SEC Proposes Amendments to Regulation S-K
On October 11th, the SEC proposed amendments to modernize and simplify certain disclosure requirements in Regulation S-K. The proposal would not make major changes to Regulation S-K. Rather, in Commissioner Piwowar’s words, the proposed amendments respond to the SEC’s mandate under the Fixing America’s Surface Transportation Act to “prune the regulatory orchard” – i.e., clear away the unnecessary or inconsequential to allow enhanced focus and attention on what is material to a filing. The amendments are based primarily on recommendations made in the staff’s November 2016 Report on Modernization and Simplification of Regulation S-K and are intended to update or streamline the disclosure framework while still providing investors with all material information required to make informed decisions.
Among other things, the proposed amendments would revise:
- S-K Item 303, Management’s Discussion and Analysis, to emphasize that the registrant focus its discussion of comparative periods on changes that are material to its financial condition and operations. The proposed amendments emphasize concepts in the SEC’s 2003 MD&A Interpretive Release, which encourages registrants to take a “fresh look” at previous periods. The proposal would permit registrants to omit the discussion of the earliest period presented if it is no longer material or of continuing relevance to an investor.
- S-K Item 102, Description of Property, to replace references to “major” encumbrances and “materially important” physical properties with a materiality threshold. The proposal would require a description of property only if it is material to the registrant or its business. However, the proposed amendments would not apply to registrants in the mining, real estate, and oil and gas industries.
- S-K Item 601, Exhibits, to permit registrants to redact confidential information from material contracts without first submitting a confidential treatment request to the SEC staff where such information is both not material and competitively harmful if publicly disclosed.
The proposal would also make changes to use technology to improve access to information. Comments on the proposal are due within 60 days of being published within the Federal Register.
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