SEC Simplifies and Modernizes
Certain Regulation S-K Requirements
by Christine Mazor and Doug Rand, Deloitte & Touche LLP
On March 20, 2019, the SEC issued a final rule1 that revises certain disclosure requirements
in Regulation S-K. Issued in response to recommendations in the SEC staff’s 2016 Report on
Modernization and Simplification of Regulation S-K,2 the final rule incorporates substantially all3
of the amendments outlined in the proposed rule, with certain limited modifications. Most of
the final rule’s provisions become effective on May 2, 2019.
Key Amendments to Regulation S-K
The changes to Regulation S-K affect U.S. registrants, foreign private issuers, and investment
companies. The SEC has stated that the amendments are intended to improve the readability
of filed documents and simplify registrants’ compliance efforts while ensuring that all material
information is provided to investors.
The most significant changes are related to the following:
Management’s discussion and analysis (MD&A) — Registrants that present three years
of audited financial statements are currently required to address their changes in
financial condition and results of operations for each year, typically by providing year-to-year comparisons between each period. The final rule permits these registrants
to omit discussion of the earliest year if such discussion was already included in any
of the registrants’ prior EDGAR filings that required such information. Registrants
electing to omit discussion of the earliest year must disclose, in the current filing, the
location of such discussion in the prior filing. In addition, the instructions to the MD&A rules were updated to remove reference to a year-to-year comparison, clarifying
that a registrant may use judgment in determining what type of presentation would
most clearly communicate results and trends to investors. For example, in certain
circumstances, a narrative discussion about specific periods on a stand-alone basis
may be more meaningful than period-to-period comparisons.
The proposed rule permitted discussion of the earliest year to be omitted only if that
discussion was not material to an understanding of the registrant. While the final rule
does not retain a specific reference to materiality, the SEC’s comments in the adopting
release remind registrants of their general obligation to “provide investors with all
material information, customized in light of the company’s particular circumstances.”
Connecting the Dots
The final rule is intended to eliminate repetitive disclosures and give
registrants more flexibility in determining how to present MD&A. Registrants
should consider the total mix of available information, including the
impact of any recastable events (e.g., a discontinued operation or other
retrospective accounting change), on the prior-period MD&A when
determining whether to omit discussion of the earliest year and the
most appropriate form of presentation. If a registrant concludes that it is
necessary to discuss operations related to the earliest period presented, it
may limit the discussion to the information that has changed or has been
determined to be significant to its operations or financial condition.
Redaction of confidential information — Registrants are currently able to request
approval from the SEC to redact information in exhibits that is not material and would
cause competitive harm to the company. The amendments streamline this process
by allowing registrants to omit such information, as well as personally identifiable
information, without having to first request confidential treatment from the SEC.
Registrants would instead mark the exhibits from which information has been omitted
and include a statement prominently on the first page of each exhibit to indicate that
the redacted information has been omitted.
Connecting the Dots
The amendments change the process related to the confidential treatment
of information but not a registrant’s responsibility to provide required
disclosures. Exhibits would still be subject to SEC staff review, and
confidential-treatment redactions that do not adhere to the requirements
could be challenged. After publishing the final rule, the SEC issued an
announcement describing the general compliance review process for
Description of property — Regulation S-K currently requires disclosure of information
related to the “location and general character of the principal plants, mines, and other
materially important physical properties of the registrant.” The SEC has observed that
this requirement may have prompted some registrants (e.g., those in the service or
technology industries) to disclose information about physical property even though
it is not material to their company’s operations. The final rule clarifies that the
disclosures are required only if the physical properties are material, and it specifies
that the information “may be provided on a collective basis, if appropriate.” However,
the final rule does not modify the industry-specific disclosure requirements for
registrants in the oil and gas, mining, and real estate industries since the disclosure of
information about their physical properties is generally considered significant.
Risk factors — Regulation S-K requires disclosure of the most significant risk factors
related to a registrant’s offering or business and currently provides examples of
specific factors that a company may consider for such disclosure. Although the
current requirement is intended to be principles-based, the examples of risk factors
led certain registrants to disclose information that was generic or not specific to
their circumstances. The final rule eliminates the examples from the disclosure
requirements and encourages registrants to revisit their risk assessment and disclose
their most significant risk factors.
