SEC Proposes Rules to Implement FAST Act Mandate to Modernize and Simplify Disclosure

The Securities and Exchange Commission today voted to propose amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies and to implement a mandate under the Fixing America's Surface Transportation (FAST) Act. The proposed amendments would make adjustments to update, streamline or otherwise improve the Commission's disclosure framework.

"The FAST Act has given the Commission the opportunity to update our rules, simplify our forms, and utilize technology to make disclosure more accessible," said SEC Chairman Jay Clayton. "An effective disclosure regime provides investors with the information necessary to make informed investment choices without imposing unnecessary burdens of time and money on issuers, and today's action embodies that goal."

The proposal reflects changes based on recommendations in the staff's FAST Act Report and amendments developed as part of a broader review of the Commission's disclosure system. 

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Fact Sheet

FAST Act Modernization and Simplification of Regulation S-K

SEC Open Meeting

October 11, 2017

Action

The Commission will consider whether to propose amendments to modernize and simplify certain disclosure requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors. The amendments are also intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information. 

Highlights

Among other things, the proposed amendments would:

• Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold;
• Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements;
• Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management's Discussion and Analysis that would allow for flexibility in discussing historical periods; and
• Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

The proposal also includes parallel amendments to several rules and forms applicable to investment companies and investment advisers, including proposed amendments that would require certain investment company filings to include a hyperlink to each exhibit listed in the exhibit index of the filings and be submitted in HyperText Markup Language (HTML) format.

Background

As mandated by the FAST Act, in November 2016 the staff published a report on modernizing and simplifying the disclosure requirements in Regulation S-K.  The report provided specific and detailed recommendations on modernizing and simplifying Regulation S-K in a manner that reduces costs and burdens on companies while still providing all material information.  The FAST Act also requires that the Commission issue a proposal to implement the recommendations in the report.   

What's next?

If approved, the Commission will seek public comment on the proposed rules for 60 days.