Securities Law Blog

In preparing for this year’s annual report and annual proxy statement, companies should keep in mind certain rule changes that were adopted by the Securities and Exchange Commission during 2018.  In particular, companies should be aware of the Disclosure Update and Simplification rules adopted by the SEC in August 2018, which became effective in November 2018, as well as the SEC’s amendments to the smaller reporting company definition, which were adopted in June 2018.

On August 17, 2018, the SEC adopted amendments to its rules and forms in order to facilitate the disclosure of information to shareholders and simplify compliance by revising or eliminating certain requirements that have become redundant, duplicative, overlapping, outdated or superseded.  These changes will generally result in shareholders continuing to receive substantially the same information from issuers.  Among the changes that will have an impact on the 2018 Form 10-K and current proxy season are:

• For issuers with common stock traded on an established public trading market, elimination of the requirement to provide high and low trading prices over the last two years (instead, such issuers must now disclose their trading symbols for each class of common stock traded);
• in the issuer’s Business section in the Form 10-K:
• elimination of financial information about segments,
• elimination of disclosure of research and development activities, and
• elimination of disclosure of financial information by geographic area;
• elimination of disclosure of the amount and frequency of dividends and restrictions that currently or are likely to materially limit a company’s ability to pay dividends on its common stock;
• elimination of disclosure of ratio of earnings to fixed charges;
• elimination of exhibit showing the calculation of earnings per share; and
• elimination of disclosure in the Form 10-K concerning the availability of SEC reports in the Public Reference Room and instead requiring disclosure of the issuer’s website address.

As we previously reported, on June 28, 2018, the SEC adopted amendments to enable a company with less than $250 million of public float to provide scaled disclosures as a “smaller reporting company,” as compared to the prior $75 million threshold. In addition, the SEC further amended the definition of “smaller reporting company” to also include companies with no public common equity float or a public float of less than $700 million, so long as such companies had less than $100 million in revenues during its previous fiscal year. As a result, more public companies are now able to take advantage of the less rigorous reporting standards available for smaller reporting companies under Regulation S-K.  Although the definition of small reporting company was amended, no similar revisions were made to the definition of accelerated filer.  Accordingly, some issuers may now be able to take advantage of the scaled disclosure requirements of smaller reporting companies, but remain subject to the accelerated filer reporting deadlines and continue to be required to provide auditor attestation for internal control over financial reporting.

For more information regarding the SEC’s updates to Form 10-Ks and proxy statements and revised disclosure to be included in those SEC filings, please contact the Olshan attorney with whom you regularly work or Jason Saltsberg of this firm.