The SEC’s Division of Corporation Finance (CorpFin) on Nov. 6, 2020, issued staff interpretive guidance to help small public companies comply with recent disclosure rule changes under Regulation S-K.
In August, the SEC published the revised rules in Release No. 33-10825, Modernization of Regulation S-K Items 101, 103, and 105. The release, which revised Items 101, 103 and 105 of Reg S-K, became effective on Nov. 9.
Reg S-K lays out the reporting requirements for periodic reports. Item 101 is about the description of business; Item 103 is about legal proceedings; and Item 105 is about risk factors.
The commission largely simplified or modernized the disclosure requirements to reduce compliance costs but added human capital management disclosure to Item 101.
“These disclosure requirements have not undergone significant revisions in over 30 years,” CorpFin said in Modernization of Regulation S-K Items 101, 103, and 105: A Small Entity Compliance Guide. “The amendments the Commission adopted update these items to reflect the many changes in our capital markets and the domestic and global economy in recent decades.”
The small company compliance guide said that the rules apply to both domestic companies and foreign private issuers (FPIs) that file registration statements, periodic reports, proxy statements, and other documents that require disclosure under Items 101, 103 and 105.
However, the staff guide noted that smaller reporting companies (SRCs) are not required to provide risk factor disclosure under Item 105 in registration statements on Form 10 and annual reports on Form 10-K.
SRCs have public float of $250 million. A company with no public float or with a public float of less than $700 million also qualifies as an SRC if it had annual revenues of less than $100 million during its most recently completed fiscal year.
The compliance guide said that SRCs also do not need to disclose material changes from risk factors that were previously disclosed on Form 10-K in quarterly reports on Form 10-Q.
CorpFin included a table in the guide that summarizes the changes to Items 101, 103 and 105.
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