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SEC Approves Disclosure Simplifications and Updates

On August 17, 2018, the Securities and Exchange Commission (SEC) adopted amendments to certain disclosure requirements that had, according to the Commission, become duplicative, overlapping or outdated in light of other Commission disclosure requirements, U.S. Generally Accepted Accounting Principles (GAAP) or changes in the information environment. According to the final rules, the “amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors.” The SEC is also referring certain disclosure requirements that overlap with, but require information incremental to, GAAP to the Financial Accounting Standards Board (FASB) for consideration for potential incorporation into GAAP.

The majority of the SEC’s changes are incremental and focused on cleaning up references or deleting duplicative descriptions and definitions. Below we have included a summary of the more significant changes that companies and practitioners should update their forms and compliance checklists to reflect.

   Affected Provisions  Changes Made
Description of Business Item 101(b) of Regulation S-K Financial information about segments will no longer be separately required on the basis that substantially the same information will still be required in the notes to financial statements.
 Item 101(c)(1)(xi) and Item 101(h)(4)(x) of Regulation S-K Disclosure regarding the amounts a company spends on research and development activities will no longer be separately required on the basis that substantially the same information will still be required in the notes to financial statements.
 Item 101(d) and Item 303(a) of Regulation S-K Information by geographic area and the risks associated with and dependency on a company’s foreign operations will no longer be separately required on the basis that, when material, similar disclosures must be included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Management’s Discussion and Analysis of Financial Condition and Results of Operations Instruction 5 to Item 303(b) of Regulation S-K Seasonality disclosure will no longer be separately required in MD&A on the basis that similar disclosures will still be required by U.S. GAAP and Item 101(c) of Regulation S-K.
Ratio of Earnings to Fixed Charges Item 503(d) and Item 601(b)(12) of Regulation S-K The ratio of earnings to fixed charges and the related exhibit will no longer be required.
Market Price and Dividends Item 201(a) and Item 201(c)(1) of Regulation S-K Disclosure of high and low prices for common equity for each quarter within the two most recent fiscal years and subsequent interim period will no longer be required. Publicly traded companies will be required to disclose the principal U.S. market of each class of their common equity and the trading symbol(s) used.

Companies will no longer be required to separately disclose (1) the frequency and amount of cash dividends declared, and (2) restrictions on the company’s ability to pay dividends. Instead, similar disclosures will be required in the notes to the financial statements.

Public Reference Room Item 101(e)(2) and Item 101(h)(5)(iii) of Regulation S-K The requirement to refer to the SEC’s Public Reference Room and disclose its physical address and phone number has been deleted.
Issuer Internet Address Item 101(e) and Item 101(h)(5) of Regulation S-K Companies are now required to disclose their Internet addresses if they have one. Previously, the rule only encouraged disclosure.

The amendments will be effective 30 days from publication in the Federal Register.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.