
from a single paragraph to multiple pages. In Form 10-K, this
disclosure is provided as part of Item 5 of Part II (Market for
Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities) while in Form 10-Q this disclosure is
provided as Item 2 of Part II (Unregistered Sales of Equity Securities
and Use of Proceeds). Should we require this disclosure where it
currently appears, in the context of the liquidity discussion in MD&A,
or elsewhere?
    196. Do registrants face any particular challenges in complying
with the item's disclosure requirements?
4. Use of Proceeds From Registered Securities (Item 701(f))
    Item 701(f) requires a registrant to disclose the use of proceeds
from its first registered offering.\594\ The registrant must provide
the following disclosure in its first Exchange Act periodic report
after effectiveness of the Securities Act registration statement:
---------------------------------------------------------------------------

    \594\ Item 701(f) of Regulation S-K [17 CFR 229.701(f)].
---------------------------------------------------------------------------

     The effective date of the Securities Act registration
statement;
     the offering date or an explanation of why the offering
has not commenced;
     if the offering terminated before any securities were
sold, an explanation of the termination;
     if the offering did not terminate before any securities
were sold, registrants must disclose (i) whether the offering has
terminated and, if so, whether it terminated before the sale of all
securities registered; (ii) the names of the managing underwriters, if
any; (iii) the title of each class of securities registered; (iv) for
each class of securities, the amount registered, the aggregate offering
price of the amount registered, the amount sold, and the aggregate
offering price of the amount sold to date; (v) the amount of expenses
incurred by the registrant in connection with the issuance and
distribution of the securities registered; (vi) net offering proceeds
after deducting expenses; (vii) the amount of net offering proceeds
used for certain enumerated purposes; and (viii) a brief description of
any material change from the prospectus disclosure about the use of
proceeds.\595\
---------------------------------------------------------------------------

    \595\ Id.
---------------------------------------------------------------------------

    Item 701(f) requires registrants to provide disclosure in each
subsequent

periodic report to the extent it has changed since the last periodic
report filed. Registrants must continue to provide this disclosure
until the application of all of the offering proceeds or termination of
the offering.
a. Comments Received
    S-K Study. Two commenters recommended eliminating Item 701(f),
indicating the requirement does not result in useful information for
investors since companies cannot necessarily determine whether a dollar
spent was derived from revenue or from the net proceeds of a securities
offering, and that the discussion of cash flow in MD&A should already
address material uses of cash.\596\
---------------------------------------------------------------------------

    \596\ See Silicon Valley; M. Liles.
---------------------------------------------------------------------------

    Disclosure Effectiveness Initiative. None.
b. Discussion
    The precursor to Item 701(f) originated in Rule 463 of the
Securities Act, which was adopted with related Form SR in 1971.\597\ In
proposing this rule, the Commission noted that disclosure about the
progress of an offering of registered securities would enable the
Commission to know whether the registrant is required to file and use
an updated Section 10(a)(3) prospectus and whether ``dealers effecting
transactions in the registered security must furnish a copy of the
prospectus to purchasers.'' \598\ The Commission further noted that, if
registrants have used offering proceeds for purposes different from
those stated in the prospectus, investors may have been misled as to
the purposes for which the funds supplied by them would be applied.
Information about the actual use of proceeds following the offering
would indicate whether statements in the prospectus were borne out by
the registrant's subsequent actions.\599\
---------------------------------------------------------------------------

    \597\ See Adoption of Rule 463 and Form SR Requiring Reports by
First-Time Registrants of Sales of Registered Securities and Use of
Proceeds Therefrom, Release No. 33-5141 (Apr. 19, 1971) [36 FR 7896
(Apr. 28, 1971)] (``Rule 463 Adopting Release''). Form SR was a
stand-alone report required to be filed once every six months
following the effective date of a registrant's first Securities Act
registration statement.
    \598\ Notice of Proposal to Require Reports by First-Time
Registrants of Sales of Registered Securities and Use of Proceeds
Therefrom, Release No. 33-5130 (Feb. 8, 1971) [36 FR 3429 (Feb. 24,
1971)] at 3430.
    \599\ See id. As adopted, Rule 463 did not require a Form SR to
be filed with respect to any offering of securities issued by any
investment company registered under the Investment Company Act of
1940; any public utility company or public utility holding company
required to file reports with any state or federal authority; or
with respect to American depositary receipts for foreign securities.
See Rule 463 Adopting Release.
---------------------------------------------------------------------------

    In 1980, the Commission proposed revisions to Rule 463 and Form SR
to require, among other things, disclosure of use of proceeds beyond
first-time registered offerings.\600\ After considering comments on the
proposal, the Commission concluded it was not clear that the benefits
from such an extension would outweigh the additional reporting burdens
imposed on registrants.\601\ At the same time, the Commission affirmed
the use of Form SR for first-time issuers and noted that commenters
generally did not object to the use of Form SR to elicit information
about use of proceeds from first-time issuers.\602\
---------------------------------------------------------------------------

    \600\ See Report of Sales of Securities, Release No. 33-6251
(Oct. 23, 1980) [45 FR 71811 (Oct. 30, 1980)]. The proposed
requirement was intended to facilitate the determination of whether
an issuer of a direct distribution or a best efforts underwritten
offering that was not a first-time offering was complying with the
prospectus delivery and updating requirements of Sections 4(3) and
10(a)(3) of the Securities Act.
    \601\ See Report of Sales of Securities and Use of Proceeds,
Release No. 33-6346 (Sept. 21, 1981) [46 FR 48137 (Oct. 1, 1981)].
    \602\ See id.
---------------------------------------------------------------------------

    In 1997, the Commission eliminated Form SR and adopted Item 701(f)
to require disclosure about the use of offering proceeds in periodic
reports.\603\ The Commission stated its belief that relocating the
disclosure to periodic reports would make it more accessible to
investors, since periodic reports were more commonly monitored by the
public than Form SR.\604\ The adoption of Item 701(f) led to use of
proceeds information being reported on a quarterly basis instead of
semi-annually through Form SR.
---------------------------------------------------------------------------

    \603\ See Phase Two Recommendations of Task Force on Disclosure
Simplification Release.
    \604\ See id. The Commission also noted that consolidating the
disclosure requirements into the periodic report forms should ease
reporting burdens on registrants by reducing the number of forms
required to be filed.
---------------------------------------------------------------------------

