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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 232, 239, 240, 249, 270, 274, and 275

[Release No. 33-10618; 34-85381; IA-5206; IC-33426; File No. S7-08-17]

RIN 3235-AM00

FAST Act Modernization and Simplification of Regulation S-K

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: We are adopting amendments to modernize and simplify certain disclosure

requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs

and burdens on registrants while continuing to provide all material information to investors. The

amendments are also intended to improve the readability and navigability of disclosure

documents and discourage repetition and disclosure of immaterial information. To provide for a

consistent set of rules to govern incorporating information by reference and hyperlinking, we are

also adopting parallel amendments to several rules and forms applicable to investment

companies and investment advisers, including amendments that would require certain investment

company filings to be submitted in HyperText Markup Language format.

DATES: The final rules are effective May 2, 2019, except for the amendments to 17 CFR

229.601(b)(2) and (b)(10)(iv); paragraph 4(a) of Instructions as to Exhibits of 17 CFR 249.220f;

Instruction 6 to Item 1.01 of 17 CFR 249.308; Instruction 4 to Item 28 of 17 CFR 239.15A and

274.11A; Instruction 6 to Item 25.2 of 17 CFR 239.14 and 274.11a-1; Instruction 5 to Item 29(b)

of 17 CFR 239.17a and 274.11b; Instruction 5 to Item 24(b) of 17 CFR 239.17b and 274.11c;

Instruction 3 of Instructions as to Exhibits of 17 CFR 239.24 and 274.5; new Instruction 3 to

Item 26 of 17 CFR 239.17c and 274.11d; Instruction 3 to Item 16 of 17 CFR 239.23; Additional

Instruction 3 to the Instructions as to Exhibits of 17 CFR 239.16; and Instruction 3 to IX.

Exhibits of 17 CFR 274.12, which are effective April 2, 2019. For more information, see

Section III (Other Matters).

Compliance dates: See Section IV (Transition Matters) and Section V (Compliance Dates).

FOR FURTHER INFORMATION CONTACT: Daniel Greenspan, Office of Rulemaking,

Division of Corporation Finance, at (202) 551-3430; Michael C. Pawluk or Sean Harrison,

Investment Company Rulemaking Office, Division of Investment Management, at (202) 5516792; U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting amendments to:

CFR Citation

(17 CFR)

Commission Reference

Regulation S-K

Regulation M-A

Regulation AB

Item 10

Item 102

Item 202

Item 303

Item 401

Item 405

Item 407

Item 501

Item 503

Item 512

Item 601

Item 1016

Item 1100

§§ 229.10 through

229.1305

§ 229.10

§ 229.102

§ 229.202

§ 229.303

§ 229.401

§ 229.405

§ 229.407

§ 229.501

§ 229.503

§ 229.512

§ 229.601

§§ 229.1000

through 229.1016

§ 229.1016

§§ 229.1100

through

229.1125

§ 229.1100

Regulation S-T

Securities Act of 1933 1

(“Securities Act”)

Securities Exchange Act of 1934 2

(“Exchange Act”)

15 U.S.C. 77a et seq.

15 U.S.C. 78a et seq.

Rule 11

Rule 102

Rule 105

Rule 303

Rule 312

Rule 406

§§ 232.10 through

232.903

§ 232.11

§ 232.102

§ 232.105

§ 232.303

§ 232.312

§ 232.406

Rule 405

Rule 411

Rule 491

Form S-1

Form S-3

Form S-6

Form S-11

Form N-14

Form S-4

Form F-1

Form F-3

Form F-4

Form F-7

Form F-8

Form F-10

Form F-80

Form SF-1

Form SF-3

§ 230.405

§ 230.411

§ 230.491

§ 239.11

§ 239.13

§ 239.16

§ 239.18

§ 239.23

§ 239.25

§ 239.31

§ 239.33

§ 239.34

§ 239.37

§ 239.38

§ 239.40

§ 239.41

§ 239.44

§ 239.45

Rule 12b-23

Schedule 14A

Rule 16a-3

Form 3

Form 4

Form 5

Form 8-A

Form 10

Form 20-F

Form 40-F

Form 8-K

§ 240.12b-23

§ 240.14a-101

§ 240.16a-3

§ 249.103

§ 249.104

§ 249.105

§ 249.208a

§ 249.210

§ 249.220f

§ 249.240f

§ 249.308

Investment Company Act of 1940 3

(“Investment Company Act”)

Securities Act and

Investment Company Act

Form 10-Q

Form 10-K

Form 10-D

§ 249.308a

§ 249.310

§ 249.312

Rule 0-4

Form N-8B-2

Form N-CSR

§ 270.0-4

§ 274.12

§§ 239.15A and

274.11A

§ 239.14 and

§ 274.11a-1

§§ 239.17a and

274.11b

§§ 239.17b and

274.11c

§§ 239.24 and

274.5

§§ 239.17c and

274.11d

§§ 249.331 and

274.128

Rule 0-6

§ 275.0-6

Form N-1A

Form N-2

Form N-3

Form N-4

Form N-5

Exchange Act and

Investment Company Act

Investment Advisers Act of 1940 4

(“Investment Advisers Act”)

Form N-6

We are also adopting 17 CFR 229.105 (new “Item 105”) to Regulation S-K) and rescinding the

following:

CFR Citation

(17 CFR)

Commission Reference

Exchange Act

Investment Company Act

15 U.S.C. 80a-1 et seq.

15 U.S.C. 80b-1 et seq.

Rule 12b-32

Rule 8b-23

Rule 8b-24

Rule 8b-32

§ 240.12b-32

§ 270.8b-23

§ 270.8b-24

§ 270.8b-32

Table of Contents

I. INTRODUCTION

II. FINAL AMENDMENTS

A. Adoption of Proposals with Modifications

1. Management’s Discussion and Analysis of Financial Condition and Results of

Operations (Item 303)

2. Redaction of Confidential Information in Material Contract Exhibits

3. Financial Statements: Incorporation by Reference and Cross-Reference of Information

B. Adoption of Amendments as Proposed

1. Description of Property (Item 102)

2. Management, Security Holders, and Corporate Governance

3. Corporate Governance (Item 407)

4. Registration Statement and Prospectus Provisions

5. Exhibits

6. Incorporation by Reference

7. Manner of Delivery

C. Proposed Amendments Not Being Adopted

1. Forms – Captions and Item Numbers

2. Subsidiaries of the Registrant and Entity Identifiers

D. Removal of Outdated Requirement

III. OTHER MATTERS

IV. TRANSITION MATTERS

V. COMPLIANCE DATES

VI. ECONOMIC ANALYSIS

A. Baseline

B. Economic Analysis of the Amendments: General Assessment, Including Impact on

Efficiency, Competition, and Capital Formation

C. Economic Analysis of the Specific Amendments: Amendments that Clarify, Streamline,

or Update Existing Rules

1. Amendments that Clarify or Streamline a Rule’s Requirements

2. Amendments to Update Rules to Account for Subsequent Developments

D. Economic Analysis of the Specific Amendments: Amendments that Simplify the

Disclosure Process or Eliminate Disclosures

1. Management’s Discussion and Analysis (Item 303 and Item 5 of Form 20-F)

2. Information Omitted from Exhibits

E. Economic Analysis of the Specific Amendments: Amendments that Require More

Disclosure or the Incorporation of New Technology

1. Description of Registrant’s Securities (Item 601(b)(4))

2. Tagging Cover Page Data

3. Amendments for Additional Disclosure with Minimal Additional Costs to Registrants

F. Economic Analysis of HTML and Hyperlinking Requirements of Forms under the

Investment Company Act

VII. PAPERWORK REDUCTION ACT

A. Background

B. Summary of Comment Letters and Revisions to PRA Estimates

C. Summary of the Amendments’ Impact on Collections of Information

1. Amendments Expected to Decrease Burdens

2. Amendments Expected to Increase Burdens

3. Amendments Not Expected to Meaningfully Affect Burdens

D. Burden and Cost Estimates to the Amendments

1. Form 10-K and Form 10-Q; Schedule 14A and Schedule 14C

2. Form S-1, Form S-3, Form S-4, Form F-3, Form F-4, Form SF-1, Form SF-3, Form 10,

and Form 20-F

3. Form 8-A, Form 10-D, Form 40-F, Form F-7, Form F-8, Form F-10, and Form F-80

4. Form S-6, Form N-1A, Form N-2, Form N-3, Form N-4, Form N-5, Form N-6, Form

N-14, Form N-8B-2, and Form N-CSR

VIII. FINAL REGULATORY FLEXIBILITY ACT ANALYSIS

A. Need for, and Objectives of, the Amendments

B. Significant Issues Raised by Public Comments

C. Small Entities Subject to the Amendments

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements

E. Agency Action to Minimize Effect on Small Entities

IX. STATUTORY AUTHORITY

INTRODUCTION

On October 11, 2017, the Commission proposed amendments to modernize and simplify

certain disclosure requirements in Regulation S-K and related rules and forms, 5 as mandated by

the 2015 Fixing America’s Surface Transportation Act (the “FAST Act”). 6 The proposals were

based on the Commission’s report to Congress, published on November 23, 2016 (the “FAST

Act Report”), 7 which contained “specific and detailed recommendations on modernizing and

simplifying the requirements in Regulation S-K in a manner that reduces the costs and burdens

on companies while still providing all material information” and “[recommendations] on ways to

improve the readability and navigability of disclosure and to discourage repetition and the

disclosure of immaterial information.” 8 The proposals were also informed by the Commission’s

experience with Regulation S-K arising from the Division of Corporation Finance’s disclosure

review program and our staff’s broader review of the Commission’s disclosure regime. 9 In

addition, the Commission proposed parallel amendments to several rules and forms applicable to

investment companies and investment advisers to provide for a consistent set of rules governing

See Fast Act Modernization and Simplification of Regulation S-K, Release No. 33-10425 (Oct. 11, 2017) [82 FR

50998 (Nov. 2, 2017)] (“Proposing Release”).

Pub. L. No. 114-94, Sec. 72003, 129 Stat. 1312 (2015).

See Report on Modernization and Simplification of Regulation S-K (Nov. 23, 2016), available at

https://www.sec.gov/reportspubs/sec-fast-act-report-2016.pdf (the “FAST Act Report”).

See FAST Act section 72003(c). Section 72003(c) required the Commission to issue the FAST Act Report and

Section 72003(d) required the Commission to issue a proposed rule to implement the recommendations

contained in the FAST Act Report.

See the Proposing Release, supra note 5, at 50989. We are continuing to consider additional changes to our

disclosure regime in connection with recent rule releases and requests for comment. See, e.g., Request for

Comment on Possible Changes to Industry Guide 3 (Statistical Disclosure by Bank Holding Companies),

Release No. 33-10321 (Mar. 1, 2017) [82 FR 12757 (Mar. 7, 2017)]; Business and Financial Disclosure

Required by Regulation S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23916 (Apr. 22, 2016)] (the

“Concept Release”); and Request for Comment on Subpart 400 of Regulation S-K Disclosure Requirements

Relating to Management, Certain Security Holders and Corporate Governance Matters, Release No. 33-10198

(Aug. 25, 2016) [81 FR 59927 (Aug. 31, 2016)] (the “Regulation S-K Subpart 400 Release").

incorporation by reference and hyperlinking, including proposed amendments that would require

certain investment company filings to be submitted in HyperText Markup Language (“HTML”)

format. 10

Commenters on the Proposing Release generally supported the proposed amendments

and the Commission’s efforts to improve and modernize the disclosure requirements of

Regulation S-K. 11 While commenters were largely supportive of the proposals, we also received

a number of suggestions for modifying the amendments in ways that commenters believed would

clarify the revised disclosure requirements, simplify compliance, or more consistently reflect the

policy objectives cited in the Proposing Release.

After taking into consideration the public comments, we are adopting the majority of the

amendments as proposed. As we discuss further below, in certain cases we are adopting

amendments with modifications from those proposed and, in other cases, we have chosen not to

adopt the proposed amendments. In the discussion that follows, we first address the proposals

we are adopting with modifications from those proposed, then the amendments we are adopting

as proposed, and, finally, the proposed amendments we have elected not to adopt.

The changes we are adopting, consistent with the Commission’s mandate under the

FAST Act, are intended to improve the quality and accessibility of disclosure in filings by

simplifying and modernizing our requirements. The amendments also clarify ambiguous

The Commission has adopted requirements for exhibit hyperlinks and HTML format for operating companies.

See Exhibit Hyperlinks and HTML Format, Release No. 33-10322 (Mar. 1, 2017) [82 FR 14130 (Mar. 17,

2017)] (the “Exhibit Hyperlinks Adopting Release”) (adopting amendments to require registrants to hyperlink

to each exhibit listed in the exhibit index and, to enable the inclusion of hyperlinks, requiring registrants to

submit all such filings in HTML format).

Comment letters related to the Proposing Release are available at https://www.sec.gov/comments/s7-0817/s70817.htm. Unless otherwise indicated, comment letters cited in this release are to the Proposing Release.

disclosure requirements, remove redundancies, and further leverage the use of technology.

Taken together, we believe these rule changes should result in significant savings of time and

money for registrants. We also believe they will increase investor access to information without

reducing the availability of material information.

The following table highlights some of the changes we are adopting, as described more

fully in Section II (Final Amendments) and elsewhere in this release:

Summary Description

of Amended Rules 12

Principal Objective

Discussed

Below In Section

Regulation S-K,

Item 303 and

Form 20-F

Registrants will generally be able to exclude

discussion of the earliest of three years in MD&A if

they have already included the discussion in a prior

filing.

Simplify disclosure requirements to

reduce repetition, reduce costs and

burdens to registrants, focus

disclosure on material information

and improve readability.

II.A.1.

Regulation S-K,

Items 601(b)(10) and

601(b)(2) and investment

company registration

forms

Registrants will be able to omit confidential

information in material contracts and certain other

exhibits without submitting a confidential treatment

request to the Commission, so long as the

information is (i) not material and (ii) would likely

cause competitive harm to the registrant if publicly

disclosed.

Rule

Substantially reduce the burden

borne by registrants in preparing

and responding to confidential

treatment requests while still

providing all material information to

investors.

II.A.2.

Regulation S-K,

Item 601(b)(10)

Eliminate duplicative and

Only newly reporting registrants will be required to file unnecessary disclosure and reduce

material contracts that were entered within two years costs and burdens to registrants

while still providing all material

of the applicable registration statement or report.

information to investors.

II.B.5.c.

Regulation S-K,

Item 601(a)(5) and

investment company

forms

Registrants will not be required to file attachments to Reduce costs and burdens to

their material agreements if such attachments do not registrants while still providing all

material information to investors.

contain material information or were not otherwise

disclosed.

II.B.5.b.i.

Regulation S-K,

Item 102

Registrants will need to provide disclosure about a

physical property only to the extent that it is material

to the registrant.

Clarify and simplify the disclosure

requirement to reduce costs and

burdens to registrants, while

focusing on material information.

II.B.1.

Forms 8-K, 10-Q, 10-K,

20-F and 40-F

Registrants will be required to disclose on the form

cover page the national exchange or principal U.S.

market for their securities, the trading symbol, and

title of each class of securities.

Improve investors’ efforts to search

news websites and stock market

databases for information about

registrants and distinguish among

II.B.4.a.iii. &

II.B.7.a.

The information in this chart is not comprehensive and is intended only to highlight some of the more

significant aspects of the final amendments. It does not reflect all of the amendments or all of the rules and

forms that are affected. All changes are discussed in their entirety below. As such, this table should be read

together with the referenced sections and the complete text of this release.

Summary Description

of Amended Rules 12

Rule

Principal Objective

Discussed

Below In Section

similarly named companies.

Improve readability and navigability

of disclosure documents and

discourage repetition.

Securities Act Rule

411(b)(4); Exchange Act

Rules 12b-23(a)(3), and

12b-32; Investment

Company Act Rule 0-4;

and Regulation S-T Rules

102 and 105

Registrants will no longer be required to file as an

exhibit any document or part thereof that is

incorporated by reference in a filing, but instead will

be required to provide hyperlinks to documents

incorporated by reference.

Forms 10-K, 10-Q, 8-K,

20-F and 40-F.

Further enhance investors’ use of

Registrants will be required to tag all cover page data interactive data to identify, count,

sort, compare, and analyze

in Inline XBRL.

registrants and their disclosures.

II.B.7.a.

Regulation S-T Rules 102

105, 201, 202 and 311;

Form N-CSR; and

investment company

registration forms

Investment companies will be required to file reports

on Form N-CSR and registration statements and

amendments thereto in HTML format and provide

hyperlinks to exhibits and other information

incorporated by reference.

II.B.7.b.

II.

II.B.6.i, &

II.B.6.b.ii.

