United States: SEC Adopts Final Rules Modernizing Business And Financial Disclosure Requirements

Last Updated: April 9 2019
Article by Anthony G. Alfano, John J. Harrington and Janet A. Spreen

On March 20, 2019, the Securities and Exchange Commission (SEC) adopted amendments to the disclosure requirements for public companies under Regulation S-K, and to similar provisions regarding investment company disclosures. These final amendments are based on rules proposed by the SEC on Oct. 11, 2017, and were mandated by the 2015 Fixing America’s Surface Transportation Act. The final rules are intended to improve the quality and accessibility of public company disclosure by modernizing, simplifying, removing redundancies, clarifying ambiguities and increasing the use of technology to reduce disclosure burdens while still providing all material information to investors. The most significant sections of the amendments are summarized below.

Item 303(a) ‒ MD&A

Item 303(a) requires registrants to discuss their financial condition, changes to financial condition and results of operations in a Management’s Discussion and Analysis (MD&A). Under the prior rules, registrants that included three years of financial statements in their annual reports were required to address all three years in the MD&A. The amendments allow registrants who are providing financial statements covering three years to forgo discussion of the earliest of the three years if such a discussion was already included in the registrant’s prior EDGAR filings. If a registrant elects not to discuss the earliest year, it must provide the location of the prior filing where this information can be found.

The amendments also eliminate a reference to five-year selected financial data in the instructions related to requirements to discuss trend information in the MD&A, and simplify the instructions to clarify that registrants may present the MD&A in any format that, in their judgment, enhances the reader’s understanding.

The adopting release emphasizes that these changes seek to reduce the burden on registrants of disclosing information and to decrease duplicate information in order to improve readability for investors; however, registrants should continue to focus on the general obligation within MD&A to “provide investors with all material information, customized in light of the company’s particular circumstances, and presented in a manner that best reflects the discussion and analysis of the business as seen through the eyes of those who manage that business.”

Item 601 – Exhibits and Confidential Information

Item 601(b)(10) requires registrants to file as exhibits to periodic reports and registration statements certain material contracts entered into within the previous two years or having future performance obligations. If these contracts contained sensitive information that was not material, the registrant could redact such information and simultaneously submit a confidential treatment request (CTR) to the SEC. The CTR process required a registrant to present the legal grounds for confidential treatment and its arguments as to why disclosure of the information is not necessary for the protection of investors. The amendments allow a registrant to conduct this analysis without submitting a CTR and to redact the confidential information if it (i) is not material and (ii) would likely cause competitive harm if publicly disclosed. Additionally, the registrant may redact information from exhibits if the disclosure of such information would be considered a “clearly unwarranted invasion of personal privacy,” such as disclosure of bank account numbers, Social Security numbers, home addresses and similar information. These rules do not change the registrant’s disclosure obligations, including the requirement to mark exhibits as redacted, or the substantive bases upon which information could be redacted, but rather reduce the cost and burden of the registrant in preparing and processing a CTR. The SEC staff will continue its selective review of filings, including regarding the appropriateness of redacted information, and may request the information that would have been previously submitted with the CTR. The rules also extend this ability to redact sensitive information from certain other types of exhibits pursuant to specific form requirements rather than Item 601.

Under the prior rules, registrants generally had to attach complete copies of required exhibits, which often include extensive schedules and attachments and are not useful to investors. However, in the case of material acquisition and similar agreements filed pursuant to Item 601(b)(2), registrants could omit immaterial schedules and attachments. The final rules extend this accommodation to other types of material agreements filed pursuant to Item 601. The amendment permits registrants to omit entire schedules and attachments that do not contain material information not otherwise disclosed in the exhibit or the disclosure document. If a registrant elects to omit a schedule or attachment, the registrant must provide a list briefly identifying the contents of such omitted schedule or attachment. Comparable changes were also made to the exhibit requirements of Item 1016 of Regulation M-A and investment company registration and related forms.

Under the prior rules, registrants were required to file certain material contracts if one of two tests were met: (i) the contract must be performed in whole or in part at or after the filing of the registration statement or report, or (ii) the contract was entered into not more than two years before that filing. The amendment requires only new registrants comply with the second prong – the two-year look-back. Registrants who have already made filings with the SEC would no longer be subject to this two-year requirement, as investors already have access to these contracts in other filings on EDGAR.

The SEC also amended Item 601(b)(4), which now requires registrants to provide a brief description of their registered capital stock, debt securities, warrants, rights, American Depository Receipts and other securities as an exhibit to Form 10-K. Previously, registrants were only required to provide this information in their registration statements. The amendment is intended to provide these disclosures in one location rather than forcing investors to piece together this information from multiple sources.

