In March, the Securities and Exchange Commission (“SEC”) adopted final rules to require the inclusion of active hyperlinks to each exhibit in a ling’s exhibit index. The final rules also require the use of Hyper Text Markup Language (“HTML”) formatting for all lings subject to the hyperlink rule. These amendments will affect all SEC reporting companies as well as those ling their first registration statement, and according to the SEC Acting Chairman Michael Piwowar, they are the “commonsense solution [that] will make life simpler for a lot of people.”
Currently, to access an exhibit that is incorporated by reference into a company’s Securities Act registration statement or Exchange Act report, an investor or any other user must search through that company’s previous SEC lings to locate it. On August 31, 2016, the SEC proposed amendments requiring reporting companies to include hyperlinks to each exhibit in an exhibit index. Since the text-based American Standard Code for Information Interchange (“ASCII”) format cannot support functional hyperlinks, the SEC also proposed to require public companies to submit their lings in HTML formatting. The proposed rules were open for public comment for forty-five days, and according to the SEC, the comments were overwhelmingly in support of the proposed rules.
The primary purposes of these final rules are to modernize financial disclosures and to facilitate easier access to exhibits for investors and other users of the information. To further advance these objectives, the final rules will apply to most registration statements, including those led on Forms S-1, S-3, S-4, S-8 and S-11 as well as any Exchange Act reports required to include exhibits under Item 601 of Regulation S-K such as Forms 10, 10-K, 10-Q, 8-K and 10-D. In addition, Form F-10 and Form 20-F must also contain hyperlinks for their exhibits. The final rules provide an exemption for exhibits led in paper pursuant to the hardship exemptions under Rules 201 and 202. It is important to note that EDGAR does not accept documents that include hyperlinks to external websites.
The recent amendment also codifies a new instruction to Rule 105 of Regulation S-T, requiring companies to correct mistaken or nonfunctioning hyperlinks. For registration statements that are not yet effective, the correction must be included in a pre-effective amendment to the registration statement. If the inaccurate or nonfunctioning hyperlink appears in an effective registration statement or an Exchange Act report, then the next Exchange Act periodic report that includes an Item 601 exhibit must contain the correct, functioning hyperlink. Under the final rules, a mistaken or nonfunctioning hyperlink will not render the filing materially deficient. In other words, inaccurate hyperlinks alone will not affect a company’s eligibility to use a short-form registration statement such as a Form S-3.
What to Do Now
The recently adopted final rules regarding hyperlinks will be effective on September 1, 2017, requiring year-end reporting companies to comply with the new rules when ling their Form 10-Qs for the quarter ending September 30, 2017. For smaller reporting companies and non-accelerated filers who submit lings in ASCII format, the final rules are not effective until September 1, 2018. However, the SEC encourages early compliance.