Improve navigability of disclosure.

FINAL AMENDMENTS

Adoption of Proposals with Modifications

1. Management’s Discussion and Analysis of Financial Condition and

Results of Operations (Item 303)

a. Year-to-Year Comparisons (Instruction 1 to Item 303(a))

i. Proposed Amendments

Item 303(a) requires registrants to discuss their financial condition, changes in financial

condition, and results of operations. 13 Instruction 1 to Item 303(a) states that the discussion and

analysis shall be of the financial statements and other statistical data that the registrant believes

will enhance a reader’s understanding of its financial condition, changes in financial condition,

and results of operations. This instruction also provides that, generally, the discussion shall

cover the three-year period covered by the financial statements and either use year-to-year

17 CFR 229.303(a).

comparisons or any other format that in the registrant’s judgment would enhance a reader’s

understanding. The instruction states that reference to the five-year selected financial data may

be necessary where trend information is relevant.

The Commission proposed to amend Item 303 to clarify that discussion of the earliest

year would not be required in certain situations. 14 Specifically, when financial statements

included in a filing cover three years, 15 discussion about the earliest year would not have been

required under the proposed amendments if (i) that discussion was not material to an

understanding of the registrant’s financial condition, changes in financial condition, and results

of operations, and (ii) the registrant had filed its prior year Form 10-K 16 on EDGAR and that

Form 10-K included in its Management’s Discussion and Analysis (“MD&A”) a discussion of

the earliest of the three years included in the financial statements of the current filing. By

allowing registrants to eliminate MD&A disclosure about the earliest year in these situations, the

proposal was intended to discourage repetition of disclosure that is no longer material, which we

believe would further our mandate under the FAST Act to modernize and simplify Regulation SK in a manner that reduces costs and burdens on companies while still providing all material

information.

See Proposing Release, supra note 5, Section II.B.1., n. 46 through 53. See also FAST Act Report, supra note

7, at Recommendation C.1.

The proposed amendments to Item 303(a)(3) would not affect smaller reporting companies, as smaller reporting

companies may limit their disclosure to the two-year period covered by their financial statements. See

Instruction 1 to Item 303(a) of Regulation S-K. See also Rule 12b-2 under the Exchange Act and Rule 405

under the Securities Act. Similarly, the proposed amendments would not affect emerging growth companies

that provide two years of audited financial statements. Emerging growth companies are only required to

provide two years of audited financial statements in an initial public offering of common equity securities and

may limit their MD&A to only those audited periods presented in the financial statements. Pub. L. No. 112106, Sec. 102(b)-(c), 126 Stat. 306 (2012). See also Instruction 1 to Item 303(a) of Regulation S-K.

17 CFR 249.310.

For the reasons discussed in the Proposing Release, the Commission also proposed to

eliminate the reference to five-year selected financial data in Instruction 1 to Item 303(a). 17 In

addition, the Commission proposed to simplify Instruction 1 to Item 303(a) to emphasize that

registrants may use any presentation that, in the registrant’s judgment, would enhance a reader’s

understanding. 18

ii. Comments

The proposal generated a wide range of responses among commenters. While some

commenters supported the amendments as proposed, 19 many commenters sought revisions or

clarifications to the proposed rule. In particular, several commenters focused their remarks on

the proposed conditions by which registrants could omit discussion of the earliest of the three

years of financial statements covered by a filing. One commenter opposed the amendments to

Item 303, asserting that retaining the discussion of the earliest year would help investors

“understand the validity of analysis” in the MD&A where a company’s circumstances have

changed. 20

A number of commenters found the first proposed condition to be problematic, largely

due to uncertainty over the phrase “material to an understanding.” 21 While many of these

commenters supported the concept underlying the proposal, they advocated that the Commission

See Proposing Release, supra note 5, Section II.B.1., at 50993.

Id.

See letters from American Fuel and Petrochemical Manufacturers (“American Fuel”), Center for Capital

Markets Competitiveness (“CCMC”), Davis Polk & Wardwell (“Davis Polk”), FedEx Corporation (“FedEx”),

Fenwick & West LLP (“Fenwick”), Nasdaq, Inc. (“Nasdaq”), and UnitedHealth Group (“UnitedHealth”).

See letter from Public Citizen.

See, e.g., letter from Ernst & Young LLP (“E&Y”) (noting that the proposed standard “could be challenging to

apply in practice … registrants could struggle to consistently evaluate whether discussion of the earliest of the

three years is ‘material to an understanding’…”).

first refine or clarify the materiality condition to ensure that its implementation would have the

effect the Commission intended. 22 These commenters questioned how the “material to an

understanding” condition would be applied in practice and were uncertain how it differed, if at

all, from the standard of materiality registrants already use to fulfill their disclosure

obligations. 23 Several commenters advised that without further clarification registrants would be

unlikely to omit the discussion of the earliest year for fear that their judgment would be

challenged. 24 Along these lines, one commenter predicted that, because of litigation risk,

registrants would find it much easier to simply repeat the disclosure made in the prior year rather

than expose their assessment of materiality to second-guessing. 25

To mitigate these concerns and add more certainty to the process, some commenters

favored revising the proposal to make the condition less subjective, 26 while others suggested

adding conditions that would preclude registrants from omitting disclosure of the earliest year in

See, e.g., letters from E&Y (raising a series of interpretive questions about the proposal) and Deloitte & Touche

LLP (“Deloitte”) (questioning whether the phrase “material to an understanding” was intended to convey any

special considerations beyond a registrant’s customary assessment of materiality).

See, e.g., letter from E&Y (noting the abundance of instances in Regulation S-K where the disclosure

requirements reference some variation of materiality, creating a lack of clarity in many cases about whether the

Commission intended registrants to evaluate materiality in a different context than its general application under

federal securities law).

See, e.g., letters from BDO USA, LLP (“BDO”), CNA Financial Corporation (“CNA”), Cravath, Swaine &

Moore LLP (“Cravath”), Institute of Management Accountants (“IMA”), KPMG LLP (“KPMG”), Piercy

Bowler Taylor and Kern, CPAs (“Piercy Bowler”), and Society for Corporate Governance (“Society for Corp.

Gov.”).

See letter from IMA. See also letter from Society for Corp. Gov. (suggesting that modifying the default

requirement of Item 303 from “disclosure of the earliest year’s discussion, unless not material” to “omission of

the earliest year’s discussion, unless material” may more effectively accomplish the Commission’s objective of

reducing the amount of immaterial and repetitive disclosure).

See, e.g., letter from Financial Executive International (“Financial Executives”) (requesting that the rule be

revised to permit the omission of the discussion about the earliest year unless there has been a material change

to the previous disclosures).

certain specified situations. 27 Other commenters favored removing the materiality condition

altogether because they believed it was unnecessary and would only create confusion. 28 These

commenters stated that registrants should be permitted to omit the discussion of the earliest year

covered by the financial statement in a filing based solely on the condition that the disclosure

was already included in a previous filing. One such commenter noted that it is unnecessary to

embed an explicit materiality reference within the proposed rule because materiality is already

the overarching principle for a registrant’s disclosure and has been well defined by federal

securities law. 29 The commenter went on to state that, as such, materiality is always a factor in

disclosure, whether or not the proposed revision makes explicit reference to it. In this context,

another commenter asserted that adding an additional materiality assessment would only add

ambiguity and complexity to the registrant’s decision whether to include a discussion of the

earliest period presented. 30

Several commenters supported expanding the second of the two proposed conditions for

omission of the earliest year’s discussion to allow registrants to use filings other than the prior

year’s Form 10-K as the reference document. 31 These commenters recommended that any filing

See, e.g., letter from Council of Institutional Investors (“CII”) (suggesting that registrants not be allowed to

exclude discussion of the earliest year if there has been a material change to either of the two earlier years due

to a restatement or a retrospective adoption of a new accounting principle).

See, e.g., letters from BDO, Center for Audit Quality (“CAQ”), and Northrop Grumman Corporation

(“Grumman”).

See letter from CAQ.

See letter from BDO.

See letters from BDO, Cravath, Deloitte, E&Y, KPMG, Piercy Bowler, and Sullivan & Cromwell LLP

(“Sullivan”).

available on EDGAR (e.g., Form S-1, Form S-4, Form 8-K, Form 10, etc.) that contains the

relevant MD&A discussion should suffice. 32

Finally, several commenters expressed support for the proposal to eliminate the reference

to five-year selected financial data in Instruction 1 to Item 303(a), and no commenters opposed

it. 33

iii. Final Amendments

We are adopting amendments to Item 303 in substantially the form proposed, but with

modifications in response to comments received. We are adopting as proposed the revision to

Instruction 1 of Item 303 that eliminates the reference to year-to-year comparisons. Instruction 1

will now state that registrants may use any presentation that in the registrant’s judgment

enhances a reader’s understanding of the registrant’s financial condition, changes in financial

condition, and results of operations, without suggesting that any one mode of presentation is

preferable to another. We anticipate that many registrants will continue to provide year-to-year

comparisons, as this is a familiar and, in many cases, appropriate method of presentation.

However, we recognize that this presentation may not always be the most effective format,

depending on the unique circumstances of a particular registrant. Also, as proposed, we are

deleting the reference to five-year selected financial data in Instruction 1 to Item 303(a). Item

303(a)(3)(ii) already requires disclosure of known trends and uncertainties, so we do not

anticipate that the removal of similar wording from Instruction 1 will discourage trend disclosure

or otherwise reduce disclosure of material information.

Id.

See letters from CAQ, CCMC, CNA, Cravath, Davis Polk, Fenwick, Financial Executives, Securities Industry

and Financial Markets Association (“SIFMA”), and Sullivan.

We are revising Instruction 1 to Item 303(a) to allow registrants who are providing

financial statements covering three years in a filing to omit discussion of the earliest of the three

years if such discussion was already included in any other of the registrant’s prior filings on

EDGAR that required disclosure in compliance with Item 303 of Regulation S-K. 34 Registrants

electing not to include a discussion of the earliest year in reliance on this instruction must,

however, identify the location in the prior filing where the omitted discussion may be found.

These amendments reflect two changes from the proposal.

First, we are expanding the condition regarding the earliest year discussion to allow

registrants to rely on any prior EDGAR filings that include such discussion. We agree with

commenters who recommended expanding this condition to encompass MD&A of the earliest

year included in filings other than Form 10-K. 35 We do not believe it is necessary to designate

the registrant’s prior Form 10-K as the only filing that may serve as the location of the omitted

disclosure, so long as the registrant clearly identifies the prior filing that includes the relevant

discussion.

Second, we are not adopting, as an explicit condition, that the omitted discussion must

not be “material to an understanding” of the registrant’s financial condition, changes in financial

condition, and results of operations. This is not to suggest, however, that materiality is not

relevant to management’s judgment about what disclosure is provided in MD&A. Materiality

remains, as always, the primary consideration. Rather, this change recognizes that the language

of the proposed condition was superfluous and never intended to modify, supplement, or alter the

Instruction 1 to Item 303(a), as revised. Amended Form 20-F will include analogous wording in new

Instruction 6 to Item 5. See infra Section II.A.1.b. of this release.

See supra note 31.

overarching materiality analysis that management must undertake with respect to the information

it provides investors in MD&A. As several commenters pointed out, this superfluous language

may serve to create confusion for registrants and discourage them from tailoring their disclosure

in a manner that is most useful for investors. 36

Although a discussion of the earliest year of the financials could in some circumstances

be material, in many cases the entirety of the discussion of the earliest year that was presented in

the MD&A of a prior filing would not need to be reiterated if, in management’s view, that

discussion is not necessary to understand the financial condition, changes in financial condition,

and results of operations. 37 This is the standard that applies to all of MD&A, 38 and our

amendments do not change that standard. A registrant’s obligation is to provide investors with

all material information, customized in light of the company’s particular circumstances, and

presented in a manner that best reflects the discussion and analysis of the business as seen

through the eyes of those who manage that business. 39 We continue to encourage registrants to

take the opportunity to reevaluate their disclosure in light of these amendments and determine

See supra note 21. For similar reasons, we are not adopting different or additional conditions on the omission

of the earliest year discussion as suggested by several commenters. See supra notes 26 and 27.

For investors who find the earliest year discussion useful in understanding the MD&A, this information will

remain readily available from prior filings on EDGAR. See supra note 20.

See Item 303(a): “The discussion … shall provide such other information that the registrant believes to be

necessary to an understanding of its financial condition, changes in financial condition and results of

operations.”

See Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and

Results of Operation, Release No. 33–8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29,2003)] (“2003 MD&A

Interpretive Release”), Sections I.B and III.B.2. See also Concept Release on Management’s Discussion and

Analysis of Financial Condition and Operations, Release No. 6711 (Apr. 17, 1987) [52 FR 13715, 13717] (Apr.

23, 1987)] (“MD&A Concept Release”) (“an opportunity to look at the company through the eyes of

management by providing both a short and long-term analysis of the business of the company”).

whether a discussion of the earliest year’s information remains material. 40 We believe these

amendments underscore the continuing relevance of the Commission’s guidance in the 2003

MD&A Release that “it is increasingly important for companies to focus their MD&A on

material information. In preparing MD&A, companies should evaluate issues presented in

previous periods and consider reducing or omitting discussion of those that may no longer be

material or helpful, or revise discussions where a revision would make the continuing relevance

of an issue more apparent.” 41

We believe the revisions to Item 303 that we are adopting give registrants the flexibility

to tailor their presentation in MD&A in a manner that is most suitable for their varying

circumstances, while at the same time continuing to require that they provide all of the

information necessary to an understanding of their financial condition, changes in financial

condition and results of operations. In that respect, we view the elimination of references to

year-to-year comparisons and the new language in Instruction 1 of Item 303 allowing registrants

to omit discussion of the earliest of the three years covered by the financial statements as

complementary.

b. Application to Foreign Private Issuers

i. Proposed Amendments

The disclosure requirements for Item 5 of Form 20-F (Operating and Financial Review

and Prospects) are substantively comparable to the MD&A requirements under Item 303 of

See 2003 MD&A Interpretive Release, Sections I.B. and III.B.2.; and see Proposing Release, supra note 5, at

50993.

See 2003 MD&A Release, Section III.B.2.

Regulation S-K. 42 To maintain a consistent approach to MD&A for domestic registrants and

foreign private issuers, the Commission proposed changes to Form 20-F to conform with the

proposed amendments to Instruction 1 to Item 303(a). 43

ii. Comments

Several commenters supported the proposal to make conforming changes to Form 20-F,

and no commenters opposed. 44

iii. Final Amendments

We are adopting the proposed revisions to Item 5 of Form 20-F, as modified to be

consistent with the amendments to Item 303. In its amended form, Item 5 of Form 20-F will

provide that, when a filing includes financial statements covering three years, discussion about

the earliest year may be omitted if such discussion was already included in the registrant’s prior

year Form 20-F filed on EDGAR or in any other of the registrant’s prior filings on EDGAR that

required disclosure in compliance with Item 5 of Form 20-F or with Item 303 of Regulation S-K.

Registrants electing not to include a discussion of the earliest year must, however, include a

statement that identifies the location in the prior filing where the omitted discussion may be

found. Similar to revised Item 303, we are revising the instructions to Item 5 to emphasize that

registrants may use any presentation that, in the registrant’s judgment, would enhance a reader’s

understanding.

When the Commission revised the wording of Item 5 of Form 20-F in 1999, the adopting release noted that the

requirements correspond with Item 303 of Regulation S-K. See International Disclosure Standards, Release

No. 33-7745 (Sept. 28, 1999) [64 FR 53900 (Oct. 5, 1999)], at 53904.

The Commission did not propose similar changes to Form 40-F. Form 40-F generally permits Canadian issuers

to use Canadian disclosure documents to satisfy the Commission’s registration and disclosure requirements. As

a result, the MD&A contained in Form 40-F is largely prepared in accordance with Canadian disclosure

standards.

See letters from BDO, CAQ, Cravath, E&Y, PricewaterhouseCoopers (“PWC”), and Sullivan.

2. Redaction of Confidential Information in Material Contract Exhibits

a. Proposed Amendment

As a general matter, current Item 601(b)(10) requires registrants to file as an exhibit to

their applicable disclosure document each of their material contracts entered into within the

preceding two years or which is to be performed, at least in part, in the future. It is not unusual

for some of the information contained in such exhibits to be highly sensitive, most often for

competitive reasons. If such information is not material and is covered by an exemption from

the Freedom of Information Act, 45 a registrant may request confidential treatment which, if

granted by the Commission, would allow the registrant to redact specific information from the

material contract exhibit that it files publicly on EDGAR.

