Get the S-K Item 201(d) Table Right!

A frequent question in our SEC Reporting Skills Workshop is “What the heck is going on with the table required by S-K Item 201(d)?”  This question results from an actual “mistake” in the Form 10-K Instructions which was later “fixed” by a letter from the SEC to the American Bar Association (ABA) and a Compliance and Disclosure Interpretation.  Despite the “fixes,” this table is still frequently in the wrong place in Form 10-K.

(Spoiler alert:  The table should be in Item 12, not Item 5!)

(As another note, if an equity compensation plan is being submitted to shareholders for action, Schedule 14A requires the S-K Item 201(d) table in the proxy statement.  It will then be incorporated by reference into Item 12 of Form 10-K.)

The uncertainty about the placement of this table dates back to 2001 when the SEC adopted a Final Rule to provide more robust disclosure about equity compensation plans.  This Final Rule required the equity compensation plan table in S-K item 201(d) but was not clear about where to include it in Form 10-K.

This situation begins with the instructions to Item 5 in Form 10-K:

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)  Furnish the information required by Item 201 of Regulation S-K (17 CFR 229.201) and Item 701 of Regulation S-K (17 CFR 229.701) as to all equity securities of the registrant sold by the registrant during the period covered by the report that were not registered under the Securities Act. If the Item 701 information previously has been included in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K (17 CFR 249.308), it need not be furnished.

(Note:  (b) and (c) omitted)

This instruction seems to require that all the information required by S-K Item 201 should be included in Item 5.  That information includes S-K Item 201(d):

(d) Securities authorized for issuance under equity compensation plans. (1) In the following tabular format, provide the information specified in paragraph (d)(2) of this Item as of the end of the most recently completed fiscal year with respect to compensation plans (including individual compensation arrangements) under which equity securities of the registrant are authorized for issuance, aggregated as follows:

(i) All compensation plans previously approved by security holders; and

(ii) All compensation plans not previously approved by security holders.

Equity Compensation Plan Information 

Plan category  Number of securities to be issued upon exercise of outstanding options, warrants and rights  Weighted-average exercise price of outstanding options, warrants and rights  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a) (b) (c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total

(2) The table shall include the following information as of the end of the most recently completed fiscal year for each category of equity compensation plan described in paragraph (d)(1) of this Item:

(i) The number of securities to be issued upon the exercise of outstanding options, warrants and rights (column (a));

(ii) The weighted-average exercise price of the outstanding options, warrants and rights disclosed pursuant to paragraph (d)(2)(i) of this Item (column (b)); and

(iii) Other than securities to be issued upon the exercise of the outstanding options, warrants and rights disclosed in paragraph (d)(2)(i) of this Item, the number of securities remaining available for future issuance under the plan (column (c)).

(3) For each compensation plan under which equity securities of the registrant are authorized for issuance that was adopted without the approval of security holders, describe briefly, in narrative form, the material features of the plan.

(Note:  Instructions omitted)

A close reading of the instructions would indicate that this table should be in Item 5 of Form 10-K.  However, the instructions to Item 12 call this conclusion into question:

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 Furnish the information required by Item 201(d) of Regulation S-K (§ 229.201(d) of this chapter) and Item 403 of Regulation S-K (§ 229.403 of this chapter).

These two instructions raise the question of whether the S-K Item 201(d) table should be in Item 5, Item 12 or both?  This situation created enough confusion that the ABA wrote a letter to the SEC asking for clarification.  The SEC sent this response to the ABA which included this section:

  1. Placement of Item 201(d) Disclosure in Forms 10-K and 10-KSB

The Item 201(d) disclosure should be included in Part III, Item 12 of a Form 10-K, and Part III, Item 11 of a Form 10-KSB, as applicable.

The Item 201(d) disclosure should not be included in Part II, Item 5 of a Form 10-K or Part II, Item 5 of a Form10-KSB. Item 5 should include only the disclosure required by Items 201(a), (b) and (c) of Regulation S-K or S-B, as applicable.

An issuer may rely on General Instruction G.3 to Form 10-K or General Instruction E.3 to Form 10-KSB to incorporate by reference the Item 201(d) disclosure from its proxy or information statement, even if the issuer does not submit a compensation plan for security holder action at its annual meeting of security holders.

The SEC then followed their letter to the ABA with this Compliance and Disclosure Interpretation:

Question 106.01

Question: Is the Item 201(d) disclosure required in Part II of Form 10-K, given that Item 5 of Form 10-K indicates that the registrant is required to furnish the information required under Item 201, or should the Item 201(d) disclosure be included (or incorporated by reference) in Part III of Form 10-K given that Item 12 indicates that the registrant is required to furnish the information required under Item 201(d)?

Answer: The Item 201(d) disclosure should be included in Part III, Item 12 of Form 10-K. An issuer may rely on General Instruction G.3 to Form 10-K to incorporate by reference the Item 201(d) disclosure from its proxy statement or information statement, even if the issuer did not submit a compensation plan for security holder action at its annual meeting of security holders. See American (Jan. 30, 2004). [Mar. 13, 2007]

So, despite the ambiguity in the instructions the S-K Item 201(d) table should be in Item 12 in Form 10-K.

As always, your thoughts and comments are welcome!

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