SEC Proposes to Update Disclosures about Business Description, Legal Proceedings and Risk Factors Required by Regulation S-K

On August 8, 2019, the Securities and Exchange Commission (SEC) proposed amendments to modernize its rules requiring disclosure about a company’s business description, legal proceedings and risk factors. Proposed amendments to Items 101, 103 and 105 of Regulation S-K would:

• give a company more flexibility to tailor the description of its business to its particular circumstances;
• reduce disclosure about matters that are not material to an understanding of a company’s business or legal proceedings; and
• encourage risk factor disclosure that is streamlined, well-organized and limited to material risks.

The proposed amendments are part of the ongoing Disclosure Effectiveness Initiative led by the SEC’s Division of Corporation Finance (Corp Fin) to review and improve the effectiveness of its disclosure requirements for the benefit of investors and companies. It has been more than 30 years since the SEC has significantly revised Items 101, 103 and 105 of Regulation S-K. The proposed amendments are intended to enhance the readability of disclosures, discourage repetitive and immaterial disclosures and reduce the compliance burden on companies. The proposed amendments were informed by input from public comment letters and Corp Fin’s disclosure review process. They are also responsive to changes in the regulatory, business and technological environment since the adoption of Regulation S-K and increasing calls for the SEC to require human capital disclosure.

The proposed amendments are summarized in the table below. The SEC will accept public comments on the proposal for 60 days following its publication in the Federal Register.