SEC Proposes Amendments to Modernize and Simplify its Disclosure Requirements as Mandated by the FAST Act

The SEC is proposing amendments to dozens of SEC regulations and forms. The most noteworthy of the proposed amendments are highlighted below. See the Appendix for a more detailed summary of these proposed amendments and others discussed in the proposing release.

• Streamlining MD&A Disclosure. The SEC proposes amending Item 303(a) of Regulation S-K to allow registrants, when financial statements included in a filing cover three years, to eliminate MD&A discussion of the earliest year if (i) that discussion is not material to an understanding of the registrant’s financial condition, changes in financial condition and results of operations and (ii) the registrant has filed its prior year Form 10-K on EDGAR containing MD&A of the earliest of the three years included in the financial statements of the current filing. The proposed amendments would also emphasize that registrants have discretion to use any form of MD&A presentation that would enhance a reader’s understanding (and are not limited to using year-to-year comparisons).
• Reducing the Need for Confidential Treatment Requests. The SEC proposes amendments to Item 601(a)(5), Item 601(a)(6) and Item 601(b)(10)(iv) which would expand registrants’ ability to omit certain information from their exhibit filings. These amendments would permit registrants to omit, without submitting a confidential treatment request, (i) immaterial schedules and attachments from all exhibits (rather than just plans of acquisition as currently permitted under Item 601(b)(2)), (ii) personally identifiable information and (iii) confidential information in material contract exhibits that is both (x) not material and (y) competitively harmful if publicly disclosed.
• Other Exhibit-Related Proposals. New Item 601(b)(4)(vi) would require registrants to file an Item 202 description of their Exchange Act registered securities as an exhibit to Form 10-K. A proposed amendment to Item 601(b)(10) would limit the two-year look back test for filing material contracts to newly reporting registrants. Proposed amendments to Item 601(b)(21) would require disclosure of a legal entity identifier or LEI (only if one has been obtained) for each registrant and any subsidiaries required to be listed on the significant subsidiaries exhibit.
• Offering-Related Proposals. Proposed amendments to Item 501 would streamline the information required on a prospectus cover page by explicitly allowing registrants to (i) state that the offering price will be determined by a particular method or formula that is more fully explained in the prospectus (with a cross reference to such disclosure) and (ii) exclude the portion of the legend relating to state law for offerings that are not prohibited by state blue sky law. A proposed amendment to Item 508 would define the term “sub-underwriter” to clarify whether disclosure is required about the plan of distribution for a registered securities offering. Finally, proposed amendments to Item 512 would eliminate certain undertakings that are redundant or obsolete.
• Other Significant Proposed Amendments.
  • Proposed amendments would give registrants the flexibility to exclude item numbers and captions or create their own captions tailored to their disclosure in Form 10, Form 10-K and Form 20-F.
  • A proposed amendment to Item 102 would clarify that a description of property is required only to the extent physical properties are material to the registrant and may be provided on a collective basis, if appropriate. (The proposed modifications would not apply to companies in the mining, real estate and oil and gas industries.)
  • Proposed amendments to Item 503(c) would relocate the current risk factor disclosure requirement to Subpart 100 (new Item 105) and eliminate the five risk factor examples set forth in the rule.
  • Proposed amendments would eliminate the requirement in Exchange Act Rule 16a-3(e) that reporting persons furnish Section 16 reports to the registrant and eliminate the checkbox on the Form 10-K cover page relating to Item 405 disclosures of delinquent Section 16 filings.
  • Proposed amendments would require registrants to tag all – rather than some as currently required – of the information on the cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F and Form 40-F using Inline XBRL. The SEC also proposes requiring each of the cover pages of such Forms to include trading symbols for each class of the registrant’s registered securities.
  • Finally, the SEC proposes to apply rules governing incorporation by reference and hyperlinking to investment advisers and investment companies, including proposed amendments that would require certain investment company filings to be submitted in HTML format.
    
    

Please click here to view the Appendix.