History of the SEC Disclosure Effectiveness Initiative
Posted by Laura Anthony, Esq. on November 27, 2017
History of the SEC Disclosure Effectiveness Initiative- Today I am giving a brief history of the SEC Disclosure Effectiveness Initiative. In early December 2015 the FAST Act was passed into law. The FAST Act required the SEC to adopt or amend rules to: (i) allow issuers to include a summary page to Form 10-K; and (ii) scale or eliminate duplicative, antiquated or unnecessary requirements for emerging-growth companies, accelerated filers, smaller reporting companies and other smaller issuers in Regulation S-K.
The current Regulation S-K and S-X Amendments are part of this initiative. In addition, the SEC was required to conduct a study within one year on all Regulation S-K disclosure requirements to determine how best to amend and modernize the rules to reduce costs and burdens while still providing all material information. That report was issued on November 23, 2016.
Prior to that time the SEC and various market participants have been talking about needed changes. In March 2015 the American Bar Association submitted its second comment letter to the SEC making recommendations for changes to Regulation S-K and in September 2015 the SEC Advisory Committee on Small and Emerging Companies met and finalized its recommendation to the SEC regarding changes to the disclosure requirements for smaller publicly traded companies.
As we have talked about in this Lawcast series, on April 15, 2016, the SEC issued a the concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements followed by proposed rule changes issued on July 13, 2016.
As part of the same initiative, on June 27, 2016, the SEC issued proposed amendments to the definition of “Small Reporting Company”. The SEC also previously issued a release related to disclosure requirements for entities other than the reporting company itself, including subsidiaries, acquired businesses, issuers of guaranteed securities and affiliates. Both of these items are slated for action in this year’s SEC regulatory agenda.
On August 25, 2016, the SEC requested public comment on possible changes to the disclosure requirements in Subpart 400 of Regulation S-K. Subpart 400 encompasses disclosures related to management, certain security holders and corporate governance.
On March 1, 2017, the SEC passed final rule amendments to Item 601 of Regulation S-K to require hyperlinks to exhibits in filings made with the SEC. The amendments require any company filing registration statements or reports with the SEC to include a hyperlink to all exhibits listed on the exhibit list. In addition, because ASCII cannot support hyperlinks, the amendment also requires that all exhibits be filed in HTML format. The new Rule went into effect on September 1, 2017, however non-accelerated filers and smaller reporting companies that submit filings in ASCII may delay compliance through September 1, 2018.
Finally, as covered in this Lawcast series, On October 11, 2017, the SEC published proposed rule amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies.