SEC further eases disclosure requirements in latest Regulation S-K and 20-F changes
Amendments will eliminate specific requirements for selected financial data, off-balance sheet liabilities and contractual obligations.
Continuing its move toward a more principles-based disclosure approach, the U.S. Securities and Exchange Commission (the “SEC”) has adopted amendments to its disclosure requirements so that registrants will no longer have to provide in their registration statements and annual and other reports:
- Five years of selected financial data;
- A separate section about off-balance sheet arrangements; and
- Tabular disclosure of contractual obligations
Some disclosure requirements will be increased by the amendments. The amendments codify earlier SEC staff guidance regarding the disclosure of critical accounting estimates, adding it as a requirement in the Operating and Financial Review and Prospects (“OFR”)/Management’s Discussion and Analysis (“MD&A”). Language changes with respect to capital resources and known trends and uncertainties could also possibly result in expanded disclosure in those areas.
The amendments do not add any new requirements with respect to environmental, social or governance or sustainability matters, instead emphasizing the SEC’s existing guidance on these topics.
The amendments, which affect Regulation S-K, Form 20-F, Form 40-F and various other SEC forms, will become effective 30 days after they are published in the Federal Register. Registrants must comply beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register (the “mandatory compliance date”). The amended rules will apply to registration statements and prospectuses that on their initial filing date must contain financial statements for a period on or after the mandatory compliance date. Registrants may voluntarily comply with the amendments any time after the effective date, but they must provide disclosure responsive to an amended item in its entirety.
Set forth in our full PDF (accessible using the link to the right) are the key changes, with an emphasis on those that apply to foreign private issuers (i.e., most non-governmental issuers incorporated outside the United States) (“FPIs”). Many of the SEC disclosure rules that apply to FPIs are found in Form 20-F, while U.S. domestic issuers (and FPIs that choose to file on domestic forms) are subject to Regulation S-K. In general, the SEC took a similar conceptual approach to the amendments in Regulation S-K and Form 20-F, although the changes do not always include the same language. Further, some items of Regulation S-K have no parallel in Form 20-F. For example, the deletion of Item 302(a) (Supplementary financial information) of Regulation S-K will have no effect on FPIs, as this item is not found in Form 20-F.
On balance, the amendments reduce disclosure requirements more than they increase them, as has been the overall trend in recent years, and we welcome their adoption. These amendments both reduce burdens on issuers and streamline disclosure documents so that investors can focus on the material information. If you would like to discuss any of the foregoing, please contact your regular Linklaters contacts or any of the lawyers listed below.