United States: Looking Ahead To The New Reporting Season: Tips, Updates And Trends For SEC Filers

The dawn of a new year marks an important time for companies with SEC reporting obligations to prepare for the upcoming reporting season. This memorandum highlights a variety of important topics that companies should be mindful of as the new year begins and includes reviews of and updates on, among other topics, certain existing and new disclosure obligations (including a discussion of the use of social media), annual eligibility assessments and other reminders, NYSE and NASDAQ rule changes, executive compensation matters relevant to the upcoming proxy season and top trends in regulatory and SEC enforcement. In addition, a convenient SEC reporting calendar highlighting due dates for key filings and other important information is attached to this memorandum.

  • Regulation FD Compliance. SEC Regulation Fair Disclosure ("Reg. FD") remains a challenge for the management of every reporting company. Reg. FD regulates the constant informal contacts between companies and investors – investor conferences, "one-on-one" meetings, day-to-day telephone calls and other informal contacts. Reg. FD restricts investor relations contacts for public companies from selectively disclosing material, nonpublic information to investors. Looking at the year ahead, recent SEC Reg. FD developments underscore two practical issues:
    • Management Training. In bringing a September 2013 settled action alleging Reg. FD violations against Lawrence Polizzotto, the SEC announced that no proceeding would be initiated against his former employer, First Solar Inc., due to its cooperation and a number of other factors, including the SEC‟s observation that "First Solar cultivated an environment of compliance" through its disclosure committee and Reg. FD training. See SEC Release 2013-174 (Sept. 6, 2013). Many public company managers have to learn "real time" reporting skills to make quick materiality assessments and disclosure judgments. These are skills different from those honed through financial reporting obligations. Even the most experienced management team benefits from a "refresher" on the Reg. FD rules and the constant potential pitfalls.
    • Social Media as Disclosure Tools. The most closely-watched SEC Reg. FD investigation in recent memory focused on an alleged 2012 disclosure of material corporate information on the Facebook page of Netflix, Inc. CEO Reed Hastings. The SEC closed the investigation with an April 2013 report specifying that social media channels – such as Facebook or Twitter – can serve as appropriate vehicles to disclose material information if companies have previously alerted investors that these channels will be used for these purposes. See Exchange Act Release No. 69279 (Apr. 2, 2013). For the vast majority of companies, established tools (like the press release and SEC Form 8-K) remain the best channels for disclosure of material corporate information. At the same time, social media channels provide a useful tool to supplement public company disclosures.
  • Revisiting Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). The beginning of a new year for many companies means it‟s time to dust off last year‟s Form 10-K or Form 20-F and start preparing the company‟s annual report for the recently completed fiscal year. Although MD&A is nothing new in the landscape of disclosure, it continues to embody a critical source of information for investors. With this in mind, it is helpful to revisit the purpose, focus and other aspects of MD&A as companies begin the process of drafting the upcoming annual report.
    • The purpose of MD&A is to satisfy three objectives: (1) to provide a narrative explanation of a company‟s financial statements that enables investors to see the company through the eyes of management, (2) to enhance the overall financial disclosure and provide a context for investors to analyze financial information, and (3) to disclose information about the quality and variability of a company‟s earnings and cash flow, so that investors can judge whether past performance is indicative of future performance.
    • Companies should focus on providing material information, disclosing key performance metrics (both financial and non-financial performance indicators) used by management to run the business and that are material to investors, identifying known trends and uncertainties that are reasonably likely to have a material effect on the company‟s financial condition and operating performance and including an analysis that explains management's view of the implications and significance of the information required by the rules.
    • When drafting MD&A, companies should collectively review Item 303 of Regulation S-K, Item 5 of Form 20-F (in the case of foreign private issuers) and a series of SEC interpretive releases, which together set forth the disclosure requirements and the SEC‟s expectations on the purpose, form, content and approach to MD&A. Companies should also make sure to continue to reflect disclosure arising from past SEC comment letters that affect MD&A disclosure, to the extent still applicable.
    • We encourage companies to use the opportunity of a new reporting season to approach drafting and improving MD&A as they would in connection with drafting a prospectus for an IPO or other securities offerings.
  • Revisiting Risk Factors. Including a robust and current risk factor section in periodic reports serves the dual purpose of satisfying express form requirements and protecting against potential antifraud liability for forward-looking statements. When reviewing the risk factor section, it is important to make sure that the section is up-to-date with respect to both the selection of risks included as well as the description of the risks. Risk factors should be specifically tailored to the company‟s business and circumstances rather than reflecting generic risks that could apply to any company. Other questions to consider when revisiting the risk factor section include:
