A disclosure committee is a group tasked with reviewing all proposed disclosures prior to their release. This committee is needed by a publicly-held business. A public company is subject to highly specific reporting requirements by the Securities and Exchange Commission (SEC), and so must pay particular attention to any information issued to the public, whether it is done through press releases, reports filed with the SEC, speeches, web site pages, or other forms of communication.
Members of the committee are usually drawn from those areas of a business that typically generate disclosures, and also includes specialists with knowledge about the allowable form and content of disclosures.
The following individuals may be members of the committee:
- Chief financial officer
- Legal counsel
- Chief operating officer
- Investor relations officer
Committee members should share information about disclosure issues, and be informed of what types of situations may require formal disclosure. They should also be given advance notice of the disclosures currently being included in the financial statements. With such a committee in place, a business is more likely to issue comprehensive disclosures, as well as to routinely update the disclosures that it is already reporting to the public.
If there is no disclosure committee in place, there is an increased likelihood that incorrect information will be released, or that information will be disclosed that does not follow SEC reporting guidelines.
The need for a disclosure committee is not an especially large concern in a smaller business, where there is so much informal communication that disclosure issues are easily located and reported. The situation can be much worse in a larger organization, where employees are so dispersed that informal communication systems are not workable.