& Securities

During today’s Open Meeting, the Commission, led by Chairman Jay Clayton in his first Open Meeting, unanimously voted in favor of proposing amendments contained in the staff’s Report on Modernization and Simplification of Regulation S-K1 (see our earlier Client Alert here). Several of those who spoke during the meeting emphasized the goal of the proposed amendments was to modernize and simplify disclosure requirements in Regulation S-K, while protecting the need for investors to have material information.

Commissioner Kara M. Stein, while voting in favor of the proposed amendments, highlighted three areas she urged the public to comment on:

1. Item 303 (Management’s Discussion and Analysis): Commissioner Stein raised the question of whether amending Regulation S-K to require a registrant to only provide a period-to-period comparison for the two most recent fiscal years presented in the financial statements (with a hyperlink to the prior year’s annual report for the additional period-to-period comparison), rather than the current three-year period requirement would provide investors with the information that they need.
2. Item 601 (Exhibit Attachments and Schedules): Currently registrants are permitted to omit attachments and schedules to plans of acquisition, reorganization, arrangement, liquidation, or succession filed as exhibits, unless they contain information that is material to an investment decision and has not been disclosed otherwise. The proposed amendment would permit registrants to omit attachments and schedules to all exhibits (e.g. Exhibit 10 – Material Contracts) under similar circumstances. Commissioner Stein noted that registrants currently must seek confidential treatment, subject to SEC staff review of the materials, before redacting exhibits, and questioned whether registrants should be allowed to make such determinations in their sole discretion as would be permitted under the proposed amendments.
3. Item 601 (Subsidiaries of the Registrant): Commissioner Stein emphasized the need to move towards modernizing disclosure by supporting efforts to expand the use of legal entity identifiers (“LEIs”). Currently registrants are required to, subject to certain exceptions, list all of their significant subsidiaries, the state or other jurisdiction of incorporation or organization of each, and the names under which such subsidiaries do business. The proposed amendments would require registrants to include the LEIs of the registrant and each subsidiary included on the list, to the extent that each entity has an LEI. Commissioner Stein noted that the proposed amendments may not go far enough in identifying LEIs.

The Open Meeting also included a discussion of other proposed amendments not covered above. More to come in future updates.