Securities and Exchange Commission rule and form changes require registrants to include active hyperlinks to exhibits in the exhibit index and to use new cover pages for several periodic reports and registration statements. In addition, the standard settlement cycle for most broker-dealer transactions will change from T+3 to T+2.

Mandatory exhibit hyperlinks and HTML format rules

The Securities and Exchange Commission has adopted final rules requiring registrants to include an active hyperlink to each exhibit listed in the exhibit index of certain registration statements and periodic reports. Under the current rules, to view an exhibit incorporated by reference it is necessary to identify which filing contains the exhibit and then manually locate such filing. Under the new rules, which take effect on September 1, 2017, a hyperlink in the exhibit index will take the viewer directly to the filing from which the exhibit is incorporated by reference. The new rules will apply to nearly all registration statements and reports subject to Item 601 of Regulation S-K, namely Forms S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, SF-1 and SF-3 under the Securities Act of 1933 and Forms 10, 10-K, 10-Q, 8-K and 10-D under the Securities Exchange Act of 1934. All such filings also must now be submitted in HTML format, as ASCII format cannot support functional hyperlinks.

Certain exceptions to the final rules should limit the burden placed upon registrants. A hyperlink will not be required, for example, where an exhibit incorporated by reference was not originally filed in electronic format. While the final rules do not require paper submissions to be refiled in electronic format, the registrant is required to identify exhibits that were filed in paper by providing a notation in the exhibit index. The final rules also will not apply to Forms ABS-EE and 6-K, other forms under the multi-jurisdictional disclosure system or to XBRL exhibits. In addition, a registrant qualifying as a “smaller reporting company” or a “non-accelerated filer” that submits filings in ASCII format has until September 1, 2018 to comply with the new rules. Notwithstanding these exceptions, the SEC estimates that hyperlinking to exhibits will require one to four additional hours of preparation, depending on the particular filing.

During the rulemaking process, commenters expressed concern with the procedures required to correct an errant hyperlink and the impact of inadvertently including an errant hyperlink in a registrant’s filing. In response, the final rules require that any nonfunctioning hyperlinks (i) in an ineffective registration statement be corrected in a pre-effective amendment, and (ii) in an effective registration statement or periodic report be corrected in the next periodic report requiring an exhibit under Item 601 of Regulation S-K. Further, an errant hyperlink alone will neither deem the filing materially deficient nor impact whether a registrant may use a short-form registration statement.

Revisions to cover pages of Exchange Act and other forms

For Forms 10-Q, 8-K, and certain other filings made after April 12, 2017, the cover pages to applicable registration statements and periodic reporting forms have been revised to identify emerging growth company (EGC) filers. Although the changes are applicable to EGCs, all filers are required to use the new form cover pages. Forms S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, 10, 8-K, 10-Q, 10-K, 20-F, 40-F and C now have cover pages that include two additional checkboxes: one for the filer to indicate whether it is an EGC and another to indicate whether the EGC has opted not to utilize the extended transition period permitted for EGCs to comply with new accounting standards. The Division of Corporate Finance previously issued guidance that a filer needs to indicate whether it is an EGC on the cover page of its prospectus, but the amended cover pages harmonize that practice among all EGC filers and extend the requirement to a wide range of forms. The new cover pages are available on the SEC’s Forms List located here.

Adoption of the T+2 settlement cycle

Beginning on September 5, 2017, the standard settlement cycle for most broker-dealer securities transactions will shorten from three business days (known as T+3) to two business days (known as T+2). Under amended Rule 15c6-1(a) of the Securities Exchange Act, broker-dealers will be prohibited from effecting or entering into certain securities transactions that permit the delivery of securities and the tender of payment more than two—instead of three—business days from the transaction date, unless the parties specifically agree to such an extended period of time at the time of the transaction. The change to the standard settlement cycle will apply to stocks, bonds, exchange-traded funds, certain mutual funds, municipal securities and limited partnerships that trade on exchanges and will have several practical implications for public companies.

Among those implications are changes to the ex-dividend date and the time period allotted to deliver a final prospectus for certain registered securities offerings. The ex-dividend date, which is set by securities exchange rules and is based on the standard settlement cycle, establishes the date before which an investor must purchase a company’s stock to be eligible to receive its previously declared dividend. NYSE and Nasdaq have amended their rules to be consistent with T+2, changing the ex-dividend date from two business days to one business day prior to the record date. This change should especially be noted by companies who release the ex-dividend date with their record and payment date announcements to ensure the accurate ex-dividend date is communicated to the market. Additionally, public companies will need to operate under a tighter timeline when delivering a final prospectus for offerings that are not eligible for “access equals delivery” under Rule 172 of the Securities Act. Section 5(b)(2) of the Securities Act requires that a final prospectus be delivered contemporaneously with or prior to the delivery of securities. A shorter settlement cycle narrows the time allotted for delivering the final prospectus and reduces the margin for operational errors that may delay delivery.