Exchange Act Rule 24b-2 and Securities Act Rule 406 set forth the exclusive procedures

for obtaining confidential treatment in regard to exhibits filed under the Exchange Act and

Securities Act. Registrants who wish to avail themselves of these rules must submit a detailed

application to the Commission that identifies the particular text for which confidential treatment

is sought, a statement of the legal grounds for the exemption, 46 and an explanation of why, based

on the facts and circumstances of the particular case, disclosure of the information is unnecessary

for the protection of investors. 47 Upon receipt of the application, known as a “confidential

5 U.S.C. 552 (“FOIA”). Rule 80 [17 CFR 200.80 et seq.], the Commission’s rule adopted under FOIA,

incorporates the criteria for permissible non-disclosure set forth in FOIA. Of the list of available FOIA

disclosure exemptions provided in Section 552(b), most applicants for confidential treatment rely on paragraph

(b)(4), which exempts certain trade secrets or privileged or confidential commercial or financial information.

Exchange Act Rule 24b-2 and Securities Act 406 require that applicants for confidential treatment justify their

nondisclosure on the basis of the applicable exemption(s) from disclosure under Rule 80.

The Division has published procedural and substantive guidance on how to prepare and submit confidential

treatment requests in Staff Legal Bulletins 1 and 1A, available on the Commission’s website at

https://www.sec.gov/interps/legal/slbcf1.txt and https://www.sec.gov/interps/legal/slbcf1r.htm.

treatment request” or “CTR,” Commission staff will evaluate whether the request appears

appropriate and whether to issue comments on the application.

The Commission proposed revisions to Item 601(b)(10) that would permit registrants to

omit confidential information from material contracts filed pursuant to that item without the need

to submit a CTR, if the information (i) is not material and (ii) would be competitively harmful if

publicly disclosed. Although registrants would not be required to file a confidential treatment

request in accordance with Rule 406 or Rule 24b-2 in connection with the redacted exhibit, the

responsibility of a registrant to determine whether all material information has been disclosed

and whether it may redact the information under the proposed rules would remain unchanged. 48

Redactions made in accordance with revised Item 601(b)(10) should include no more

information than necessary to prevent competitive harm to the registrant.

Under the proposal, the requirements for marking exhibits subject to confidential

treatment would remain in place as well. Just as registrants must do under the current rules, the

proposed amendments would require registrants to:

•

mark the exhibit index to indicate that portions of the exhibit or exhibits have been

omitted;

•

include a prominent statement on the first page of the redacted exhibit that certain

identified information has been excluded from the exhibit because it is both (i) not

material and (ii) would be competitively harmful if publicly disclosed; and

•

indicate with brackets where the information has been omitted from the filed version

of the exhibit.

See Rule 12b-20 [17 CFR 240.12b-20], Rule 408(a) [17 CFR 230.408(a)], and proposed Item 601(b)(10)(iv).

Under the proposed revisions, the Commission staff would continue its selective review

of registrant filings and would selectively assess whether redactions from exhibits appear to be

limited to information that is not material and that would cause competitive harm if publicly

disclosed. Upon request, registrants would be expected to promptly provide supplemental

materials to the staff similar to those currently required in a CTR, including an unredacted copy

of the exhibit and an analysis of why the redacted information is both (i) not material and (ii)

would be competitively harmful if publicly disclosed. 49 Pursuant to Rule 83, registrants may

request confidential treatment of this supplemental information while it is in the staff’s

possession. If the registrant’s supplemental materials do not support its redactions, the staff may

request that the registrant file an amendment that includes some, or all, of the previously

redacted information, similar to the process the staff currently follows for confidential treatment

requests under Rule 406 and Rule 24b-2. After completing its review of the supplemental

materials, the Commission or its staff would return or destroy them at the request of the

registrant if the registrant complies with the procedures outlined in Rule 418 under the Securities

Act or Rule 12b-4 under the Exchange Act, as applicable.

b. Comments

Many commenters favored this proposal. 50 Several commenters that supported the

proposal stated that the current rules impose a significant burden on registrants and that reducing

the significant cost and time expended to prepare and process confidential treatment requests

This analysis would be substantially the same as is currently required in confidential treatment requests.

See, e.g., letters from Eversheds Sutherland (US) LLP, on behalf of the Committee of Annuity Insurers

(“Comm. of Annuity Insurers”), CCMC, Cravath, Davis Polk, FedEx, Fenwick, Financial Executives,

Grumman, IMA, Reed Smith LLP (“Reed Smith”), SIFMA, Society for Corp. Gov., and Sullivan (supporting

the proposal). But see, letters from CII and Public Citizen (opposing the proposal).

would provide much needed relief without diminishing the quality of information available to

investors. 51 Along these lines, commenters indicated the proposed revisions to Item 601(b)(10)

would effectively change only the confidential treatment process, not the substance of

registrants’ disclosure. 52 For example, two commenters noted that published guidance, such as

Staff Legal Bulletins 1 and 1A, is readily available to registrants and sets forth the staff’s long

established views on appropriate redactions of confidential information in accordance with Rules

406 and 24b-2. 53 Commenters also observed that the staff would retain the ability to review any

of the information redacted by registrants from their filings, as necessary on a case-by-case basis.

Several commenters noted that the prospect of staff review and request for further information

would continue to act as a safeguard for investors, much as the staff’s selective review process of

filings generally operates today. 54

However, not all commenters supported the proposal. In particular, two commenters

expressed concern that if registrants were no longer required to formally request confidential

treatment of redactions in their exhibits, they may be motivated to err on the side of redacting

much more information than would likely be afforded confidential treatment under the current

system. 55

See letters from Comm. of Annuity Insurers, Cravath, Davis Polk, FedEx, IMA, Reed Smith, Society for Corp.

Gov., and Sullivan. See also letter from Reed Smith (stating that the current requirements for confidential

treatment disproportionately burden smaller reporting companies).

See, e.g., letters from Cravath, Davis Polk, and Society for Corp. Gov.

See letters from Cravath and Davis Polk.

See letters from Comm. of Annuity Insurers, Cravath, Fenwick, Reed Smith, SIFMA, and Society for Corp.

Gov.

See letters from CII and Public Citizen.

In the Proposing Release, the Commission asked whether to extend the proposal beyond

Item 601 to reach:

•

Exhibits required by other subsections of Item 601, including Item 601(b)(2);

•

Exhibits required by certain of the Commission’s disclosure forms to which the

exhibit requirements of Item 601 do not specifically apply; 56 and

•

Exhibits required by certain of the Commission’s disclosure forms related to

investment companies. 57

Several commenters supported expanding the proposed accommodation to exhibits filed

pursuant to Item 601(b)(2), which requires registrants to file as exhibits any plans of acquisition,

reorganization, arrangement, liquidation, or succession. 58 One such commenter stated that

including Item 601(b)(2) within the coverage of the proposed amendments was a sensible

approach given that Item 601(b)(2) exhibits are substantively a subset of 601(b)(10) exhibits.

However, this commenter also suggested initially limiting the proposed amendments to Item

601(b)(2) and 601(b)(10) and revisiting potential expanded applicability at a future date. 59

By contrast, a few commenters favored immediately expanding the proposal beyond

601(b)(2) and 601(b)(10), specifically to underwriting agreements required by Item 601(b)(1) 60

or generally to all exhibits filed pursuant to Item 601. 61 These commenters reasoned that, for

For example, Form 20-F, for use by foreign private issuers, has its own exhibit requirements that do not

reference Item 601 of Regulation S-K. See Item 19 of Form 20-F.

See Proposing Release, supra note 5, Section II.E.2.c, at 51004.

See letters from Cravath, Fenwick, SIFMA, and Sullivan.

See letter from Cravath.

See letter from SIFMA.

See letter from Society for Corp. Gov.

purposes of the proposed rule change, there was no meaningful basis to distinguish these

additional exhibits from material contracts filed under Item 601(b)(10). One such commenter

noted that broadening the rule change to all Item 601 exhibits would promote a more consistent

approach to confidential treatment overall. 62

None of the commenters that supported the proposal objected to an analogous change to

the exhibit requirements of Commission disclosure forms for which Item 601(b)(10) does not

apply. In addition, two commenters recommended that the proposals should be expanded to

provide similar accommodations to investment companies. 63

c. Final Amendment

We are adopting the amendment to Item 601(b)(10) as proposed. We have, however,

slightly revised the language of the amendment to refer to information that “would likely cause

competitive harm” to more closely track the standard under FOIA. 64 In addition, we are

amending Item 601(b)(2) in a similar manner to allow registrants to redact immaterial provisions

or terms from agreements filed under that item that would likely cause them competitive harm if

publicly disclosed. 65 To facilitate consistency across our exhibit requirements, we are also

expanding the proposal to certain exhibit related requirements in specified disclosure forms for

which Item 601(b)(10) does not apply. 66

Id.

See letters from Comm. of Annuity Issuers and Investment Company Institute (“ICI”).

See new paragraph (iv) to Item 601(b)(10).

Additional amendments to the exhibit requirements of Item 601 that will allow registrants to omit (i) schedules,

appendices and attachments to exhibits that are not material and (ii) personally identifiable information are

discussed infra at Section II.B.5.b.i. and ii.

See amendments to Form 20-F (Instructions as to Exhibits), Form 8-K (Instructions 4-6 to Item 1.01), Form N1A (new Instruction 4 to Item 28), Form N-2 (new Instruction 6 to Item 25.2), Form N-3 (new Instruction 5 to

We believe that these amendments will substantially reduce the burden currently borne

by registrants in preparing and processing requests for confidential treatment while still

providing all material information to investors. As such, we believe these amendments are in

keeping with our mandate under the FAST Act. In our view, the sizeable costs to registrants, in

terms of financial expenditures, staff time, and potential transactional delays resulting because of

time spent on confidential treatment request applications, justifies such an approach where, as

here, any corresponding negative impact on investors is expected to be minimal. The

amendments to Item 601 do not substantively alter registrant disclosure requirements – they do

not affect the principles of what a registrant may or may not permissibly redact from its

disclosure for reasons of confidentiality, nor do they change the fundamental disclosure

obligations a registrant owes its shareholders under the federal securities laws. Rather, the

amendments recognize that the administrative process by which registrants currently are

permitted to protect confidential information in certain exhibits is not the most efficient way to

serve investors’ interests. In response to commenters who expressed concern that registrants

would err on the side of redacting much more information than would likely be afforded

confidential treatment under the current system, we note that these procedural revisions do not

limit the Commission or its staff’s prerogative to scrutinize the appropriateness of a registrant’s

omissions of information from its exhibits. In this regard, we emphasize that the amended rules

retain the requirement that exhibits be clearly marked to indicate where immaterial and

Item 29(b)), Form N-4 (new Instruction 5 to Item 24(b)), Form N-5 (new Instruction 3 of Instructions as to

Exhibits), Form N-6 (new Instruction 3 to Item 26), Form N-14 (new Instruction 3 to Item 16), Form S-6 (new

Additional Instruction 3 to the Instructions as to Exhibits), and Form N-8B-2 (new Instruction 3 to IX.

Exhibits).

competitively harmful information has been omitted 67 and that any redactions will remain

subject to review and comment at the staff’s discretion. 68

As noted, consistent with several commenters’ suggestions, we are adopting revisions to

Item 601(b)(2) that will conform to the treatment of exhibits in amended Item 601(b)(10). We

agree with those commenters who stated that these exhibits are generally a subset of the material

agreements filed under Item 601(b)(10) and should be treated the same way.

At this time, we are not expanding this approach to other exhibits required by Item 601,

given the specialized subject matter and specific considerations relevant to each exhibit. For

example, we believe it would be a very rare case that a company would appropriately be able to

exclude portions of other exhibits such as the articles of incorporation, bylaws, legal or tax

opinions, and codes of ethics. Moreover, by a significant margin, the vast majority of

confidential treatment requests handled by the Commission is made in connection with exhibits

filed pursuant to Item 601(b)(10). 69

Both Item 601(b)(2)(ii) and new Item 601(b)(10)(iv) require the registrant to mark the exhibit index to indicate

that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of

the redacted exhibit that certain identified information has been excluded from the exhibit because it is both

(i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. The

registrant also must indicate by brackets where the information is omitted from the filed version of the exhibit.

Where applicable, the staff may request that a registrant file an amendment that includes some, or all, of the

information previously redacted from an exhibit. We note that the rule, as revised, does not require a registrant

to include an explanatory note in its amendment describing why the amendment was necessary. In the

Proposing Release, the Commission asked whether it should impose such a requirement. No commenters

advocated in favor of such a requirement and, after consideration, we do not think it necessary. This is

consistent with the Commission’s approach to filing amendments generally, whereby registrants are not

required to annotate their changes to documents. We also are mindful that such explanations could, by drawing

the attention of the reader, overemphasize the importance of the amended information. See letters from Reed

Smith and Society for Corp. Gov.

For example, in the fiscal year ended 2018, out of 1,239 requests for confidential treatment 1,130 related to

exhibits filed pursuant to Item 601(b)(10). Similarly, of the 1,188 CTRs granted by the Commission that year,

1,086 related to exhibits filed pursuant to Item 601(b)(10).

Finally, to facilitate the consistency of our exhibit requirements across different forms, we

are adopting a parallel approach to information omitted from exhibits required by certain other

forms and rules for which the exhibit requirements of Item 601 do not apply. For example, as we

discuss below, we are adopting amendments to Form 20-F 70 to maintain a consistent approach to

the exhibit filing requirements for domestic registrants and foreign private issuers. We are also

amending Item 1.01 of Form 8-K to conform to the revisions to Item 601(b)(10)(iv). Item 1.01

of Form 8-K requires the disclosure of material definitive agreements that are not made in the

ordinary course of business. The item parallels Item 601(b)(10) of Regulation S-K with regard

to the types of agreements that are material to a company, but it does not require that the material

agreements themselves be filed as exhibits to the Form 8-K. In 2004, when Item 1.01 was added

to Form 8-K, the Commission considered mandating an Item 1.01 exhibit filing requirement but

ultimately chose not to do so after considering the views of commenters. 71 Commenters

expressed concern that the short Form 8-K filing period would make it too difficult to prepare

and submit requests for confidential treatment of sensitive terms of the agreements in a timely

manner. 72 Instead, the Commission retained the rule that material agreements disclosed on Form

8-K do not need to be filed until the company’s next periodic report or registration statement, but

encouraged companies to file such agreements with the Form 8-K to the extent practicable. 73

Accordingly, although the language of Item 1.01 and its instructions reference Item 601(b)(10)

Unlike the exhibit requirements of Form 20-F, which are separate from and do not reference Item 601 of

Regulation S-K, the registration statement Forms F-1, F-3, F-4 for foreign private issuers all require registrants

to comply with the exhibit requirements of Item 601.

See Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date, Release No. 33-8400

(Mar. 16, 2004) [69 FR 15593] (“2004 8-K Release”), at 15996-7.

Id.

Id. at 15597.

of Regulation S-K for purposes of determining which agreements must be reported under this

Form 8-K item, they do not specifically incorporate the exhibit filing requirements of Item

601(b)(10). We are therefore adopting changes to Form 8-K to clarify that the accommodations

to the exhibit filing requirements extend to Item 1.01 of Form 8-K as well, to the extent such

exhibits are filed with the intention of being incorporated into future filings in satisfaction of

Item 601(b)(10).

For policy reasons similar to those described above, we are adopting parallel amendments

to the registration forms used by investment companies to allow them to redact immaterial

provisions or terms from exhibits filed as “other material contracts” that would likely cause the

registrant competitive harm if publicly disclosed. 74 We are also extending this treatment to

information in reinsurance agreements required to be filed as exhibits under Forms N-3, N-4, and

N-6. 75 Staff of the Division of Investment Management has routinely granted confidential

treatment as to information in reinsurance agreements in the past. We believe that extending this

relief to these specific categories of exhibits will substantially reduce the burden currently borne

by registrants in preparing and processing requests for confidential treatment, while still

providing all material information to investors holding those contracts.

See new Instruction 4 to Item 28 of Form N-1A; new Instruction 6 to Item 25.2 of Form N-2; new Instruction 5

to Item 29(b) of Form N-3; new Instruction 5 to Item 24(b) of Form N-4; new Instruction 3 of Instructions as to

Exhibits of Form N-5; new Instruction 3 to Item 26 of Form N-6; new Instruction 3 to Item 16 of Form N-14;

new Additional Instruction 3 to the Instructions as to Exhibits of Form S-6; and new Instruction 3 to IX.

Exhibits of Form N-8B-2.

See new Instruction 5 to Item 29(b) of Form N-3, new Instruction 5 to Item 24(b) of Form N-4, and new

Instruction 3 to Item 26 of Form N-6. Reinsurance agreements are required to be filed as separate and distinct

exhibits within the list of exhibit items required by Forms N-3, N-4, and N-6. Registrants often seek

confidential treatment of the negotiated terms and of proprietary information about how they operate their

insurance business that is included in these agreements.