    Other disclosure requirements may elicit information about the use
of offering proceeds. For example, registrants may disclose the
proceeds from initial public offerings as a material source of cash in
the liquidity discussion within MD&A.\605\ Changes in a registrant's
statement of cash flow and statement of stockholders' equity in the
financial statements may also indicate the progress of its initial
registered offering. However, certain information about the progress of
an offering, such as when a registrant has not commenced an offering or
the offering is terminated before any securities were sold, may not be
available to investors outside of disclosures required by Item 701(f).
---------------------------------------------------------------------------

    \605\ See Item 303(a)(1) of Regulation S-K [17 CFR
229.303(a)(1)] (requiring registrants to discuss and analyze
``internal and external sources of liquidity'') and Item
303(a)(2)(ii) of Regulation S-K (requiring registrants to discuss
and analyze any known material trends, favorable or unfavorable, in
capital resources, including changes between equity, debt and any
off-balance sheet financing arrangements).
---------------------------------------------------------------------------

c. Request for Comment
    197. Should we retain or eliminate disclosure about the use of
offering proceeds required by Item 701(f)? Why? If we retain this
requirement, how could we improve it? For example, should we modify the
item, such as by expanding it to offerings other than a registrant's
first registered offering or by requiring other additional disclosure?
Why?
    198. In Form 10-K, this disclosure is provided as part of Item 5 of
Part II (Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities) while in Form 10-Q
this disclosure is provided as Item 2 of Part II (Unregistered Sales of
Equity Securities and Use of Proceeds). Should we require this
information in its current location, in the context of liquidity or
elsewhere? Should we require disclosure only if the actual use of
proceeds differs materially from the description of the offering?
5. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers (Item 703)
    Item 703 requires tabular disclosure of purchases of registered
equity securities by the registrant or any affiliated purchaser
including:
     Total number of shares repurchased;
     average price paid per share;
     total number of shares purchased as part of publicly
announced plans or programs; and
     maximum number (or approximate dollar value) of shares
that may yet be purchased under the plans or programs.\606\
---------------------------------------------------------------------------

    \606\ Item 703 of Regulation S-K [17 CFR 229.703].
---------------------------------------------------------------------------

    Item 703 also requires footnote disclosure of (1) the date each
plan or program was announced, (2) the dollar amount (or share amount)
approved, (3) the expiration date (if any) of each plan or program, (4)
each plan or program that has expired during the period covered by the
table, and (5) each plan or program the registrant has determined to
terminate prior to expiration, or under which the issuer does not
intend to make further purchases.\607\
---------------------------------------------------------------------------

    \607\ Instruction 2 to paragraphs (b)(3) and (b)(4) of Item 703
of Regulation S-K [17 CFR 229.703].
---------------------------------------------------------------------------

    Item 703 requires disclosure for each month included in the period
covered by the report. Form 10-Q requires this information for any
equity repurchase made in the quarter covered by the

report,\608\ while Form 10-K requires this disclosure for repurchases
made in the fourth fiscal quarter of the registrant's fiscal year.\609\
---------------------------------------------------------------------------

    \608\ Item 2(c) of Part II of Form 10-Q [17 CFR 249.308a].
    \609\ Item 5(c) of Form 10-K [17 CFR 249.310].
---------------------------------------------------------------------------

a. Comments Received
    S-K Study. None.
    Disclosure Effectiveness Initiative. One commenter recommended the
Commission and the FASB coordinate efforts to review and clarify the
different disclosure objectives of Item 703 and U.S. GAAP to determine
whether both requirements continue to provide distinct and useful
information.\610\ This commenter also recommended, alternatively, that
if the Commission and the FASB determine that the requirements are
still useful, that they issue joint guidance on how both requirements
should work together.
---------------------------------------------------------------------------

    \610\ See SCSGP (specifying overlap between Item 703 and ASC
Topic 505).
---------------------------------------------------------------------------

    Another commenter recommended enhanced disclosure of the ``pros''
and ``cons'' of share repurchase programs by addressing, among other
things, (i) the time period specified for each program, (ii) the
maximum number of shares authorized by the board to be repurchased,
(iii) the cash (including any borrowings) spent on repurchases and
dividends compared to that spent on reinvestment, and (iv) the impact
of repurchase programs on corporate indebtedness.\611\ This commenter
also recommended that companies consider disclosing the sources of
funds to finance stock buybacks.
---------------------------------------------------------------------------

    \611\ See letter from William J. Klein and Thomas J. Amy (May
12, 2015) (``Klein and Amy 3'').
---------------------------------------------------------------------------

b. Discussion
    In 2003, the Commission adopted Item 703 to increase the
transparency of security repurchases by registrants and their
affiliates and to inform investors of registrants' stated repurchasing
intentions and subsequent repurchases.\612\ The Commission noted in the
adopting release that public announcement of a repurchase is often
followed by a rise in the registrant's stock price, and that studies
have shown some registrants publicly announce repurchase programs but
either do not repurchase shares or only repurchase a small portion of
the publicly disclosed amount. Item 703 was intended to inform
investors whether, and to what extent, registrants follow through on
their original repurchase plans and to provide investors with
information that could affect a registrant's stock price.\613\
---------------------------------------------------------------------------

    \612\ See Purchases of Certain Equity Securities by the Issuer
and Others, Release No. 33-8335 (Nov. 10, 2003) [68 FR 64952 (Nov.
17, 2003)].
    \613\ See id.
---------------------------------------------------------------------------

    In recent years, stock repurchases by registrants have increased
significantly.\614\ According to media reports, since 2004 U.S.
companies have spent nearly $7 trillion repurchasing their own
shares.\615\ Common reasons for engaging in repurchases include
returning excess cash to shareholders,\616\ boosting earnings per share
\617\ and offsetting share dilution resulting from employee benefit
plans.\618\ Repurchases typically affect earnings per share by reducing
the amount of shares outstanding,\619\ except when repurchased shares
are distributed to employees as compensation. Recent studies have found
that, since the Commission adopted Item 703, registrants have announced
smaller open market repurchases \620\ and have completed announced open
market repurchases at a higher rate.\621\
---------------------------------------------------------------------------

