Disclosure Update and Simplification – The Details Continue! Post Number Three – Item 5 – Form 10-K Changes

As we blogged on August 21, September 26, and October 3and October 4, the SEC’s 314-page Final Ruledealing with “Disclosure Update and Simplification” makes a myriad of fairly detailed updates to Regulations S-X and S-K, as well as many of the Forms and other rules.

As you may have heard (and can read in this post),the new rule was published in the Federal Register on October 4, 2018.  This means the changes in the new rule are effective for filings made on or after November 5, 2018.  The one caveat to this effective date, as you may have heard, is for the addition to changes in shareholders’ equity information to Form 10-Q, where the SEC issued a C&DIindicating “the staff would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.”

You can read about all the related details for the new 10-Q requirement to present changes in shareholders’ equity in this post.

Just in case you have not seen it, the SEC published what they are calling a “demonstration version” with the final rule that shows all the changes to Regulation S-K, S-X, the Instructions to the Forms and other related guidance. 

In this post we focus on changes to S-K Item 201, which is included in Item 5 of Form 10-K.  Here is the list of changes from the final rule:

Amend § 229.201 by:

a. Revising paragraph (a)(1)(i);

b. Removing paragraph (a)(1)(ii), redesignating paragraph (a)(1)(iii) as paragraph (a)(1)(ii), revising newly redesignated paragraph (a)(1)(ii) and adding new paragraph (a)(1)(iii);

c. Removing paragraphs (a)(1)(iv) and (v);

d. Removing and reserving paragraphs (a)(2)(i) and (c)(1) and Instruction 1 to the Instructions to Item 201;

e. Redesignating Instructions 1 through 5 to Item 201 consecutively as Instruction 1 to Item 201, Instruction 2 to Item 201, Instruction 3 to Item 201, Instruction 4 to Item 201 and Instruction 5 to Item 201; and

f. Revising newly redesignated Instruction 2 to Item 201.

To help you get started making changes for your next Form 10-K and 10-Q, here are the details:

  1. For the first change, paragraph (a)(1)(i), which requires information about stock trading, will now read:

(i) Identify the principal United States market(s) and the corresponding trading symbol(s) for each class of the registrant’s common equity. In the case of foreign registrants, also identify the principal foreign public trading market(s), if any, and the corresponding trading symbol(s) for each class of the registrant’s common equity.

The changes in this paragraph are:

1. The addition of disclosure of your ticker symbol

2. The removal of a requirement to make disclosures where there is no established trading market, which has been moved to new (a)(2)(ii)

  1. The paragraph that has been deleted, (a)(1)(ii), was the requirement to disclose stock price information by quarter for the last two years:

(ii) If the principal United States market for such common equity is an exchange, state the high and low sales prices for the equity for each full quarterly period within the two most recent fiscal years and any subsequent interim period for which financial statements are included, or are required to be included by Article 3-01 through 3-04 of Regulation S-X (§210.3-01 through 3-04 of this chapter), or Article 8-02 through 8-03 of Regulation S-X (§210.8-02 through 8-03 of this chapter) in the case of smaller reporting companies, as reported in the consolidated transaction reporting system or, if not so reported, as reported on the principal exchange market for such equity.

The change here is that disclosure of stock price by quarter for the last two years is no longer required.


  1. The new paragraph (a)(1)(ii) now reads:

(ii) If the principal United States market for such common equity is not an exchange, indicate, as applicable, that any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The change here is that disclosure of stock price, or absent a market, bid price information for the last two years by quarter is no longer required, similar to the change in number 2 above.


  1. The new paragraph (a)(1)(iii) now reads:

  (iii) Where there is no established public trading market for a class of common equity, furnish a statement to that effect and, if applicable, state the range of high and low bid information for each full quarterly period within the two most recent fiscal years and any subsequent interim period for which financial statements are included, or are required to be included by 17 CFR 210.3-01 through 210.3-20 (Article 3 of Regulation S-X), indicating the source of such quotations. Reference to quotations shall be qualified by appropriate explanation. For purposes of this Item the existence of limited or sporadic quotations should not of itself be deemed to constitute an “established public trading market.”

