Tag: MD&A

Cooley Alert: SEC Proposes to Modernize MD&A and Other Financial Disclosures

Check out our new Cooley Alert: SEC Proposes to Modernize MD&A and Other Financial Disclosures.  It’s a thrill from beginning to end and much more fun than watching the market these days. 

Corp Fin posts new CDIs on omission from MD&A of earliest year discussion

You might recall that in the FAST Act Modernization and Simplification of Regulation S-K, adopted last year, the SEC amended Item 303 of Reg S-K to provide that, where a company includes in the filing financial statements covering three years, the company may omit  “discussion about the earliest of the three years…if such discussion was already included in the registrant’s prior filings on EDGAR…, provided that registrants electing not to include a discussion of the earliest year must include a statement that identifies the location in the prior filing where the omitted discussion may be found.” (See this PubCo post.) Notably, there was no specific condition in the new amendment that discussion of the earliest year not be material, although MD&A continued to be subject to an overarching materiality analysis.  Corp Fin has now issued three new CDIs that address omission of the earliest year, summarized below. 

Failure to disclose “revenue management scheme” leads to SEC action

In this Enforcement Order, the SEC described a “revenue management scheme” orchestrated by the respondent, Marvell Technology Group, and the imposition on Marvell of a $5.5 million penalty and cease-and-desist order—not because of the scheme itself, but rather because the company failed to publicly disclose the scheme in its MD&A or to discuss its likely impact on future performance.  The Order demonstrates that, even if a scheme involving unusual sales practices may not amount to chargeable accounting fraud, failure to disclose its distortive effects can be misleading and result in violations of the Securities Act and Exchange Act.

SEC adopts amendments for FAST Act Modernization and Simplification of Regulation S-K (revised and updated)

Yesterday, once again without an open meeting, the SEC adopted changes to its rules and forms designed to modernize and simplify disclosure requirements.  The final amendments, FAST Act Modernization and Simplification of Regulation S-K, which were adopted largely as originally proposed in October 2017 (see this PubCo post), are part of the SEC’s ambitious housekeeping effort, the Disclosure Effectiveness Initiative.  (See this PubCo post and this PubCo post.)   The amendments are intended to eliminate outdated, repetitive and unnecessary disclosure, lower costs and burdens on companies and improve readability and navigability for investors and other readers. Here is the SEC’s press release.

The final amendments make a number of useful changes, such as eliminating the need to include discussion in MD&A about the earliest of three years of financial statements, permit omission of schedules and attachments from most exhibits, limiting the two-year lookback for material contracts, and streamlining the rules regarding incorporation by reference and other matters. The final amendments also impose some new obligations, such as a requirement to file as an  exhibit to Form 10-K a description of the securities registered under Section 12 of the Exchange Act and a requirement to data-tag cover page information and hyperlink to information incorporated by reference. .

Certainly one of the most welcome changes is the SEC’s innovative new approach to confidential treatment, which will allow companies to redact confidential information from exhibits without the need to submit in advance formal confidential treatment requests.  This new approach will become effective immediately upon publication of the final amendments in the Federal Register. The remainder of the final amendments will become effective 30 days after publication in the Federal Register, with the exception of new cover page data-tagging requirements, which are subject to a three-year phase-in.

SEC proposes FAST Act Modernization and Simplification of Regulation S-K

The SEC has now posted its release regarding FAST Act Modernization and Simplification of Regulation S-K, which proposes amendments to rules and forms based primarily on the staff’s recommendations in its Report to Congress on Modernization and Simplification of Regulation S-K (required by the FAST Act).  (See this PubCo post.) That Report, in turn, was premised on the review that the SEC conducted as part of its Disclosure Effectiveness Initiative and the related Concept Release, which addressed a broader range of potential changes.  (See this PubCo post and this PubCo post.)  A new approach to confidential treatment, not addressed in the Report, is also proposed.  As indicated by the title, the proposed amendments are intended to modernize and simplify a number of disclosure requirements in Reg S-K, and related rules and forms, in a way that reduces the compliance and cost burdens on companies while continuing to provide effective disclosure for investors, including improvements designed to make the disclosures more readable, less repetitive and more easily navigable.

SEC proposes amendments to modernize and simplify Reg S-K

This morning, the SEC voted to propose amendments to Reg S-K and related rules and forms based primarily on the staff’s recommendations in its Report to Congress on Modernization and Simplification of Regulation S-K (required by the FAST Act).  (See this PubCo post.) That Report, in turn, was premised on the review that the SEC conducted as part of its Disclosure Effectiveness Initiative.  (See this PubCo post and this PubCo post.) The proposal also includes a new approach intended to “streamline” the confidential treatment process. Although the rule proposal has not yet been posted, the staff indicated at the meeting that the proposal largely follows the recommendations in the Report and seeks to clarify ambiguous requirements, update or streamline the rules by eliminating duplication and outdated references, simplify the rules where possible and improve navigability through the use of technology. The SEC also voted to propose certain parallel amendments to investment company and investment adviser rules and forms. Here is the press release.  Stay tuned for further details once the proposal has been posted (and digested).

Corp Fin Director highlights recent issues in public offerings

by Cydney Posner At PLI’s Securities Regulation Institute this morning, Corp Fin Director Keith Higgins highlighted* some recent issues the staff has identified in the context of public offerings.