    \614\ See, e.g., Oliver Renick and Michael P. Regan, Getting
High on Their Own Supply, Bloomberg Businessweek, July 16, 2015,
available at http://www.bloomberg.com/news/articles/2015-07-16/corporate-stock-buybacks-make-earnings-look-better (citing data that
companies in the S&P 500 spent more than $550 billion in stock
repurchases in 2014); John Waggoner, Beware the Stock-Buyback Craze,
The Wall Street Journal, June 19, 2015, available at http://www.wsj.com/articles/beware-the-stock-buyback-craze-1434727038
(noting that stock repurchases are returning to pre-financial crisis
levels and citing research indicating that companies in the S&P 500
repurchased about $148 billion of their own shares in the first
quarter of 2015); Audit Analytics, Research and Development Up
Despite Stock Buybacks, June 15, 2015, available at http://www.auditanalytics.com/blog/research-and-development-up-despite-stock-buybacks (citing research that stock buybacks have surpassed
$2.1 trillion since the beginning of the first quarter of 2009 among
S&P 500 companies).
    \615\ See Andrew Ross Sorkin, Stock Buybacks Draw Scrutiny from
Politicians, The New York Times, Aug. 10, 2015, available at http://www.nytimes.com/2015/08/11/business/stock-buybacks-draw-scrutiny-from-politicians.html (citing data from Mustafa Erdem Sakinc of the
Academic-Industry Research Network).
    \616\ See, e.g., Maxwell Murphy and John Kester, Buybacks Can
Juice Per-Share Profit, Pad Executive Pay, The Wall Street Journal,
Oct. 19, 2014, available at http://www.wsj.com/articles/buybacks-can-juice-per-share-profit-executive-pay-1414453356 (``Murphy and
Kester'').
    \617\ See, e.g., Maxwell Murphy, The Big Number, The Wall Street
Journal, Apr. 6, 2015, available athttp://www.wsj.com/articles/the-big-number-1428362150 (``Murphy'').
    \618\ See, e.g., Gerrit De Vynck, BlackBerry Plans Share Buyback
to Offset Employee Incentives, Bloomberg Business, May 21, 2015,
available at http://www.bloomberg.com/news/articles/2015-05-21/blackberry-planning-share-buyback-to-offset-employee-incentives;
Ford Announces $1.8 Billion Share Buyback Program, Can Reduce Debt,
Chicago Tribune, May 7, 2014, available at http://articles.chicagotribune.com/2014-05-07/marketplace/sns-rt-us-ford-stocks-buyback-20140507_1_ford-motor-co-ford-stock-103-million-shares. See also Karen Brettell, David Gaffen and David Rohde, The
Cannibalized Company, Reuters, Nov. 16, 2015, available at http://www.reuters.com/investigates/special-report/usa-buybacks-cannibalized (stating that the prevalence of share repurchases is
the result of several factors: Pressure from activist investors;
executive compensation programs that tie pay to earnings per share
and share prices; increased global competition; and ``fear of making
long-term bets on products and services that may not pay off'').
    \619\ See E.S. Browning, Is the Surge in Stock Buybacks Good or
Evil?, The Wall Street Journal, Nov. 22, 2015, available at http://www.wsj.com/articles/is-the-surge-in-stock-buybacks-good-or-evil-1448188684; Murphy and Kester. See also Murphy (noting that 22
companies in the S&P 500 reported lower profits but still posted
flat or positive earnings per share in 2014 solely from share
repurchases, and that 308 companies in the index ended the year with
fewer shares outstanding).
    \620\ See Alice A. Bonaim[eacute], Mandatory Disclosure and Firm
Behavior: Evidence from Share Repurchases, 90 Accounting Review 4,
1333 (2015) (``Bonaim[eacute] 2015'').
    \621\ See Michael Simkovic, The Effect of Mandatory Disclosure
on Open Market Repurchases, 6 Berkley Bus. L.J. 1, 96 (2009)
(comparing a sample of post-2003 open market repurchases with
literature on open market repurchases predating Item 703);
Bonaim[eacute] 2015.
---------------------------------------------------------------------------

    The staff has observed that registrants generally comply with the
item requirements but often do not analyze the impact of stock
repurchases in the context of MD&A. Even when the amount used to
repurchase shares exceeds a registrant's net income or cash generated
from operating activities for the reporting period, registrants do not
always analyze these repurchases in MD&A.
    While some of the disclosure required under Item 703 overlaps with
requirements under U.S. GAAP,\622\ there are differences between the
two standards. Item 703 disclosure is required on a quarterly basis
while U.S. GAAP requires annual disclosure. Additionally, disclosure
requirements under U.S. GAAP vary depending on the type of transaction
through which shares are repurchased, and in some situations U.S. GAAP
disclosures are more extensive than those required under Item 703.\623\
Disclosure provided

under U.S. GAAP is also audited, unlike Item 703 disclosure. Typically,
registrants provide disclosure about share repurchases in both the
notes to the financial statement and in non-financial statement
disclosures.
---------------------------------------------------------------------------

    \622\ The dollar amount and the number of shares repurchased are
disclosed in the annual Statement of Shareholders' Equity, because
U.S. GAAP requires the repurchase of stock to be deducted from
capital stock, additional paid-in capital, and retained earnings.
See ASC Topics 505-10-50, 505-30-30 and Rule 3-04 of Regulation S-X.
This financial statement presents shareholders' equity activity in a
roll forward of each of the shareholders' equity components from the
beginning to the end of the annual period. Article 10 of Regulation
S-X does not require an interim period statement of shareholders
equity. Instead, Rule 10-01(a)(5) requires disclosure of events
subsequent to the end of the most recent fiscal year that have
occurred which have a material impact on the registrant.
    \623\ For example, for shares repurchased through accelerated
share repurchase programs, registrants must disclose the nature and
terms of the arrangement with the seller from which the registrant
is acquiring its shares, including the number of shares subject to
the contract, per share price terms and settlement options
available. See ASC Topic 815-40-50-5.
---------------------------------------------------------------------------

    While Item 703 requires disclosure of all monthly repurchases on a
quarterly basis,\624\ other jurisdictions require this disclosure more
frequently.\625\ We seek comment on whether we should require more
frequent or more granular information about repurchases or whether the
current disclosure requirements are sufficient.
---------------------------------------------------------------------------

