On August 26, 2020, the SEC adopted amendments to Regulation S-K that are intended to modernize business, legal proceedings and risk factor disclosures.1 According to the SEC, the amendments are designed to update rules to account for developments since they were first adopted or last amended and to improve the readability of disclosures for investors while discouraging repetition and disclosure of immaterial information and simplifying compliance for reporting companies. These amendments become effective 30 days after the adopting release is published in the Federal Register.

The amendments include changes to the certain items of the Business section, as well as the Legal Proceedings disclosure requirements. Importantly for our readers, the SEC also has revised Item 105 of Regulation S-K (Risk factors) to address its concerns about the lengthy and generic nature of current risk factor disclosure. The amendments require a risk factor summary of not more than two pages if the risk factor discussion exceeds 15 pages. Most risk factor sections included in periodic reports and/or in registration statements exceed 15 pages.

The risk factor summary must contain a series of concise bulleted or numbered statements summarizing the principal factors that make an investment in the company or offered securities speculative or risky and has to appear in the forepart of the prospectus or annual report, as applicable. The summary does not have to contain all of the risk factors described in the full risk factor discussion. Companies may prioritize certain risks in, and omit others from, the summary.

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1 Available at https://bit.ly/3cp97oD.

Originally published in REVERSEinquiries: Volume 3, Issue 8.
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