U.S. Securities and Exchange Commission statement urges principles based AI disclosure and questions Section 11 lockup recommendation

The U.S. Securities and Exchange Commission published remarks to the Investor Advisory Committee that argued for keeping public company disclosure on artificial intelligence risks and opportunities anchored in materiality and principles based requirements, rather than adding prescriptive, topic specific disclosure frameworks. The statement also previewed the Committee’s discussions on retail investor fraud and a draft recommendation intended to preserve investors’ ability to bring claims under Section 11 following an initial public offering. The statement set out several concerns with prescriptive disclosure regimes, including forcing companies with no material information to incur costs, creating indirect pressure on substantive business operations, distracting boards and management, and crowding out decision useful information with standardized responses. On retail fraud, it pointed to the SEC’s Interagency Securities Council, led by Adam Anicich and Manuel Vazquez, as a mechanism to coordinate financial regulators and law enforcement on emerging threats and investigative approaches. On the draft Section 11 proposal, the remarks highlighted the Supreme Court’s confirmation of Section 11’s tracing requirement and questioned whether a mandatory lockup period would meaningfully address traceability issues given the limited number of direct listings from 2021 through 2023, the bespoke nature of early lockup releases, the role of underwriter discretion to waive lockups, the availability of Section 10(b) claims, and the potential costs and distraction from expanding strict liability litigation.