    \624\ See Item 2(c) of Part II of Form 10-Q and Item 5(c) of
Form 10-K.
    \625\ For example, exchange listing requirements in Australia
require disclosure of share repurchases by the next business day.
See Australian Securities Exchange Listing Rule 3.8A, available at
http://www.asx.com.au/documents/rules/Chapter03.pdf.
---------------------------------------------------------------------------

c. Request for Comment
    199. Is the information required under Item 703 about repurchases
of a registrant's equity securities important to investors? If so, are
there any revisions we could make to Item 703 to improve the disclosure
provided to investors?
    200. Should we require more granular information on repurchases of
a registrant's equity securities? If so, what additional detail or more
granular information should we require? For example, should we require
disclosure about incurrence of indebtedness to fund repurchases or the
impact repurchases had on performance measures, such as earnings per
share or other items? If so, how should this information be formatted
and presented?
    201. Does Item 703 provide important information that is not also
disclosed in a registrant's financial statements? Are there benefits to
investors in providing this information in both the financial
statements and in non-financial statement disclosure?
    202. Item 703 requires disclosure of all repurchases of registered
securities and does not have a de minimis requirement. Do investors
find disclosure of all repurchases of securities during a registrant's
fiscal quarter important to making a voting or investment decision?
Should we adopt a general materiality standard or specify a monetary
threshold for Item 703 disclosure in periodic reports?
    203. Item 703 disclosure is required on a quarterly basis, while
relevant U.S. GAAP disclosure is required on an annual basis. Should we
require more frequent Item 703 disclosure? If so, what timeframe for
reporting repurchases would be appropriate?
    204. Should we require registrants to report repurchases on Form 8-
K? For example, should we require Form 8-K disclosure only of
repurchases that exceed a certain threshold, similar to Item 3.02 of
Form 8-K, which requires registrants to disclose sales of equity
securities that constitute more than one percent of the shares
outstanding of the class of equity securities? If so, what should this
threshold be and why?

E. Industry Guides

    The Industry Guides express the disclosure policies and practices
of the Division and are intended to assist registrants and their
counsel in preparing disclosure for their filings.\626\ Currently,
there are five Industry Guides that address disclosures by: (i) Bank
holding companies,\627\ (ii) oil and gas programs,\628\ (iii) real
estate limited partnerships,\629\ (iv) property-casualty insurance
underwriters,\630\ and (v) mining companies.\631\ All five of the
Industry Guides apply to disclosure in Securities Act registration
statements. The Industry Guides for bank holding companies, property-
casualty insurance underwriters, and mining companies also apply to
disclosure in Exchange Act filings.\632\
---------------------------------------------------------------------------

    \626\ Although the Commission published the Industry Guides,
they do not constitute Commission rules and instead are statements
of staff policy. See Rescission of Guides and Redesignation of
Industry Guides, Release No. 33-6384 (Mar. 3, 1982) [47 FR 11476
(Mar. 16, 1982)] (``Industry Guide Release'') (``These guides remain
as an expression of the policies and practices of the Division of
Corporation Finance and their status is unaffected by [the listing
of the Industry Guides in Regulation S-K].'' Id. at 11476).
    \627\ Securities Act and Exchange Act Industry Guide 3--
Statistical Disclosure by Bank Holding Companies. Industry Guide 3
was first published in 1976 as Securities Act Guide 61 and Exchange
Act Industry Guide 3. See Guides for Statistical Disclosure by Bank
Holding Companies, Release No. 33-5735 (Aug. 31, 1976) [41 FR 39007
(Sept. 14, 1976)]. There have been only minor revisions to the text
of Industry Guide 3 since its re-designation as an Industry Guide in
1982. Revisions relating to non-performing loan disclosure
requirements were implemented in 1983, and revisions relating to
exposures to borrowers in certain foreign countries were implemented
in 1986. See Revision of Industry Guide Disclosures for Bank Holding
Companies, Release No. 33-6478 (Aug. 11, 1983) [48 FR 37609 (Aug.
19, 1983)]; Amendments to Industry Guide Disclosures by Bank Holding
Companies, Release No. 33-6677 (Nov. 25, 1986) [51 FR 43594 (Dec. 3,
1986)].
    \628\ Securities Act Industry Guide 4--Prospectuses Relating to
Interests in Oil and Gas Programs. Industry Guide 4 was first
published in 1970 as Guide 55, which was redesignated as Securities
Act Industry Guide 4 in 1982. See Definitive Guide for the
Preparation of Prospectuses Relating to Interests in Oil and Gas
Programs, Release No. 33-5036 (Jan. 19, 1970) [35 FR 1233 (Jan. 30,
1970)]. While the disclosure requirements for oil and gas producing
activities were modernized in 2008 (at which time Industry Guide 2
was eliminated), the changes did not affect Securities Act Industry
Guide 4. Securities Act Industry Guide 4 is focused on disclosure
relating to the offering of interests in oil and gas programs, such
as the terms of the offering, the participation in costs and
revenues, application of proceeds and risk factors.
    \629\ Securities Act Industry Guide 5--Preparation of
Registration Statements Relating to Interests in Real Estate Limited
Partnerships. Industry Guide 5 was originally published in 1976 as
Guide 60 and redesignated as Securities Act Industry Guide 5 in
1982. See Preparation of Registration Statements Relating to
Interests in Real Estate Limited Partnerships, Release No. 33-5692
(March 17, 1976) [41 FR 17403 (Apr. 26, 1976)]; Industry Guide
Release. In 1991 the Commission expanded the application of Industry
Guide 5 to include the preparation of registration statements for
real estate investment trusts and all other limited partnership
offerings, as applicable. See Limited Partnership Reorganizations
and Public Offerings of Limited Partnership Interests, Release No.
33-6900 (June 17, 1991) [56 FR 28979 (June 25, 1991)].
    \630\ Securities Act Industry Guide 6 and Exchange Act Industry
Guide 4--Disclosures Concerning Unpaid Claims and Claim Adjustment
Expenses of Property-Casualty Insurance Underwriters. These Industry
Guides were first published in 1984 and there have been no
significant revisions since their adoption. See Rules and Guide for
Disclosure Concerning Reserves for Unpaid Claims and Claim
Adjustment Expenses of Property-Casualty Underwriters, Release No.
33-6559 (Nov. 27, 1984) [49 FR 47594 (Dec. 6, 1984)].
    \631\ Securities Act and Exchange Act Industry Guide 7--
Description of Property by Issuers Engaged or To Be Engaged in
Significant Mining Operations (``Industry Guide 7''). Industry-
specific disclosure requirements for mining companies were
previously included in various Securities Act Forms. In 1992, in
connection with the Commission's small business initiatives that
rescinded Form S-18, Item 17A of Form S-18 was redesignated as
Industry Guide 7, so that the industry specific guidance would be
applicable to all issuers engaged in mining operations, not only to
small business issuers. See Small Business Initiatives, Release No.
33-6949 (July 30, 1992) [57 FR 36442 (Aug. 13, 1992)] (``Small
Business Initiatives Adopting Release''). A rulemaking petition to
amend Industry Guide 7 was submitted to the Commission in October
2012. See letter from the Society for Mining, Metallurgy and
Exploration, Oct. 1, 2012, available at http://www.sec.gov/rules/petitions/2012/petn4-654.pdf.
    \632\ Guidance contained in Exchange Act Industry Guides 3 and 4
applies to the description of business portion of registration
statements filed on Form 10; in proxy and information statements
relating to mergers, consolidations, acquisitions, and similar
matters (Item 14 of Schedule 14A and Item 1 of Schedule 14C); and in
reports filed on Forms 10-K. See Item 802 of Regulation S-K [17 CFR
229.802]. Exchange Act Industry Guide 7 does not specify the
Exchange Act filings to which the guidance applies.
    In proposing to re-designate the Industry Guides, the Commission
noted that industry guidelines ``maximize'' the quality of
disclosure in certain industries. Accordingly, though not
specifically applicable to Exchange Act filings, Industry Guide 5
may be useful in determining the type of information that might be
important in an Exchange Act filing for a real estate program. See
Proposed Revision of Regulation S-K and Guides for the Preparation
and Filing of Registration Statements and Reports, Release No. 33-
6276 (Dec. 23, 1980) [46 FR 78 (Jan. 2, 1981)] (``1980 Proposed
Revision of Regulation S-K'').
---------------------------------------------------------------------------

