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SEC proposes amendments to simplify and modernize certain disclosure requirements in Regulation S-K

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Oct 11, 2017

On October 11, 2017, the Securities and Exchange Commission (SEC) issued a proposed rule that contains a number of specific revisions to a broad group of disclosure requirements in Regulation S-K in response to a mandate of the Fixing America’s Surface Transportation (FAST) Act.

The objective of the proposed rule is to "modernize and simplify certain disclosure requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors." The proposal underscores the importance of making registrants' disclosures more readable and navigable as well as eliminating "repetition and disclosure of immaterial information."

SEC Chairman Jay Clayton addressed the proposed rule in a public statement at the Commission's October 11, 2017, open meeting. Mr. Clayton particularly emphasized two areas in which the proposed rule has recommended improvements: (1) Management's Discussion and Analysis (MD&A) and (2) the confidential treatment process. Regarding the proposed changes related to MD&A, he pointed out that registrants would be permitted to "forgo discussion of the oldest period if the information has been previously reported and . . . is no longer material." In discussing the suggested enhancements to the confidential treatment process, he noted that the proposed amendments would "create efficiencies" by permitting "registrants to omit from material contract exhibits confidential information that is not material and would cause competitive harm if publicly disclosed, without having to request confidential treatment from the Commission."

Application to Foreign Private Issuers

The disclosure requirements for Item 5 of Form 20-F (Operating and Financial Review and Prospects) are substantively comparable to the MD&A requirements under Item 303 of Regulation S-K. To maintain a consistent approach to MD&A for domestic registrants and foreign private issuers, they are proposing changes to Form 20-F that conform to their proposed amendments to Instruction 1 to Item 303(a). Accordingly, their proposals would amend the instructions to Item 5 of Form 20-F to provide that, when financial statements included in a filing cover three years, discussion about the earliest year would not be required 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 20-F on EDGAR containing Item 5 disclosure of the earliest of the three years included in the financial statements of the current filing. Similar to their proposals for Item 303, they are proposing to amend the instructions to Item 5 of Form 20-F to emphasize that registrants may use any presentation that, in the registrant’s judgment, would enhance a reader’s understanding.

Review the proposed rule and Mr. Clayton's public statement on the SEC's Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.