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FAST Act Update: SEC Adopts Amendments to Modernize and Simplify Public Disclosure

What Happened?

On March 20, 2019, the SEC adopted amendments to modernize and simplify disclosure requirements for public companies. Specifically, the SEC adopted amendments to modernize its disclosure requirements for public filings in a way that the SEC believes will minimize the costs and burdens on public companies while continuing to provide all material information to investors.

Why It Matters

Investors will benefit from these new amendments as they eliminate out-of-date, repetitive and unnecessary disclosure, and should simplify the process by which they assess material information. The SEC hopes investors will benefit from its work to improve disclosure, as they focus on modernizing their disclosure system to meet the expectations of today’s investors while eliminating unnecessary costs and burdens.

The Amendments

The amendments are consistent with the SEC’s mandate under the FAST Act, and are based on recommendations in the SEC staff’s FAST Act Report and an overall review of the SEC’s disclosure rules.

Specifically, the amendments will (i) allow companies to redact confidential information from most exhibits without filing a confidential treatment request, (ii) provide more flexibility in the discussion of historical periods in Management’s Discussion and Analysis, known as the MD&A, by removing the requirement to include a discussion about the earliest of the three years in such section and allowing a company to tailor their presentation in a way meaningful to investors, not just based on year-over-year comparisons and (iii) incorporate technology to improve access to information on the cover page of certain filings. In addition, the amendments will streamline the cover pages to public companies’ filings, so investors will be able to identify the national stock exchange and trading symbol without having to read the entire filing.

Some Thoughts

These amendments will serve as a useful step towards the SEC’s goal of simplifying and cleaning up public company disclosures; however, some these amendments will have more of an impact than others.

We believe the most notable amendment will be the omission of confidential information from most exhibits without filing a confidential treatment request. These requests, known as CTRs, are time-intensive and require approval from the SEC, which can take 30 days or more. The major pitfall for these CTRs is that the SEC will not declare a company’s pending registration statement effective while a CTR is being reviewed, which, of course, can delay, or cause a company to lose, its ability to raise much needed capital. With this amendment, companies will be able to redact appropriate confidential information based on extensive and longstanding SEC guidance without causing any delay to their capital raising efforts.

We expect that the amendments related to the MD&A section will have a lesser impact on public disclosure. While the SEC believes companies will benefit from increased flexibility regarding their MD&A presentation, we expect most companies to continue to disclose their financial results in a manner consistent with their prior filings, including year-over-year-comparisons, because such presentations are familiar to investors and are appropriate methods for such disclosure. It is also important to note that smaller reporting companies are able to disclose two years of financial statements instead of three years, so the amendment to omit the earliest of three years in the MD&A will not have an impact on their filings.

What Happens Next?

These amendments take effect 30 days after they are published in the Federal Register, except that the amendments relating to the redaction of confidential information in certain exhibits will go effective upon publication in the Federal Register.

© 2019 Mitchell Silberberg & Knupp LLP

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About this Author

Blake Baron MSK corporate lawyer
Associate

Mr. Baron concentrates his practice on general corporate law, securities law, mergers and acquisitions and corporate governance. He represents public and private companies engaging in debt and equity securities offerings, with a particular focus on deal structure, negotiation, and documentation. Mr. Baron also advises public companies in complying with their obligations under the Securities Exchange Act of 1934, including preparation of annual, quarterly, and current reports, and proxy statements . He also assists emerging companies with filing registration statements connected to SEC...

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Nimish Patel Corporate lawyer MSK
Partner

If you ever want the ultimate dose of energy and excitement, sit for a few minutes with Nimish Patel. His infectious attitude will make you believe that anything is possible, including “closing that deal”. Nimish is the consummate deal-making lawyer. He hails from Gujarat, a region of India, where entrepreneurship is almost a religion, which would explain his pursuit of an MBA and CPA credential, a prized possession in India, along with his law degree. That combination has served him well in the practice of corporate securities, which is really more about the art of the deal than anything else.

Nimish is an advocate for his clients, especially those in fundraising mode, and has been known to orchestrate deals thought impossible by many. His mix of enthusiasm, thoughtfulness, and grasp for the technical nature of corporate securities law, makes him the perfect ambassador. No one is more passionate about advocating for the betterment of his clients and that comes across as a genuine interest in helping others.

That same passion for helping others was the impetus to him running and getting elected to the Board of the Santa Monica Malibu Unified School District in 2010. Diplomacy is a necessary ingredient when serving in public office and it’s a skill that translates nicely to his practice of law. Finding a way to get to “yes” for all parties involved is a nuance missed by many practitioners.

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