    We are seeking public input on whether the Industry Guides elicit
disclosure that is important to investment and voting decisions. We are
interested in commenters' views on

whether the Industry Guides provide useful guidance for registrants
that improves disclosure to investors. Additionally, we are seeking
input on whether the Industry Guides or portions of the Industry Guides
should be codified in Regulation S-K.\633\
---------------------------------------------------------------------------

    \633\ We focus only on the Industry Guides in this section of
the release. We do not address items of Regulation S-K that contain
industry-specific disclosure requirements, such as Item 104, which
requires disclosure about mine safety that is applicable only to
registrants that operate coal or other mines. Additionally, this
section focuses on the Industry Guides generally and does not pose
questions specific to any of the Industry Guides, although we
welcome comments on specific revisions to any of the Industry
Guides. As part of the Disclosure Effectiveness Initiative, the
staff is currently considering recommendations for Industry Guides 3
and 7. Comment letters received specific to Industry Guides 3 and 7
are being considered as part of these staff recommendations.
---------------------------------------------------------------------------

1. Comments Received
    S-K Study. None.
    Disclosure Effectiveness Initiative. A few commenters recommended
general updates to all Industry Guides.\634\ One commenter recommended
that we consider additional industry-specific disclosure requirements
and consider whether changes in the economy require additional
industry-specific disclosure in either or both Regulations S-X and S-
K.\635\ This commenter also stated that the Industry Guides should be
updated to reflect changes in disclosure requirements within
Regulations S-X and S-K and stated that the Industry Guides, relative
to U.S. GAAP and Regulation S-X, could use improvement. One commenter
suggested that improved Industry Guides could be helpful in highly-
regulated or specialized industries, such as financial institutions and
banks, mining, oil and gas exploration, and the pharmaceutical
industry.\636\ This commenter also suggested moving industry-specific
disclosure requirements currently in Regulation S-K to the relevant
Industry Guide.\637\ One commenter recommended requiring additional
disclosure from oil and gas companies about the carbon asset risk to
such companies.\638\
---------------------------------------------------------------------------

    \634\ See, e.g., letters from Rep. Shelley Moore Capito, et al.
(July 7, 2014); Senators Dean Heller, Mike Crapo and Jon Tester
(Aug. 13, 2014); Shearman.
    \635\ See CFA Institute (listing the technology and social media
sectors as examples of industries where industry-specific disclosure
may be useful).
    \636\ See Shearman (suggesting that new industry guides could
address issues such as the regulatory environments in which
industries operate).
    \637\ Id. (citing Item 104--Mine Safety Disclosure as an
industry-specific disclosure requirement in Regulation S-K that
could be moved to an Industry Guide).
    \638\ See letter from Ceres (Apr. 17, 2015) (``Ceres'').
---------------------------------------------------------------------------

2. Discussion
    Between 1962 and 1992, the Commission published various Guides and
Industry Guides to assist registrants in preparing and filing
registration statements and periodic reports and to shorten the comment
process.\639\ The Guides represented policies and practices followed by
the Division and were published in response to an increase in the
number of filings reviewed by the Division and an associated increase
in the amount of time between the filing and effective dates of a
registration statement.\640\ The Guides were intended to provide
uniformity and enhance comparability of disclosure while reducing the
necessity for staff comment on matters addressed in the Guides.\641\
The Guides were modified and expanded over time, in part, to address
anticipated disclosure issues.\642\
---------------------------------------------------------------------------

    \639\ The first Guides were published in 1962. By 1979, there
were 63 Guides for the preparation and filing of registration
statements and five Guides for the preparation and filing of
periodic reports. See 1980 Proposed Revision of Regulation S-K
(discussing the history of the guides) 1964 Guides; S-K Study at 7,
footnote 16, and 10, footnote 28.
    \640\ See id. The backlog of filings and inordinate length of
the pre-effective period was attributed in part to the low-quality
of first-time filings and inexperience of counsel and accountants.
See Acceleration of Registration Statements, Release No. 33-4475
(Apr. 13, 1962) [27 FR 3990 (Apr. 26, 1962)]; 1980 Proposed Revision
of Regulation S-K.
    \641\ See 1964 Guides (``It is expected that the publication of
these policies and practices will not only be of assistance to
registrants, their counsel and accountants in the preparation of
registration statements, but also that it will relieve the staff of
the Commission of the necessity for commenting on these matters in
respect of such statements.'' Id. at 2490); Proposed Guides
Concerning Prospectuses Relating to a Public Offering of Interests
in Oil and Gas Programs, Release No. 33-5001 (Aug. 27, 1969) [34 FR
14125 (Sept. 6, 1969)] (``The guide is designed to accomplish, to
the extent feasible, uniformity in both the sequence of disclosures
and their general content. The guide should thus serve to assist
issuers in preparing registration statements involving oil and gas
drilling programs and to facilitate the understanding and analysis
of the program by the investor, enabling him also to compare more
readily one offering with another.'' Id. at 14125).
    \642\ See 1980 Proposed Revision of Regulation S-K (also citing
the Commission's investigation of the hot issues securities markets,
recommendations of the Industrial Issuers Advisory Committee and
recommendations in the Sommer Report as factors to which the
expansion and modification of the Guides can be attributed).
---------------------------------------------------------------------------

