On October 11, the SEC proposed amendments to modernize and simplify disclosure requirements in Regulation S-K, which were mandated by the Fixing America’s Surface Transportation (FAST) Act. In large part, the proposed amendments follow the recommendations of a November 2016 report from the SEC staff. As one SEC commissioner put it, the incremental adjustments to Regulation S-K are meant to “prune” the SEC’s existing disclosure regime rather than as “an exercise in slash-and-burn clearcutting.”
Below are six highlights from the SEC’s proposed amendments to Regulation S-K:
- Rules for Management’s Discussion and Analysis (MD&A) would be amended to clarify that a registrant need only provide a period-to-period comparison for the two most recent fiscal years presented in the financial statements and may hyperlink to the prior year’s annual report for additional period-to-period comparison. The proposed amendments would require hyperlinks to information that is incorporated by reference if that information is available on EDGAR. Instruction 1 to Item 303(a).
- Requirements to allow for consistent incorporation by reference or cross-referencing to disclosure found elsewhere in a filing, including the financial statements, would be streamlined; provided that registrants would not be permitted to incorporate by reference in the financial statements to disclosure found elsewhere. Item 10(d).
- Disclosure of material contracts in a registrant’s exhibit index would be limited to material contracts not made in the ordinary course of business that have not been fully performed prior to the filing date and the existing two-year look back would be limited to newly reporting registrants. Item 601(b)(10)(i).
- The requirement that Section 16 filers furnish any delinquent Section 16 reports to the registrant would be eliminated and the proposed amendments would permit the registrant to rely on a review of the Section 16 reports submitted on EDGAR and any written representations that no Form 5 is required. Also, the proposed rules would eliminate the need to include the “Section 16(a) Beneficial Ownership Reporting Compliance” heading if there are no delinquent Section 16 filings and would eliminate the cover page checkbox relating to Item 405 disclosures. Item 405.
- The proposed amendments create a new carve out in the process of seeking confidential treatment for commercially sensitive or confidential information, including personally identifiable information (PII), which would permit registrants to omit from material contract exhibits confidential information that is not material and would cause competitive harm if publicly disclosed, without having to request confidential treatment from the SEC. Item 601(b)(10).
- Changes to the “Subject to Completion” legend for preliminary prospectuses would eliminate the statement that “the prospectus is not an offer to sell or a solicitation of an offer to buy securities in any state where the offer or sale is not permitted” to allow for a more tailored prospectus cover page in recognition of the changes to securities law brought by the National Securities Markets Improvement Act (NSMIA). Item 501(b)(10).
The foregoing is not a complete description of the proposed amendments to Regulation S-K. The full text of the proposed amendments is available here. Some of the requirements of the report have already gone into effect, e.g., including hyperlinks to exhibits, which we’ve previously blogged about. The SEC will seek public comment on the remaining proposed rules for 60 days. If you have other questions about the proposed amendments to Regulation S-K, please contact any member of our Corporate & Securities practice for more information.