Executive Summary
At its December 4, 2025 meeting, the SEC’s Investor Advisory Committee (IAC) approved its Disclosure Subcommittee’s proposed recommendations on AI-related disclosures, with a focus on materiality and integration into existing SEC reporting frameworks. The approval was not unanimous: two committee members voted against the recommendations, citing increased procedural burdens and a perceived divergence from the Commission’s stated goal of reducing disclosure obligations, and two members abstained. The recommendations center on three pillars: issuer-level definitions of “artificial intelligence,” disclosure of board oversight of AI, and separate, materiality-based reporting on AI deployment and its effects on internal operations and consumer-facing matters. The discussion highlighted the rapid pace of AI adoption, the challenges of definitional precision in a dynamic technological environment, and differing views on whether the guidance will enhance investor decision-making. The recommendations now proceed as advisory input to the Commission and its staff. While advisory in nature, the IAC’s recommendations are expected to inform future SEC staff guidance and potential rulemaking.
This update should be read together with our Hebrew client memorandum ‘Artificial Intelligence (AI) and Disclosure Obligations – Guidance for Israeli Public Companies’ from February 24, 2025, which provides complementary analysis of Israeli and EU regulatory developments.
Core Elements of the Approved Recommendations
The IAC’s approved framework emphasizes materiality and technology-neutral application. In particular, the recommendations contemplate that the SEC encourages or requires issuers to:
- Adopt and disclose a definition of “artificial intelligence.” The framework allows for issuer-specific definitions or reliance on established legislative or regulatory sources, recognizing the heterogeneity of AI use cases across industries and the rapid evolution of the technology.
- Describe board oversight mechanisms for AI. Issuers should explain whether and how the board or relevant committees oversee AI deployment, reflecting investor interest in governance, risk management, and accountability for AI-related decisions.
- Report separately, where material, on AI deployment and its effects on (a) internal business operations, including human capital, internal controls, and cybersecurity, and (b) consumer-facing matters, including AI-enabled products and services.
Implementation would be integrated into existing SEC rules rather than through a standalone AI rule. A transition period of up to one year is contemplated to allow issuers to build internal processes and align stakeholder communications.
Context: Rapid AI Growth and Definitional Challenges
The IAC’s framework acknowledges the rapid growth of AI capabilities and adoption across industries, which complicates efforts to settle on a single or static definition. By allowing issuers to articulate a definition reflective of their use cases—while encouraging reference to recognized statutes or standards—the recommendations aim to balance comparability with flexibility. The emphasis on materiality and integration into existing disclosure items is intended to avoid duplicative reporting while promoting transparency where AI materially affects operations, strategy, risks, or governance.
Implications for Issuers and Corporate Boards
Issuers should expect increased investor focus on AI governance and disclosure discipline, even before any Commission action. The IAC’s approval, though advisory, signals a direction of travel toward structured, materiality-based AI disclosures within the familiar SEC framework.
Recent SEC enforcement activity has also highlighted concerns around “AI washing”—misleading claims about the use or capabilities of AI—which underscores the importance of accuracy and balance in disclosures.
For boards, the recommendations underscore the need to clarify oversight responsibilities for AI, including committee charters, reporting lines, and management controls. Cross-functional coordination—spanning technology, risk, compliance, internal audit, human capital, and product—will be essential to identify material AI uses, assess risks and opportunities, and support MD&A, risk factor, cybersecurity, and business disclosures.
For disclosure controls and procedures, issuers should map AI deployment across the enterprise, evaluate material impacts on operations and consumer-facing activities, and document the rationale underpinning materiality judgments. Where AI is material to strategy, risk, or performance, issuers should anticipate investor expectations for specificity over boilerplate. Where AI is not material, issuers should be prepared to explain the basis for that conclusion.
Finally, given definitional fluidity, issuers adopting an AI definition should prioritize clarity, consistency across reporting periods, and linkage to internal governance and risk frameworks, while monitoring evolving terminology in legislation and standards to reduce fragmentation and enhance comparability.
Recommended Near-Term Actions
In light of the IAC’s approval, issuers should consider the following readiness steps within existing disclosure controls:
- Confirm board and committee oversight structures for AI and update governance documents as appropriate.
- Disclosure of how AI is being deployed in internal business operations and products and consumer-facing matters, including AI-enabled products and services.
- Draft a clear, fit-for-purpose definition of “AI,” with cross-references to recognized sources where appropriate, and test it for internal and external consistency.
- Align prospective disclosures to existing required disclosure items, including MD&A, risk factors, cybersecurity, and business descriptions, and plan for a potential transition period.
We will continue to monitor SEC staff engagement with the IAC’s recommendations and any follow-on guidance or rulemaking. In the interim, issuers and boards should treat the IAC’s action as a strong signal of investor expectations and prepare to address AI governance, deployment, and material impacts within the established disclosure framework.
For further information or assistance in assessing your company’s AI disclosure readiness, please do not hesitate to contact our team.
This client update is provided for general informational purposes only and does not constitute legal advice. Readers should seek specific legal counsel before acting on any information contained herein.
