As we previously reported, the SEC has adopted amendments to the public company disclosure rules intended to further streamline and simplify the reporting process for public companies. The amendments also significantly change the process for requesting and renewing confidential treatment of exhibits to SEC filings. Most of these amendments became effective on May 2, 2019. Below is a brief summary of several of the significant changes that resulted from these amendments.
Amendments to Form 10-K, Form 10-Q, and Form 8-K Cover Pages
Companies must now list on the cover page of Form 10-Q and Form 8-K each class of securities registered under Section 12(b) of the Exchange Act, the trading symbol, and the exchange(s) on which the securities trade, similar to the current requirements for the Form 10-K cover page. The cover page of Form 10-K was also modified to require the inclusion of the trading symbol for each class of registered securities, which previously was not required to be provided. The new Form 10-K cover page will also no longer include the checkbox related to delinquent filers under Section 16.
Description of Material Properties
Item 102 of Regulation S-K was revised to encourage disclosure regarding only material properties, plants and mines. The new rules make clear that it is acceptable for a company to determine that none of its properties are material for purposes of Item 102. However, the amendments do not alter disclosure requirements for companies engaged in the real estate, mining, and oil and gas industries, in which physical properties may be of particular importance. Companies in these industries must continue to comply with the existing instructions to Item 102 and applicable SEC industry guides governing their industries.
MD&A Coverage Periods
In an effort to avoid duplication, companies will no longer need to include discussion and analysis for the earliest of the three years in the MD&A if that year was covered in a prior filing. However, companies omitting this information must reference where readers can find the discussion and analysis pertaining to that year. Note that this is not limited to annual reports on Form 10-K – if this disclosure is contained in a registration statement or other filing, companies may still take advantage of the new rule and reference the information contained in the prior filing.
Hyperlinks for Information Incorporated by Reference
Companies must now include hyperlinks for required information that is incorporated by reference into a filing, similar to the links that are currently required for exhibits that are incorporated by reference. For example, these amendments will require companies to include active hyperlinks to the filings listed in the section of their Securities Act registration statements on the incorporation of information by reference. The SEC further indicated that inaccurate links, alone, would not render a filing materially deficient or affect the company’s S-3 eligibility.
New Form 10-K Exhibit
Companies must now include a new exhibit which includes a description of its securities based on Item 202 of Regulation S-K. Note that the initial exhibit must be filed with the Form 10-K and may not be incorporated by reference to another filing. Thereafter, a company may incorporate the exhibit by reference to the Form 10-K with which it was filed so long as there is no change. If there is a change, even if immaterial, an amended exhibit must be filed.
Omission of Schedules to Exhibits
Companies will be permitted to omit entire schedules and similar attachments to exhibits if they do not contain material information. Previously, this was permitted only for acquisition agreements filed under Item 601(b)(2), although, in practice, several issuers also extended this to material contracts filed under Item 601(b)(10).
Proxy Statement Changes
Delinquent Section 16 filings must now be reported under a new heading – “Delinquent Section 16(a) Reports.” If a company does not have any delinquent filings to report, the new rules encourage that companies omit this section entirely from their proxy statement. The new rules also clarify that emerging growth companies are not required to include a compensation committee report
Confidential Treatment Requests and Renewals
Companies no longer need to submit confidential treatment requests to redact information from exhibits filed under Item 601(b)(2) or 601(b)(10) of Regulation S-K if the redacted information (1) is not material and (2) would result in competitive harm to the company if publicly disclosed. Information meeting these criteria may be redacted so long as the redaction is noted in the exhibit list and the company includes a statement on the first page of the filed exhibit indicating that the redacted information meets the two requirements noted above. Companies must indicate by brackets where the information is omitted from the filed version of the exhibit. The amendments also permit a company to redact personal confidential information if disclosure would constitute “a clearly unwarranted invasion of personal privacy.” The SEC staff has informally permitted this, so the amendments merely codify existing practice. Redactions related to personal privacy do not require any further justification regarding materiality or competitive harm.
Renewals for confidential treatment requests can now be applied for through submission of a simple one-page application that can be submitted electronically to the SEC by email.
While none of these changes is necessarily significant, they demonstrate the SEC’s commitment to make disclosures (and the process of disclosing) simpler and more effective, at least incrementally.