    In connection with the adoption of the integrated disclosure system
in 1982, the Guides relating to specific industries were re-designated
as Industry Guides and the titles of the Securities Act Industry Guides
and Exchange Act Industry Guides were listed in Items 801 and 802 of
Regulation S-K, respectively.\643\ Although the Industry Guide titles
are listed in Items 801 and 802 of Regulation S-K, these guides are not
part of Regulation S-K and are not rules, regulations or statements of
the Commission.\644\
---------------------------------------------------------------------------

    \643\ See Industry Guide Release (rescinding all guides other
than those which contain industry-specific disclosure); Items 801
and 802 of Regulation S-K [17 CFR 229.801; 17 CFR 229.802].
    \644\ See Industry Guide Release.
---------------------------------------------------------------------------

    In 1996, the Task Force on Disclosure Simplification recommended
incorporating the Industry Guides into Regulation S-K, based on the
Task Force's understanding that registrants find the role of the
Industry Guides within our disclosure regime confusing.\645\ The Task
Force also recommended eliminating Industry Guide 1 (Disclosure of
Principal Sources of Electric and Gas Revenues) because the Task Force
believed that the information required by the Industry Guide was
provided in response to other disclosure requirements.\646\
---------------------------------------------------------------------------

    \645\ See Task Force Report (recommending that the Industry
Guides be placed intact at the end of Regulation S-K, in the manner
that industry-specific disclosure requirements are currently placed
in Regulation S-X). The Task Force also recommended that the
Commission consider adopting rules applicable to additional
industries and recommended general modernization of the Industry
Guides. Id.
    \646\ See Task Force Report. The Task Force stated that the
disclosure provided by Guide 1 appears to be adequately covered by
the requirements of Regulation S-K, primarily Items 101 and 303 of
Regulation S-K.
---------------------------------------------------------------------------

    Although it did not incorporate the Industry Guides into Regulation
S-K,\647\ the Commission did follow the Task Force's recommendation
\648\ to eliminate Industry Guide 1 (Disclosure of Principal Sources of
Electric and Gas Revenues) because the information requested by the
Industry Guide is covered by other Commission rules, including Items
101 and 303 of Regulation S-K.\649\ In 2008, the Commission modernized
the reporting requirements applicable to oil and gas reserves and
codified the disclosure items formerly in Industry Guide 2 by
relocating them into Regulation S-K.\650\
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    \647\ In addressing other Task Force recommendations, the
Commission stated that its action for certain Task Force
recommendations was not intended to indicate either approval or
disapproval of any of the remaining recommendations or suggestions
in the Task Force Report. See Phase One Recommendations of Task
Force on Disclosure Simplification Release.
    \648\ See Task Force Report.
    \649\ See Phase One Recommendations of Task Force on Disclosure
Simplification Release.
    \650\ See Oil and Gas Release.
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    The S-K Study recommended reviewing the Industry Guides to evaluate
whether they continue to elicit useful information that would not
otherwise be disclosed. The S-K Study also recommended considering
whether any Industry Guide provisions should

