Commissioner Uyeda Warns Of Looming Item 402 Letter Deficit, But George Eliot Provides An Answer

Earlier this week, the Securities and Exchange Commission adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 which provides affirmative defenses to trading on the basis of material nonpublic information.  The amendments add new conditions to the rule.  According to the Commission, these amendments are designed "to address concerns about abuse of the rule to trade securities opportunistically on the basis of material nonpublic information in ways that harm investors and undermine the integrity of the securities markets".  The Commission also added a new paragraph (x) to Item 402 of Regulation S-K to require disclosure of a registrant's policies and practices related to the grant of certain equity awards close in time to the release of material nonpublic information.  In approving the amendments, Commissioner Mark Uyeda expressed concern about the number of amendments of Item 402:

With respect to today’s amendments to Item 402 of Regulation S-K, this will be the third change to that item since I became a commissioner five-and-a-half months ago.  The addition of paragraph (x) to Item 402 is puzzling because (1) the required narrative disclosure is arguably already required by the Commission’s existing compensation discussion and analysis rules and (2) the information required by the tabular disclosure is otherwise publicly available.  Before we reach the end of the alphabet for Item 402, I hope that the Commission carefully weighs the effectiveness of future executive compensation disclosure versus its costs.

I share Commissioner Uyeda's concern about the frequent changes in disclosure requirements.  However, George Eliot may have an answer to his concern about running out of letters:

He was a little more severe than usual on Jacob Storey’s Z’s, of which poor Jacob had written a pageful, all with their tops turned the wrong way, with a puzzled sense that they were not right “somehow.” But he observed in apology, that it was a letter you never wanted hardly, and he thought it had only been there “to finish off th’ alphabet, like, though ampusand (&) would ha’ done as well, for what he could see.”

George Eliot, Adam Bede ch. XXI.  If you are wondering why the letter Z ends the alphabet, see this post from 2014.