SEC Proposes to Modernize Disclosures Under Regulation S-K

The SEC 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 SEC 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.”

Proposed Amendments to Item 101

The proposed amendments of Item 101(c) would:

  • Clarify and expand its principles-based approach, by including disclosure topics drawn from a subset of the topics currently contained in Item 101(c);
  • Include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant’s business,such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel; and
  • Refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic.

Proposed Amendments to Item 103

The proposed amendments of Item 103 would:

  • Expressly state that the required information about material legal proceedings may be provided by including hyperlinks or cross-references to legal proceedings disclosure located elsewhere in the document in an effort to encourage registrants to avoid duplicative disclosure; and
  • Revise the $100,000 threshold for disclosure of environmental proceedings to which the government is a party to $300,000 to adjust for inflation.

Proposed Amendments to Item 105

The proposed amendments of Item 105 would:

  • Require summary risk factor disclosure if the risk factor section exceeds 15 pages;
  • Refine the principles-based approach of that rule by changing the disclosure standard from the “most significant” factors to the “material” factors required to be disclosed; and
  • Require risk factors to be organized under relevant headings, with any risk factors that may generally apply to an investment in securities disclosed at the end of the risk factor section under a separate caption.

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

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