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.

Read our Legal Update for additional analysis.

Footnotes

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

Originally published in REVERSEinquiries: Volume 3, Issue 8.
Click here to read the articles in this latest edition.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.