Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The SEC has adopted amendments to its rules to simplify disclosures in filings with the SEC.  The amendments eliminate certain:

  • Redundant and duplicative requirements, which require substantially similar disclosures as GAAP, International Financial Reporting Standards (IFRS), or other Commission disclosure requirements.
  • Overlapping requirements, which are related to, but not the same as GAAP, IFRS, or other Commission disclosure requirements.
  • Outdated requirements, which have become obsolete because of the passage of time or changes in the regulatory, business, or technological environment.
  • Superseded requirements, which are inconsistent with recent legislation, more recently updated Commission disclosure requirements, or more recently updated GAAP.

The amendments contain a mind-numbing level of detail, particularly with respect to the accounting rules in Regulation S-X.  However, set forth below are the basic changes that will affect typical disclosures made in the body of Form 10-Ks, proxy statements and registration statements outside of the financial statements.

Description of Business.  The amendments revise Item 101 of Regulation S-K to eliminate required disclosures in the business description regarding:

  • Financial information about segments.
  • Research and development spending.
  • Financial information about geographic areas, such as revenues from external customers in the issuers country of domicile and foreign countries, but where material must be covered in the MD&A.
  • Risks attendant to the foreign operations and any dependence on one or more of the registrant’s segments upon such foreign operations, but where material should be covered in risk factors.

Internet Address.  Disclosure of the issuer’s internet address is now mandatory if the issuer has one.  Previously the rule “encouraged” disclosure.

Public Reference Room:  The amendments eliminate required disclosures for registration statements about SEC filings being available in the public reference room at the SEC’s headquarters.

Trading Markets and Dividends.  The identification of trading markets for equity securities must now be accompanied by the trading symbols for such securities.  Disclosure of high and low trading prices for each quarter in the last two full fiscal years and interim periods is no longer required.  In addition, the dividend history for the previous two fiscal years and interim periods is also eliminated.  Restrictions on ability to pay dividends has now been consolidated into Regulation S-X, so if included in the financial statements such restrictions no longer need to be disclosed in the body of the Form 10-K or other applicable filing.

Ratio of Earnings to Fixed Charges.  The required disclosure of the ratio of earnings to fixed charged and the related exhibit requirement have been deleted.