On March 20, 2019, the SEC adopted rules (the Rules) to implement certain provisions of the FAST Act. The omnibus highway bill called “Fixing America’s Surface Transportation Act” or the “FAST Act,” was signed into law in December 2015. Among other things, the FAST Act required changes to Securities and Exchange Commission (SEC) Form 10-K and Regulation S-K under the Securities Act of 1933 (the 1933 Act) to modernize and simplify disclosure for public companies, investment advisers and investment companies. See our earlier legal alert for a description of the rule changes mandated by the FAST Act.
On April 8, 2016, Eversheds Sutherland submitted a letter in response to the SEC’s request for comment on the interim final rules the SEC adopted in connection with the FAST Act. The comment letter urged the SEC to expand certain provisions in the FAST Act to include Business Development Companies (BDCs) and Form N-2 registration statements used by BDCs. The comment letter argued BDCs should be permitted to incorporate information into Form N-2 registration statements by reference to periodic reports filed under the Securities Exchange Act of 1934 (the 1934 Act) to the same extent allowed for registrants eligible to use Form S-1 (which, as a result of the FAST Act, now permits backward and forward incorporation by reference in certain circumstances). Under the new Rules, the general instructions for Form N-2 will be revised to specifically state that, subject to certain procedures and limitations, “...in general, a Registrant may incorporate by reference, in response to any item of Form N-2 not required to be included in the prospectus, any information contained elsewhere in the registration statement or in other statements, applications, or reports filed with the [SEC].” This is consistent with the proposed offering reforms for BDCs.
The Rules also amended Regulation S-K to reduce the information related to material contracts that must be filed with the SEC, as follows:
- registrants will now be able to omit confidential information in material contracts and certain other exhibits without submitting a confidential treatment request, if the information is (i) not material, and (ii) would likely cause competitive harm to the registrant if publicly disclosed;
- only newly reporting registrants will be required to file material contracts that were entered within two years of the applicable registration statement or report; and
- registrants will not be required to file schedules or similar attachments to their material agreements if such attachments do not contain material information or were not otherwise disclosed. Registrants will be required to file with each exhibit a list briefly identifying the contents of the omitted schedules and attachments and would be required to furnish them upon request.
The Rules further amended Regulation S-K, among other items, to:
- permit registrants to exclude discussion of the earliest of three years in the Management’s Discussion and Analysis section of various filings if they have already included the discussion in a prior filing;
- permit registrants to exclude disclosure about a physical property owned by the registrant unless such property is material to the registrant;
- clarify disclosure about executive officers that does not need to be repeated in proxy or information statements if it is already included in Form 10-K;
- simplify the Section 16 reporting process by allowing registrants to rely on a review of Section 16 reports submitted on EDGAR instead of gathering reports furnished to the registrant and eliminate the requirement for insiders to furnish Section 16 reports to the company on paper; and
- update the requirements for compensation committee disclosure to exclude emerging growth companies because they are not required to include a Compensation Discussion and Analysis.
The Rules also amended various SEC forms and rules under the 1933 Act and the 1934 Act, as follows:
- on Forms 8-K, 10-Q, 10-K, 20-F and 40-F, registrants will now be required to disclose on the form cover page the national exchange or principal US market for their securities, the trading symbol, the title of each class of securities and will be required to tag all cover page data in Inline XBRL. The tagging requirement will not apply to BDCs;
- 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 the documents incorporated by reference; and
- 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.
The Rules will be effective 30 days after they are published in the Federal Register. The full text of the Rules can be found in the SEC’s adopting release at https://www.sec.gov/rules/final/2019/33-10618.pdf.