Many of the modifications reflect the SEC’s long-standing dedication to a principles-based, registrant-specific attitude toward disclosure. Though strict in some regards, these disclosure requirements are designed to help explain each registrant’s business, financial condition, and prospects. The rules are set forth so that this data is presented on a basis consistent with the gauge that management and the board of directors use to monitor the registrant’s performance. The revision of Items 101, 103, and 105 should produce better-quality disclosures that are designed to reflect each registrant’s specific situation. They should therefore improve disclosures for investors and streamline the compliance efforts of registrants.

The modifications are also intended to facilitate the interpretation of disclosure documents, discourage repetition, decrease the disclosure of irrelevant information. The final amendments will:

• amend Item 101(a) by:
  • shifting to largely principles-based disclosure, requiring inclusion of information material to an understanding of the general development of the business
  • replacing the previously prescribed five-year timeframe with a materiality framework
  • in filings made after a registrant’s initial filing, permitting a registrant to provide only an update of the general development of the business focused on material developments that have occurred since its most recent full discussion of the development of its business, which will be incorporated by reference


• amend Item 101(c) by:
  • clarifying and expanding its principles-based approach with a non-exclusive list of disclosure topic examples drawn in part from topics currently contained in Item 101(c)
  • including a description of the registrant’s human capital resources to the extent these disclosures are material to understanding the registrant’s business
  • refocusing the regulatory compliance disclosure requirement by including all material government regulations as a topic, not just environmental laws


• amend Item 103 by:
  • expressly stating that the required information may be provided by hyperlink or cross-reference to legal proceedings disclosure located elsewhere in the document to avoid duplicative disclosure
  • implementing a modified disclosure threshold for certain governmental environmental proceedings resulting in monetary sanctions. The existing quantitative threshold for disclosure of those proceedings will be raised from $100,000 to $300,000. This also affords a registrant some flexibility by allowing the registrant to select a different threshold that it determines is reasonably designed to result in disclosure of material environmental proceedings, provided that the threshold does not exceed the lesser of $1 million or one percent of the current assets of the registrant


• amend Item 105 by:
  • requiring summary risk factor disclosure of no more than two pages if the risk factor section exceeds 15 pages
  • refining the principles-based approach of Item 105 by requiring disclosure of “material” risk factors
  • requiring risk factors to be organized under relevant headings in addition to the subcaptions currently required. Any risk factors that may generally apply to an investment in securities may be disclosed at the end of the risk factor section under a separate caption

These amendments will go into effect 30 days following publication in the Federal Register.

Sources:

SEC Adopts Rule Amendments to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors Under Regulation S-K (sec.gov)

Modernization of Regulation S-K Items 101, 103, and 105 (sec.gov)