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

The SEC recently revised Instruction 1 to Item 303(a) to allow registrants who are providing financial statements covering three years in a filing to omit discussion of the earliest of the three years if such discussion was already included in any other of the registrant’s prior filings on EDGAR that required disclosure in compliance with Item 303. Registrants electing not to include a discussion of the earliest year in reliance on this instruction must identify the location in the prior filing where the omitted discussion may be found.

The SEC recently issued three Compliance and Disclosure Interpretations, or C&DIs, that address the above instruction.  According to the C&DIs:

  • A statement merely identifying the location in a prior filing where the omitted discussion can be found does not incorporate such disclosure into the filing unless the registrant expressly states that the information is incorporated by reference.
  • The instruction does not authorize the registrant to omit the earliest of three years from its current MD&A if it believes a discussion of that year is necessary. Item 303(a) requires that the registrant provide such information that it believes to be necessary to an understanding of its financial condition, changes in financial condition and results of operations. A registrant must assess its information about the earliest of three years and, if it is required by Item 303(a), include it in the current disclosure or expressly incorporate by reference its discussion from a previous filing.
  • Merely referring to the location of the prior disclosure does not appear to be effective to update an existing registration statement. The omitted information must be expressly incorporated by reference. [Update – the earliest year need only be incorporated by reference when necessary to an understanding of financial condition and results of operation and the like.]

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