Bill Overview
Title: Mandatory Materiality Requirement Act of 2022
Description: This bill limits additional disclosure requirements applicable to issuers of securities. Specifically, the Securities and Exchange Commission may only require an additional disclosure if the commission determines that there is a substantial likelihood that a reasonable investor of the issuer would consider the information important with respect to an investment decision.
Sponsors: Rep. Huizenga, Bill [R-MI-2]
Target Audience
Population: Individuals involved with or invested in securities issuers worldwide
Estimated Size: 15000000
- The bill affects issuers of securities, which mainly includes corporations listed on public exchanges, thus primarily impacting those involved in corporate governance and financial reporting of these companies.
- Investors who rely on disclosures to make informed decisions will also be impacted by this bill as it alters the scope of disclosures they receive.
- The concept of 'materiality' is crucial for accountants, auditors, and legal professionals in the securities industry as it determines what information must be disclosed in financial statements.
- The legislation will have implications for regulatory bodies overseeing securities, primarily the Securities and Exchange Commission in the United States.
Reasoning
- The Mandatory Materiality Requirement Act of 2022 primarily impacts corporations that issue securities and their investors. Therefore, interviews need to include perspectives from executives or board members who oversee financial reporting, accountants and auditors within these corporations, retail and institutional investors who analyze these disclosures, and others including legal professionals involved in corporate compliance.
- Corporations involved, particularly those with complex financial records, might see administrative relief due to reduced disclosure requirements. This could be reflected in higher profit margins or streamlined operations, which might indirectly affect share prices and hence investors.
- On the flip side, retail investors might feel less informed, possibly impacting their investment decisions and perceived security, thereby impacting their subjective wellbeing negatively.
- The SEC's role might shift to more evaluative and less operational due to reduced volume of disclosure assessments, possibly impacting workload and morale of relevant staff.
- These simulations need to balance the proportion of people affected in varying ways, from high to low impacts, to accurately assess the policy's wider implications.
Simulated Interviews
CEO of a Mid-Sized Public Company (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- This policy helps streamline reporting obligations, reducing redundant disclosures.
- As a CEO, it grants my team more flexibility to focus on truly significant matters rather than overburdening themselves with excessive documentation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 8 |
Portfolio Manager at Investment Firm (San Francisco, CA)
Age: 35 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- Less information may lead to increased uncertainty when making investment decisions.
- Could impact my ability to make fully-informed choices for clients, potentially affecting returns.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 8 |
| Year 20 | 8 | 8 |
Retail Investor (Boston, MA)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- The policy might limit access to critical information needed to make informed decisions.
- As a retail investor, I feel more risk is passed onto investors who may need to dig deeper for information.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 7 | 7 |
Securities Lawyer (Washington, D.C.)
Age: 50 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- The act may simplify the advisory role but could raise legal risks due to less public information.
- From a legal perspective, there is a balance to be struck between transparency and confidentiality.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Senior Accountant (Austin, TX)
Age: 38 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- Reduces the complexity of financial reporting tasks, making my job easier.
- The policy alignment with materiality is beneficial for prioritizing significant information.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Financial Analyst (Miami, FL)
Age: 42 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- Potentially hinders the granularity of data needed to fully assess investment opportunities.
- Complex situations might be oversimplified in standardized reports.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 8 |
Retired Investor (Chicago, IL)
Age: 65 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- I trust fund managers to make informed decisions, so the impact is less direct.
- However, less transparency in disclosures might affect the overall faith in markets.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
SEC Regulatory Compliance Officer (Los Angeles, CA)
Age: 54 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 1/20
Statement of Opinion:
- May reduce workload from constant monitoring of extensive disclosures.
- Focus can be shifted towards quality rather than quantity in disclosures.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 8 |
Tech Startup Founder (Seattle, WA)
Age: 31 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 2/20
Statement of Opinion:
- Streamlined reporting could be beneficial as we prepare for IPO, less overhead on compliance topics.
- However, investors might demand extra information informally, which can be challenging.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 7 |
Retail Stock Trader (Dallas, TX)
Age: 28 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- Relying on less documentation might make daily trading riskier.
- May have to resort to other informal data sources to supplement decision-making.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $15000000 (Low: $10000000, High: $20000000)
Year 2: $10000000 (Low: $5000000, High: $15000000)
Year 3: $7500000 (Low: $5000000, High: $12000000)
Year 5: $5000000 (Low: $3000000, High: $8000000)
Year 10: $3000000 (Low: $2000000, High: $5000000)
Year 100: $3000000 (Low: $2000000, High: $5000000)
Key Considerations
- The act redefines 'materiality' which may influence what companies consider necessary disclosures, impacting transparency.
- SEC's approach to enforcement and guidelines will be pivotal in how the law is practically applied across industries.
- Long-term compliance costs and implications on investor trust and market efficiency should be monitored.