The SEC has proposed a series of amendments to modernize and simplify disclosure requirements for public companies, investment advisers and investment companies, particularly those disclosure requirements under Regulation S-K. Such amendments include proposed changes to, among others, Item 102 (Description of Property), Item 303 (Management’s Discussion and Analysis), Item 401 (Directors, Executive Officers, Promoters, and Control Persons), Item 405 (Compliance with Section 16(a) of the Exchange Act), Item 501(b) (Outside Front Cover Page of the Prospectus), Item 503(c) (Risk Factors), Item 508 (Plan of Distribution), Item 601(b)(10) (Material Contracts) and various rules related to incorporation by reference.
Among the most impactful proposed changes are:
- Limiting the period-to-period comparison required by Item 303 (Management’s Discussion and Analysis) to only the two most recent fiscal years rather than the currently required three most recent fiscal years. The comparison to the third fiscal year would still be required if material to the understanding of the company’s financial statements and if not included in the company’s Form 10-K for the previous year.
- Limiting the disclosure required by Item 102 (Description of Property) to only those properties that are material.
- With respect to exhibits to SEC filings (Item 601):
- Allowing companies to omit schedules that don't contain material information from all
exhibits, rather than only from acquisition agreements.
- Eliminating the requirement (other than for newly reporting companies) under Item
601(b)(10) to file as exhibits material contracts that were entered into less than two
years before that filing but that have been fully performed at the time of the filing.
- Permitting companies to omit or redact from material agreements filed as exhibits to
SEC filings confidential information that is not material and would cause competitive
harm if made public, without requiring companies to first file a confidential treatment
request. Companies would be required to mark their filings to indicate omitted items.
- Permitting companies to omit disclosure about Section 16 reports if all reports have been timely filed (and eliminating the box on the cover of Form 10-Ks regarding Section 16 disclosure).
In contrast, the proposals would add a few requirements regarding descriptions of securities and XBRL tagging of cover pages, among others.
In addition, the proposals would eliminate certain other outdated disclosure requirements and make various conforming updates to forms and rules with outdated references.
The proposals, which can be found here, are subject to a public comment period, following which time, the SEC will further consider whether or not to approve them as final rules.