SEC Adopts Amendments to Regulation S-K to Modernize Disclosures of Business, Legal Proceedings and Risk Factors
On August 26, 2020, the SEC adopted amendments to modernize the description of business (Item 101), legal proceedings (Item 103) and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The amendments give companies more flexibility and, as discussed in The Wall Street Journal, are “part of a wider regulatory shift from strict guidance toward principles-based disclosure that aims to simplify information for companies and investors.” The amendments were proposed on August 8, 2019, and were adopted substantially as proposed.
According to the SEC’s press release, the amendments “reflect the Commission’s long-standing commitment to a principles-based, registrant-specific approach to disclosure. These disclosure requirements, while prescriptive in some respects, are rooted in materiality and are designed to facilitate an understanding of each registrant’s business, financial condition, and prospects. The rules are designed for this information to be presented on a basis consistent with the lens that management and the board of directors use to manage and assess the registrant’s performance.”
In his statement in support of the amendments, Chairman Jay Clayton highlights the topic of human capital. “I fully support the requirement in today’s rules that companies must describe their human capital resources, including any human capital measures or objectives they focus on in managing the business, to the extent material to an understanding of the company’s business as a whole.”
The amendments will become effective 30 days after publication in the Federal Register.
For a more detailed discussion of the amendments as originally proposed, see this previous update.