3. Financial Statements: Incorporation by Reference and Cross-Reference

of Information 76

a. Proposed Amendments

Having financial statements cross-reference to disclosure in other parts of a filing or

incorporate information by reference from other filings can raise questions as to the scope of an

auditor’s responsibilities. 77 To address this concern, the Commission proposed amendments to

our rules and forms that would prohibit such incorporation by reference or cross-referencing. 78

The proposed amendments did not, however, prohibit cross-references to other parts of a filing

when otherwise specifically permitted by our rules. The proposed amendments also did not

prohibit incorporating financial information from other filings to satisfy financial reporting

requirements when otherwise permitted or required. 79 In addition, for consistency with both

current and proposed Rule 411 and Rule 12b-23, we also proposed an additional amendment to

Rule 0-4 providing restrictions on the incorporation of financial information required to be given

in comparative form for two or more fiscal years or periods. 80

For a discussion of other amendments we are adopting that also pertain to our rules regarding incorporation by

reference, see Section II.B.6 infra.

See Proposing Release, supra note 5, Section II.F.2.c. at 51010.

The Commission proposed amendments to Rule 411, Rule 12b-23, and Rule 0-4 and Securities Act Forms S-1,

S-3, S-11, and F-1. Because Rule 0-6 governs incorporation by reference only for applications filed under the

Investment Advisers Act, the Commission did not propose to make similar amendments to that rule, but did

request comment on whether the final amendments should include this provision. We received no comments

regarding extending similar amendments to Rule 0-6.

For example, registrants using Form S-3 would continue to be permitted to incorporate financial statements

filed with a Form 8-K that reports the acquisition of a significant business. Also, registrants using Form S-4 to

report a merger with another registrant would continue to be able to incorporate the financial statements of the

registrant filed on Form 10-K and Form 10-Q. Similarly, investment company registrants using, for example,

Form N-1A would continue to be permitted to incorporate financial statements included as part of reports to

shareholders that are filed on Form N-CSR.

See proposed Rule 0-4(b).

b. Comments

Several commenters supported the proposed amendments, 81 while one commenter

opposed. 82 Although this commenter shared the concern over the need to define the scope of the

auditor’s responsibilities, it stated that prohibiting incorporation by reference or crossreferencing of information into the financial statements was a significant lost opportunity to

improve the delivery of information to investors by improving the technology platform on which

the Commission collects and disseminates that information. A number of commenters suggested

that the final rule permit foreign private issuers on Form 20-F to cross-reference outside the

financial statements when expressly permitted by applicable accounting standards, such as IFRS

or by law, regulation or by the primary securities regulator in the registrant’s home country

jurisdiction or market. 83 A few commenters requested confirmation that the proposal would not

affect financial reporting for certain investment company “fund of funds” arrangements, such as

a master/feeder arrangement. 84

See letters from BDO, CAQ, Deloitte, E&Y, Grant Thornton LLP (“Grant Thornton”), Piercy Bowler, PWC,

and ICI.

See letter from Sullivan.

See letters from CAQ, Deloitte, E&Y, KPMG, and PWC.

See letters from CAQ, KPMG, and PWC. Feeder funds typically invest their assets solely in another investment

company (a master fund), and provide financial statements of the master fund together with the feeder fund’s

financial statements. Generally, the staff of the Division of Investment Management has taken the position that

the financial presentation that is most meaningful in the feeder fund context is unconsolidated, provided that,

among other things, the feeder fund attaches the financial statements of the master fund to its financial

statements. See Investment Management Guidance Update No. 2014-11, Investment Company Consolidation,

available at http://www.sec.gov/investment/imguidance-2014-11.pdf; and SEC Staff Generic Comment Letter

for Investment Company CFOs (Dec. 30, 1998), available at

https://www.sec.gov/divisions/investment/imlr1230.htm. The amendments we are adopting today would not

change the staff interpretation that the master fund’s financial statements should be attached to the feeder fund’s

financial statements and not incorporated by reference.

c. Final Amendments

We are adopting the amendments as proposed, with the following modification. In

response to commenters who were concerned that the proposed amendments may create

uncertainty regarding cross-references and incorporation by reference in the financial statements

when expressly permitted by applicable accounting standards, such as IFRS, our amendments

explicitly provide that incorporating by reference, or cross-referencing to, information outside of

the financial statements is not permitted unless otherwise specifically permitted or required by

the Commission’s rules or by U.S. Generally Accepted Accounting Principles or International

Financial Reporting Standards as issued by the International Accounting Standards Board,

whichever is applicable. 85

While the use of cross-references and incorporation by reference to present information

can help investors access information, navigate disclosure and focus on key information, we

believe it is necessary to place restrictions on the ability of registrants to cross-reference and

incorporate by reference information into the financial statements. By generally prohibiting this

practice, with certain exceptions as noted above, the amendments address concerns that

referencing information outside the audited financial statements to satisfy financial statement

disclosure requirements could create confusion about which financial information has been

audited or reviewed by the independent auditor. 86 We think these changes will reduce potential

confusion and make it less cumbersome for investors to determine what pieces of financial

information form a set of audited or reviewed financial statements. While we appreciate the

See, as amended, Rule 411, Rule 12b-23, Rule 0-4, and Forms S-1, S-3, S-11, and F-1.

See letter from Deloitte.

views of the commenter who opposed the amendments on the grounds that they represented a

missed opportunity to improve the technology platform on which the Commission collects and

disseminates information to investors, broader changes to the Commission’s EDGAR system are

outside the scope of this rulemaking and we do not agree that adoption of this change would precondition the Commission’s approach in any future technology changes.

Adoption of Amendments as Proposed

1. Description of Property (Item 102)

a. Proposed Amendments

Item 102 of Regulation S-K requires that registrants disclose “the location and general

character of the principal plants, mines, and other materially important physical properties of the

registrant and its subsidiaries.” The instructions to Item 102 further clarify the type of

information required, specifying that registrants:

•

must disclose such information as reasonably will inform investors as to the

suitability, adequacy, productive capacity, and extent of the registrant’s utilization

of the facilities; 87 and

•

should take into account both quantitative and qualitative factors when

determining whether properties should be described. 88

See Instruction 1 to Item 102 of Regulation S-K. Detailed descriptions of the physical characteristics of

individual properties or legal descriptions by metes and bounds are not required.

See Instruction 2 to Item 102 of Regulation S-K. Disclosure specific to the mining, oil and gas, and real estate

industries is outside the scope of this rulemaking. Instruction 3 of Item 102 applies to the mining industry. The

Commission has separately adopted revisions to the property disclosure requirements for mining registrants.

See Modernization of Property Disclosures for Mining Registrants, Release No. 33-10570 (Oct. 31, 2018) [83

FR 66344 (Dec. 26, 2018)] (“Modernization for Mining Registrants Release”). Instructions 4, 5, and 6 of Item

102 apply to the oil and gas industry. The Commission considered disclosure specific to the oil and gas

industry in 2008. See Modernization of Oil and Gas Reporting, Release No. 33-8995 (Dec. 31, 2008) [74 FR

2158 (Jan. 14, 2009)]. Instruction 9 of Item 102 applies to the real estate industry.

Despite existing language in Item 102 that limits the required information to properties

that are “materially important” to the registrant and its subsidiaries, the disclosure elicited in

response to this item may not have been consistently material. 89 For many companies, the only

physical properties held may be their headquarters, office space, or ancillary facilities, a

description of which is likely to be unimportant to an investor’s evaluation of an investment in

the company. Even where a description of the registrant’s physical properties is more likely to

be salient to investors, such as with manufacturing companies, data centers, or casinos, the

language of Item 102 may not provide sufficient clarity to registrants for determining which of

their properties must be described. For example, commenters have pointed out that Item 102

contains a mixture of different disclosure triggers, such as references to “principal” plants and

mines, “materially important” physical properties, and “major” encumbrances, which together in

the same disclosure requirement may create unnecessary ambiguity. 90 In addition, while

Instruction 2 of Item 102 incorporates the materiality concepts of Instruction 1 to Item 101 of

Regulation S-K, Instruction 1 of Item 102 provides no such materiality overlay. This lack of

harmony in Item 102 has created uncertainty about the scope of the rule and has likely

contributed to the disclosure of immaterial information.

To address this issue, the Commission proposed revising Item 102 to emphasize

materiality, which was consistent with several commenters’ suggestions and the staff’s

See the Proposing Release, supra note 5, at nn. 21 through 23 and see generally Section II.A. of the Proposing

Release, supra note 5. See also Fast Act Report, supra note 7, at Section IV.B.1, and Concept Release, supra

note 9, at Section IV.A.6.b.

See Section II.A. of the Proposing Release, supra note 5, and note 28 of that release (citing to the American Bar

Association’s comment letter of March 6, 2015 with respect to the Commission’s Disclosure Effectiveness

initiative).

recommendation in the FAST Act Report. 91 The Commission proposed to amend Item 102 to

require disclosure to the extent physical properties are material to the registrant, which would

include those properties that are material to the registrant’s business. 92 The proposal was also

intended to harmonize the various non-industry-specific triggers 93 for disclosure in Item 102 by

replacing them with a consistent materiality threshold that would facilitate its application. The

Commission also proposed to clarify that the disclosure required under Item 102 may be

provided on a collective basis, if appropriate.

b. Comments

Many commenters supported the proposal to focus the required disclosure on material

physical properties, with several of these commenters stating that the proposed amendments

would help reduce unnecessary disclosure. 94 Several commenters suggested different

formulations of the rule. For example, one commenter recommended that Item 102 be subsumed

into the disclosure objectives of Item 101 and specific references to “material” and “materiality”

See FAST Act Report, supra note 7, at Recommendation B.1.

In the Proposing Release, the Commission stated the belief that this approach would not inadvertently omit

disclosures that would be material to the registrant, but not its ongoing business, such as properties that have

value that is material to the registrant but are no longer important to its operations. See Proposing Release,

supra note 5, Section II.A., at 50991.

In light of the particular significance of this disclosure for registrants in the mining, real estate, and oil and gas

industries, the Commission did not propose to modify any of the instructions of Item 102 specific to those

industries. Instructions 3 through 7 to Item 102 are industry-specific. For example, Instruction 3 of Item 102

requires that registrants engaged in mining operations must refer to, and if required, provide the disclosure

under §§ 229.1300 through 229.1305 (subpart 1300) of Regulation S-K, in addition to any disclosure required

by Item 102. See supra note 88.

See letters from American Fuel (supporting the revision because it “would help reduce disclosure of immaterial

information and therefore alleviate the possibility of disclosure overload”), Business Roundtable (stating

generally that a focus on materiality “helps filter unnecessary information out of disclosures, providing

investors a clearer picture of a company’s business and financial profile”) and Cravath (stating that the proposed

amendments “should enhance [Item 102] disclosure where appropriate or eliminate it where not material”),

CCMC, CNA, Davis Polk, E&Y, FedEx, Fenwick, Financial Executives, Grumman, IMA, Lark Research,

Nasdaq, Reed Smith, SIFMA, Society for Corp. Gov., and Sullivan.

in the item be omitted in favor of a more precisely articulated disclosure objective. 95 Another

commenter suggested that the rule require disclosure only of properties that present specific risks

to the registrant, which might mitigate the use of boilerplate disclosure. 96 A third commenter

supported the proposed amendment but recommended that it apply uniformly to all issuers

regardless of industry, including the real estate and extractive industries. 97

In the Proposing Release, the Commission also requested comment on whether to further

amend Item 102 to require additional disclosure about material properties, such as uncertainties

in connection with these properties. A number of commenters responded that requiring such

additional disclosure would only duplicate existing requirements, such as those in Items 101,

103, 303, and 503(c) of Regulation S-K and Exchange Act Rule 12b-20, as well as the financial

statement footnotes. 98

Finally, some commenters favored removing Item 102 as a separate disclosure item and

incorporating it into the description of business required by Item 101, 99 an approach that the staff

previously put forward in the FAST Act Report. 100

See letter from E&Y, recommending that the disclosure objective for properties should be “to identify assets

that contribute significantly to enterprise value, that are unique or provide competitive advantage, that could not

be readily replaced or that present a significant risk to the enterprise if the registrant loses [its] use or access to

them.”

See letter from IMA (providing as an example the risk of expropriation of an oil and gas facility by an unstable

government).

See letter from CCMC (acknowledging that while physical properties will often be material to companies in the

real estate and extractive industries, there are many situations where individual properties or groups of related

properties are not material to particular issuers in these industries).

See letters from American Fuel, Cravath, Davis Polk, Fenwick, Reed Smith, SIFMA, Society for Corp. Gov.,

and Sullivan.

See letters from E&Y and Sullivan.

100

See letters from E&Y and Sullivan. See also FAST Act Report, supra note 7, at Recommendation B.1.

c. Final Amendment

We are adopting the amendment to Item 102 as proposed. 101 The revised item makes

clear that, unless otherwise specified, disclosure need only be provided about a physical property

to the extent that it is material to the registrant. The final rules provide a uniform standard of

disclosure based on materiality for non-industry specific properties. Because determinations of

materiality are fact-specific and encompass a wide range of possible considerations, we do not

think it is appropriate to further limit the criteria for Item 102 disclosure by focusing only on

certain specific risks or other narrowly defined measures of materiality. We believe that

registrants are best suited to determine which, if any, of their physical properties warrant

discussion based on what is material to them in light of their particular circumstances. Under

this approach, some physical properties held by a registrant may not be material. In some cases,

application of this analysis may result in a description of property on an individual basis or on a

collective basis, or may result in no disclosure.

We have not modified any of the instructions to Item 102 that relate to specific industries.

As stated in the Proposing Release, the particular significance and unique considerations of

property disclosure for registrants in the mining, real estate, and oil and gas industries weigh in

favor of separate consideration. 102

We are also not opting to combine Item 102 with Item 101, as some commenters

recommended. We continue to believe any effort to combine these requirements should be in the

101

See revised Item 102.

102

See supra note 88, noting that the Commission has separately adopted revisions to the property disclosure

requirements for mining registrants.

context of a broader inquiry into the purpose and function of a registrant’s disclosure of its

business operations, which was outside of the scope of this rulemaking.

2. Management, Security Holders, and Corporate Governance

a. Amendment to Item 401 of Regulation S-K (Directors, Executive

Officers, Promoters, and Control Persons)

Item 401 of Regulation S-K sets forth disclosure requirements about the identity and

background information of a registrant’s directors, executive officers, and significant

employees. 103 Form 10-K, which is one of several forms that calls for such disclosure, allows

registrants to incorporate this information (and all other information required by Part III of

Form 10-K) by reference to their definitive proxy or information statement. 104 As an alternative

to incorporating this information by reference to a definitive proxy or information statement,

Instruction 3 to Item 401(b) allows registrants to include required information about their

executive officers in Part I of Form 10-K. If a registrant chooses this alternative, Instruction 3

states that the registrant is not required to repeat that information in its definitive proxy or

information statement.

To make clear that Instruction 3 applies to any executive officer disclosure required by

Item 401, and therefore registrants need not duplicate such disclosure in their definitive proxy or

103

Item 401 was adopted in 1982 as part of the Commission’s integrated disclosure initiative, although similar

requirements can be traced back to Schedule A of the Securities Act. See Adoption of Integrated Disclosure

System, Release No. 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)] (the “Integrated Disclosure System

Adopting Release”). See also Securities Act, Schedule A, Paragraph 4 [15 U.S.C. 77aa(4)].

104

General Instruction G.3 of Form 10-K. This instruction allows the information required by Item 401, along

with other items required by Part III of Form 10-K, to be incorporated by reference from the registrant’s

definitive proxy or information statement (prepared in accordance with Schedule 14A) if the statement is filed

with the Commission within 120 days after the end of the fiscal year covered by the Form 10-K. If the

definitive proxy statement or information statement is not filed within the 120-day period or is not required to

be filed with the Commission, the Part III information must be filed as part of the Form 10-K, or an amended

Form 10-K, no later than the end of the 120-day period.

information statement if they have already provided it in their Form 10-K, the Commission

proposed to clarify the scope of the instruction by moving it from Item 401(b) and making it a

general instruction to Item 401. The Commission also proposed to revise the required caption

for the disclosure if it is included in Part I of Form 10-K to reflect a “plain English” approach.

The required caption would be “Information about our Executive Officers” instead of “Executive

officers of the registrant.”

