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: Sen. Rounds, Mike [R-SD]
Target Audience
Population: Individuals globally who invest in securities
Estimated Size: 150000000
- The bill pertains to disclosure requirements for issuers of securities, which means it directly affects companies that issue stocks, bonds, or other securities for public trading.
- Investors in these securities are the primary group for whom material disclosures are relevant. Thus, their investment decisions and protection are affected by these potential changes in disclosure practices.
- The Securities and Exchange Commission (SEC), as a regulatory body, also has a direct role and interest in the execution and implications of this act.
- Since companies that issue securities and investors are globally present, the act could have implications both in and outside the United States.
Reasoning
- The population impacted includes both companies issuing securities and individual investors, primarily those in the U.S. market.
- American investors, especially those who actively manage portfolios, could be significantly impacted by changes in disclosure requirements.
- The policy also impacts corporate compliance departments, which may see shifts in workload and strategic focus depending on the SEC's assessment of disclosure materiality.
- While the SEC oversees this regulation, its implications for international investors are primarily indirect, focusing on U.S. issuers.
- The budget constraints imply a phased rollout targeting critical areas of compliance and investor communication strategies. The SEC would need to prioritize resources efficiently to ensure the act's implementation without exceeding budget.
Simulated Interviews
Financial Analyst (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- The policy could streamline information flow, allowing me to focus on more relevant data.
- However, there is concern about potentially missing out on nuanced information that could have long-term impacts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 6 | 6 |
Tech Startup Founder (San Francisco, CA)
Age: 30 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 2.0 years
Commonness: 4/20
Statement of Opinion:
- I welcome any relief from compliance burdens, as long as it doesn't affect investor trust.
- The focus on materiality aligns with how we present data to investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Retired (Dallas, TX)
Age: 65 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- I value knowing as much as possible about my investments, so reduced disclosures worry me.
- Trust in companies and regulators is key to my investment decisions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 4 | 5 |
| Year 20 | 4 | 5 |
Compliance Officer (Chicago, IL)
Age: 40 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- It may reduce our workload slightly, but determining what is material could be more subjective.
- Any clarity on materiality aids our compliance efforts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 4 |
Individual Investor (Miami, FL)
Age: 28 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- I rely less on traditional SEC disclosures due to my investment focus.
- The policy seems boring to me unless it affects my specific interests.
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 | 6 | 6 |
Corporate Attorney (Los Angeles, CA)
Age: 55 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- The act might simplify legal advice and reduce client liability anxieties.
- It’s a balanced approach provided investors are informed sufficiently.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 6 |
Small Business Owner (Atlanta, GA)
Age: 50 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 8/20
Statement of Opinion:
- Less disclosure focus might make future public offerings easier and less costly.
- It primarily seems a concern for much larger issuers.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
University Professor (Seattle, WA)
Age: 60 | Gender: other
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 3/20
Statement of Opinion:
- This policy poses an intriguing development in securities regulation.
- Will be closely watching its impact on investor behavior and trust.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 8 | 8 |
Public Company CFO (Boston, MA)
Age: 35 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- Materiality is subjective, so clear guidelines are necessary.
- This could simplify processes, but we need to be cautious about assumptions.
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 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Investor (Houston, TX)
Age: 48 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 11/20
Statement of Opinion:
- Enhanced focus on what matters could streamline my analysis processes.
- However, any ambiguity in disclosures might add risk, especially in volatile markets.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 5 |
Cost Estimates
Year 1: $3000000 (Low: $2000000, High: $4000000)
Year 2: $1500000 (Low: $1000000, High: $2500000)
Year 3: $1500000 (Low: $1000000, High: $2500000)
Year 5: $1500000 (Low: $1000000, High: $2500000)
Year 10: $1500000 (Low: $1000000, High: $2500000)
Year 100: $1500000 (Low: $1000000, High: $2500000)
Key Considerations
- Investors relying on transparent disclosures might face increased due diligence responsibility.
- The reduction in strictly non-material disclosures could reduce noise and enhance the focus on critical financial information.
- The impact of the policy largely depends on how 'material' is interpreted and enforced by the SEC.