The Securities and Exchange Commission proposed sweeping new regulations yesterday that would reduce radically the amount of information major companies must file when they go to the market to sell stocks and bonds.
The proposed regulations -- issued on what SEC Chairman John S. R. Shad called an "historic occasion" -- basically rewrite the rules about what 9,000 public firms registered with the SEC must disclose in prospectuses, weeding through nearly 40 years of regulations and throwing out some of them.
In many cases, potential investors could be given as little as five pages of disclosure describing the security to be sold. For other basic information about the company, investors would be referred to other documents already on file with the commission.
Under one proposal, at least 30 percent of the companies trading on the New York Stock Exchange, the American Stock Exchange and over the counter would be eligible to use the minimal-disclosure form.
The regulations would also allow campanies to file contingency registrations ahead of time to permit them to pop into the market quickly when they need to raise money or conditions appear particularly favorable or to sell securities gradually over a period of time. Still another change would permit companies selling debt securities to disclose credit ratings made by firms such as Dun & Bradstreet. Such disclosure generally is prohibited now.
Yesterday's proposal was not entirely new. Parts of the package have been proposed earlier in slightly different versions. But yesterday's proposal pulls everything together and adds to earlier proposals in what amounts to a wholesale revision. Commissioners generally applauded the proposal, saying they would help companies raise capital.
The proposal followed new regulations last year that simplified the way companies report information to the commission and stockholders. The new proposals are available for public comment until Oct. 30, with final rules epected to be adopted by the end of the year or early 1982.
The major feature of the proposed changes is a three-tier system governing what firms include in prospectuses filed with the SEC before securities are sold. Firms that are widely traded would be allowed to file the least information, on the theory that information about those firms abounds in the marketplace.
Those firms would be allowed to file a form S3 that would simply describe what the companies are selling and refer investors who want more information to various annual and other periodic reports that must be filed with the SEC. To be eligible to use that form, companies would be required to have been reporting to the SEC for at least three years
Companies that have suffered a default since their last audit would be prohibited from using the short form. The proposal also requires companies to provide updates on major developments not included in documents on file.