Public Companies Must Disclose Regulations and Compliance and HR
The SEC has adopted significant changes to the public company disclosure regime including a description of the effect of government regulations and human resources. New disclosures must include the “material effects that compliance with government regulations… may have upon the capital expenditures, earnings and competitive position of the registrant.” Additionally, public companies must describe their “human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that the registrant focuses on in managing the business.” The new rules also remove some arbitrary disclosure in favor of principles-based materiality descriptions and implement a summary risk factor requirement if the full disclosure exceeds 15 pages.
The new disclosures recognize that regulations and compliance significantly impact ongoing operations and financial performance. This is why firms should spend no less than 5% of their revenues on regulatory compliance. Firms that don’t will need to re-assess the materiality of disclosures.