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SEC to Propose Simplifying Regulation S-K Disclosure Requirements

In a unanimous decision, the Securities and Exchange Commission (“SEC”) has agreed to a proposal that would update and streamline some disclosure requirements under Regulation S-K. The proposed amendments stem from SEC staff recommendations in the Report on Modernization and Simplification of Regulation S-K, issued in November 2016 as required by the Fixing America’s Surface Transportation Act, and include the following:

  • Management’s Discussion and Analysis (“MD&A”): The proposal would allow companies to skip discussion within MD&A of the oldest period included in a filing if it was part of and discussed in a previous report and is not significant. Companies that disclose three years of financial statements in their filing would be exempt from discussing the oldest period if it is not important to understanding the company’s financial state and a discussion of the period was featured in the company’s Form 10-K for the prior year. This proposal will lower the regulatory costs on companies and provide easier-to-read filings for investors.
  • Confidential Treatment. The proposal would allow companies to omit in their filings information in exhibits that is unimportant and considered harmful without asking the SEC for confidential treatment. Personally identifiable information could also be omitted without submitting an initial confidential treatment request. Filings would have to indicate omitted items, and companies could be asked to submit additional information on the omitted items in exhibits upon the SEC’s request.
  • Description of Property. The proposal would clarify that companies must disclose physical properties only if the issuer deems the facilities as significant. Certain industries wherein all facilities are considered significant would continue to fall under the existing Regulation S-K requirements.
  • Material Contracts. The proposal would restrict the two-year look back provision under Item 601 of Regulation S-K to newly reporting registrants. Per Item 601, registrants must file each contract made outside of the normal course of business if the contract is significant to the registrant and must be executed at, or following, the filing of the registration statement or periodic report, or was entered into no more than two years prior to filing.
  • Hyperlinks. The proposal would require companies to include hyperlinks for references in current filings to previously filed documents on the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”).
  • Legal Entity Identifiers (“LEI”). The proposal would require registrants to disclose the LEI of the registrant and all of their subsidiaries.

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