SEC Adopts Final Rules To Further Simplify Disclosure Requirements
The Securities and Exchange Commission (SEC) recently adopted amendments to certain of its rules and regulations to modernize and simplify Regulation S-K.1 The SEC adopted these amendments in response to mandates under the 2015 Fixing America’s Surface Transportation Act, nearly 18 months after it first proposed the amendments2 and just over 6 months after it adopted other changes also intended to simplify and update reporting requirements.3 The latest modifications are “intended to improve the quality and accessibility of disclosure in filings by simplifying and modernizing . . . requirements” while also clarifying ambiguous disclosure requirements, removing redundancies, and further leveraging the use of technology.4 Highlights of these new amendments are summarized below.
Amended Disclosure Requirements
Among other changes, the new amendments to the SEC’s disclosure requirements include:
Management’s Discussion and Analysis.
Registrants will no longer be required to provide year-to-year comparisons; instead, they will be permitted to use any presentation that they believe will enhance a reader’s understanding of their financial condition, changes in financial condition, and results of operations. Registrants may, however, continue to provide the year-to-year comparison as their method of presentation. They will also be permitted to omit a discussion of the earliest of the three years presented in the financial statements if: (i) such discussion was included in one of their prior filings; (ii) such discussion is not necessary to understand their financial condition, changes in financial condition, and results of operations; and (iii) they identify the location of such discussion in the prior filing.
Description of Property.
Unless otherwise specified, registrants will only need to describe material physical properties. The SEC acknowledged that this requirement may result in a description of properties on an individual basis or on a collective basis, or may result in no disclosure at all. The amendments do not impact the industry- specific disclosure requirements.
Confidential Treatment Requests.
Registrants choosing to redact portions of agreements filed pursuant to Item 601(b)(2), or of material contracts filed pursuant to Item 601(b)(10), of Regulation S-K will no longer be required to submit a confidential treatment request (“CTR”) in connection with the filing of such redacted exhibits, provided that the redacted information is not material and would likely cause competitive harm if publicly disclosed. However, any redactions will remain subject to review and comment at SEC staff discretion.
Registrants will no longer be required to file schedules and similar attachments to any exhibit required under Item 601 of Regulation S-K, provided (i) such schedules/attachments do not contain material information; (ii) such schedules/attachments are not otherwise disclosed in the exhibit or disclosure document; and (iii) the exhibit contains a list briefly identifying the contents of such schedules/attachments. In addition, the two-year lookback period for determining which material contracts must be filed will only apply to newly reporting registrants. In contrast to these reduced exhibit requirements, other amendments to Item 601 will require registrants to file a new exhibit to their Form 10-K to include a description of their securities.
Section 16 Compliance.
Registrants will no longer be required to include Section 16 compliance information in their proxy statement if there are no Section 16 delinquencies to report. When there are delinquencies to report, registrants should use the heading, “Delinquent Section 16(a) Reports” instead of “Section 16(a) Beneficial Ownership Reporting Compliance.” In addition, the related checkbox disclosure on Form 10-K will be eliminated.
Information about Executive Officers.
The amendments clarify that registrants do not need to include any executive officer disclosure required by Item 401 of Regulation S-K in their proxy statement if previously provided in their Form 10-K. They also revise the required caption from “Executive officers of the registrant” to “Information about our Executive Officers.”
To encourage registrants to focus on their own risk identification processes, the amendments eliminate the specific risk factor examples that are currently listed in Item 503(c) of Regulation S-K and relocate the risk factor disclosure requirement to new Item 105 of Regulation S-K.
Registrants will be required to file a “Cover Page Interactive Data File” to Forms 10-K, 10-Q, and 8-K to tag in Inline XBRL all of the information on those cover pages. This will include the ticker symbol for each class of a registrant’s registered securities, which will be required on the cover pages of these forms. In addition, the cover pages of Forms 8-K and 10-Q will also require disclosure of the title of each class of a registrant’s securities and each exchange on which they are registered.
Incorporation by Reference.
Instead of filing as an exhibit a document or other information that is incorporated into a filing by reference, registrants will be required to hyperlink to such information if it is available on EDGAR.
The amendments make certain changes to the prospectus cover page requirements and also eliminate the undertakings required by Items 512(c)–(f) of Regulation S-K.
Effective Date of Amendments
The amendments described above under “Confidential Treatment Requests” will become effective on the date the amendments are published in the Federal Register, with most of the remaining amendments becoming effective 30 days after publication in the Federal Register. The requirements to tag cover page data in Inline XBRL, as described under “Cover Pages” above, will be phased in for operating companies on the same timeline as the Inline XBRL requirements, as follows:
Type of Filer
Large accelerated filers that prepare their financial statements in accordance with U.S. GAAP
Reports for fiscal periods ending on or after June 15, 2019
Accelerated filers that prepare their financial statements in accordance with U.S. GAAP
Reports for fiscal periods ending on or after June 15, 2020
All other filers
Reports for fiscal periods ending on or after June 15, 2021
However, Form 10-Q filers will not be required to comply with the Inline XBRL requirements with respect to any Form 10-K or any other form until after they have been required to comply with such requirements for their first Form 10-Q for a fiscal period ending on or after the applicable compliance date described above.
Registrants should familiarize themselves with the amendments, most of which will become effective 30 days after publication in the Federal Register. In addition, registrants with CTRs currently under staff review will need to determine whether to withdraw their CTRs or continue through the review process.5
1 See “FAST Act Modernization and Simplification of Regulation S-K,” SEC Release No. 33-10618 (Mar. 20, 2019) (hereinafter referred to as the “Adopting Release”).
2 See “FAST Act Modernization and Simplification of Regulation S-K,” SEC Release No. 33-10425 (Oct. 11, 2017).
3 See “Disclosure Update and Simplification,” SEC Release No. 33-10532 (Aug. 17, 2018), available at See also our prior client alert, “SEC Adopts Final Rules to Update and Simplify Disclosure Requirements,” (Aug. 22, 2018).
4 See the Adopting Release at 8-9.
5 The Adopting Release advises registrants who withdraw their CTRs to refile the related exhibit(s), in redacted form, in an amended filing that conforms to the amended rules. See the Adopting Release at 92.