One frequently asked question in our Workshops concerns the “10-K Wrap” or the annual report that companies prepare: Is this a required report or is it an optional investor relations “marketing” document?
Turns out it actually is required for the proxy process. When a company solicits proxies for its annual meeting, and the annual meeting includes, the election of directors, the proxy statement must be accompanied or preceded by an Annual Report to Shareholders or “ARS”. You can find all the details about this requirement in Rule 14a-3. The Form 10-K and the ARS, however, are significantly different. The Form 10-K is a filed document while the ARS is furnished to shareholders pursuant to the proxy rules.
In this earlier post we reviewed the details of the proxy requirement for the ARS.
If you would like a refresher on the filed vs. furnished issues, check out this post.
One of the seeming anachronisms in this process is that the SEC has, even in these days of EDGAR, still required that paper copies of the ARS be sent to the SEC. This requirement is in the proxy rules. (Check out rules 14a-3(c) and Rule 14c-3(b)). Every time we talk about this requirement in our Workshops there are visions of the last scene from “Raiders of the Lost Ark” with a huge warehouse full of boxes no one will ever open again!
On November 2 the SEC modernized this requirement with the following Compliance and Disclosure Interpretation:
Proxy Rules and Schedule 14A (Regarding Submission of Annual Reports to SEC under Rules 14a-3(c) and 14c-3(b))
Question: Exchange Act Rule 14a-3(c) and Rule 14c-3(b) require registrants to mail seven copies of the annual report sent to security holders to the Commission “solely for its information.” A similar provision in Form 10-K requires certain Section 15(d) registrants to furnish to the Commission “for its information” four copies of any annual report to security holders. Can a registrant satisfy these requirements by means other than physical delivery or electronic delivery pursuant to Rule 101(b)(1) of Regulation S-T?
Answer: Yes. The Division will not object if a company posts an electronic version of its annual report to its corporate web site by the dates specified in Rule 14a-3(c), Rule 14c-3(b) and Form 10-K respectively, in lieu of mailing paper copies or submitting it on EDGAR. If the report remains accessible for at least one year after posting, the staff will consider it available for its information. [November 2, 2016]
So, as we approach this year end we can change this process and even save some postage!
As always, your thoughts and comments are welcome!
George M. Wilson, Director, The SEC Institute & Carol A. Stacey, Director, The SEC Institute