The SEC is requesting public comment on proposed changes to Industry Guide 3 (Statistical Disclosure by Bank Holding Companies). In light of developments in the financial services industry since the publication of Guide 3, the SEC is considering modernizing the nature, timing, scope, and applicability of Guide 3, which at the moment applies strictly to Bank Holding Companies (BHCs).
The Commission often applies additional regulation beyond those specified in Regulation S-K and Regulation S-X to specific industries where further disclosure is warranted. Guide 3 was published in 1976 as a convenient reference to statistical disclosure required in the registration statements and other financial disclosures made by BHCs. It was meant to encourage the publication of the same sorts of statistical data repeatedly over time, making it easier for investors to assess future earning potentials and compare similar information among BHCs. This information includes more meaningful disclosure of loan portfolios and foreign operations.
Since the last major revision of Guide 3 in 1986, the Financial Accounting Standards Board (FASB) has issued accounting standards that have changed the reporting standards for registrants generally. There have also been additions and changes to other accounting and disclosure requirements published by the federal and state governments and other regulatory bodies. Therefore, there may be some duplication and overlap among Guide 3, the SEC’s requirements, and generally accepted accounting practices (US-GAAP) in the United States. The banking industry itself has evolved, and many banking organizations conduct a broader range of activities than was the case when Guide 3 was published. To that end, the SEC is attempting to improve the disclosure requirements in Guide 3 to better align with the current environment.
Specifically, the Commissions seeks comment on multiple points, some of which are highlighted below:
| 1. | | Determining if the Guide 3 requirements should apply to other classes of financial industry companies, including foreign participants. Banking organizations, as defined by the SEC, include national banks, state member banks, Federal savings associations, and top-tier bank holding companies domiciled in the US that are not subject to the Federal Reserve System’s Small Bank Holding Company Policy Statement, as well as some top-tier savings and loan holdings companies. |
| 2. | | Guide 3’s ability to provide important information to investors about BHC registrants, including: |
| (a) | | if the disclosures help investors compare and contrast BHCs, |
| (b) | | if the Guide 3 rules should be codified into Commission rules, and |
| (c) | | if the requirements should be extended to other companies in the financial services industry. |
| 3. | | Restructuring BHC’s Call Reports and disclosure requirements to produce more aggregated information, including: |
| (a) | | better reporting of interest income and interest expense disclosures, |
| (b) | | mandating disclosure in XBRL or another structured data format for BHC registrants when they report (i) assets, liabilities, and stockholders’ equity, (ii) interest rates, and (iii) interest differential disclosures, and |
| (c) | | if the requirements should be expanded. |
| (a) | | if investment portfolio disclosures overlap with current Commission requirements or US-GAAP, |
| (b) | | if the requirements concerning investment portfolio disclosures require improvements, |
| (c) | | if BHC registrants should be required to specify their investment categories to improve comparability among portfolios, and |
| (d) | | if information supplied in Call Reports should be a disclosure mandated by SEC. |
| 5. | | Determining if loan portfolio, loan loss experience, deposit, return on equity and assets, and short-term borrowings disclosures require updating, improvement, and reduction of overlap with other regulatory disclosures, including implementing disclosure in a structured data format such as XBRL. |
| 6. | | Determining if there are additional activities in which BHCs and other financial industry participants engage that should require disclosure, including disclosure for non-interest income and non-interest expenses and the effects of Dodd-Frank based regulation. |
The SEC is interested in public comments on other topics as well. The complete set of comment solicitations can be read in the full release concerning these proposed changes.
The public comment period is open until July 7, 2017. You can submit comments using the form available on the SEC’s website or by e-mailing rule-comments@sec.gov with File Number S7-02-17 in the subject line. You can also use the Federal Rulemaking Portal to submit comments or send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, be sure to reference File Number S7-02-17.
Comments that have already been received by the SEC are available here.
Sources:
SEC Release 33-10321; 34-80131: Request for Comment on Possible Changes to Industry Guide 3 (Statistical Disclosure by Bank Holding Companies) (www.sec.gov)
SEC Votes to Seek Public Input on Possible Change to Industry Guide 3 (March 1, 2017) (www.sec.gov)
