Modernizing and Simplifying Disclosure with the FAST Act Mandate

Low angle side view of carBy Blake Baron

Under the FAST Act mandate, the U.S. Securities and Exchange Commission (SEC) voted on October 11, 2017 to propose amendments to Regulation S-K and related rules and forms aimed at modernizing and simplifying the current disclosure requirements for investment companies, public companies, and investment advisers.

What are the Proposed Amendments?

If adopted, the amendments would:

  • Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold;
  • Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements;
  • Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management’s Discussion and Analysis that would allow for flexibility in discussing historical periods; and
  • Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

In addition to the above amendments, the proposal also includes changes to rules and forms applicable to investment advisers and investment companies such as amendments that would require certain investment company filings to include hyperlinks to all listed exhibits. These hyperlinks would be required to be in HyperText Markup Language (HTML) format.

The proposed amendments are intended to reduce costs and burdens on registrants as well as improve the readability and navigability of disclosure documents. If approved, the SEC will seek public comments on the proposed amendments over a 60-day period.

Read more about the SEC’s proposal here.

What is the FAST Act?

The Fixing America’s Surface Transportation Act, or “FAST Act,” is the first law in over ten years to provide long-term federal funding for surface transportation projects in the United States. The act was signed into law by President Obama on December 4, 2015. It also continues the work of the Jumpstart Our Business Startups Act (JOBS Act) by implementing additional changes intended to make it easier for smaller companies to raise capital and streamline public disclosure requirements.

Read more about the FAST Act here, or view the full Act here.

What Prompted this Proposal?

Section 72003 of the FAST Act entitled “Study on Modernization and Simplification of Regulation S-K” stipulates that the SEC carry out a study on the requirements contained in Regulation S-K, and subsequently issue a proposal to implement recommendations generated from the study.

The FAST Act requires that the study on Regulation S-K determine the best ways to “modernize and simplify such requirements in a manner that reduces the costs and burdens on issuers while still providing all material information.”

The SEC carried out the study and published a report on November 23, 2016. The proposed amendments to Regulation S-K are based on recommendations published in the SEC’s FAST Act Report.

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