    • Are the risks logically grouped and ordered? It is helpful to group risks into categories (e.g., business risks, industry risks and risks relating to debt and common stock) and to list risks in order of priority with the most critical risks appearing first.
    • Does the caption for each risk factor adequately describe the risk presented in the accompanying text? Risk factor captions should not only serve as sub-headings but should also stand alone as a succinct summary of the risk being discussed.
    • Are the risk factors written in plain English? The SEC requires that the risk factor sections of disclosure documents comply with the SEC‟s plain English writing principles.
    • Do any of the risk factors contain mitigating language? Mitigating language may diminish the value of the warning that the risk factor is intended to convey and should be eliminated. The staff of the SEC frequently raises this point when providing comments on a company‟s risk factors.
    • Has the company issued a prospectus or private offering document since filing its latest periodic report? Companies should make sure to update their annual reports to reflect any new or revised risk factors included in offering documents issued since the prior year‟s annual report. The same principle applies to Form 10-Qs, which are required to include any material changes from the risk factors disclosed in the most recent Form 10-K.
  • Revisiting Forward-looking Statements. The forward-looking statements disclaimer that companies typically include in their SEC filings and press releases is designed to protect against antifraud liability by complying with the safe harbor under Section 21E of the Exchange Act.1 This safe harbor protects against antifraud liability for any forward-looking statement that is (1) identified as a forward-looking statement and (2) accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.2 In order for the forward-looking statements disclaimer to be effective, it is important that it is both well-tailored and up-to-date. Accordingly, companies should review the disclaimer and consider the following:
    • Is the portion of the disclaimer that is intended to identify the forward-looking statements consistent with the actual forward-looking statements made throughout the document? If the disclaimer is set up to include a list of topics about which forward-looking statements are being made, the company should update this list for any relevant changes in its business (e.g., expectations concerning the anticipated success of a new major product line or the projected effects of a recent or proposed material business combination). In particular, the material trends and uncertainties discussed in MD&A should be captured by the forward-looking statements disclaimer.
    • If the disclaimer lists meaningful cautionary statements, is it consistent with the risk factors described elsewhere or incorporated by reference in the document? In particular, the list of factors that could cause actual results to differ materially from those in the forward-looking statements should track very closely the risks presented in the risk factor section.
  • Conflict Minerals Disclosure – Form SD due May 31, 2014. The 2014 reporting season brings with it a new reporting obligation for covered companies – Form SD. Pursuant to Rule 13p-1 adopted by the SEC on August 22, 2012, implementing the "conflict minerals" disclosure requirements in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), companies that file reports with the SEC under Exchange Act Sections 13(a) or 15(d) – including foreign private issuers – for which conflict minerals are necessary to the functionality or production of a product manufactured, or contracted to be manufactured, by that company will be required to file a specialized disclosure report on Form SD for the first time by May 31, 20143 disclosing, among other matters, whether its necessary conflict minerals originated in the Democratic Republic of Congo or adjoining countries (the "Conflict Countries"). At a minimum and regardless of the conclusion, a company is required to disclose on Form SD the determination and the reasonable "country of origin" inquiry process it used in reaching the determination, make the same information publicly available on its website and provide the address of that website in the Form SD. In addition, a company that determines both that (a) it knows or has reason to believe that the minerals may have originated in the Conflict Countries and (b) it knows or has reason to believe that the minerals may not be from scrap or recycled sources is required to undertake "due diligence" on the source and chain of custody of its conflict minerals, file, as an exhibit to its Form SD, a separate report that describes, among other matters, the measures taken to exercise due diligence on the source and chain of custody of its conflict minerals (the "Conflict Minerals Report"), make the Conflict Minerals Report publicly available on its website and provide the address of that website in its Form SD. In addition, under certain circumstances, Rule 13p-1 requires that the company obtain an independent private sector audit of the processes described in the company‟s Conflict Minerals Report. As a general matter, companies will need to, depending on each successive determination: (1) determine whether the company is subject to Rule 13p-1, (2) conduct a reasonable country of origin inquiry, (3) conduct supply chain due diligence, and (4) prepare and file a Form SD and, if applicable, a Conflict Minerals Report. With the first filing date quickly approaching, any affected company should consider placing renewed attention on the Form SD requirements and make sure that the compliance policies and procedures in place are working as planned and that the company is on schedule in meeting its first filing deadline.4