This new paragraph essentially continues the old disclosure requirements for situations where a company’s stock does not have an “established public trading market”

  1. The next change is the removal of these two paragraphs, (a)(1)(iv) and (a)(1)(iv):

(iv) Where a foreign registrant has identified a principal established foreign trading market for its common equity pursuant to paragraph (a)(1) of this Item, also provide market price information comparable, to the extent practicable, to that required for the principal United States market, including the source of such information. Such prices shall be stated in the currency in which they are quoted. The registrant may translate such prices into United States currency at the currency exchange rate in effect on the date the price disclosed was reported on the foreign exchange. If the primary United States market for the registrant’s common equity trades using American Depositary Receipts, the United States prices disclosed shall be on that basis.

(v) If the information called for by this Item is being presented in a registration statement filed pursuant to the Securities Act or a proxy or information statement filed pursuant to the Exchange Act, the document also shall include price information as of the latest practicable date, and, in the case of securities to be issued in connection with an acquisition, business combination or other reorganization, as of the date immediately prior to the public announcement of such transaction.

This change removes the requirement for stock price information for companies whose stock trades on a non-US exchange, similar to the change for stock traded on US exchanges, as well as certain stock price information in registration statements.

  1. The next paragraph removed, (a)(2)(i), is part of a 33Act registration statement requirement for disclosures about shares subject to option when a company in registration does not have a currently active public market. Company’s in this situation had to disclose the amount of shares:

(i) That is subject to outstanding options or warrants to purchase, or securities convertible into, common equity of the registrant;

Since this information is readily available in the financial statements, the S-K disclosure is removed.

  1. The next paragraph removed, (c)(1), is information about dividends, which is available in the financial statements, hence the elimination of this paragraph:

(1) State the frequency and amount of any cash dividends declared on each class of its common equity by the registrant for the two most recent fiscal years and any subsequent interim period for which financial statements are required to be presented by §210.3 of Regulation S-X. Where there are restrictions (including, where appropriate, restrictions on the ability of registrant’s subsidiaries to transfer funds to the registrant in the form of cash dividends, loans or advances) that currently materially limit the registrant’s ability to pay such dividends or that the registrant reasonably believes are likely to limit materially the future payment of dividends on the common equity so state and either (i) describe briefly (where appropriate quantify) such restrictions, or (ii) cross reference to the specific discussion of such restrictions in the Management’s Discussion and Analysis of financial condition and operating results prescribed by Item 303 of Regulation S-K (§229.303) and the description of such restrictions required by Regulation S-X in the registrant’s financial statements.

  1. The last changes made for S-K Item 201 are some adjustments to the instructions. First, Instruction 1 is removed as it is no longer relevant:

Registrants, the common equity of which is listed for trading on more than one securities exchange registered under the Exchange Act, are required to indicate each such exchange pursuant to paragraph (a)(1)(i) of this Item; such registrants, however, need only report one set of price quotations pursuant to paragraph (a)(1)(ii) of this Item; where available, these shall be the prices as reported in the consolidated transaction reporting system and, where the prices are not so reported, the prices on the most significant (in terms of volume) securities exchange for such shares

Next, Instruction 2 is revised to reference bid information:

Market prices and dividends Bid informationreported pursuant to this Item shall be adjusted to give retroactive effect to material changes resulting from stock dividends, stock splits and reverse stock splits


As we saw with the changes to Item 1, none of the changes here to Item 5 are earth shattering, but there is a fair amount of detail.

You might think this is enough for S-K Item 201, but there is actually another change that is kind of hidden in the other sections of the rule.  It turns out the table required by S-K Item 201(d) for equity compensation plans will move from Item 12 to Item 5 and no longer be required in the proxy statement.  Our next post will have all the details of that change.

As always, your thoughts and comments are welcome!


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