In remarks to the National Association of Corporate Directors’ Nashville Chapter, U.S. Securities and Exchange Commission (SEC) Chief Economist and Director of the Division of Economic and Risk Analysis Joshua White discussed how regulatory relief and artificial intelligence (AI) can free corporate resources for other uses. The economic assessment of deregulation must weigh those potential gains against reduced investor protection, the loss of information investors value and the cost of unwinding existing compliance systems. Fixed compliance costs can also disproportionately affect smaller companies and influence whether businesses enter or remain in public markets.
Research cited on the 2012 JOBS Act illustrated how compliance savings can support business investment. Eligible emerging growth companies received scaled disclosure requirements and temporary relief from auditor attestation of internal controls under Section 404(b) of the Sarbanes-Oxley Act. The research found increased biotech initial public offering activity, greater patent and clinical trial activity, and lower company failure rates, without a detectable decline in financial reporting quality. White encouraged companies to provide evidence on compliance costs, who bears them and how requirements change business behavior.
AI may reduce the cost of processing and producing information, but reliable disclosures still require collection, verification and reconciliation. Materiality therefore remains necessary to keep disclosure focused on investors’ needs rather than expand output simply because technology permits it. Boards should assess both whether AI makes necessary work more efficient and how companies redeploy the resources saved. This emphasis aligns with SEC Chairman Paul Atkins’ July discussion of a possible Regulation S-K materiality overlay that would permit issuers to omit immaterial information otherwise required by individual disclosure items.