Several commenters supported the amendments to Item 401 as proposed, and no

commenters opposed. 105 One commenter suggested further expanding the instruction in Item

401 to allow registrants to omit additional disclosure from their definitive proxy or information

statement if the disclosure was previously filed on Form 10-K. 106

We are adopting the amendment to Item 401, as proposed, to eliminate any confusion

arising from the current location of the instruction. 107 We are not expanding this amendment to

cover other Part III disclosure about executive officers, such as Item 404 disclosure about

related-party transactions, because doing so could result in bifurcating Part III disclosure

between the Form 10-K and a separate proxy or information statement based on whether a party

is an executive officer of the registrant. We think it is preferable to have the disclosure required

by the Item in one filing.

105

See letters from CCMC, Cravath, FedEx, Fenwick, Nasdaq, and Society for Corp. Gov.

106

See letter from Cravath (regarding previously filed Item 404 disclosure). But see letter from Society for Corp.

Gov. (arguing against expanding the instruction to Item 404 and other disclosure items relating to executive

officers).

107

New Instruction to Item 401 of Regulation S-K.

b. Compliance with Section 16(a) of the Exchange Act (Item 405)

Section 16(a) of the Exchange Act requires officers, directors, and specified types of

security holders to report their beneficial ownership of a registrant’s equity securities using

forms prescribed by the Commission,108 which must be filed electronically on EDGAR. 109

Item 405 requires registrants to disclose each reporting person 110 who failed to file Section 16

reports on a timely basis during the most recent fiscal year or prior fiscal years. 111 The

disclosure is required under the caption “Section 16(a) Beneficial Ownership Reporting

Compliance.” Rule 16a-3(e) currently requires reporting persons to furnish a duplicate of those

Section 16 reports to the registrant. 112 Registrants are instructed under Item 405(a) to provide

108

See Form 3, Form 4, and Form 5.

109

Reporting persons have been required to file their Section 16 reports on EDGAR since 2003. See Mandated

Electronic Filing and Web Site Posting for Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788

(May 13, 2003)] (“Section 16 Mandatory Electronic Filing Release”). In addition, all registrants who maintain

a corporate website are required to post any Section 16 reports relating to the equity securities of the registrant

on such website pursuant to Rule 16a-3(k) of the Exchange Act [17 CFR 240.16a-3(k)], and many registrants

satisfy this requirement by providing hyperlinks directly to the electronic filings once they are made on

EDGAR. The Commission has noted that any concerns a registrant may have about obtaining an electronic

copy of the filing from a Section 16 reporting person in order to satisfy the web posting requirement “would not

arise for issuers that rely on a hyperlink (for example, to EDGAR) instead of, or in addition to, direct website

posting.” Id. at 25790.

110

Item 405(a)(1) of Regulation S-K [17 CFR 229.405(a)(1)] defines a “reporting person” as “each person who, at

any time during the fiscal year, was a director, officer, beneficial owner of more than ten percent of any class of

equity securities of the registrant registered pursuant to Section 12 of the Exchange Act, or any other person

subject to Section 16 of the Exchange Act with respect to the registrant because of the requirements of

Section 30 of the Investment Company Act.”

111

Item 405 was initially proposed in 1988 in an attempt to reduce the high delinquency rate for Section 16 reports.

See Ownership Reports and Trading by Officers, Directors and Principal Stockholders, Release No. 34-26333

(Dec. 2, 1988) [53 FR 49997 (Dec. 13, 1988)] and Ownership Reports and Trading by Officers, Directors and

Principal Security Holders, Release No. 34-27148 (Aug. 18, 1989) [54 FR 35667 (Aug. 29, 1989)] (reproposing Item 405 in response to comments on the 1988 proposing release).

112

See 17 CFR 240.16a-3(e).

the required disclosure relying solely on their review of such furnished reports and any written

representation provided by such persons that no Form 5 is required. 113

As described in the Proposing Release, the Commission proposed the following

changes: 114

•

Eliminate the requirement in Rule 16a-3(e) that reporting persons furnish

Section 16 reports to the registrant.

•

Amend Item 405 to:

ο Clarify that registrants may, but are not required, to rely only on Section

16 reports that have been filed on EDGAR (as well as any written

representations from the reporting persons) to assess whether there are any

Section 16 delinquencies to disclose. 115

ο Change the disclosure heading required by Item 405(a)(1) from “Section

16(a) Beneficial Ownership Reporting Compliance” to the more specific

“Delinquent Section 16(a) Reports” and encourage registrants to exclude

this heading altogether when they have no Section 16(a) delinquencies to

report.

•

Eliminate the checkbox on the cover page of Form 10-K (and the related

instruction in Item 10 of Form 10-K) whereby the registrant indicates that there is

113

See Item 405(a) and (b)(1).

114

See Proposing Release, supra note 5, Section II.C.2 at 50995-6. These proposed amendments were based on

staff recommendations in the FAST Act Report, which called for revisions to Item 405 and Rule 16a-3(e) in

light of the availability of Section 16 reports on EDGAR. See FAST Act Report, supra note 7, at

Recommendation D.2. See also Section 16 Mandatory Electronic Filing Release, supra note 109, at 25790.

115

Proposed Item 405(b).

no disclosure of delinquent filers in the Form 10-K and, to the best of the

registrant’s knowledge, will not be included in a definitive proxy or information

statement incorporated by reference.

We received several comments on the proposed amendments, 116 all of which generally

supported the revisions, with some commenters recommending slight modifications to the rules

as proposed. 117

We are adopting the amendments to Item 405, Section 16a-3(e), and the cover page of

Form 10-K, as proposed. We believe these amendments, taken together, will improve the

Section 16 disclosure regime for the benefit of both registrants and investors by making the rules

more straightforward, compliance less burdensome, and the disclosure itself more streamlined.

Rule 405, as amended, will allow registrants to leverage the availability of Section 16

reports on EDGAR to perform their diligence for Item 405 disclosures more efficiently and with

a greater degree of confidence in the results. 118 By shifting the focus of a registrant’s inquiry to

Section 16 reports filed electronically on EDGAR, revised Item 405 modernizes and simplifies

the registrant’s compliance with Item 405 while still providing all material information.

However, registrants are not restricted to only these documents and may, but are not required, to

116

See letters from CCMC, Cravath, FedEx, Fenwick, and Society for Corp. Gov.

117

See letter from Society for Corp. Gov. (suggesting that changing the caption to “Delinquent Section 16(a)

Reports” was unnecessary) and letter from Cravath (suggesting that there may be some value in requiring

affiliates, other than officers and directors, to provide registrants with electronic notice of delinquent Section 16

reports).

118

See revised Item 405(b) [17 CFR 229.405(b)]. Revised Item 405(b) permits registrants to rely on a review of

Section reports filed electronically with the Commission during the registrant’s most recent fiscal year and any

written representations from reporting persons that no Form 5 is required.

expand the scope of their inquiry. 119 Consistent with this shift away from furnished reports, as

proposed, we are also removing the provision in Rule 16a-3(e) that requires Section 16 reporting

persons to provide a duplicate copy of their reports to the registrant. This provision, which

predates EDGAR and the requirement that all reporting persons electronically file their Section

16 reports, has become unnecessary. 120

We are also changing the required caption in Item 405(a)(1) from “Section 16(a)

Beneficial Ownership Reporting Compliance” to “Delinquent Section 16(a) Reports” and

including an instruction to this item to clarify that registrants are encouraged not to provide this

caption if there are no delinquencies to report, as proposed. This revision is intended to

minimize unnecessary disclosure and, at the same time, facilitate the ability of investors to

identify and monitor Section 16 delinquencies.

Finally, we are modifying the cover page of Form 10-K, as proposed, to eliminate the

checkbox indicating the absence of Item 405 disclosure in a registrant’s Form 10-K and its

definitive proxy or information statement incorporated by reference. We believe the value of

119

Item 405 previously provided that the registrant “shall” make its disclosure “based solely upon” the Section 16

reports furnished to it pursuant to Rule 16a-3(e) and any written representation from a reporting person that no

Form 5 is required. As stated in the Proposing Release, this language could be read to suggest that registrants

may not rely on information outside of the Section 16 reports furnished to the registrant pursuant to Rule 16a3(e). Therefore, revised Item 405(b) provides that registrants “may” rely only on the Section 16 reports and the

written representation. As a result, if a registrant were aware that information in a Section 16 report submitted

on EDGAR was not complete or accurate, or that a reporting person failed to file a required report, it could

provide appropriate disclosure pursuant to Item 405, as revised. See Proposing Release, supra note 5, at 50995.

120

For the same reason, we are not amending our rules to require that reporting persons provide notice to the

registrant when they file a Section 16 report on EDGAR. We believe such a notice requirement is not only

unnecessary, but contrary to the objectives of this rulemaking to streamline our disclosure rules and make them

less burdensome.

this cover page disclosure has outlived its usefulness as a tool to facilitate the staff’s processing

and review of the form. 121

3. Corporate Governance (Item 407)

Several disclosure requirements related to corporate governance are consolidated in Item

407. 122 The Commission proposed amendments to update a reference to an outdated auditing

standard in Item 407(d)(3)(i)(B) and proposed to revise Item 407(e)(5) to clarify that emerging

growth companies (“EGCs”) are not required to provide a compensation committee report. 123

We are adopting these amendments as proposed, as further discussed below.

a. Audit Committee Discussions with Independent Auditor (Item

407(d)(3)(i)(B))

Under existing Item 407(d)(3)(i)(B), when a registrant files a proxy or information

statement relating to an annual or special meeting of security holders at which directors are

elected or written consents are provided in lieu of a meeting, a registrant’s audit committee must

state whether it has discussed with the independent auditor the matters required by AU

section 380, Communication with Audit Committees (“AU sec. 380”). 124 As described in the

Proposing Release, the reference to AU sec. 380 has become outdated. 125 As such, the

Commission proposed to update the reference to AU sec. 380 in Item 407(d)(3)(i)(B) by

referring more broadly to “the applicable requirements of” the Public Company Accounting

121

See Proposing Release, supra note 5, Section II.C.2 at 50995-6.

122

17 CFR 229.407. Item 407 was adopted in 2006 to consolidate various corporate governance requirements

under a single disclosure item. See Executive Compensation and Related Person Disclosure, Release No. 338732A (Aug. 29, 2006) [71 FR 53158 (Sept. 8, 2006)].

123

See FAST Act Report, supra note 7, at Recommendations D.4 and D.5.

124

See Instruction 3 to Item 407(d) of Regulation S-K.

125

See Proposing Release, supra note 5, Section II.C.3.a. at 50996.

Oversight Board (“PCAOB”) and the Commission. 126 Several commenters supported the

proposed amendments, and no commenters opposed. 127 We are therefore adopting the

amendments to Item 407(d)(3)(i)(B) as proposed. We believe this language will more easily

accommodate any future changes to audit committee communication requirements.

b. Compensation Committee Report (Item 407(e)(5))

Item 407(e)(5) 128 requires a registrant’s compensation committee to state whether it has

reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) required by

Item 402(b). 129 Based on this review and discussion, Item 407(e)(5) requires that the

compensation committee state whether it recommended to the board of directors that the CD&A

be included in the registrant’s annual report, proxy statement, or information statement. The

Commission proposed to amend Item 407 to explicitly exclude EGCs from the Item 407(e)(5)

requirement because they are not subject to a requirement to include a CD&A in their public

disclosures. 130 Specifically, the proposed amendment added a reference to EGCs in Item 407(g),

which currently excludes smaller reporting companies from Item 407(e)(5), among other

provisions of Item 407. Several commenters supported the proposed amendments, and no

126

See Auditing Standard No. 1301, Communications with Audit Committees (“AS 1301”), including Appendix B

to AS 1301; Section 10A(k) of the Exchange Act [15 U.S.C. §78j-1(k)]; Rule 2-07 of Regulation S-X [17 CFR

210.2-07]; and Exchange Act Rule 10A-3 [17 CFR 240.10A-3].

127

See letters from BDO, CAQ, CCMC, Cravath, Deloitte, E&Y, FedEx, Fenwick, Nasdaq, PWC, Society for

Corp. Gov., and Sullivan. Two of these commenters also encouraged the staff to publish guidance that catalogs

the specific PCAOB and Commission rules that are covered by revised Item 407(d)(3)(i)(B) at the time to avoid

confusion and provide clarity to registrants. See letters from Cravath and Society for Corp. Gov. The staff will

consider the necessity of such additional guidance.

128

17 CFR 229.407(e)(5).

129

17 CFR 229.402(b).

130

See Item 402(l) of Regulation S-K.

commenters opposed. 131 Accordingly, we are adopting the amendments to Item 407(e)(5) as

proposed.

4. Registration Statement and Prospectus Provisions

a. Outside Front Cover Page of the Prospectus (Item 501(b))

Item 501(b) 132 sets forth disclosure requirements related to the outside front cover page

of prospectuses. 133 The proposed amendments were intended to streamline these requirements

and to provide registrants with greater flexibility in designing a cover page tailored to their

business and the particular offering. We are adopting these amendments as proposed, as

discussed below.

i. Name (Item 501(b)(1))

Item 501(b)(1) requires disclosure of a registrant’s name, including an English translation

of the name of foreign registrants. The instruction to Item 501(b)(1) states that if a registrant’s

name is the same as that of a “well known” company, or if the name leads to a misleading

inference about the registrant’s line of business, the registrant must include information to

eliminate any possible confusion with the other company. If disclosure is insufficient to

eliminate the confusion, the instruction indicates that the registrant may be required to change its

name. The instruction provides an exception, however, if the registrant is an “established

131

See letters from CAQ, Cravath, FedEx, Fenwick, Nasdaq, Society for Corp. Gov., and CCMC.

132

17 CFR 229.501(b).

133

See FAST Act Report, supra note 7, at Recommendations E.1-5.

company,” the character of the registrant’s business has changed, and the “investing public is

generally aware of the change and the character of [the registrant’s] current business.” 134

As discussed in the Proposing Release, in an effort to streamline Item 501(b)(1), the

Commission proposed to eliminate the portion of the instruction to Item 501(b) that discusses

when a name change may be required and the exception to that requirement. 135

A few commenters supported the proposed amendment to Instruction 1 of Item

501(b)(1), 136 while some opposed it. 137 One commenter encouraged the Commission to

eliminate the language about a registrant being required to change its name because this subject

matter is already addressed by state law, as well as common law and federal trademark law. 138

The commenter asserted that the Commission’s resources should not be devoted to matters

“outside its core mission of investor protection that are already addressed by other regulators and

non-securities laws.” 139 However, one of the commenters who objected to the proposal stated

134

This policy reflected in Item 501(b)(1) with regard to misleading company names was first articulated by the

Commission in 1969 in response to an increase in the number of registrants using names that the staff

considered to be misleading. At the time, the Commission noted that registrants were using words such as

“nuclear,” “missile,” “space,” “nucleonics,” and “electronics” in their names when they were not engaged in

activity normally associated with those words, or were engaged to a limited extent. See Guide for Preparation

and Filing of Registration Statements; Misleading Names of Registrants, Release No. 33-4959 (Apr. 16, 1969)

[34 FR 6575 (Apr. 17, 1969)]. This policy was contained in Guide 53 of the Commission’s Guides for

Preparation and Filing of Registration Statements before being moved into Item 501 in 1982. See Integrated

Disclosure System Adopting Release, supra note 103; Rescission of Guides and Redesignation of Industry

Guides, Release No. 33-6384 (Mar. 3, 1982) [47 FR 11476 (Mar. 16, 1982)].

135

See Proposing Release, supra note 5, Section II.D.1.a. at 50997.

136

See letters from K. Bishop, CCMC, and Fenwick.

137

See letters from Cravath and Sullivan.

138

See letter from K. Bishop.

139

Id.

that the Commission should be developing and expanding guidance on misleading names, not

reducing it, noting that this issue continues to raise investor protection concerns. 140

After considering these comments, we have decided to adopt the amendment as proposed.

Our intent is to streamline the instruction to Item 501(b) in accordance with the objectives of this

rulemaking to modernize and simplify our disclosure requirements, not to signal a change in

Commission policy with respect to the use of potentially misleading company names. We

continue to believe that a registrant’s name could mislead investors under some circumstances.

However, these situations can typically be addressed by the addition of clarifying disclosure and

exercise of the Commission’s discretion to take registration statements effective commensurate

with the public interest and the protection of investors. 141

ii. Offering Price of the Securities (Item 501(b)(3))

Item 501(b)(3) requires disclosure on the prospectus front cover page of the price of the

securities being offered, the underwriter’s discounts and commissions, and the net proceeds that

the registrant and any selling security holders will receive. 142 The disclosure must be provided

on an aggregate and per share basis, but registrants may present the required information in any

format that fits the design of the cover page and is clear, easily read, and not misleading.

In situations where it is not practicable to provide a price for the securities, Instruction 2

to Item 501(b)(1)(3) permits registrants to explain the method by which the price is to be

140

See letter from Sullivan.

