SEC Proposes to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors Under Regulation S-K


Washington D.C., Aug. 8, 2019 —

The Securities and Exchange Commission today announced that it has voted to propose rule amendments to modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K.  The proposed amendments are intended to update the rules to improve disclosures for investors and to simplify compliance efforts for registrants.

“The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies.  Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future,” said Chairman Jay Clayton.  “I applaud the staff for their efforts to modernize and improve our disclosure framework, including recognizing that intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy.  The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens.”

“We invite further engagement from market participants on these proposals and any other areas where our approach to ensuring investors have the appropriate mix of information to make investment decisions can be improved.  Many members of our staff contributed to this effort, including Bill Hinman, Betsy Murphy, Felicia Kung, Lisa Kohl, Elliott Staffin, Sandra Hunter Berkheimer, and Shehzad Niazi in the Division of Corporation Finance; S.P. Kothari, Narahari Phatak, Tanakorn Makaew, and Vladimir Ivanov in the Division of Economic and Risk Analysis; and Laura Jarsulic, Bryant Morris and Dorothy McCuaig in the Office of the General Counsel.”

The proposal will have a 60-day public comment period following its publication in the Federal Register.

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Modernization of Regulation S-K Items 101, 103, and 105

The Securities and Exchange Commission today proposed amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K.  The Commission is proposing amendments to these items to improve these disclosures for investors and to simplify compliance for registrants.  More specifically, the proposed amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.


These proposals are part of a comprehensive evaluation of the Commission’s disclosure requirements that was recommended in the staff’s Report on Review of Disclosure Requirements in Regulation S-K (“S-K Study”). The report was mandated by Section 108 of the Jumpstart Our Business Startups Act (“JOBS Act”).  Based on the S-K Study’s recommendation, the staff initiated an evaluation of the information our rules require registrants to disclose, how this information is presented, where this information is disclosed, and how we can better leverage technology as part of these efforts (collectively, the “Disclosure Effectiveness Initiative”).  The overall objective of the Disclosure Effectiveness Initiative is to improve our disclosure regime for both investors and registrants.  

In developing the proposed amendments, the Commission considered input from comment letters received in response to these disclosure modernization efforts.  The Commission also took into account the staff’s experience with Regulation S-K arising from the Division of Corporation Finance’s disclosure review program and changes in the regulatory and business landscape since the adoption of Regulation S-K.


The proposed amendments would revise Items 101(a) (description of the general development of the business), 101(c) (narrative description of the business), and 105 (risk factors) to emphasize a more principles-based approach because businesses differ in terms of which aspects of these disclosures are material to them.  Such a flexible approach, as opposed to prescriptive requirements, may elicit more relevant disclosures about these items.  The proposed amendment of Item 103 (legal proceedings) would continue the current prescriptive approach because that requirement depends less on the specific characteristics of registrants.

In particular, the proposed amendment of Item 101(a) would:

The proposed amendment of Item 101(c) would:

The proposed amendment of Item 103 would:

The proposed amendment of Item 105 would:

What’s Next?

The proposal will be subject to a 60-day public comment period.