Review SEC Guidelines for Form 10-Q Disclosures. Previously, the SEC issued two disclosure guidelines affecting companies’ Form 10-Q disclosures: guidance on cybersecurity risks and exposures to European sovereign debt. Recently, public companies evaluated whether their businesses were materially affected by cybersecurity risks or exposure to European debt in connection with the preparation of Form 10-K. However, these issues should be reevaluated in connection with the Form 10-Q filing because they can affect a company’s disclosures in its Form 10-Q “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, as well as its notes to financial statements and disclosure controls and procedures. In addition, a financial company needs to review recently issued Disclosure Guidance: Topic No. 5. See “SEC News—SEC Issues Guidance on MD&A and Accounting Policy Disclosure of Smaller Financial Institutions.”
Use Correct Headings in Form 10-Q and Comply with Mine Safety Disclosure Rules. Similar to Form 10-K, Form 10-Q now includes a new Item 4 in Part II:
“Item 4. Mine Safety Disclosures. If applicable, provide a statement that the information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in exhibit 95 to the quarterly report.” Although the new mine safety disclosure applies only to a “registrant that is the operator, or that has a subsidiary that is an operator, of a coal or other mine” and may not apply to your company, check the table of contents of Form 10-Q to make sure that Item 4 of Part II states “Mine Safety Disclosures,” not “(Removed and Reserved).”
Evaluate Whether New Risk Factor Disclosure Is Necessary. Companies need to review risk factors included in Form 10-K and evaluate whether any material changes to previously disclosed risk factors are necessary due to new developments in the company’s business or otherwise. Companies should also evaluate whether they face new material risks that did not exist at the time of filing Form 10-K and that should be disclosed in Form 10-Q (smaller reporting companies are not required to provide risk factor disclosure in Form 10-Q or 10-K).
Count Shares Withheld to Pay Taxes Due Upon Vesting of Restricted Stock as Stock Repurchases. The SEC takes the position that withholding shares by the company in order to pay taxes due upon vesting of restricted stock should be disclosed under Item 703 “Purchases of Equity Securities by the Issuer and Affiliated Purchasers” of Regulation S-K because it involves delivery of already outstanding shares in payment of a tax obligation. Check whether shares were withheld in connection with the vesting of restricted stock granted under equity plans or otherwise to make sure that tabular disclosure required under Item 703 is included in Form 10-Q.