SEC Chair Jay Clayton and William Hinman, Director, Division of Corporation Finance, shared their views in a public statement on first quarter earnings communications. Highlights of the wide-ranging statement are discussed below.
According to Messrs. Clayton and Hinman, company disclosures should reflect investor interest in:
- where the company stands today, operationally and financially,
- how the company’s COVID-19 response, including its efforts to protect the health and well-being of its workforce and its customers, is progressing, and
- how its operations and financial condition may change as all our efforts to fight COVID-19 progress.
The two SEC officials noted that providing detailed information regarding future operating conditions and resource needs is challenging, including because our national response strategies to COVID-19 are in their incipient stages (and are likely to change), but it is important on many levels. Updating and refining these estimates should become less difficult over time.
They discussed benefits that extend beyond the goal of traditional securities law disclosures. Well thought out disclosures addressing the foregoing topics will enhance valuable communication and coordination across our economy—including between the public and private sectors—as together we pursue the fight against COVID-19. This transparency can foster confidence in countless specific instances, for example, between a supplier and a manufacturer as well as between an investor and a company, which in combination will benefit all.
Messrs. Clayton and Hinman encourage companies that respond to their call for forward-looking disclosure to avail themselves of the safe-harbors for such statements and also note that they would not expect good faith attempts to provide appropriately framed forward-looking information to be second guessed by the SEC.