S-K Modernization: The Questions Just Keep Coming. . .
We continue to get a lot of questions on the SEC’s recent amendments to Item 101, 103 and 105 of Regulation S-K. As Liz blogged last month, some of these questions have focused on potential disconnects between the amended language of Item 101 of S-K and the language of Item 1 of Form 10-K. More recently though, we’ve been getting some interesting questions on our Q&A Forum on how the rules apply to Securities Act filings and Form S-3 registration statements in particular. Here’s one question that we received:
Any thoughts on how the amendments will apply to outstanding shelf registration statements? If after November 9, 2020, a prospectus supplement incorporates by reference the risk factor discussion from a previously filed Form 10-K and that risk factor discussion does not comply with the amended rule (e.g., because it fails to include headings), must the prospectus supplement restate all risk factors in compliance with the amended rule?
Although Form S-3 does not specifically require disclosure of Items 101 and 103, Form S-3 incorporates prior disclosure of these items because of the required incorporation by reference if the Form 10-K. Must the Form 10-K disclosures be updated to conform to the rule changes?
Here was my response:
That’s an interesting question. For what it’s worth, here are my two cents: In the case of an already effective S-3, I don’t think that updating to address the new requirements would be required. That’s because the registration statement contained everything “required to be stated therein” under the rules applicable at the effective time, and that’s when Section 11 speaks. The fact that information incorporated by reference into that registration statement no longer complies with the amended requirements of Item 105 wouldn’t implicate Section 11.
I think the obligation to update the prospectus would instead be governed by the obligations imposed by the undertakings in Item 512 of S-K, Rule 10b-5, and Section 12(a)(2) of the Securities Act. My guess is that in most instances, issuers would likely conclude that the existing disclosure incorporated by reference into the filing doesn’t need to be updated to conform to the requirements of amended Item 105 in order to comply with any of these potential updating obligations.
There have been follow-up questions addressing situations involving Form S-3s filed before the new rules went into effect, but declared effective afterward, as well as whether existing 10-K language addressing Item 101 would need to be updated in the case of a Form S-3 filed after the S-K amendments. If you’d like to check those out, they’re all in Topic #10475.
I’ve taken a stab at answering these questions, but who cares what I think? The bottom line is that there are a lot of questions about the application of the S-K amendments, and with the effective date just around the corner, guidance from Corp Fin would be very helpful.
-John Jenkins, TheCorporateCounsel.net October 21, 2020
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