7 Key Proposed Amendments to Regulation S-K

October 17, 2017

By Amanda K. Lorentz

Update stampOn October 11, 2017, the Securities and Exchange Commission proposed several amendments to Regulation S-K as part of the FAST Act Modernization and Simplification of Regulation S-K. This follows an initial report put out by SEC staff in November 2016 discussing various Regulation S-K updates, many of which were incorporated into the SEC’s proposing release. Key among the proposed amendments are the following:

1. Management’s Discussion and Analysis 

The SEC proposes to allow registrants that are otherwise required to include three years of financial statements in a Form 10-K to omit a discussion of the earliest year in the discussion required by Item 303 if the discussion is (1) not material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations and (2) the registrant has filed its prior year Form 10-K on EDGAR containing MD&A covering the earliest required year. The proposing release also emphasizes that companies should be taking a fresh look at MD&A disclosures and tailoring the disclosures to their specific situations, including adopting a presentation that enhances a reader’s understanding.

2. Disclosure of Section 16 Filing Delinquencies

Registrants would be allowed to omit from the proxy statement the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” required by Item 405 if no delinquent Section 16 filings are listed. This change would also amend the cover page to Form 10-K to remove the checkbox related to disclosure of these delinquencies.

3. Description of Securities

Registrants would be required to include as an exhibit to Form 10-K a description of its securities registered under Section 12 of the Exchange Act. Such description would be similar to what is required by Item 202 to be included in registration statements. Once filed, this disclosure could be incorporated by reference into subsequent exhibit listings, similar to the current treatment of a registrant’s organizational documents.

4. Schedules and Exhibits to Material Agreements 

The SEC proposes to extend the provision allowing registrants to exclude schedules and exhibits from agreements filed under Item 601(b)(2) [plans of acquisition] to also allow registrants to exclude schedules and exhibits from agreements filed under Item 601(b)(10) [material agreements]. The same qualifications would apply, namely that the registrant would need to include a list of omitted schedules and an agreement to furnish them supplementally to the SEC upon request.

5. Confidential Treatment Requests 

Registrants would be allowed to redact from material agreements information that is not material and could cause competitive harm if publicly disclosed without also submitting an unredacted copy and supporting analysis to the SEC. Companies would still be required to provide such analysis if requested by the SEC as part of a regular filing review, but the previously-used confidential treatment process would no longer be required in these limited circumstances.

6. Material Agreements as Exhibits 

The SEC proposes to limit the two-year lookback in Item 601(b)(10) to only “newly reporting registrants.” Item 601(b)(10) currently requires registrants to include material agreements that (1) are to be performed in whole or in part at or after the time of filing or (2) were entered into not more than two years before such filing. All registrants that are not “newly reporting registrants” would only be required to file material agreements that are to be performed in whole or in part at or after the time of filing.  

7. Incorporation by Reference

The SEC has proposed several changes, including eliminating the current five-year limit on incorporation by reference in Item 10(d), requiring hyperlinks for information incorporated by reference and available on EDGAR, and removing the requirements under Rule 12b-23(a)(3) and Rule 411(b)(4) to attach certain information incorporated by reference to a filing.

The proposing release also includes various clean-up items, including removal of outdated undertakings in Item 512, updates to certain references in Audit Committee communications disclosures in Item 407(d)(3)(i)(B), formal adoption of the SEC staff position on inclusion of executive officer biographical information under Item 401 in the Form 10-K versus the proxy statement, clarification that emerging growth companies are generally exempt from the requirement to provide a Compensation Committee Report under Item 407(e)(5), and the addition of a requirement to list a registrant’s ticker symbol on the cover page to Forms 10-K, 10-Q and 8-K and to list each exchange on which a registrant’s securities are registered on the cover page to Forms 10-Q and 8-K.

The comment period for these proposed changes will be open for 60 days after the publication of the proposing release in the Federal Register and comments may be submitted on the SEC’s website.