be codified in Regulation S-K, whether any information is duplicative
of U.S. GAAP requirements and whether industry-specific disclosure
requirements should be scaled or transition periods be provided for
certain classes of registrants.\651\
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    \651\ See S-K Study at 103.
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    In proposing the re-designation of the Industry Guides, the
Commission cited industry guidelines as an example of the limited
instances where the use of guidelines is appropriate, stating that
guidelines should pertain only to areas such as industry-specific
information, where more specific guidance is appropriate yet
flexibility is necessary to tailor disclosures to particular facts and
circumstances.\652\ The Commission cited findings of the Sommer Report
in concluding that the use of industry guidelines minimizes the extent
to which registrants must comply with inapplicable disclosure
requirements, maximizes the quality of the disclosure made for
particular industries, and provides Commission staff with a reference
for examining filings by particular industries.\653\
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    \652\ See 1980 Proposed Revision of Regulation S-K (stating
waiver procedures would be necessary if Industry Guides were
codified as formal regulations to address scenarios in which the
rule technically applies but where disclosure was neither necessary
nor appropriate).
    \653\ See id.
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    We are seeking input on whether the Industry Guides continue to
achieve the benefits cited by the Commission when it re-designated the
guides in 1980. Today, the Division publicly releases its comment
letters.\654\ These letters are often analyzed by third parties that
publish reports about comment trends in an industry.\655\ We believe
that registrants look to filings in their industry and recently-issued
staff comment letters to anticipate and proactively address industry-
specific issues.
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    \654\ See Commission Staff to Begin Publicly Releasing Comment
Letters and Responses, May 9, 2005, available at http://www.sec.gov/news/press/2005-72.htm.
    \655\ See, e.g., PricewaterhouseCoopers LLP, SEC Comment Letter
Trends, available at http://www.pwc.com/us/en/cfodirect/publications/sec-comment-letter-trends.html.
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    We also are seeking public input on the advantages and
disadvantages of codifying industry-specific disclosure requirements in
Regulation S-K. Codifying the Industry Guides in Regulation S-K would
be consistent with the approach taken by the Commission in 2008 when
former Industry Guide 2 was codified as Subpart 1200 of Regulation S-
K.\656\ This approach could help provide consistency in the disclosure
provided by registrants in certain industries by making such disclosure
a regulatory requirement. A potential disadvantage of this approach,
however, is that over time registrants may be required to provide
industry-specific disclosure that has become obsolete due to changes in
industry practices or technology. Codifying the Industry Guides may
afford registrants less flexibility in determining the industry-
specific disclosures that are most applicable to them.
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    \656\ See Oil and Gas Release.
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    Another possible approach is to update but not codify the Industry
Guides in Regulation S-K. While this approach may allow registrants the
flexibility to omit obsolete disclosures, the fact that the guidance is
not a regulatory requirement may result in less uniformity in
compliance and therefore less comparability across an industry.
3. Request for Comment
    205. Do the Industry Guides result in disclosure that is important
to investors that registrants might not otherwise disclose under
Regulation S-K or Regulation S-X? If so, what are examples of this type
of disclosure?
    206. Do registrants find the Industry Guides useful in preparing
disclosure for periodic reports?
    207. To the extent that the Industry Guides call for information
that registrants would not otherwise disclose but for the Industry
Guides, what are the challenges of providing this disclosure?
    208. Should we include additional industry-specific disclosure
requirements in Regulation S-K by codifying all or portions of the
Industry Guides? What are the advantages and disadvantages of including
industry-specific disclosure requirements in Regulation S-K versus
retaining the Industry Guides?
    209. Should some or all of the Industry Guides be updated? If so,
which ones? Should additional Industry Guides or industry-specific
rules for other industries be developed? If so, which industries would
benefit from such guidance? Should industry-specific disclosure in
Regulation S-K or staff guidance be limited to certain industries? If
so, what criteria should be used to identify those industries?
    210. What additional costs or costs savings, including the
administrative and compliance costs of preparing and disseminating
disclosure, do registrants experience because of the Industry Guides?
Would registrants' disclosure costs be higher, lower or the same if the
disclosures currently detailed in Industry Guides were incorporated
into Regulation S-K or Regulation S-X? Please provide quantitative
estimates if possible.
    211. The Industry Guides originally were intended to assist
registrants, their counsel and accountants in the preparation of
disclosure by publishing staff policies and practices related to staff
review of registrant filings.\657\ Does the public release of the
staff's comment letters and increased availability of tools that
aggregate information about disclosure included in Commission filings
and comment letters reduce the need for the Industry Guides as guidance
for registrants?
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    \657\ See 1964 Guides.
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    212. Does the status of the Industry Guides as staff policy rather
than Commission rules have any impact on the extent to which
registrants provide disclosure consistent with the Industry Guides?
    213. Regulations S-K and S-X include some industry specific
disclosures. For example, Form S-11 \658\ and Schedules III and IV
prescribed by Articles 12-28 and 12-29 of Regulation S-X, respectively,
include industry specific disclosure requirements for certain real
estate companies. If we update and codify the Industry Guides in
Regulation S-K, should we also move and consolidate other industry-
specific disclosure requirements currently located elsewhere to
Regulation S-K at the same time? If so, how should we identify those
disclosure requirements? Are any of these other industry-specific
disclosure requirements already substantially addressed by non-
industry-specific required disclosures either in Regulation S-K or by
U.S. GAAP?
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    \658\ 17 CFR 239.18.
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    214. Should industry-specific disclosure requirements apply to
every registrant in a particular industry or should they be limited to
certain categories of registrants? If they should be limited, to which
registrants should they apply?
    215. What types of investors or audiences are most likely to value
the information that registrants would not disclose but for the
Industry Guides?

F. Disclosure of Information Relating to Public Policy and
Sustainability Matters

    In recent years, Congress has mandated new disclosure requirements
that address specific public policy concerns. For example, Section 1502
of the Dodd-Frank Act mandated that the Commission adopt rules
regarding registrants' use of ``conflict minerals'' originating in
specified countries, and Section 1504 of the Dodd-Frank Act