141

15 U.S.C. 77h.

142

17 CFR 229.501(b)(3). Item 501(b)(3) also includes specific disclosure requirements for offerings being made

on a minimum/maximum basis.

determined. 143 The Commission proposed to amend Instruction 2 to explicitly allow registrants

to include a clear statement on the cover page, when applicable, that the offering price will be

determined by a particular method or formula that is more fully explained in the prospectus.

This proposal was based on the belief that investors may be better served if registrants were

given the option to provide a full explanation of the pricing method in the body of the

prospectus, with a reference to this more fulsome disclosure displayed prominently on the

prospectus cover page.

After considering the responses from a number of commenters who supported this

proposal, 144 with no commenters opposed, we are adopting the amendment to Item 501(b)(3).

We continue to believe that requiring a detailed explanation of the pricing method on the outside

front cover page of the prospectus could reduce the impact of other significant disclosures and is

unnecessary so long as the cover page clearly directs investors to the location in the prospectus

where the disclosure is provided in full.

iii. Market for the Securities (Item 501(b)(4))

Item 501(b)(4) requires a registrant to disclose on the prospectus cover page the name of

any national securities exchanges that list the securities being offered and the trading symbols for

those securities. A “national securities exchange” is defined in the Exchange Act as a securities

exchange that has registered with the Commission under Section 6 of the Exchange Act. 145

143

The instruction also provides that if the securities are to be offered at the market price, or if the offering price is

to be determined by a formula relating to the market price, the registrant should indicate the market and market

price of the securities as of the latest practicable date. The Commission did not propose any change to this

portion of the instruction.

144

See letters from Cravath, Fenwick, Sullivan, and CCMC.

145

See Section 6 of the Securities Exchange Act of 1934 [15 U.S.C. 78f].

Item 501(b)(4) is specific to “national securities exchanges” and does not, under its terms,

require registrants to identify markets that are not national securities exchanges. 146

The Commission proposed to amend Item 501(b)(4) to require disclosure on the

prospectus cover page of the principal United States market or markets for the securities being

offered and the corresponding trading symbols based on the premise that the information

required by Item 501(b)(4) could be important to investors even as to markets that are not

“national securities exchanges.” 147 The Commission proposed to expand the scope of the item

only to the principal United States markets where the registrant, through the engagement of a

registered broker-dealer, has actively sought and achieved quotation. By limiting the proposal in

this way, the Commission acknowledged that registrants cannot always control whether their

securities are quoted on an over-the-counter market and should not be burdened with making that

determination.

Several commenters supported the proposal, 148 and only one commenter opposed it. 149

The commenter that opposed expanding the cover page disclosure of applicable securities

markets stated that the identification of trading markets other than national securities exchanges

146

Item 501(b)(4) requires registrants whose securities are listed on “any national securities exchange or the

Nasdaq Stock Market” to identify the market(s) and trading symbol(s) for the securities. The Nasdaq Stock

Market became operational as a registered national securities exchange on August 1, 2006, following the

Commission’s approval of its application for registration on January 13, 2006. A list of registered national

exchanges is available on the Commission’s website at https://www.sec.gov/fastanswers/divisionsmarketregmrexchangesshtml.html.

147

The proposed changes to Item 501(b)(4) align with recent amendments to Item 201(a) [17 CFR 229.201(a)].

See Disclosure Update and Simplification, Release No. 33-10532 (Aug.17, 2018) [83 FR 50148 (Oct. 4, 2018)]

(the “Disclosure Update and Simplification Release”) at 51688.

148

See letters from CCMC, Cravath (noting that in connection with the implementation of the European Union

Market Abuse Regulation, many registrants have discovered that it is possible for third parties— without any

participation by or even notice to the registrant—to list the registrant’s securities on a securities exchange),

Fenwick, and Sullivan.

149

See letter from Nasdaq.

on the prospectus cover page may confuse investors by suggesting that the markets were

equivalent to national exchanges. 150

We are adopting amended Item 501(b)(4), as proposed. We continue to believe, as stated

in the Proposing Release, that investors would benefit from the addition of this information. 151

In adopting this disclosure requirement, we considered the concern that the presentation of this

information on the prospectus cover page might suggest to some investors that the registrant’s

principal United States market, while not a national securities exchange, carries the imprimatur

of an exchange registered under Section 6(b) of the Exchange Act. It is not clear, however, that

providing the name of the principal market on the prospectus cover page, in and of itself, is

sufficient to create an inference about the quality of the market, or that such identification carries

any implication about the market that would not already be produced by identification of the

market under the existing prospectus disclosure requirements of Item 202 and Item 508 of

Regulation S-K. 152 Therefore, we do not think that there is a significant risk that investors will

equate the principal market or markets listed on the cover page with a national stock exchange.

iv. Prospectus “Subject to Completion” Legend (Item 501(b)(10))

Item 501(b)(10) requires a registrant that is using a preliminary prospectus to include a

legend advising readers that the information will be amended or completed. The legend also

must include a statement that the prospectus is not an offer to sell or a solicitation of an offer to

150

Id. The commenter pointed out that national securities exchanges are registered under Section 6(b) of the

Exchange Act and therefore subject to more rigorous requirements than non-registered domestic exchanges.

Cover page disclosure of these other exchanges might, in the commenter’s view, give them the “imprimatur” of

a national securities exchange, thus complicating the disclosure rather than streamlining it.

151

See Proposing Release, supra note 5, Section II.D.1.c. at 50998.

152

Item 202 [17 CFR 229.202] requires a description of the registrant’s securities, including relevant market

information. Item 508 [17 CFR 229.508] pertains to disclosure about the plan of distribution of the securities

offering, including identification of the exchange, if any, on which the securities are to be offered.

buy securities in any state where the offer or sale is not permitted. The latter statement was

introduced in 1958 to harmonize the legend with what was required by state securities

administrators at the time. 153

The legend requirement has remained mostly unchanged since 1958, even after the

National Securities Markets Improvement Act (“NSMIA”) allowed for preemption of state blue

sky laws in many offerings. 154 The Commission proposed to amend Item 501(b)(10) to permit

registrants to exclude from the prospectus the portion of the legend relating to state law for

offerings that are not prohibited by state blue sky laws. This change would allow for a more

tailored prospectus cover page in recognition of the changes to securities law brought by

NSMIA.

The Commission also proposed to streamline Item 501(b) by consolidating existing Item

501(b)(11), regarding the use of Rule 430A, into Item 501(b)(10) for the sake of simplicity

without substantive change.

A number of commenters supported the amendments to Item 501(b)(10) that would

simplify the “subject to completion” legend on preliminary prospectuses, and no commenters

opposed these amendments. 155 Therefore, and for the reasons noted in the Proposing Release,

we are adopting the revisions to Item 501(b)(10) as proposed.

153

See Amendment of Rules 134 and 433, Release No. 33-3885 (Jan. 7, 1958) [23 FR 184 (Jan. 10, 1958)]. This

requirement was originally in Rule 433, a predecessor to the current requirement.

154

Pub. L. No. 104-290, 110 Stat. 3416 (1996).

155

See letters from CCMC, Cravath, Fenwick, and Sullivan.

b. Risk Factors (Item 503(c))

Item 503(c) requires disclosure of the most significant factors that make an offering

speculative or risky. 156 This risk factor disclosure was initially called for only in the offering

context, 157 but in 2005 the risk factor disclosure requirements were extended to periodic reports

and registration statements on Form 10. 158 Consistent with this change, the Commission

proposed to relocate Item 503(c) to new Item 105, as Subpart 100 covers a broad category of

business information and is not limited to offering-related disclosure. 159

The Commission also proposed amendments that would eliminate the specific risk factor

examples that are currently enumerated in Item 503(c). Although Item 503(c) is principlesbased, and the Commission has eschewed “boiler plate” risk factors that are not tailored to the

unique circumstances of each registrant, the following examples of factors that may make an

offering speculative or risky have remained unchanged since the Commission first published

guidance on risk factor disclosure in 1964: 160

•

a registrant’s lack of an operating history;

156

17 CFR 229.503(c).

157

See Guides for Preparation and Filing of Registration Statements, Release No. 33-4666 (Feb. 7, 1964) [29 FR

2490 (Feb. 15, 1964)] and Guides for Preparation and Filing of Registration Statements, Release No. 33-4936

(Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)].

158

See Securities Offering Reform, Release No. 33-8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (“Securities

Offering Reform Adopting Release”).

159

Additionally, the proposed amendments use the term “registrant” instead of “issuer.” Use of and reference to

“registrant” instead of “issuer” was intended to better reflect the application of risk factor disclosure outside of

the offering context. The term “registrant” is defined under both the Exchange Act and Securities Act. See

Rule 12b-2 [17 CFR 240.12b-2] and Rule 405 [17 CFR 230.405]. The Commission also proposed amendments

to several Commission forms that require risk factor disclosure and reference Item 503(c). The proposed

amendments would revise references to Item 503 to specify new Item 105. A number of forms that require risk

factor disclosure do not reference Item 503(c). The proposed amendments did not include revisions to these

forms. For example, Forms 10-Q and 20-F require risk factor disclosure but do not reference Item 503(c).

160

See Guides for Preparation and Filing of Registration Statements, Release No. 33-4666 (Feb. 7, 1964) [29 FR

2490 (Feb. 15, 1964)].

•

a registrant’s lack of profitable operations in recent periods;

•

a registrant’s financial position;

•

a registrant’s business or proposed business; and

•

the lack of a market for a registrant’s common equity securities or securities

convertible into or exercisable for common equity securities.

As discussed in the Proposing Release, the Commission’s principles-based approach to

risk factor disclosure is not consonant with the item’s list of examples of material risks. 161 These

examples may not apply to all registrants and may not correspond to the material risks of any

particular registrant. In addition, the inclusion of these examples could suggest that a registrant

must address each one in its risk factor disclosures, regardless of the significance to its business.

Finally, the Commission was concerned that the inclusion of any examples in Item 503(c),

whether to illustrate the specific kinds of risks that should be disclosed or generic risks that

should be avoided, could anchor or skew the registrant’s risk analysis in the direction of the

examples. 162

Numerous commenters supported the proposed amendments to relocate the risk factor

disclosure requirements from Item 503(c) to new Item 105 and eliminate the examples of risk

factors that currently appear in the rule. 163 Commenters generally agreed that the examples are

not helpful because they are written generically and, as such, are not well suited to the particular

161

See Proposing Release, supra note 5, Section II.D.2. at 50998-10.

162

See Proposing Release, supra note 5, at n. 145.

163

See letters from American Fuel, BDO, CAQ, Cravath, Edison Electric Institute & American Gas Association,

E&Y, Fenwick, Financial Executives, PNC Financial Services Group (“PNC”), Reed Smith, SIFMA, Sullivan,

and UnitedHealth.

circumstances and material risks of individual registrants. Some commenters pointed out that the

examples may even prompt registrants to include risk factors that address the risks highlighted in

the examples even if they are not material to their business. 164 One commenter opposed the

elimination of examples in Item 503(c) because, in its view, the examples are helpful guidance

that brings focus to the risk factor disclosures. 165 The commenter suggested that eliminating the

examples may not further the Commission’s objective of eliciting more specific and relevant risk

factor disclosure.

We are adopting the amendments as proposed. With respect to the elimination of the

specific examples of material risks currently found in Item 503(c), we continue to think that

retaining these examples, which have remained unchanged since they were first articulated in

1964, would be inconsistent with the Commission’s emphasis on principles-based requirements

that encourage registrants to provide risk disclosure that is more precisely calibrated to their

particular circumstances and therefore more meaningful to investors. By removing this language

from the risk factor disclosure rules, we seek to encourage registrants to focus on their own risk

identification processes.

c. Plan of Distribution (Item 508)

Item 508 requires disclosure about the plan of distribution for securities in an offering,

including information about underwriters. Paragraph (a) requires disclosure about the principal

underwriters and any underwriters that have a material relationship with the registrant, while

paragraph (h) requires disclosure of the discounts and commissions to be allowed or paid to

164

See, e.g., letters from Reed Smith and SIMFA.

165

See letter from CII.

dealers. If a dealer is paid any additional discounts or commissions for acting as a “subunderwriter,” paragraph (h) allows the registrant to include a general statement to that effect

without giving the additional amounts to be sold.

“Sub-underwriter” is not a defined term, and its application may be unclear. “Principal

underwriter,” however, is defined in Regulation C as “an underwriter in privity of contract with

the issuer of the securities as to which he is an underwriter.” 166 The Commission accordingly

proposed to amend Rule 405 to define the term “sub-underwriter” as a dealer that is participating

as an underwriter in an offering by committing to purchase securities from a principal

underwriter for the securities but is not itself in privity of contract with the issuer of the

securities. 167

A number of commenters supported the proposed amendments to Rule 405 and no

commenters opposed them. 168 We are therefore adopting the amendment to add the definition of

“sub-underwriter” to Rule 405, as proposed.

d. Undertakings (Item 512)

Item 512 provides undertakings that a registrant must include in Part II of its registration

statement, depending on the type of offering. As further described in the Proposing Release, the

Commission proposed the following amendments to eliminate undertakings that are duplicative

166

Rule 405.

167

The only other use of the term “sub-underwriter” or “subunderwriter” in Regulation S-K, the Securities Act

rules, or the Exchange Act rules is in Rule 491. The Commission proposed to amend Rule 491 to reference

“sub-underwriter,” consistent with the proposed amendments to Rule 405. The proposed definition of subunderwriter would not change the meaning of that term in Rule 491.

168

See letters from CCMC, Cravath, and Sullivan.

of other rules or that have become unnecessary due to developments since their adoption. 169

Specifically, the Commission proposed to eliminate Item 512(c) 170 in its entirety because it is no

longer necessary, 171 and proposed to eliminate the Item 512(d), Item 512(e), and Item 512(f)

undertakings, because they are obsolete. 172

A number of commenters supported the proposed amendments to the undertakings and no

commenters opposed them. 173 Accordingly, and for the reasons noted in the Proposing Release,

we are amending Item 512 to remove the undertakings in paragraphs 512(c), (d), (e), and (f), as

proposed.

169

See Proposing Release, supra note 5, Section II.D.4. at 51000-1.

170

17 CFR 229.512(c).

171

See Proposing Release, supra note 5, Section II.D.4. at 51000. Item 512(c) sets forth undertakings that a

registrant must include if it registers a warrant or rights offering to existing security holders and the securities

not purchased by those security holders will be reoffered to the public. The Item requires a registrant to

supplement the prospectus to disclose the results of the subscription offer and the terms of any subsequent

reoffer to the public. If any public reoffer is made on different terms than the offer to existing security holders,

the registrant must undertake to file a post-effective amendment. The purpose of the undertaking is to provide

current information about warrants or rights offerings. See FAST ACT Report, supra note 7, at

Recommendation E.8. Given that the registrant would already have to register and disclose the offering to

existing security holders, as well as the reoffering to the public, the undertaking is duplicative and unnecessary.

Furthermore, disclosure of material changes in the terms of the offering would also be required as part of the

Item 512(a)(1) undertaking, thus obviating the need for Item 512(c).

172

Id. at 51000-1. Item 512(d) is applicable when the securities to be registered are to be offered at competitive

bidding. Item 512(e) sets forth undertakings that are required if the registration statement incorporates by

reference in the prospectus all or any part of the annual report to security holders meeting the requirements of

Rule 14a-3 or Rule 14c-3 under the Exchange Act. Item 512(f) pertains to equity offerings of registrants that

are not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act. Each of these items

is no longer necessary because of prior changes in our rules, as described in the Proposing Release. For

example, the undertaking in Item 512(d) arose from a requirement in the Public Utility Holding Company Act

of 1935 (“PUHCA”) that public utility company securities be sold through competitive bidding. That

requirement was rescinded in 1994 and PUHCA was repealed by Congress in 2005.

173

See letters from Cravath, FedEx, Nasdaq, Sullivan, and CCMC.

5. Exhibits

a. Description of Registrant’s Securities (Item 601(b)(4))

Item 202 requires registrants to provide a brief description of their registered capital

stock, debt securities, warrants, rights, American Depositary Receipts, and other securities. 174

Registrants provide Item 202 disclosure about registered securities in their registration

statements, 175 but are not required to provide this disclosure in their Form 10-K or Form 10-Q. 176

The Commission proposed to amend Item 601(b)(4) 177 to require registrants to provide

the information required by Item 202(a)-(d) and (f) as an exhibit to Form 10-K, rather than

limiting this disclosure to registration statements. 178 The proposed amendments were intended to

be in addition to the current requirement to file a complete copy of the amended articles of

174

Items 202(a)-(d) and (f) [17 CFR 229.202(a)-(d) and (f)]. Item 202(e), “Market information for securities other

than common equity,” is outside the scope of this rulemaking; it requires that if securities other than common

stock are to be registered and there is an established trading market for such securities, registrants are required

to provide market information for such securities comparable to that required by Item 201(a) of Regulation S-K.

