SEC Announcement


The United States Securities and Exchange Commission (the “SEC”) has adopted the “Fast Act Modernization and Simplification of Regulation S-K, which comprises certain “specific and detailed recommendations on modernizing and simplifying the requirements in Regulation S-K in a manner that reduces the costs and burdens on companies while still providing all material information” and “[recommendations] on ways to improve the readability and navigability of disclosure and to discourage repetition and the disclosure of immaterial information.”  These amendments relate to domestic and foreign issuers in most cases, and take effect 30 days after publication in the Federal Register; however, these amendments regarding redaction of confidential information in material contracts and other exhibits take effect on publication.

S-K Item 102 (Description of Property):  Registrants do not need to provide disclosure about a physical property unless it is material to the Registrant’s business or has a material monetary value.  The revisions to Item 102 clearly state that disclosure is required only of physical property to the extent that the physical property is material to the Registrant, and the SEC comments seemed to indicate that limited facilities would not be required to be disclosed in this context; however, the amendments to Item 102 do not provide relief to Registrants engaged in mining, real estate and oil and gas industries.

S-K Item 303 (Management’s Discussion and Analysis of Financial Condition and Results of Operations): Registrants may exclude from MD&A, if not material to an understanding of the Registrant’s results of operations, three year historical financial information discussion if the Registrant has already included the disclosure in a prior 10-K or 20-F (adopted to include where the information was disclosed in any report filed with the SEC), to discourage repetition of disclosure that is no longer material.  Based upon many of the comments received about “materiality” and related issues, the final wording of the amendment was left unchanged, with the SEC stating “We are adopting as proposed the revision to Instruction 1 of Item 303 that eliminates the reference to year-to-year comparisons. Instruction 1 will now state that registrants may use any presentation that in the registrant’s judgment enhances a reader’s understanding of the registrant’s financial condition, changes in financial condition, and results of operations, without suggesting that any one mode of presentation is preferable to another.”  The SEC further noted that Registrants deciding to leave out the third year historical discussion would be required to identify the location where that information was previously disclosed (the earliest disclosure is emphasized) in an SEC filing, whether made in Form 10-K or another report.  A further condition of the omission is that the discussion must not be “material to an understanding” of the Registrant’s financial condition, changes in financial condition and results of operations.  The SEC stated: “This is not to suggest, however, that materiality is not relevant to management’s judgment about what disclosure is provided in MD&A. Materiality remains, as always, the primary consideration. Rather, this change recognizes that the language of the proposed condition was superfluous and never intended to modify, supplement, or alter the overarching materiality analysis that management must undertake with respect to the information it provides investors in MD&A.”

S-K Item 401 (Directors, Executive Officers, Promoters and Control Persons): Information about directors and officers included in Form 10-K can be incorporated into proxy or information statements.  Instruction 3 to Item 401(b) requires Registrants to include this information in a Form 10-K, and if this alternative is utilized, Instruction 3 states that the Registrant is not required to include this information in any proxy or information statement.  Instruction 3 applies to executive officer information, and the heading about this information has been changed from “Executive Officers of the Registrant” to “Information about our Executive Officers.”

Item 404 of S-K (Section 16(a) Exchange Act Reports): Currently, persons required to file these reports are required to provide a copy of the filed reports to the Registrant; and Registrants are required to report, based upon such filings made or received, whether these reports have been timely filed. These amendments would eliminate the requirements of SEC Rule 16a-3(e) that the reporting person provide a copy of the report filed to the Registrant and amend Item 405 of S-K to: (i) clarify that Registrants are not required to rely on Section 16 reports filed or representations of the filers in that respect to assess delinquency in filings; (ii) change the heading from “Section 16(a) Beneficial Ownership Reporting Compliance” to “Delinquent Section 16(a) Reports” and encourage the elimination of the headings altogether when there are no delinquencies to report; and (iii) eliminate the check box filing on the Cover Page of Form 10-K about “there is no disclosure of delinquent filings in the Form 10-K…”

S-K Item 407 (Corporate Governance):  These amendments provide or clarify: (i) that Emerging Growth Companies (“EGC”) are not required to provide a compensation committee report; (ii) change the reference “AU” in “Communications with Audit Committees” (“AICPA” [American Institute of Certified Public Accountants] standards as opposed to PCAOB standards) when a Registrant files a proxy or information statement for an annual or special meeting of shareholders to refer more broadly to the applicable requirements of “the Public Company Accounting Oversight Board (“PCAOB”) and the Commission” as the term “AU” has become outdated (Item 407(d)(3)(i)(B)); and (iii) to specifically exclude any requirement of EGC’s from stating whether the compensation committee “recommended to the board of directors that the CD&A be included in the registrant’s annual report, proxy statement, or information statement.” (Item 407(e)(5)).

