At an open meeting this morning, the SEC voted to adopt new rule and form amendments requiring that the exhibit index in registration statements and reports contain hyperlinks to the exhibits listed and that these filings all be made in HTML format. (The SEC also voted to propose the use of Inline XBRL for financial statement information. See this PubCo post.) Not terribly controversial, which probably explains how any action was taken at all, given that there are now only two commissioners and they have diametrically opposed views on just about everything.
The exhibit hyperlink rules were adopted substantially as proposed at the end of August last year, with just one significant change, according to Corp Fin staff speaking at the meeting. (See this PubCo post.) Acting SEC Chair Michael Piwowar commented that the new rules are designed to “harness technology” to improve disclosure. The use of hyperlinks is expected to eliminate the cumbersome process of searching through years of filings to find exhibits, facilitating the review process.
More specifically, the amendments will require registrants that file registration statements and periodic and current reports that are subject to the Reg S-K Item 601 exhibit requirements (or that file on Forms F-10 or 20-F) to include an active link or hyperlink to each exhibit listed in the exhibit index of these filings, whether or not the exhibit is incorporated by reference. The only exceptions would be for the following:
- exhibits filed on paper under temporary or continuing hardship exemptions under Rules 201 or 202 of Reg S-T or under Rule 311 of Reg S-T;
- XBRL exhibits that are filed with the affected forms (because the XBRL exhibits are in unconverted code and not incorporated by reference into other filings);
- exhibits filed with Form ABS-EE; and
- exhibits incorporated by reference that were filed on paper prior to the time that electronic filing on EDGAR became mandatory and have not been refiled in electronic format.
For paper exhibits, Reg S-T requires that the letter “P” be placed next to the listed exhibit in the exhibit index of the electronic filing, together with various other designations, depending on the reason for the paper filing.
The amendments would apply to Forms S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, F-10, SF-1 and SF-3 under the Securities Act; and Forms 10, 10-K, 10-Q, 8-K, 10-D and 20-F under the Exchange Act. For periodic or current reports, the active hyperlink to each exhibit must be included when the report is filed. In a change from the proposal, the final rules require the active hyperlink to each exhibit in registration statements to be included in the initial filing and in each amendment (including each pre-effective amendment), as opposed to only in the version that becomes effective as originally proposed. The rationale for the change was that inclusion of hyperlinks at the early stages of registration would enhance review by potential investors when they are most engaged in the review process for purposes of making investment decisions.
In addition, because the ASCII format supports cross-references but not functional hyperlinks, to enable the inclusion of hyperlinks, the amendments will require registrants to submit these form and report filings in HTML format. The SEC noted that, for fiscal 2016, less than 2% of registrants filed these forms using the ASCII format. Schedules or forms that are not subject to the exhibit filing requirements under Item 601, such as proxy statements, or other documents included with a filing, such as exhibits, may continue to be filed in ASCII format.
Several commenters on the proposing release expressed concerns about correction of inaccurate or non-functioning exhibit hyperlinks. In response, the SEC added an instruction to Rule 105 of Reg S-T providing that, for a registration statement that is not effective, the registrant must correct the hyperlink by filing a pre-effective amendment. For an effective registration statement or an Exchange Act report, the registrant must correct the hyperlink in the next periodic report that requires, or includes, an exhibit pursuant to Item 601 (or in the case of a foreign private issuer, pursuant to Form 20-F or Form F-10). The SEC also provides comfort that an inaccurate exhibit hyperlink would not, by itself, render the filing materially deficient or affect a registrant’s eligibility to use short-form registration statements.
SideBar: The SEC also noted that EDGAR does not accept documents containing web addresses that hyperlink to external websites. Under Reg S-T, if “a filer includes an external hyperlink within a filed document, the information contained in the linked material will not be considered part of the document for determining compliance with reporting obligations, but the inclusion of the link will cause the filer to be subject to the civil liability and antifraud provisions of the federal securities laws with reference to the information contained in the linked material.”
To allow sufficient time for the transition, the effective date will be delayed for most issuers until September 1, 2017 and, for smaller reporting companies and non-accelerated filers that submit filings using the ASCII format, until September 1, 2018. (There is also a special phase-in exception for Form 10-D filings, as a result of the need for programming changes.)