One of the more subtle issues we discussed in our recent Sixth Annual Form 10-K Tune-up One Hour Briefing was a reminder to properly categorize (i.e., 12(b) versus 12(g) securities that the company has registered under the Exchange Act and to list all securities registered pursuant to either of those sections on the cover pages of Forms 10-K and 10-Q. While this was not a big deal historically, the list of 12(b) securities now also requires the trading symbols to be included.
As an example shown below are the cover pages from P&G’s June 30, 2018 and 2019 Form 10-K’s. You can see the difference in the 12(b) lists from 2018 to 2019.
As another thought, this is closely tied to the new requirement to have, as an exhibit to the Form 10-K a description of securities (as set forth in Item 202 of Regulation S-K) that are registered under section 12 (whether 12(b) or 12(g)). You can read all the details in this blog post which will also has the detailed instructions from See S-K Item 601(b)(4)(vi) and Item 202.
In P&G’s case, they provided a separate exhibit for each class, which makes a lot of sense – some securities may go away (such as when debt securities are redeemed) and you can simply delete that exhibit in the future rather than having to amend an all-inclusive exhibit.
Which brings us to a final point – one that we noticed even with P&G – their exhibit 4.3.2, which purports to be a description of their common stock, also describes their preferred stock, none of which is outstanding nor are these classes registered under section 12. The new exhibit requirement is NOT a requirement to provide a description of the company’s authorized capitalization – it is a requirement to provide certain information required by S-K Item 202 but only as to securities that are registered under section 12 of the Exchange Act.
Again, to see the difference compare these two P&G cover pages from 2018 and 2019:
Notice the difference in their cover page from their June 30, 2019 10-K cover page after the Disclosure Modernization and Update rule:
As always, your thoughts and comments are welcome!