Schedules and attachments to exhibits — The current requirement to include all
schedules and attachments to exhibits has been viewed by some registrants as
burdensome and unnecessary. The amendments permit schedules and attachments
to exhibits to be omitted unless they contain information that is material and
not otherwise disclosed. A registrant must identify any omitted schedules and
attachments in the exhibit list.
Hyperlinks and cross-references — The final rule includes requirements related to the
use of hyperlinks to documents that are incorporated by reference from other SEC
filings. It also generally permits but does not require cross-references to other parts
of a filing. However, within the financial statements, cross-referring to or incorporating
information from outside the financial statements is prohibited unless doing so is
specifically permitted by SEC rules, U.S. GAAP, or IFRS® Standards as adopted by the
International Accounting Standards Board. This prohibition is intended to prevent
confusion about whether such information is or has been subject to audit or review by
the registrant’s external auditor.
Cover page — The final rule indicates that registrants must include the trading
symbol for each class of registered securities on the cover page of certain SEC forms.
Currently, some, but not all, of the information included on the cover page of various
SEC filings must be XBRL4 tagged. Inline XBRL tagging will be required for additional
information, such as the jurisdiction of incorporation and exchange on which the
securities are registered, on the cover page of certain forms filed under the Securities
Exchange Act of 1934 (the “Exchange Act”), including Forms 8-K, 10-K, 10-Q, 20-F, and
40-F. The SEC has historically required registrants to indicate on the cover page of
Form 10-K whether the filing includes disclosure of delinquent beneficial ownership
reporting. The final rule removes this requirement.
Other amendments — Additional changes made by the final rule include:
For existing registrants that do not meet the definition of a “newly reporting
registrant,”5 the removal of the requirement to file material contracts that were
entered into within two years of the applicable registration statement or report.
The addition of the requirement to file a new exhibit that would include a
description of a registrant’s securities.
The addition of parallel amendments to certain rules and forms applicable to
investment companies related to hyperlinking and HTML.6
Effective Date and
The amendments become effective on May 2, 2019, with three exceptions:
The amendments related to the redaction of confidential information take effect on
April 2, 2019. A registrant whose confidential treatment request is pending when the
amendments become effective may choose to withdraw the pending application and
refile the redacted exhibits in accordance with the amended rules. Requests that are
not withdrawn will be processed in a manner consistent with past practice.
The transition dates for XBRL cover-page tagging are the same as those for inline
XBRL, for which a three-phase approach is applied by registrant filing status, starting
with the quarterly filings of certain large accelerated filers for periods ending on or
after June 15, 2019. See Deloitte’s July 3, 2018, Heads Up for further information about
the requirements for adopting inline XBRL.
The requirements related to using hyperlinking and HTML for certain investment
company filings (i.e., registrations statements on Form N-CSR) are effective for filings
submitted on or after April 1, 2020.
Connecting the Dots
Given the changes to the instructions to, and the face of, commonly used
forms, coupled with a 30-day effective date for most of the final rule’s
provisions, registrants may wish to consult with their legal counsel and
advisers to ensure that the appropriate updates are reflected in future
filings. The SEC maintains a list of public forms on its Web site, along with
information about when a form was last updated.
The final rule marks the completion of another element of rulemaking focused on the SEC’s
interconnected goals of facilitating capital formation and improving disclosure effectiveness.
Still on its agenda, among other items, are proposed rules to update the disclosure
requirements related to significant acquisitions (e.g., Regulation S-X, Rule 3-057). Stay tuned for
The SEC did not adopt rules that would have required (1) the removal of certain captions and item numbers from SEC forms or
(2) disclosure of legal entity identifiers (see the Global Legal Entity Identifier Foundation’s Web site for more information).
A “newly reporting registrant” includes, for example, registrants that are not subject to the reporting requirements of Section 13(a)
of 15(d) of the Exchange Act at the time of filing or that have not filed an annual report since the revival of a previously suspended