The SEC has adopted amendments to Regulation S-K to revise the rules for MD&A and eliminate the requirement for selected financial data in SEC filings. According to the SEC, "The amendments are intended to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants."

The amendments will become effective 30 days after they are published in the Federal Register. However, companies are not required to comply with the amended rules until the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register, which means for calendar year fiscal year end companies, these rules will not be mandatory for their 2020 annual reports on 10-K or 20-F. Companies will be required to apply the amended rules in a registration statement and prospectus that on its initial filing date is required to contain financial statements for a period on or after that initial compliance date. Although companies will not be required to apply the amended rules until their mandatory compliance date, they may comply with the final amendments any time after the effective date, so long as they provide disclosure responsive to an amended item in its entirety.

The changes to Items 301, 302, and 303 of Regulation S-K:

• Eliminate Item 301 (Selected Financial Data); and
• Modernizing, simplifying and streamlining Item 302(a) (Supplementary Financial Information) and Item 303 (MD&A) to:
  • Revise Item 302(a) to replace the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes;
  • Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Amend current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;
  • Amend current Item 303(a)(3) (amended Item 303(b)(2)) to clarify, modernize and streamline disclosure requirements for results of operations;
  • Add a new Item 303(b)(3), Critical accounting estimates, to clarify and codify Commission guidance on critical accounting estimates;
  • Replace current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A;
  • Eliminate current Item 303(a)(5), Tabular disclosure of contractual obligations, in light of the amended disclosure requirements for liquidity and capital resources and certain overlap with information required in the financial statements; and
  • Amend current Item 303(b), Interim periods (amended Item 303(c)) to modernize, clarify and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles.

In addition, the SEC adopted certain parallel amendments to the financial disclosure requirements applicable to foreign private issuers, including to Forms 20-F and 40-F, as well as other conforming amendments to the Commission's rules and forms, as appropriate.

The SEC Division of Corporation Finance issued a new interpretation yesterday that allows a company to post its annual report to shareholders to its website (and keep it posted for at least one year) rather than mail the SEC seven hard copies. Rule 14a-3 under the Exchange Act requires the mailing solely for the SEC’s information, one of the few paper filings still around in the age of EDGAR. Under its current practice, when the SEC receives the hard copies it posts on a company’s EDGAR list that it has been submitted but does not include the actual document if not submitted electronically. The annual report to shareholders substantially overlaps the annual report on Form 10-K in any case. Since most companies already post their annual reports for at least a year, the new interpretation effectively means one less mailing to worry about, though companies must still mail the annual report with the proxy statement when sending out annual meeting materials to shareholders.

The SEC has approved an interim final rule that allows Form 10-K filers to provide a summary of business and financial information contained in the annual report. The rule implements a provision of the Fixing America’s Surface Transportation (FAST) Act. Note that this will be optional for companies – they do not have to provide a summary but the idea behind this is that a summary may help investors better digest the lengthier and lengthier annual reports they have been receiving lately. Importantly, however, companies opting to provide the summary must include hyperlinks to the related, more detailed disclosure in the Form 10-K.