Companies should also be aware that Form SDs are filed, not furnished, with the SEC, subjecting them to potential liability under Exchange Act Section 18 for false or misleading statements. However, the failure to timely file a Form SD relating to Conflict Minerals will not impact a company‟s eligibility to use the short-form registration statement on Form S-3. See "Checking Shelf Eligibility" below.

  • Disclosure of Payments by Resource Extraction Issuers – Delayed. Pursuant to Section 1504 of Dodd-Frank, the SEC adopted Rule 13q-1 on August 22, 2012 (concurrently with the adoption of Rule 13p-1 described above), which would have required resource extraction issuers5 – including foreign private issuers – to publicly file annually with the SEC a specialized disclosure report also on Form SD beginning with fiscal years ending after September 30, 2013. The Form SD would have required the disclosure of information relating to any payment made by the company, or by a subsidiary or another entity controlled by the company, to a foreign government or the U.S. federal government for the purpose of the commercial development of oil, natural gas or minerals, including details regarding the total amount of payments, the governments that received the payments and the projects to which the payments related. In response to claims made challenging the validity of the rule by a group of plaintiffs, which included trade and other associations representing the interests of companies that would have been directly affected by the rule, a U.S. federal court vacated Rule 13q-1 on July 2, 2013 on grounds the court characterized as "substantial errors," thereby delaying the implementation of Section 1504 of Dodd-Frank.6 For companies with calendar year ends, this disclosure obligation would have been first required in 2014. Although resource extraction issuers should benefit from efforts already taken to comply with Rule 13q-1, until the SEC adopts a revised version of the rule implementing Section 1504, which it is obligated to do, resource extraction issuers will not have to comply with the rule. We will continue to keep you informed of the SEC‟s next steps and proposals relating to the implementation of Section 1504 in 2014.
  • Disclosure of Certain Activities Associated with Iran. 2014 marks the second year SEC filers are required to comply with the disclosure obligations set forth in Exchange Act Section 13(r), which imposes an obligation on a company to disclose certain information about activities it or any of its affiliates engaged in that are associated with Iran. Specifically, the disclosure requirements apply to any company required to file an annual or quarterly report – including foreign private issuers whose home jurisdictions may not restrict or prohibit business dealings with Iran – and applies to, and must be included in, any annual or quarterly report required to be filed with the SEC after February 6, 2013. To the extent a company or any of its affiliates has engaged in or conducted any of the covered activities during the period covered by the relevant annual or quarterly report being filed with the SEC, the company must disclose a detailed description of the nature and extent of the activity, the gross revenues and net profits, if any, attributable to the activity and whether the company or its affiliate intends to continue the activity. Given the seriousness of conducting business with sanctioned nations and the severe consequences that could follow, companies should continue to make sure that their organizations, in particular foreign subsidiaries and affiliates, are periodically reminded of these disclosure requirements and the potential implications involved and that any failure to timely make the required disclosures could result in the company violating the U.S. securities laws.
  • Disclosure Committees. The beginning of the year is a good time to review the objectives and composition of a company‟s disclosure committee and set the schedule of meetings for 2014.

To view the full article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions