SEC and NYSE/Nasdaq Developments

SEC Adopts Amendments to Simplify and Update Disclosure Requirements

On August 17, 2018, the U.S. Securities and Exchange Commission (SEC) adopted amendments to simplify and update disclosure requirements that have become duplicative, overlapping or outdated in light of other SEC disclosure requirements, U.S. Generally Accepted Accounting Principles (GAAP) or "changes in the information environment." The amendments affect annual reports on Form 20-F, as well as registration statements on Form F-1, Form F-3 and Form F-4.

The noteworthy changes affecting foreign private issuers include:

  • Exchange Rate Data. Form 20-F will no longer require foreign private issuers to provide exchange rate data when financial statements are prepared in a currency other than the U.S. dollar as such data is widely available. This change also affects registration statements on Form F-1 and Form F-4, which currently refer to the same disclosure requirement in Form 20-F.
  • Earnings Per Share Calculation. The requirement to file as an exhibit a statement explaining how any earnings per share information presented in a filing was calculated has been eliminated. This change affects annual reports on Form 20-F, as well as registration statements on Form F-1, Form F-3 and Form F-4.
  • Ratio of Earnings to Fixed Charges. The amendments eliminate the requirement to include historical and pro forma ratios of earnings to fixed charges and the related exhibit when registering debt securities or preferred stock. GAAP already covers disclosure of the components commonly used to calculate these ratios, and the SEC recognizes that debt investors are more focused on the information readily available from the financial statements and EBITDA or similar metrics. These amendments are implemented through the changes to Instruction 7 of "Instructions as to Exhibits" to Form 20-F, as well as in registration statements on Form F-1, Form F-3 and Form F-4 through amendments to Items 503(d) and 601(b)(12) of Regulation S-K.
  • Eliminate Trading Price History. Companies with common equity traded in an established trading market no longer need to disclose high and low trading prices for each quarter in the last two full fiscal years and interim periods, given that such information is easily accessible to investors, so long as the company's trading symbol and principal trading markets are disclosed. Additionally, issuers with common equity that is not traded on an exchange are required to indicate, as applicable, that any over-the-counter quotations reflect inter-dealer prices and may not necessarily represent actual transactions. These changes affect annual reports on Form 20-F, as well as registration statements on Form F-1, Form F-3 and Form F-4, which refer to Item 9.A.4 of Form 20-F.
  • Research and Development Expenditures. Companies will no longer be specifically required to disclose research and development expenditures, since such information is already required in the notes to the financial statements. However, companies should continue to consider whether disclosure regarding research and development expenditures is appropriate in the context of describing material trends in the "Operating and Financial Review and Prospects" section. These amendments are implemented through changes to Item 5.C of Form 20-F, as well as in registration statements on Form F-1 and Form F-4, which refer to Item 5.C of Form 20-F.
  • Dividend Restrictions. Requirements to disclose any dividend restrictions and any limitations on the payment of dividends have been eliminated through changes to Items 10.F and 14.B of Form 20-F, namely because foreign private issuers are already required to disclose dividend restrictions in the financial statements.
  • Invitation for Competitive Bids. The requirement to file as an exhibit any invitation for competitive bids has been eliminated, because it was deemed that such information would be of little interest to investors. This change is implemented through an amendment to Item 601(b)(26) of Regulation S-K, which is incorporated by reference into registration statements on Form F-1, Form F-3 and Form F-4.
  • Age of Financial Statements in IPOs. In IPOs, foreign companies doing an SEC-registered offering have had to include in their registration statement audited financial statements not older than 12 months at the date of filing. Under the new rules, companies may include audited financials that are no older than 15 months at the time of the offering or listing, if the company represents that it is not required to comply with the 12-month age requirement in its home jurisdiction and that complying would be impracticable or involve undue hardship. Companies are no longer required to obtain a waiver from the SEC.

The amendments will become effective on November 5, 2018. In advance of upcoming filing deadlines, companies are advised to understand how to reflect such changes in their public reporting and in new registration statements and update their procedures accordingly.

To assist with understanding the amendments that were adopted, the SEC prepared a "demonstration version" of the adopted amendments, which presents the added and deleted text in the affected rules.

The SEC's demonstration version is available at:

The SEC final rule release adopting the amendments is available at:

Our related client publication is available at:

SEC Proposes Rules to Simplify and Streamline Disclosures in Certain Registered Debt Offerings

On July 24, 2018, in line with its efforts to ease disclosure and capital formation obligations applicable to public companies while ensuring that investors have access to material information, the SEC proposed rule amendments that would simplify the financial disclosure requirements for registered debt offerings with regard to guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant's securities. The SEC is proposing to amend Rules 3-10 and 3-16 of Regulation S-X and relocate part of Rule 3-10 and all of Rule 3-16 to new Article 13 in Regulation S-X, which would comprise proposed Rules 13-01 and 13-02.

Proposed Amendments to Rule 3-10:

  • As proposed, Rule 3-10 would continue to permit the omission of separate financial statements of subsidiary issuers and guarantors, provided that certain conditions are met and the parent company provides supplemental financial and non-financial disclosure about the subsidiary issuers and/or guarantors and the guarantees. The requirements regarding disclosures would be provided by proposed Rule 13-01, which would principally:

    • require that subsidiary issuers or guarantors be consolidated in the parent company's consolidated financial statements rather than be 100% owned by the parent company, as is currently required;
    • replace condensed consolidating financial information as required under the current rule with certain proposed financial and non-financial disclosures: (i) the financial disclosures would consist of summarized financial information of the issuers and guarantors, which may be presented on a combined basis, and reduce the number of periods presented, and (ii) the non-financial disclosures would expand the qualitative disclosures regarding the guarantees and the issuers and guarantors, as well as require disclosure of additional information that would be material to holders of the guaranteed security; and
    • allow the disclosures to be provided outside the footnotes contained in the parent company's financial statements in the registration statement covering the offer and sale of the subject securities and any related prospectus, as well as in certain Exchange Act reports filed shortly thereafter.

Proposed Amendments to Rule 3-16:

  • In line with the SEC's view that separate financial statements of affiliates whose securities are pledged as collateral are not material in most situations, the proposed amendments to Rule 3-16 would notably:

    • replace the current requirement to provide separate financial statements with regard to each affiliate whose securities are pledged as collateral with financial and non-financial disclosures about the affiliate(s) and the collateral arrangement as a supplement to the consolidated financial statements of the registrant that issues the collateralized security; and
    • permit the proposed financial and non-financial disclosures to be located in filings in the same manner as described above for the disclosures related to guarantors and guaranteed securities.

The SEC press release announcing the proposed rule is available at:

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