S-K Item 501(b) (Name on Cover Page):  “The instruction to Item 501(b)(1) states that if a registrant’s name is the same as that of a “well known” company, or if the name leads to a misleading inference about the registrant’s line of business, the registrant must include information to eliminate any possible confusion with the other company. If disclosure is insufficient to eliminate the confusion, the instruction indicates that the registrant may be required to change its name.”  There is an exception if the name is an “established company,” the character of the Registrant’s business has changed and the general public is well aware of that change.

S-K Item 501(b)(3): The front cover page of a Prospectus requires disclosure of the offering price of the securities being offered for sale, including underwriter discounts or commissions and the net proceeds to the Registrant to any selling security holders.  Where this is not practicable, Instruction 2 allows a Registrant to provide an explanation of how these amounts were computed.  Theses amendments specifically allow the Registrant to make a statement on the cover page, if applicable, as to how the offering prices will be determined and where that information can be accessed in the Prospectus.  See “Cover Pages” below for additional required information regarding “Cover Page” amendments.

S-K Item 503(c) (Risk Factors):  The SEC was concerned that the generic risk factors contained in this Item could anchor or skew the view of a Registrant when analyzing risk factors in registration statements and reports.  Accordingly, the SEC has eliminated the specific examples of risk factors contained in Item 503(c), and seeks to encourage Registrants to formulate their own risk factor determination and analysis process.

S-K Item 508 (Plan of Distribution):  Sub-Underwriter is not defined in Regulation C, and the SEC proposes to define “Sub-Underwriter” in SEC Rule 405 as a dealer that is participating in an offering.

S-K Item 512 (Undertakings):  The SEC is proposing to eliminate duplicative undertakings that are covered by other rules or that have become unnecessary, and accordingly, have eliminated the undertakings required by Items 512 (c) (Warrants and Rights Offerings), (d) (Competitive Bids) and (f) (Equity Offerings of Nonreporting Registrants).

S-K Item 601(b)(2) (Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession) and (b)(10) (Material Contracts):

  • Omit confidential information in material contracts and certain other exhibits so long as the information omitted is not material and would likely cause competitive harm to the Registrant if publicly disclosed, and without the prior filing of a confidential treatment request (“CTR”) with the SEC.  These amendments relate primarily to information that would be excluded for “competitive reasons” or because the information is “sensitive,” and to require that when any exhibit or material contract is redacted: (i) the Exhibit Index indicate that portions of the exhibit or material contract have been omitted; (ii) include a prominent statement on the cover page of the document that certain information has been redacted and the reasons therefore; and (iii) indicate in brackets where the information has been redacted.  The reasons cited for these amendments are the time involved in obtaining a CTR from the SEC, the cost and expense of preparing a CTR and the limited time available for CTR’s for material agreements or other exhibits that may be required to be filed with an 8-K, and though these material contracts and other exhibits can be filed with the next periodic report of the Registrant, these changes may readily facilitate the filing of these documents with the 8-K.  The Freedom of Information Act (“FOIA”) provisions were also discussed and considered in adopting these amendments.  Personal Identifiable Information (“PDI”) can also be redacted from material contracts and other exhibits under new Item 601(a)(6) without submitting a CTR.
  • Only newly reporting Registrants will be required to file material contracts that were entered into within two years of the applicable registration statement of report filed.
  • No requirement to file attachments to material contracts unless the attachments contain material information that was not otherwise disclosed.

Cover Pages: Forms 8-K, 10-Q, 10-K, 20-F and 40-F shall disclose the principal market and trading symbol of each class of equity securities of the Registrant (Item 501(b)(4)); and any inline XBRL data included on the cover page of these Forms, excluding Form 8-K, will be required to be tagged. Cover pages of Prospectuses that are “subject to completion” will not need to have the state blue sky references any longer, for offerings that are not prohibited by state blue sky laws where there is a National Securities Markets Improvement Act (“NSMIA”) exemption.  (Item 501(b)(10)).

Documents incorporated by reference in filings will no longer have to be filed, but instead will be required to be provided by hyperlinks to the documents already filed with the SEC (See Item 10(d) and SEC Rule 411 [Securities Act of 1933] and SEC Rule 12b-23 [Securities Exchange Act of 1934][Incorporation by Reference]).  The SEC also rescinded SEC Rule 12b-32 (Incorporation of Exhibits by Reference). However, to address auditor’s responsibilities that may arise from incorporation of financial statements by reference, such incorporation is only allowed “when expressly permitted by applicable accounting standards, such as IFRS, our amendments explicitly provide that incorporating by reference, or cross-referencing to, information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules or by U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards as issued by the International Accounting Standards Board, whichever is applicable.”

Investment companies will be required to file reports on Form N-CSR and registration statements and amendments in HTML format and provide hyperlinks to exhibits and information incorporated by reference to such previously filed exhibits and information.

The final amendments briefly discussed above can be viewed at:  This summary is qualified in its entirety to this reference.