10-K Tip – Another S-K Item 201 Oddity

Over the years S-K Item 201 has been amended, updated and added to on several occasions. As a result it has become a bit of a disclosure hodge-podge. It contains more than a few twists and turns, and we explored one of them in our last post about the performance graph from S-K item 201(e) that does not have to be in the Form 10-K.

This post is about another twisty disclosure rule, and is also a reminder that the Compliance and Disclosure Interpretations from CorpFin can be really helpful. You can find them all at:

www.sec.gov/divisions/corpfin/cfguidance.shtml#

This S-K Item 201 twist surrounds the equity compensation table that is required by S-K 201(d). At first reading, you would not think there is even an issue. The instructions to Form 10-K seem clear:

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 …(rest of the instruction omitted as it is not relevant).

With this straightforward instruction it would seem everything required by S-K Item 201 should be included in Item 5 of the 10-K, including S-K 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.

However, this seemingly straightforward issue gets disrupted when you get to Item 12 in the Form 10-K instructions which says:

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).

So, where is the appropriate place in the Form 10-K for this table? For a while many people read the instructions very literally and put the table in both Item 5 and Item 12! Eventually the common sense approach of the SEC, i.e. you don’t really need it twice, was clarified in this Compliance and Disclosure Interpretation:

Regulation S-K: Section 106. Item 201 — Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

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 Bar Association (Jan. 30, 2004). [Mar. 13, 2007]

This one is pretty picky, but always good to get the details right! It also shows one facet of the SEC staff’s interpretive process, as the CDI resulted from an interpretive request from the ABA, which is linked to Reg S-K’s CDI 106.1.

As always your thoughts and comments are welcome!

 

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