On August 8, 2019, the U.S. Securities and Exchange Commission (SEC) proposed amendments to the requirements related to the description of business, legal proceedings, and risk factors in SEC filings. These amendments are part of the SEC's ongoing efforts to modernize its disclosure requirements.
The SEC stated that these "proposed amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material."1
A more detailed description of the proposed amendments can be found below. The SEC is accepting public comments on the proposed rules within 60 days of their publication in the Federal Register, which can be submitted here.
For more information and/or if you would like to provide feedback for a comment letter that the firm intends to submit to the SEC, please reach out to your Wilson Sonsini contact.
What Are the Proposed Amendments?
The amendments proposed for Items 101 and 105 of Regulation S-K provide for a principles-based approach. In other words, given the variability across industries, geographies, and otherwise in the development of businesses and the risks associated with businesses, the SEC opted for amendments that provide the flexibility for a company to tailor its disclosures to the company's specific characteristics and circumstances. Conversely, the amendments proposed for Item 103 do not depend on the unique circumstances of a company; therefore, the SEC retained a prescriptive approach to this disclosure requirement.
The SEC acknowledged that a principles-based approach requires reliance on companies to make determinations on materiality and disclosures, potentially resulting in management teams misjudging what is or is not material. However, the SEC believes these risks will be offset by the commission's Division of Corporation Finance's disclosure reviews, accounting controls, and the antifraud provisions of the securities laws.
Item 101(a), General Development of the Business.
Item 101(c), Description of Business.
Item 103, Legal Proceedings.
Item 105, Risk Factors.
For more information on the SEC's proposed amendments or any related matter, please contact any member of the firm's capital markets practice.
Michael Nordtvedt, Allison Spinner, Jose Macias, Lisa Stimmell, and Courtney Mathes contributed to the preparation of this Client Alert.