Item 503(c) ‒ Risk Factors

Item 503(c) requires the registrant to provide a discussion of the most significant risks and challenges that it faces. The prior rules listed specific risk factor examples to provide context to registrants to aid them in completing this section. The final amendments eliminate these specific examples, noting that these examples are irrelevant to many registrants, and often lead registrants to fail to state risks that are unique to their business. The SEC seeks to encourage registrants to focus on risks that are applicable to their circumstances, and thus provide more meaningful insight to investors. The final amendments also relocated the risk factor disclosure requirement to a new item, Item 105.

Item 102 ‒ Physical Properties

Registrants were required to disclose the location and general nature of “the principal plants, mines and other materially important properties of the registrant and its subsidiaries” by providing such information that would reasonably inform investors as to the suitability, adequacy, productive capacity and extent of the registrant’s utilization of the property, taking into account both quantitative and qualitative factors. The SEC recognized that this requirement was ambiguous, and oftentimes led to the registrant’s disclosing information about physical property that was irrelevant to investors. The final amendment provides that disclosure only needs to be provided about a physical property to the extent that it is material to the registrant.

Items 401, 405 and 407

  • Item 401 sets forth the disclosure requirements regarding the identity and background information about the registrant’s directors, officers and executive employees. The amendment to Item 401 clarifies that registrants do not need to include this disclosure in their proxy statements if the information is already provided in Part I of their Form 10-K.
  • Section 16(a) of the Securities Exchange Act of 1934 requires officers, directors and certain security holders to report their beneficial ownership of a registrant’s securities. Item 405 requires the registrant to provide disclosure regarding individuals that failed to timely file such reports and has been amended to eliminate the requirement for filers to furnish duplicate copies of their reports to the registrant, which can instead rely on electronically filed reports to make this disclosure. Also, the amendment to Item 405 changes the disclosure heading from “Section 16(a) Beneficial Owner Compliance” to “Delinquent Section 16(a) Reports” to provide a more accurate title, encourages registrants to remove this heading if there are no delinquencies to report, and modifies the Form 10-K cover page to eliminate the check-box indicating the absence of Item 405 disclosure.
  • The amendments to Item 407 further clarify that emerging growth companies are not required to provide a compensation committee report and correct the outdated auditing standard reference in the audit committee report requirements.

Items 501, 508 and 512 ‒ Registration Statement and Prospectus Provisions

  • Items 501 contains disclosure requirements for the cover page of a prospectus and the amendments provide some additional flexibility for (i) providing the name of the registrant, (ii) referring to more detailed disclosure provided later in the prospectus regarding how the offering price will be determined and (iii) modifying the statement that the prospectus is subject to completion to eliminate the part of the statement regarding state law where such law does not prohibit the offering. Item 501(b)(4) requires a registrant to list on the cover page of a prospectus the name of any “national securities exchange” that lists the securities being offered, which as defined is limited to a securities exchange that has registered with the SEC. The amendments also expand this requirement to include the principal United States market where, through the engagement of a registered broker-dealer, the securities are being quoted.
  • Item 508 requires disclosure about the plan of distribution for the securities, including the involvement of underwriters and “sub-underwriters,” which is now defined in the amended requirements.
  • Item 512, which requires the issuer to provide certain undertakings with respect to its offering of securities, has also been amended to eliminate duplicative and obsolete provisions.

Incorporation by Reference

The amendments set forth several changes to streamline and provide more flexibility for the manner in which registrants and registered investment companies can incorporate information by reference into a filing. Item 10(d) has been revised to eliminate the prohibition against incorporating documents by reference that have been on file for more than five years. The SEC stated that this prohibition currently served little purpose since documents are now filed electronically. The amendments also eliminate the requirement in certain forms to file as exhibits previous filings from which information is incorporated and now require a registrant to provide hyperlinks to information incorporated from another disclosure on EDGAR. The SEC recently adopted rules for hyperlinks for exhibits, but expanding this to documents that are incorporated by reference allows for investors to have greater access to information that can be easily retrieved through a hyperlink. The amendments also clarify that information cannot be incorporated by reference or cross-referenced in financial statements from information outside of the financial statements unless it is specifically permitted by the SEC or accounting standard rules applicable to the filing.

XBRL Tagging

Currently, operating company registrants are required to file their financing statements as an exhibit in a machine-readable format using eXtensible Business Reporting Language (XBRL). This is required for periodic reports and certain registration statements. Registrants must tag a specific group of data points on the cover page in XBRL format, but it is not required to tag all data points. The amendments extend this requirement to require that all data points on the cover page be tagged in XBRL in accordance with the EDGAR Filer Manual, and that the cover page of these forms also include a trading symbol for each class of registered securities.

Effective Dates

The amendments will be effective 30 days after they are published in the Federal Register, except that the amendments relating to the redaction of confidential information will become effective upon publication in the Federal Register. The requirements to tag certain information on the cover pages of filings are subject to a three-year phase in.

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
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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