175

Item 202 disclosure is often incorporated by reference into a registration statement on Form 8-A from a prior

registration statement on Form S-1. See Concept Release, supra note 9, at Section IV.D.2.

176

Registrants are required to file complete copies of their articles and bylaws as exhibits to Form 10-K, but they

are not required to provide the descriptions called for by Item 202. See Item 601(b)(3) [17 CFR 229.601(b)(3).

Also, under Accounting Standards Codification (“ASC”) Topic 505-10-50-3, registrants are required to

summarize the “pertinent rights and privileges of the various securities outstanding” in the notes to their

financial statements. ASC Topic 470-10-50-5 requires the same information for debt securities. While the date

of sale is not required, registrants usually include it in their discussions of the rights and privileges of securities

sold.

177

17 CFR 229.601(b)(4).

178

To the extent that a registrant has previously filed an exhibit to a Form 10-K containing Item 202 disclosure,

under the proposal it could incorporate that exhibit by reference and hyperlink to the previously filed exhibit in

future Form 10-K filings, assuming that the information contained therein remains unchanged. See Instruction

3 to proposed Item 601(b)(4)(vi).

incorporation or bylaws under Item 601(b)(3) 179 in order to increase investors’ ease of access to

information about the rights and obligations of each class of securities registered. 180

We received responses from a number of commenters on the proposal to require Item 202

information as an exhibit to Form 10-K. 181 Several commenters supported the Commission’s

proposal to consolidate into one exhibit the description of a registrant’s securities, but

emphasized that the ability of registrants to incorporate the required information by reference to

prior filings was essential to minimizing the registrants’ compliance burden. 182 One commenter

acknowledged the initial, one-time burden required to comply with the new exhibit requirement,

but thought this cost was outweighed by the benefit to investors from making the information

easier to locate. 183 This commenter stated that the effect of the requirement would be to “put all

registrants on a level playing field.” 184 In contrast, some commenters opposed the proposal

179

See Item 601(b)(3) of Regulation S-K [17 CFR 229.601(b)(3)]. The Commission proposed to amend Item

601(b)(4) instead of Item 601(b)(3) because (b)(4) is consistent with Item 202’s requirement to provide a

description of capital stock that is registered, while (b)(3) is specific to the articles of incorporation and bylaws.

180

Proposed Item 601(b)(4)(vi) would require Item 202 disclosure only for securities that are registered under

Section 12 of the Exchange Act. Because Item 202(e) requires Item 201(a) market information for securities

other than common equity where there is an established trading market for those securities, proposed Item

601(b)(4)(vi) did not include Item 202(e).

181

See letters from Ball Corporation (“Ball”), CCMC, CII, Cravath, Davis Polk, Fenwick, Financial Executives,

Reed Smith, SIFMA, Soc. For Corp Gov., and Sullivan.

182

See, e.g., letters from Davis Polk, Fenwick, Society for Corp. Gov., and Sullivan. One commenter indicated

that without the option to incorporate by reference, preparation of new exhibits with multiple classes of

registered debt securities would exceed the associated 0.5 hour paperwork burden estimated in the Proposing

Release because of the time needed to prepare the disclosure and have it reviewed by outside counsel. See letter

from Davis Polk.

183

See letter from SIFMA.

184

Id.

because, in their view, the information required by new Item 601(b)(4)(vi) would be duplicative

of information already readily available to investors on EDGAR. 185

We are adopting amendments to Item 601(b)(4) as proposed. Although the information

required by this item will necessarily overlap with disclosure that may already be found in a

registrant’s publicly available registration statements, we think that providing all of this

information in one location is a better alternative for investors than requiring them to search for

and piece together the information they need from multiple documents that may span many

years. By virtue of new 601(b)(4)(vi), investors will be able to easily locate an updated

description of their rights as security holders by referring to the registrant’s most recent annual

report. We believe this will facilitate investors’ access to information without imposing

significant additional costs on registrants, particularly given the registrant’s ability to incorporate

the information by reference 186 and the existing requirement to hyperlink exhibits that are

incorporated by reference. 187

We note that these amendments do not change existing disclosure obligations under

Form 8-K and Schedule 14A, which require registrants to disclose certain modifications to the

rights of their security holders and amendments to their articles of incorporation or bylaws. 188

185

See letters from Ball, Cravath, and Financial Executives (noting obligations under Form 8-K and Schedule

14A). See also Proposing Release, supra note 5 at Section II.E.1. at nn. 180 and 181.

186

See Instruction 3 to new Item 601(b)(4)(vi).

187

See Item 601(a)(2) of Regulation S-K.

188

Item 3.03 of Form 8-K requires disclosure of material modifications to rights of security holders while

Item 5.03 requires disclosure of amendments to the articles of incorporation or bylaws for amendments not

disclosed in a proxy or information statement. Item 5.03 of Form 8-K also requires disclosure of changes in

fiscal year other than by means of a submission to a vote of security holders through the solicitation of proxies

(or otherwise) or an amendment to the articles of incorporation or bylaws.

Item 12 of Schedule 14A requires disclosure if action is to be taken regarding the modification of any class of

securities of the registrant, or the issuance or authorization for issuance of securities of the registrant in

Under new Item 601(b)(4)(vi), any modifications and amendments during a fiscal year should

also be reflected in the Item 202 disclosure provided in an exhibit to the registrant’s annual

report for such year. 189

b. Additional Information Omitted From Exhibits (Item 601 and

Investment Company Forms) 190

i. Schedules and Attachments to Exhibits

Under existing rules in Item 601 of Regulation S-K, registrants generally must file

complete copies of any required exhibits. Very often, these exhibits include a number of

schedules, appendices, and other similar attachments which can be quite lengthy but not

necessarily material to investors. Except for paragraph (b)(2) of Item 601, 191 which applies only

to material plans of acquisition, reorganization, arrangement, liquidation, or succession,

registrants must file every required exhibit under Item 601 in its entirety, irrespective of the

materiality of particular information in the exhibits. Because the information in certain

schedules or similar attachments to the exhibits may not be material to investors, a uniform filing

requirement for this information is not commensurate with the corresponding costs and burden

exchange for outstanding securities. Section (b) of Item 12 requires disclosure of any material differences

between the outstanding securities and the modified or new securities in respect to any of the matters

concerning which information would be required in the description of the securities in Item 202 of Regulation

S-K. Item 19 of Schedule 14A requires disclosure of amendments to the registrant’s charter, bylaws, or other

documents.

189

Over the course of a given fiscal year, it is possible that a registrant may make various non-material changes to

the rights and privileges of its securities that do not require separate disclosure on Form 8-K. However, if any

changes are made, whether material or non-material, new Item 601(b)(4)(vi) requires a registrant to update the

description of securities in the exhibit filed with its Form 10-K.

190

See supra at Section II.A.2. for a discussion of our amendment to the exhibit requirements in Item 601(b)(10)

pertaining to material contracts.

191

Item 601(b)(2) states that registrants shall not file schedules or similar attachments to material plans of

acquisition, reorganization, arrangement, liquidation, or succession unless they contain information material to

an investment decision and unless that information is not otherwise disclosed in the agreement or the disclosure

document.

imposed on registrants, particularly when the schedules, appendices, and other attachments

contain proprietary or otherwise sensitive information.

Consequently, the Commission proposed Item 601(a)(5) to expand the existing

accommodation in Item 601(b)(2) to include all exhibits filed under Item 601. Similar to current

Item 601(b)(2), proposed Item 601(a)(5) would permit registrants to omit entire schedules and

similar attachments to required exhibits, provided: (i) they did not contain material information

and (ii) were not otherwise disclosed in the exhibit or the disclosure document. Just as with

Item 601(b)(2), proposed Item 601(a)(5) was qualified by the requirement that the filed exhibit

must contain a list briefly identifying the contents of any omitted schedules and attachments. 192

The Commission also requested comment on whether it should apply the proposed amendments

to forms that contain their exhibit requirements in the form and do not separately reference Item

601 of Regulation S-K. The Commission similarly requested comment on whether it should

amend the investment company rules or forms to permit investment companies to omit entire

schedules and attachments to required exhibits on similar terms.

Commenters generally supported the proposal, with several noting the excessive burden

on registrants under the current rules without a corresponding benefit to investors. 193 One

192

See proposed Item 601(a)(5) of Regulation S-K. Unlike the current version of Item 601(b)(2), proposed Item

601(a)(5) would not require registrants to include with their list of omitted schedules an explicit agreement to

furnish a supplemental copy of any omitted schedule to the Commission upon request. Nonetheless, registrants

may be required to provide a copy of any omitted schedule to the Commission staff upon request. Securities

Act Rule 418 [17 CFR 230.418] states that the Commission or its staff may, where it is deemed appropriate,

request supplemental information concerning the registrant or a registration statement, among other things.

Exchange Act Rule 12b-4 [17 CFR 240.12b-4] similarly indicates that the Commission or its staff may, where it

is deemed appropriate, request supplemental information concerning the registrant, a registration statement, and

a periodic or other report filed under the Exchange Act.

193

See letters from Business Roundtable, CCMC, Cravath, Davis Polk, FedEx, Fenwick, Financial Executives,

Grumman, PNC, SIFMA, Society for Corp. Gov., Sullivan, and UnitedHealth.

commenter stated that the rationale for the proposed amendments to Item 601 of Regulation S-K

was applicable to other forms, 194 while another favored expanding the scope of the proposal

specifically to include rules and forms under the Investment Company Act. 195 Another

commenter stated that the required list identifying any omitted schedules or attachments was

unnecessary if a comparable list already exists in the exhibit. 196

We are adopting new Item 601(a)(5) as proposed. When the Commission first adopted

Item 601(b)(2) in 1980, it noted that many of the schedules then received by the staff were “not

material for investor information or protection and are unnecessary for Commission review

purposes.” 197 The same reasoning provides the basis for expanding the accommodation in Item

601(b)(2) to other exhibits filed pursuant to Item 601. For similar reasons, we are adding

comparable provisions to the exhibit requirements of Item 1016 of Regulation M-A, 198 our

investment company registration forms, and Form N-CSR. 199 As discussed, each exhibit that

includes omitted schedules or other attachments in reliance on these new provisions must contain

a list briefly identifying the contents of each such schedule or attachment, which is a requirement

that mirrors the language in Item 601(b)(2). However, in response to one commenter’s

suggestion, we are clarifying that the amendments do not require that registrants prepare a

194

See letter from Society for Corp. Gov.

195

See letter from ICI.

196

See letter from Cravath.

197

Amendments Regarding Exhibit Requirements, Release No. 33-6230 (Aug. 27, 1980) [45 FR 58822 (Sept. 5,

1980)], at 5.

198

See new Instruction 1 to Item 1016.

199

See new Instruction 2 to Item 28 of Form N-1A; new Instruction 4 to Item 25.2 of Form N-2; new Instruction 3

to Item 29(b) of Form N-3; new Instruction 3 to Item 24(b) of Form N-4; new Instruction 1 of Instructions as to

Exhibits of Form N-5; new Instruction 1 to Item 26 of Form N-6; new Instruction 1 to Item 16 of Form N-14;

new Additional Instruction 1 to the Instructions as to Exhibits of Form S-6; new Instruction 1 to IX. Exhibits of

Form N-8B-2; and new Instruction 2 to Item 13 of Form N-CSR.

separate list if that information is already included within the exhibit in a manner that conveys

the subject matter of the omitted schedules and attachments.

ii. Personally Identifiable Information 200

The Commission generally does not publish or make available information that “would

constitute a clearly unwarranted invasion of personal privacy.” 201 Exhibits filed pursuant to Item

601 may include sensitive personally identifiable information, such as bank account numbers,

social security numbers, home addresses, and similar information (“PII”).

As a matter of practice, the staff generally does not object where a registrant omits PII

from exhibits without also submitting a confidential treatment request under Rule 406 or Rule

24b-2. To codify this current staff practice, the Commission proposed new Item 601(a)(6) to

allow registrants to omit PII from their required Item 601 exhibits without submitting a

confidential treatment request for the information. In proposing this amendment, the

Commission also anticipated the added benefit of better safeguarding PII by limiting its

dissemination. In the Proposing Release, the Commission asked whether similar amendments

should be made to forms that contain their exhibit requirements in the form and do not separately

reference Item 601 of Regulation S-K, as well as investment company forms.

Several commenters supported the proposed amendment to Item 601, and no commenters

opposed. 202 In addition, one commenter indicated that the same rationale applied to other

200

See supra at Section II.A.2. for a discussion of our amendments to the exhibit requirements in Item 601(b)(10)

pertaining to material contracts.

201

17 CFR 200.80(b)(6) (exempting personnel and medical files and similar files the disclosure of which would

constitute a clearly unwarranted invasion of personal privacy).

202

See, e.g., letters from American Fuel, CCMC, Cravath, Davis Polk, FedEx, Grumman, ICI, PNC, and Society

for Corp. Gov.

forms 203 and two other commenters specifically recommended that a similar accommodation be

extended to investment companies. 204

We are adopting new Item 601(a)(6) as proposed. For the same policy reasons as

discussed above, we are also adding comparable provisions to the exhibit requirements of Item

1016 of Regulation M-A, 205 our investment company registration forms, and Form N-CSR. 206

Under the amendments, registrants may redact information if disclosure of such information

would constitute a clearly unwarranted invasion of personal privacy. Registrants who choose to

avail themselves of this accommodation may provide their exhibit with appropriate redactions

and need not include an analysis supporting the redactions at the time of filing.

c. Material Contracts (Item 601(b)(10)(i))

Item 601(b)(10)(i) requires registrants to file every material contract not made in the

ordinary course of business, provided that one of two tests is met: (i) the contract must be

performed in whole or in part at or after the filing of the registration statement or report, or (ii)

the contract was entered into not more than two years before that filing. 207 The first test captures

203

See supra note 194.

204

See letters from ICI and Society for Corp. Gov.

205

See new Instruction 2 to Item 1016.

206

See new Instruction 3 to Item 28 of Form N-1A; new Instruction 5 to Item 25.2 of Form N-2; new Instruction 4

to Item 29(b) of Form N-3; new Instruction 4 to Item 24(b) of Form N-4; new Instruction 2 of Instructions as to

Exhibits of Form N-5; new Instruction 2 to Item 26 of Form N-6; new Instruction 2 to Item 16 of Form N-14,

new Additional Instruction 2 to the Instructions as to Exhibits of Form S-6; new Instruction 2 to IX. Exhibits of

Form N-8B-2; and new Instruction 3 to Item 13 of Form N-CSR.

207

Item 601(b)(10)(i) of Regulation S-K [17 CFR 229.601(b)(10)(i)].

contracts that have not been fully performed prior to the filing date. The second test—the twoyear look back—captures material contracts that were fully performed before the filing date. 208

The Commission proposed amendments to Item 601(b)(10)(i) that would limit the twoyear look back test to “newly reporting registrants,” as that term was defined in the proposed

revision to Instruction 1 of Item 601(b)(10). The proposal required registrants meeting this

definition to file material agreements for the two-year look back period. The proposed

amendments were intended to help ensure that investors receive access to agreements containing

material information, including agreements entered into by newly reporting registrants up to two

years prior to the commencement of their reporting obligations. Registrants with established

reporting histories, however, would no longer be subject to the two-year look back requirement

because investors would continue to have access to any material agreements previously filed on

EDGAR. As such, the amendments were proposed to streamline reporting obligations while

maintaining investor protections.

A number of commenters supported the proposed amendments, and no commenters

opposed them. 209 Accordingly, we are adopting amendments to Item 601(b)(10)(i) and

Instruction 1 of Item 601(b)(10) as proposed. We believe restricting the two-year look back to

newly-reporting registrants is consistent with the original objective of the disclosure requirement

and will help to eliminate unnecessary disclosures without impairing investor information or

208

The two-year look back is included in Schedule A of the Securities Act [15 U.S.C. 77aa(24)] and serves as a

“cutoff period” so registrants would not have to file material contracts that may have been fully performed

many years prior to registration. When Section 12(g) was added to the Exchange Act in 1964, the Commission

was authorized to issue rules requiring such material contracts to be filed with Exchange Act reports. See

Section 12(b)(1)(I) of the Exchange Act; H.R. Rep. No. 88-1418, 83rd Cong., 2nd Sess., 1964. Prior to the

enactment of Section 12(g), the Exchange Act reporting requirements were applicable only to listed companies.

