At an open meeting held this morning, the Securities and Exchange Commission voted to adopt the previously proposed amendments to Regulation S-K Items 101, 103 and 105. These changes affect the Business section, Risk Factors section, and Legal Proceedings discussion in filings. The amendments are part of the SEC’s continuing implementation of its disclosure effectiveness initiative and, like other prior amendments to Regulation S-K, are intended to simplify the registrant disclosure requirements and make these more principles-based.
The amendments to the Business section remove the prior reference to a five-year time frame and instead substitute a materiality framework. After its initial filing, an issuer may provide only an update of its business that focuses on recent developments that occurred following the publication of their last full business description. With respect to risk factors, to the extent that an issuer’s risk factor section exceeds 15 pages (so, most risk factor sections), a summary risk factor disclosure not exceeding two pages will be required. Risks must be ordered under headings and subheadings, and risks that are applicable generally to an investment in securities should be discussed at the end of the risk factors section under a separate caption. The legal proceedings discussion required by Item 103 can cross reference a legal proceedings discussion included elsewhere in the filing in order to avoid repetition. The disclosure threshold for certain governmental environmental proceedings resulting in monetary sanction that require disclosure has increased from $100,000 to $300,000.
Item 101(c) includes as a disclosure topic a description of the registrant’s human capital resources to the extent that these disclosures would be material to an understanding of the registrant’s business. Commissioner Crenshaw, for whom this was the first open meeting, observed that the current COVID-19 pandemic has demonstrated the significance of information about human capital and that the final rule does not include standard requirements.