directed the Commission to adopt rules regarding the disclosure of
payments made by resource extraction issuers to foreign governments or
the federal government for the purpose of the commercial development of
oil, natural gas, or minerals.\659\ In addition, Section 1503 of the
Dodd-Frank Act requires certain registrants to disclose information
about health and safety violations at mining-related facilities.\660\
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    \659\ 15 U.S.C. 78m(p) and 15 U.S.C. 78m(q)(2)(A). The
Commission adopted Exchange Act Rule 13p-1 and Form SD to implement
Section 1502 and proposed Rule 13q-1 and an amendment to Form SD to
implement Section 1504. Rule 13q-1 was initially adopted by the
Commission on August 22, 2012, but it was subsequently vacated by
the U.S. District Court for the District of Columbia. See Conflict
Minerals, Release No. 34-67716 (Aug. 22, 2012) [77 FR 56274 (Sept.
12, 2012)] and Disclosure of Payments by Resource Extraction
Issuers, Release No. 34-76620 (Dec. 11, 2015) [80 FR 80057 (Dec. 23,
2015)]. See Section III.A.1 for a discussion of the Commission's
statutory mandates.
    \660\ 15 U.S.C. 78m-2. Pursuant to authority granted in Section
1503(d) of the Dodd-Frank Act, the Commission adopted Item 104 of
Regulation S-K to implement the statute. See Item 104 of Regulation
S-K [17 CFR 229.104]. See also Mine Safety Disclosure Release.
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    Some investors and interest groups also have expressed a desire for
greater disclosure of a variety of public policy and sustainability
matters, stating that these matters are of increasing significance to
voting and investment decisions.\661\ For example, some have urged the
Commission to adopt disclosure requirements on political spending.\662\
The Commission, however, has determined in the past that disclosure
relating to environmental and other matters of social concern should
not be required of all registrants unless appropriate to further a
specific congressional mandate or unless, under the particular facts
and circumstances, such matters are material.\663\
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    \661\ See, e.g., Ernst & Young LLP, Tomorrow's Investment Rules
2.0, 2015 (``Tomorrow's Investment Rules 2015''), at 19, available
at http://www.ey.com/Publication/vwLUAssets/EY-tomorrows-investment-
rules-2/$FILE/EY-tomorrows-investment-rules-2.0.pdf (stating that,
in a survey of more than 200 institutional investors around the
world, ``. . . almost two-thirds of respondents say companies do not
adequately disclose information about ESG risks, and nearly 40% call
for companies to do so more fully in the future.''); Mark Carney,
Breaking the Tragedy of the Horizon--Climate Change and Financial
Stability, Speech given at Lloyd's of London, Sept. 29, 2015,
available at http://www.bankofengland.co.uk/publications/Pages/speeches/2015/844.aspx (stating that a new disclosure ``framework
for firms to publish information about their climate change
footprint, and how they manage their risks and prepare (or not) for
a 2 degree world, could encourage a virtuous circle of analyst
demand and greater use by investors in their decision making'');
Gibson Dunn, Shareholder Proposal Developments During the 2015 Proxy
Season, July 15, 2015 (stating that the most common 2015 shareholder
proposal topics, along with the approximate number of proposals
submitted were: Political and lobbying activities (110 proposals);
proxy access (108 proposals); and independent chair (76 proposals)).
    \662\ See Petition for Rulemaking from the Committee on
Disclosure of Corporate Political Spending, Aug. 3, 2011, available
at http://www.sec.gov/rules/petitions/2011/petn4-637.pdf. The
Consolidated Appropriations Act of 2016 prohibits the Commission
from using appropriated funds to ``finalize, issue, or implement any
rule, regulation, or order regarding the disclosure of political
contributions, contributions to tax exempt organizations, or dues
paid to trade associations.'' Public Law 114-113, Sec. 707, 129
Stat. 2242 (2015) (requirement in Division O, Title VII). This
appropriations limitation applies with respect to the Commission's
current fiscal year.
    \663\ See Environmental and Social Disclosure, Release No. 33-
5627 (Oct. 14, 1975) [40 FR 51656 (Nov. 6, 1975)] (``1975
Environmental Disclosure Release''). In this release, the Commission
concluded that, although it is generally not authorized to consider
the promotion of social goals unrelated to the objectives of the
federal securities laws, it is authorized and required by NEPA to
consider promotion of environmental protection as a factor in
exercising its rulemaking authority. See also infra note 687 and
accompanying text.
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    We are interested in receiving feedback on the importance of
sustainability and public policy matters to informed investment and
voting decisions. In particular, we seek feedback on which, if any,
sustainability and public policy disclosures are important to an
understanding of a registrant's business and financial condition and
whether there are other considerations that make these disclosures
important to investment and voting decisions. We also seek feedback on
the potential challenges and costs associated with compiling and
disclosing this information.
1. Comments Received
    S-K Study. None.
    Disclosure Effectiveness. We received a number of comment letters
on a variety of sustainability and public policy matters, including
climate change.\664\ Sustainability disclosure encompasses a range of
topics, including climate change, resource scarcity, corporate social
responsibility, and good corporate citizenship.\665\ These topics often
are characterized broadly as environmental, social, or governance
(``ESG'') concerns.\666\ Many commenters noted a growing interest in
ESG disclosure among investors \667\ and many recommended increased
sustainability disclosure requirements.\668\ Some commenters criticized
the primarily voluntary nature of current corporate sustainability
reporting and stated their belief that information made available to
investors is inconsistent and incomplete.\669\ Many commenters also
sought disclosure of sustainability related risks, and some of these
commenters sought related MD&A and trend disclosure.\670\
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    \664\ See, e.g., letters from Union of Concerned Scientists (May
5, 2015) (``UCS''); Ceres; Business Roundtable; Global Reporting
Initiative (Apr. 14, 2015) (``GRI''); Carbon Tracker Initiative
(Feb. 13, 2015) (``CTI''); Investor Environmental Health Network
(Feb. 11, 2015) (``IEHN''); Wallace Global Fund (Dec. 1, 2014)
(``Wallace Global Fund''); CFA Institute; SASB; Harrington
Investments (Oct. 15, 2014) (``Harrington Investments''); Interfaith
Center on Corporate Responsibility (Sept. 24, 2014) (``ICCR'');
SCSGP; Sustainability Group (Aug. 12, 2014) (``Sustainability
Group''); Corporate Reform Coalition (July 2, 2014) (``Corporate
Reform Coalition''); First Affirmative Financial Network (June 26,
2014) (``First Affirmative Financial Network''); US SIF 1; Allianz.
    \665\ See, PricewaterhouseCoopers LLP, Sustainability goes
mainstream: Insights into investor views, May 2014, available at
https://www.pwc.com/us/en/governance-insights-center/publications/sustainability-goes-mainstream-investor-views.html. See also, e.g.,
World Federation of Exchanges, Exchange Guidance and
Recommendation--October 2015, Oct. 2015, (``WFE Guidance'')
available at http://www.world-exchanges.org/home/index.php/news/world-exchange-news/world-exchanges-agree-enhanced-sustainability-guidance.
    \666\ See, e.g., WFE Guidance.
    \667\ See, e.g., US SIF 1 (citing an increase in assets under
management by signatories to the Principles for Responsible
Investment and the number of institutional investors urging
companies to disclose greenhouse gas goals and plans to reduce
emissions); Ceres (noting that a ``growing number of investors are
working to integrate climate risk into their investment strategies .
. . .''); CFA Institute (noting ``[a] small, albeit growing,
constituency of investors has advocated for the inclusion of
sustainability information/disclosures'').
    \668\ See, e.g., UCS; Ceres; GRI; CTI; IEHN; Wallace Global
Fund; Harrington Investments; ICCR; Sustainability Group (concerned
with underreporting of material information related to environmental
liabilities); US SIF 1; First Affirmative Financial Network Group;
Allianz.
    \669\ See, e.g., US SIF 1; Corporate Reform Coalition; letter
from Warren G. Lavey, (Nov. 4, 2015).
    \670\ See, e.g., UCS; Ceres (requesting staff scrutiny of and
comment on filings made by oil and gas companies on carbon asset
risks, stating such risks constitute ``known trends''); CTI (noting
that ``the relevant `trend' is how the increasing threat of
unmanageable warming will exert pressure to curb emissions from
fossil fuel consumption,'' with potential disclosure impacts
throughout MD&A, including capital expenditure plans and reserve
valuations, and seeking quantitative disclosures when reasonably
available); IEHN (recommending enhanced trend disclosure of emerging
scientific literature that is both relevant to a company's products
and activities and indicative of potential for substantial health or
environmental risks, in addition to disclosure of: (i) Potential
long-term impact, (ii) the scope of potential exposure, (iii)
measures the company is taking to reduce or mitigate these risks,
and (iv) relevant benchmarks of liability); ICCR (supportive of risk
related requirements relating to climate change); US SIF 1
(affirming its 2009 recommendation to require annual disclosure on a
comprehensive set of sustainability indicators (both universal and
industry-specific) and seeking interpretive guidance to clarify that
short and long-term sustainability risk disclosure is appropriate in
MD&A).
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    One commenter opposed mandatory disclosure of sustainability
risks,\671\ while another opposed disclosure requirements that it
described as