209

See letters from CCMC, Cravath, Fenwick, SIFMA, and Sullivan.

protection. Accordingly, under the revised item all registrants are required to file as an exhibit

every contract not made in the ordinary course of business that is material to the registrant and is

to be performed in whole or in part at or after the filing of the registration statement or report. In

addition, newly reporting registrants are also required to file every contract that was not made in

the ordinary course of business that is material to the registrant and that was entered into not

more than two years before. 210

As proposed, we are adopting a definition of “newly reporting registrant” that includes:

•

registrants that are not subject to the reporting requirements of Section 13(a) or

15(d) of the Exchange Act at the time of filing;

•

registrants that have not filed an annual report since the revival of a previously

suspended reporting obligation; 211 and

•

any registrant that (a) was a shell company, other than a business combination

related shell company, as defined in Rule 12b-2 under the Exchange Act (17 CFR

240.12b-2), immediately before completing a transaction that has the effect of

causing it to cease being a shell company and (b) has not filed a registration

statement or Form 8-K as required by Items 2.01 and 5.06 of that form, since the

210

Item 601(b)(10)(i), as revised.

211

In the case of a registrant with a suspended reporting obligation that, less than two years later, is revived, the

requirement to file material agreements for the two-year look back period may be satisfied by incorporating by

reference and hyperlinking to agreements previously filed on EDGAR and filing any material agreements

entered into while the registrant was not reporting. See Exhibit Hyperlinks Adopting Release, supra note 10, at

14135.

completion of such transaction (or, in the case of foreign private issuers, has not

filed a Form 20-F since the completion of the transaction). 212

d. Application to Foreign Private Issuers

The Commission previously adopted amendments to conform the exhibit requirements in

Form 20-F to the requirements in Item 601. 213 To maintain a consistent approach to the exhibit

requirements for domestic registrants and foreign private issuers, the Commission proposed

amendments to require foreign private issuers to provide information in exhibit filings

comparable to the information provided by domestic registrants under the proposed amendments

to Item 601. Specifically, the Commission proposed to amend the “Instructions to Exhibits” in

Form 20-F to include revised language comparable to Items 601(a)(5), Item 601(a)(6), Item

601(b)(4)(vi), Item 601(b)(10)(i), Item 601(b)(10)(iv), and Item 601(b)(21) of Regulation S-K.

In the Proposing Release, the Commission asked whether it should amend the exhibit

requirements of Form 20-F so that they are consistent with the requirements under Item 601. A

few commenters supported the proposal, 214 and no commenters opposed.

Accordingly, and for the reasons noted in the Proposing Release, we are adopting

amendments to Form 20-F to align the exhibit requirements of the form with similar amendments

we are adopting today that are applicable to domestic registrants.

In each case, we believe that

212

The definition of “newly reporting registrant” does not include reporting companies completing merger

transactions with business combination-related shell companies.

213

See International Disclosure Standards Release, Release No. 33-7637 (Feb. 2, 1999) [64 FR 6261 (Feb. 9,

1999)] (expressing the Commission’s intention “to conform the exhibit requirements for Form 20 F with the

exhibit requirements for registration statements filed by U.S. issuers under the Exchange Act” and stating that

all of the Form 20-F exhibit requirements “are required for domestic issuers filing a registration statement on

Form 10 or an annual report on Form 10-K”).

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214

See letters from Cravath and Sullivan.

the justifications for the proposed amendments to Item 601 are equally applicable to Form 20F. 215

6. Incorporation by Reference 216

To reduce duplicative disclosure, registrants have been permitted to incorporate

previously filed information into their filings since the enactment of the Securities Act and the

Exchange Act. 217 Initially, incorporation by reference was limited to exhibits, but over time the

Commission has increasingly permitted incorporation by reference in other contexts. The rules

and instructions governing incorporation by reference are now found in a variety of regulations,

including Regulation S-K, Regulation C, Regulation 12B, and many of the Commission’s forms.

Consistent with our mandate under the FAST Act, the Commission proposed

amendments to revise Item 10(d), Rule 411, Rule 12b-23, and a number of our forms to simplify

and modernize these rules while still providing all material information. The Commission also

proposed to rescind Rule 12b-32. In addition, to provide for a consistent set of incorporation by

reference rules for investment companies and investment advisers, the Commission proposed

parallel amendments to Rule 0-4 and a number of forms under the Investment Company Act,

certain conforming amendments to Rule 0-6 under the Investment Advisers Act, and the

215

The Commission did not propose similar changes to the exhibit requirements of Form 40-F. Form 40-F

generally permits Canadian issuers to use Canadian disclosure documents to satisfy the Commission’s

registration and disclosure requirements. As a result, the exhibit requirements in Form 40-F are largely in

accordance with Canadian disclosure standards.

216

For a discussion of our amendments that impact the ability to incorporate by reference or cross-reference

information into the financial statements, see Section II.A.3 supra.

217

See Federal Trade Commission Release No. 33-47 (Sept. 22, 1933) (allowing for incorporation by reference of

exhibits filed with registration statements); Release No. 34-51 (Nov. 27, 1934) (allowing for incorporation by

reference of exhibits filed with the Commission under the Exchange Act or filed with an exchange).

rescission of Rules 8b-23, 8b-24, and 8b-32 under the Investment Company Act (certain

provisions of which would be consolidated into the amendments to Rule 0-4).

The proposed amendments were intended to streamline the requirements associated with

incorporation by reference and facilitate investor access to incorporated documents through the

use of hyperlinks. The proposed amendments were also consistent with the Commission’s

longstanding acceptance of incorporation by reference in the interests of encouraging registrants

to eliminate duplicative disclosures.

a. Item 10(d)

Item 10 of Regulation S-K contains general requirements on the application of

Regulation S-K and Item 10(d) focuses on incorporation by reference. 218 Item 10(d) states that

where rules, regulations, or instructions to the forms permit incorporation by reference, a

document may be incorporated by reference to the specific document and to the prior filing or

submission in which that document was physically filed or submitted. Item 10(d) generally

prevents registrants from incorporating by reference a portion of a document that itself also

incorporates pertinent information by reference. 219 It also prohibits incorporating documents by

reference if they have been on file with the Commission for more than five years and do not fall

within one of the exceptions provided in the rule. 220

218

17 CFR 229.10(d).

219

Indirect incorporation by reference is permitted when the registrant is expressly required to incorporate a

document by reference and, in the case of asset-backed issuers, under Item 1100(c) of Regulation AB [17 CFR

229.1100(c)]. See Item 10(d).

220

See Proposing Release, supra note 5, Section II.F.1.a. at 51007-8.

As discussed in the Proposing Release, the Commission proposed to eliminate the fiveyear limit in Item 10(d). 221 Given the broad exceptions to the rule and the current practice of

retaining documents electronically, we believe the five-year limit now serves little purpose and

may lead to confusion about which documents may be incorporated by reference. 222 Under the

proposed amendments, a registrant would not be permitted to incorporate by reference to a

destroyed document because it would render its disclosure incomplete, unclear, or confusing. 223

Several commenters supported the proposal, and no commenters opposed. 224 Therefore,

and for the reasons noted in the Proposing Release, we are adopting these amendments as

proposed.

b. Securities Act Rule 411, Exchange Act Rule 12b-23 and Rule 12b-32,

and Related Rules under the Investment Company Act and

Investment Advisers Act

Rule 12b-23 governs incorporation by reference for registration statements filed pursuant

to Sections 12(b) and 12(g) of the Exchange Act and reports filed pursuant to Sections 13 and

15(d) of the Exchange Act. 225 Rule 12b-23 broadly allows for incorporation by reference in

answer, or partial answer, to any item of an Exchange Act registration statement or report.

221

Id. Without the provisions relating to the five-year limit, little substance remains in Item 10(d). Therefore, to

simplify the requirements, the Commission proposed to move the remaining provision in Item 10(d) prohibiting

indirect incorporation by reference into the other rules governing incorporation by reference.

222

We believe that it is very unlikely that a registrant would attempt to incorporate by reference to a document that

was filed with the Commission but is no longer available because it was not submitted on EDGAR and has been

destroyed pursuant to the Records Control Schedule. For example, the Commission retains Securities Act and

Exchange Act registration statements, reports, and proxy materials that have not been filed on EDGAR for 30

years. See Records Control Schedule [17 CFR 200.80f].

223

See, e.g., proposed Rule 411(e) and Rule 12b-23(e).

224

See letters from Chamber, Cravath, Fenwick, Financial Executives, Nasdaq, Society for Corp. Gov., Sullivan,

UnitedHealth, and ICI.

225

See Rule 12b-1 [17 CFR 240.12b-1] (setting forth the scope of Regulation 12B).

Rule 12b-32 governs incorporation by reference for exhibits filed with registration statements

and reports. Rule 411 governs incorporation by reference for registration statements filed under

the Securities Act, including exhibits thereto. 226 Rule 411 restricts incorporation by reference in

a prospectus unless otherwise provided in the appropriate form but allows for incorporation by

reference similar to Rule 12b-23 for the non-prospectus portions of a registration statement. 227

Rule 0-4 provides general incorporation by reference rules for investment company

registration statements, applications, and reports filed with the Commission. Rule 8b-23

(additional incorporation by reference rules for registration statements and reports), Rule 8b-24

(rules regarding summaries or outlines of documents), and Rule 8b-32 (incorporation of exhibits

by reference) provide additional incorporation by reference rules for investment company

registration statements and reports. Rule 0-6 governs incorporation by reference for investment

adviser applications for Commission orders under the Investment Advisers Act other than

applications for registration as an investment adviser.

i. Exhibit and Other Filing Requirements

Rule 12b-23(a)(3) under the Exchange Act requires that copies of any information

incorporated by reference must be filed as an exhibit, with limited exceptions. 228 Rule 411(b)(4)

226

See Rule 400 [17 CFR 230.400] (setting forth the scope of Regulation C).

227

See Integrated Disclosure System Adopting Release, supra note 103; Proposed Revision of Regulation C,

Registration and Regulation 12B, Registration and Reporting, Release No. 33-6333 (Aug. 6, 1981) [46 FR

41971 (Aug. 18, 1981)] (“While it is generally proper to prevent prospectuses from incorporating exhibits

which are not delivered, the Commission does not believe it is necessary to impose such limits in connection

with Exchange Act reports which are not actually delivered in registered public offerings of securities.”).

228

See Rule 12b-23(a)(3) [17 CFR 240.12b-23(a)(3)] (providing exceptions for a proxy or information statement

incorporated by reference in response to Part III of Form 10-K, a form of prospectus filed pursuant to Rule

424(b) [17 CFR 230.424(b)] incorporated by reference in response to Item 1 of Form 8-A, and information filed

on Form 8-K). This provision was introduced in 1971 so that then-existing microfiche technology for the public

dissemination of reports and documents filed with the Commission could function properly. See Registration

and Reporting and Form for Annual Reports of Employee Stock Purchase Plans, Release No. 34-9048 (Jan. 4,

under the Securities Act, which is more limited and pertains to non-prospectus information that

is incorporated by reference, requires that the incorporated information be filed as an exhibit if it

does not comply with the five-year limit in Item 10(d). Rule 8b-23 generally requires investment

company registrants to file with a registration statement or report a copy of any registration

statement, report, or prospectus from which information is incorporated by reference, except in

cases where the registration statement, report, or prospectus is filed electronically. 229

The Commission proposed to eliminate these requirements to make the rules for

incorporation by reference more consistent, and to apply consistent requirements for

incorporation by reference under the Investment Company Act and Investment Advisers Act.

We no longer believe that these requirements are necessary, as most Exchange Act filings are

1971) [36 FR 4483 (Mar. 6, 1971)] (“In order that the microfiche system for the public dissemination of reports

and documents filed with [the] Commission may work, the amended rule requires that copies of information or

financial statements incorporated by reference, or copies of the pertinent pages of any document containing

such information or statement, be filed with the registration statement or report in which it is so incorporated.”).

229

See Rule 8b-23(a) [17 CFR 270.8b-23(a)]. In addition, Rule 0-4 and Rule 0-6 permit the incorporation by

reference as an exhibit in any registration statement, application or report (in the case of Rule 0-4) or in any

application (in the case of Rule 0-6) any document or part thereof previously or concurrently filed with the

Commission. Both rules also permit the incorporation by reference of financial statements (or parts thereof),

although Rule 0-6 specifies that the financial statements (or parts thereof) that are incorporated are to be filed as

exhibits. For consistent rules under both Acts, the Commission proposed amendments to Rule 0-4 to specify

that financial statements may be filed as exhibits to investment company applications, as Rule 0-6 currently

specifies with respect to applications filed under the Investment Advisers Act.

Furthermore, if the number of copies of any document from which information is incorporated by reference is

less than the number of copies required to be filed with a registration statement, application, or report, Rule 0-4

and Rule 0-6 require an investment company or applicant, respectively, to file as many additional copies of the

document incorporated by reference as may be necessary to meet the requirements of the registration statement,

application, or report. See Rule 0-4(a), Rule 0-6(a). The Commission proposed to eliminate the requirement to

file additional copies from Rule 0-4 because most investment company filings are available on EDGAR.

Although investment adviser applications are filed in paper format, in the staff’s experience, those applications

rarely incorporate by reference information as permitted by Rule 0-6. For our regulatory purposes, we do not

believe that the number of copies specified in current Rule 0-6 is needed. Thus, for the foregoing reasons and

for consistency purposes, the Commission similarly proposed to eliminate the requirement to file additional

copies from Rule 0-6.

made publicly available on EDGAR, and as we generally do not have similar exhibit filing

requirements for Securities Act registration statements. 230

The Commission also proposed to eliminate the corresponding exhibit requirement in

Item 601(b)(99)(ii) of Regulation S-K, which was adopted in connection with Rule 12b-23(a)

and Rule 411(b)(4). 231 In addition to Item 601(b)(99), other provisions in Item 601 require

documents to be filed as exhibits only when they are incorporated by reference into a filing. For

example, Item 601(b)(13) requires a registrant to file an annual report to security holders,

Form 10-Q, or quarterly report to security holders as an exhibit when the registrant incorporates

all or a portion of such a report by reference. Although annual reports to security holders are

readily available to investors and the staff outside of EDGAR, we believe it is appropriate to

retain the exhibit requirement in these circumstances because some registrants satisfy their

disclosure requirements by incorporating a significant amount of disclosure from these reports.

The Commission did not propose to eliminate these other exhibit filing requirements in Item 601.

Nonetheless, the Commission did propose to eliminate the requirement in Item 601(b)(13) to file

a Form 10-Q as an exhibit when it is specifically incorporated by reference into a prospectus.

This provision will no longer be necessary because, under the rules we are adopting, a registrant

will be required to include a hyperlink to any information that is incorporated by reference to a

document available on EDGAR. 232

230

Investment advisers register and submit some filings to the Commission electronically through the Investment

Adviser Registration Depository (“IARD”).

231

See Integrated Disclosure System Adopting Release, supra note 103 (adopting Item 601(b)(28)(ii), which is

now found in Item 601(b)(99)(ii)) and Proposed Revision of Regulation S-K and Proposed Rescission of Guides

for the Preparation and Filing of Registration Statements and Reports, Release No. 33-6332 (Aug. 6, 1981) [46

FR 41925 (Aug. 18, 1981)].

232

See infra Section II.B.6.b.ii.

Several commenters supported the proposal and no commenters opposed it. 233 Therefore,

and for the reasons noted in the Proposing Release, we are adopting the amendments, as

proposed.

ii. Hyperlinks

The Commission proposed to facilitate greater investor access to disclosure by amending

Rule 411, Rule 12b-23, and Rule 0-4 to require hyperlinks to information that is incorporated by

reference if that information is available on EDGAR. 234 The Commission recently adopted rules

requiring hyperlinks to most exhibits filed pursuant to Item 601, Form F-10, 235 or Form 20-F. 236

To accommodate hyperlinks, those filings must be made in HTML format. 237 Accordingly, the

Commission proposed to expand the requirement to file documents in HTML to include filings

that are subject to the hyperlinking requirements proposed in Rule 411, Rule 12b-23, and Rule 04.

Commenters generally supported the proposals, 238 although some thought it would be

helpful for the Commission to provide further clarification on some aspects of the rule. 239 One

commenter suggested that the Commission make clear that incorporating only a portion of a

233

See letters from American Fuel, CAQ, Chamber, Cravath, Davis Polk, E&Y, Fenwick, Piercy Bowler, PNC,

Reed Smith, Society for Corp. Gov., Sullivan, and ICI.

234

The Commission did not propose similar amendments to Rule 0-6 because applications under the Investment

Advisers Act filed pursuant to that rule are not required to be filed electronically. In addition, applications filed

pursuant to Rule 0-6 may incorporate information that may not be filed on EDGAR.

235

17 CFR 239.40.

236

See Exhibit Hyperlinks Adopting Release, supra note 10, at 14130.

237

See id. at 14130. The rules adopted by the Commission at that time did not generally apply to investment

companies. However, as discussed below, we are adopting similar requirements to

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