On August 17, the SEC adopted amendments intended to simplify and update the disclosure of information to investors and reduce compliance burdens for companies without significantly altering the total mix of information available to investors.  The amendments are effective 30 days after their publication in the Federal Register.

The amendments eliminate certain:

  • Redundant and duplicative requirements, which require substantially similar disclosures as GAAP, International Financial Reporting Standards (IFRS) or other SEC disclosure requirements.
  • Overlapping requirements, which are related to, but not the same as GAAP, IFRS or other SEC disclosure requirements.
  • Outdated requirements, which have become obsolete as a result of the passage of time or changes in the regulatory, business or technological environment.
  • Superseded requirements, which are inconsistent with recent legislation, more recently updated SEC disclosure requirements, or more recently updated GAAP.

Most of the amendments involve technical amendments to Regulation S-X that relate to the topics mentioned in the four bullets above.  For example, certain Regulation S-X and Regulation S-K items were amended to replace (or, in some cases, supplement) the existing references to “income statement” and variations thereof with “statement of comprehensive income” because the FASB has replaced the income statement with the statement of comprehensive income.  However, there were also some substantive amendments that occurred outside the financial statements.  The table below summarizes some of these other amendments:

Rule

Amendment
Item 101 of S-K (Description of business)
  • Eliminated required disclosures in Item 101 regarding:
    • Financial information about segments.
    • Research and development spending.
    • Financial information about geographic areas, but also amended MD&A rules to add an explicit reference to “geographic areas.”
    • Risks attendant to the foreign operations and any dependence on one or more of the registrant’s segments upon such foreign operations, but where material should be covered in risk factors.

(These disclosures largely were redundant with GAAP disclosures in the financial statements or with MD&A.)

  • Eliminated the requirements to identify the SEC’s Public Reference Room and disclose its physical address and phone number. The SEC’s Public Reference Room is rarely used by the public to obtain or review issuer filings, as paper filings are now only permitted (and sometimes required) in very limited circumstances. (Also eliminated were similar requirements in Forms S-1, S-3, S-4.)
  • Retained the requirement to disclose the SEC’s internet address and a statement that electronic SEC filings are available there. However, deleted the qualifier “if you are an electronic filer” because all but a limited number of issuers are now required to file electronically.
  • Required all issuers to disclose their internet addresses (or, in the case of asset-backed issuers, the address of the specified transaction party), if they have one. Existing rules only require the disclosure by accelerated and large accelerated filers.
Item 201 of S-K (Market price of and dividends on the registrant’s common equity and related stockholder matters)
  • Eliminated the outdated disclosure requirement in Item 201(a)(1) that required the disclosure of historical market price information. Instead, the SEC is substituting this disclosure with disclosure of the issuer’s ticker symbol, which can be used to obtain current and historical information on stock price, among other information.
  • Deleted requirement to disclose the frequency and amount of cash dividends declared, as amended Rule 3-04 of Regulation S-X will require disclosure of the amount of dividends in interim periods, similar to Item 201(c)(1).
Item 303 of S-K, Management’s discussion and analysis of financial condition and results of operations
  • Replaced (or, in some cases, supplemented) the existing references to “income statement” and variations thereof with “statement of comprehensive income” because the FASB has replaced the income statement with the statement of comprehensive income.
  • Eliminated the specific seasonality disclosure requirements in Item 303(b) because GAAP similarly requires seasonality disclosures
Item 503 of S-K, Prospectus summary and risk factors
  • Eliminated the requirement to disclose the ratio of earning to fixed charges by deleting Item 503(d) and Item 601(b)(12).

As a supplement to the adopting release, the SEC also issued a “demonstration version” document that redlined the rule amendments, with added text underlined and deleted text struck out.

If you have any questions regarding any of the topics covered in this blog post, please feel free to contact a member of our Corporate & Securities practice group or, if applicable, contact your primary Bass, Berry & Sims relationship attorney.

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