On March 20th the SEC adopted “FAST Act Modernization and Simplification of Regulation S-K”, as part of its aggressive housekeeping effort, the Disclosure Effectiveness Initiative. The intent is to simplify disclosure requirements in Regulation S-K and related rules and forms. This, while maintaining the flow of relevant information to the investors, will reduce the issuer’s cost burden. Along with simplification, enhanced readability, and navigability of the disclosure documents, the amendments also aim to discourage repetition and disclosure of immaterial information. Inculcation of technology to improve data access too seems to be one of the goals of the amendments.
What are the Major changes under the amendment?
There are quite a few changes made by the final amendments that are being seen as useful by the issuers. One of these welcome changes is the elimination of the need to include in the MD&A (Management Discussion & Analysis), the discussion about the earliest of the three years of financial statements. Another is SEC’s innovative approach to the treatment of confidential information. Issuers will now be allowed to redact confidential information from exhibits without an advance formal request. Below is a summarized list of changes adopted by the SEC:
Regulation S-K, Item 303 and Form 20-F:
Issuers can now exclude the discussion of earliest of three years in MD&A if it was included in a previous filing.
Regulation S-K, Items 601(b)(10) and 601(b)(2) and investment company registration forms:
As long as the information is not material, or likely to cause competitive harm to filer if publicly disclosed, omission or redaction of confidential information in contracts and other exhibits is now allowed without submitting an advance formal request.
Forms 8-K, 10-Q, 10-K, 20-F and 40-F:
Issuers will now need to disclose the details about the exchange or principal U.S market for their securities, their trading symbol and the title of each class of securities on the cover page of Forms 8-K, 10-Q, 10-K, 20-F and 40-F. And all the data on the cover page of these forms will have to be tagged in iXBRL (Inline eXtensible Business Reporting Language).
Regulation S-K, Item 601(b)(10):
Registrants reporting for the first time, will be required to file material contracts entered within two years of the applicable registration statement or report.
Regulation S-K, Item 601(a)(5) and investment company forms:
Under the new rules , issuers will not be required to file schedules or similar attachments to exhibit filings, provided such attachments do not contain material information or were not otherwise disclosed.
Regulation S-K, Item 102:
Registrants will need to provide details of the material physical property.
Compliance with Exchange Act (Section 16):
Requirement to deliver filed section 16 reports by directors, officers, and ten percent shareholders to registrants is removed. Additionally, registrants are permitted to rely upon section 16 reports filed on EDGAR.
Hyperlinks to Documents Incorporated by Reference:
If any document or part of the document is already filed, the registrant is no longer required to file the same again. Instead, it needs to be hyperlinked with the previous EDGAR filing.
Incorporation by Reference and Cross-Reference of Information in Financial Statements:
Registrants no longer need to file exhibits copies of any information incorporated by reference.
Exhibit Hyperlinks and HTML Format for Investment Companies:
All of the SEC amendments related to using of reference in the report and hyperlinking is applicable to the investment companies. Additionally, they are required to file reports on Form N-CSR and registration statements in HTML format.
What is the compliance date for various category/type of filers?
The amendments fully came into effect on May 2nd, 2019 with the following exceptions:
- Amendments related to redaction of confidential information in material contract exhibits became effective one month earlier, on April 2nd, 2019.
- Amendments related to tagging requirement of cover pages of inline XBRL. This amendment will be applicable to companies in a phased manner:
| Type of Filers | Inline XBRL Effective Date |
| Large Accelerated Filers | Beginning on or after June 15, 2019 |
| Accelerated Filers | Beginning on or after June 15, 2020 |
| Smaller Reporting Companies and Non-Accelerated Filers | Beginning on or after June 15, 2021 |
- Amendments related to use of hyperlinks and HTML format in certain filings by Investment Company will be effective on or after April 1st, 2020.
Which entities are affected by these amendments?
The amendments affect entities that are:
Domestic and Foreign Registrants
Investment companies under the Investment Company Act of 1940; and
Investment advisers
Conclusion
The amendments adopted by the SEC for the simplification of Regulation S-K are likely to benefit issuers in a big way. Specifically, the rules concerning the MD&A reporting, treatment of confidential information, and filing of exhibits are expected to ease issuers’ burden. The amendments also point to the SEC’s progressive move towards bringing in standardization of reporting. The mandate to tag all details on the cover pages of 8K, 10Q, 10K, etc., in XBRL is evidence of the fact.
