Borrowing the title of one of Shakespeare’s most famous comedies seems somehow appropriate to describe last week’s amendment to Form 10-K, which formalizes a company’s ability to include a business and financial summary in that report.
You may (or may not) recall that the Fixing America’s Surface Transportation (FAST) Act, enacted in December 2015, included a distinctly non-transportation-related (surface, sub-surface or otherwise) provision directing the SEC to adopt regulations permitting a company to submit a summary in its Form 10-K so long as it includes a cross-reference to related material contained elsewhere in the Form 10-K.
In its adopting release, the SEC quite correctly points out (you can almost hear an institutional sigh) that their current rules already implicitly allow such a summary, and in fact some companies have already begun the practice. Nevertheless, the SEC dutifully laid out over the course of three pages the details of this principles-based new rule:
- The summary is optional;
- Each summary topic must be hyperlinked to the related, more detailed disclosure in the Form 10-K;
- Companies may decide on their own what to include in the summary, so long as it is presented fairly and accurately;
- There is no mandatory length (though it should be “brief”);
- There is no mandatory location in the Form 10-K;
- A summary that discusses information incorporated by reference into the Form 10-K, and for which an exhibit is filed with the Form, must hyperlink to the discussion in that exhibit;
- The company need not update the summary for information incorporated by reference into Part III of Form 10-K at a later date via the proxy statement, though it must state that the summary does not include Part III information.
Technically, this is an interim rule that will take effect once it is published in the Federal Register. It won’t become officially final until 30 days thereafter, during which time the SEC will receive comments from anyone so moved.
The bottom line is that not much really happened. However, if you already have a Form 10-K summary or are considering adding one, take a minute to be sure you are complying with the hyperlink provisions of the new rule.