We previously blogged here about the recent SEC disclosure simplification rules. As the rules have now been published in the Federal Register and are set to go effective on November 5, 2018, set forth below are some FAQs on the new rules to help answer some common questions.
Q1: Does the effective date of November 5, 2018 mean that Exchange Act filings made on or after this date need to comply with the new rules or does it relate to periods ending on or after this date?
A1: Exchange Act filings, including Form 10-Qs, made on or after November 5, 2018 should comply with the rules in effect on the date of filing. See Exchange Act Rule 12b-10. In other words, it does not matter that the Form 10-Q relates to a period prior to effectiveness (such as quarter ended September 30, 2018). However, the Staff provided an exception to this recently in the Exchange Act Forms C&DI 105.09 (related to the changes in shareholders’ equity), which is repeated below:
Question: On August 17, 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. The amendments will become effective on November 5, 2018. Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. Refer to Rules 8-03(a)(5) and 10-01(a)(7) of Regulation S-X. When are filers expected to comply with this new requirement?
Answer: The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the staff would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments. For example, a December 31 fiscal year-end filer could omit this disclosure from its September 30, 2018 Form 10-Q. Likewise, a June 30 fiscal year-end filer could omit this disclosure from its September 30, 2018 and December 31, 2018 Forms 10-Q; however, the staff would object if it did not provide the disclosures in its March 31, 2019 Form 10-Q. (Sept. 25, 2018 and updated October 4, 2018)
Q2: If we filed an initial Form S-4 prior to November 5, 2018, and our next amendment will be filed after the effective date of the rules, do we need to comply with the new rules in our next amendment?
A2: No, Securities Act Rule 401(a) provides that the form and contents of a registration statement and prospectus shall conform to the applicable rules and forms as in effect on the initial filing date of such registration statement and prospectus. Therefore, the S-4/A filed after November 5, 2018 must conform to the rules in effect when initially filed. Note, however, that Rule 401(g) says that registrants may comply voluntarily with the rules and forms as in effect at dates subsequent to the initial filing date, provided that all of the requirements of the particular rules and forms in effect on the initial filing date (including any required undertakings) are met.
Sidebar: Securities Act Rule 401 also contains an important rule that may be surprising to some securities lawyers and probably worthy of its own blog post at some point. In this regard, Rule 401(g)(1) generally provides that, “except for registration statements and post-effective amendments that become effective immediately pursuant to Rule 462 and Rule 464, a registration statement or any amendment thereto is deemed filed on the proper form unless the Commission objects to the registration form before the effective date.” (emphasis added) In addition, Rule 401(g)(2) addresses a similar concept with respect to automatic shelf registration statements. There are some exceptions in the rule, but keep Rule 401 in mind when thinking about form eligibility questions.
Q3: The initial “Demonstration Version” on the SEC website had some places where 201(d) of S-K was removed, which seemed to conflict with the adopting release which says the Staff referred 201(d) to FASB for potential incorporation into U.S. GAAP but otherwise made no changes to 201(d). Is this correct?
A3: We understand from discussions with the Staff that the initial “Demonstration Version” on the SEC website had some inadvertent deletions as a result of late changes. The Staff has corrected these mistakes and the new version on the SEC’s website (linked here) is now correct.