What is a Disclosure Committee?
A disclosure committee is an internal governance group within a public or regulated company. Generally, it is responsible for overseeing the accuracy, reliability, and timeliness of information disclosed to shareholders, investors, regulatory bodies, and the public.
At the same time, they ensure all financial and operational information is disclosed in compliance with regulatory standards, like those set forth by the Securities and Exchange Commission (SEC). Overall, this committee is critical for maintaining transparency, investor confidence, and regulatory compliance.
What is the typical composition of a disclosure committee?
The composition of a disclosure committee typically varies. But generally, it includes senior members from departments handling financial reporting, legal compliance, investor relations, and operations. Some examples are:
- Chief Financial Officer (CFO)
- Chief Legal Officer or General Counsel
- Head of Investor Relations
- Head of Internal Audit
- Chief Accounting Officer or Controller
- Representatives from Compliance, Risk Management, and Public Relations
Some companies include external advisors like auditors or legal consultants, as non-voting members to give additional guidance on complex regulatory matters.
Responsibilities of a Disclosure Committee
The disclosure committee has a broad range of responsibilities to support regulatory compliance and effective corporate governance. Some of these include:
- Review and approval disclosures to ensure information is accurate, consistent, and timely.
- Monitor changes in disclosure-related regulations and adjust practices for compliance.
- Evaluate internal controls that govern data collection, reporting, and approval.
- Collaborate with external auditors to verify the accuracy of financial reports and resolve issues during audits.
- Assess and address risks associated with inadequate disclosures like reputational damage or regulatory penalties.
- Provide training to other departments for company-wide awareness of disclosure processes.
Does a disclosure committee have a charter?
Yes, most disclosure committees operate under a formal charter outlining their structure, authority, and responsibilities. The charter serves as a guiding document that specifies:
- Scope of responsibilities: Includes the types of disclosures the committee reviews and monitors, such as quarterly reports, press releases, and material event notifications.
- Procedures for decision-making: Defines how the committee operates, from decision-making processes to voting procedures.
- Frequency of meetings: Sets a schedule for meetings and any procedures for additional meetings as needed.
- Reporting requirements: Details how and when the committee will report findings or recommendations to the board of directors or other governance bodies.
How often does a disclosure committee meet?
Disclosure committees typically meet on a quarterly basis, aligning with the company’s reporting schedule for quarterly and annual financial filings. The frequency, however, may increase depending on the company’s needs or regulatory requirements. For example, the committee may convene more frequently during periods of operational change, mergers, acquisitions, and other events that may impact disclosures.
What is discussed in disclosure committee meetings?
In disclosure committee meetings, members review and approve the content and time of key disclosures. Topics typically include:
- Financial results and projections
- Risk disclosures (e.g. related to risks like market volatility, cybersecurity threats, and operational risks)
- Significant transactions and events (e.g. acquisitions, divestitures, lawsuits)
- Regulatory compliance (e.g. SEC or GDPR requirements)
- Review of controls and procedures
- Audit findings and recommendations