U.S. Securities Law Update | December 2019
Updates Affecting your 2019 Annual Report
on Form 20-F and Other SEC Filings
As we approach the end of 2019, we want to update our clients and friends on certain changes to the U.S. federal securities law reporting requirements affecting the filing of your annual report on Form 20-F and certain other filings with the Securities and Exchange Commission (SEC). These changes were adopted by the SEC this year to modernize and simplify the disclosure requirements on companies traded in the U.S. while continuing to provide investors with all material information. The changes described below are also intended to improve the readability and navigability of company filings.
Historical Periods in Operating and Financial Review and Prospects (MD&A)
In the past, Form 20-F generally required foreign private issuers (FPIs) to provide in the MD&A two comparative year-to-year discussions of the last three fiscal years (for example, fiscal year 2019 vs. fiscal year 2018 and fiscal year 2018 vs. fiscal year 2017). Under new rules, FPIs may generally exclude discussion of the earliest of the three years in the MD&A section of the Form 20-F if the discussion had already been included in a prior filing. For example, this year the comparison of fiscal year 2018 to fiscal year 2017 may be omitted, subject to inclusion of a statement identifying the location of such disclosure in a previous filing.
Omission of Certain Non-Material Information in Exhibits
Companies seeking confidentiality for sensitive commercial information in agreements filed with the SEC were previously required to submit to the SEC in paper a detailed confidential treatment request (CTR). Recent rule changes enable companies to omit confidential commercial terms from material contracts filed with the SEC without submitting a CTR so long as the omitted terms would likely cause competitive harm if disclosed publicly and are not material to investors.
In addition, issuers are not required to submit a confidential treatment request in order to exclude personally identifiable information (such as bank account numbers, social security numbers, home addresses, and similar information) from any exhibit filings. The SEC also now permits companies to exclude from their filings copies of schedules and other attachments to material contracts so long as they do not contain material information and the information in such schedules and attachments is not otherwise publicly disclosed.
For more information, please see our memo previously posted on the subject at: https://www.gkh-law.com/capital-markets-update-march-2019/
Filing of Material Contracts
In the past, FPIs were required to file as exhibits to the Form 20-F material contracts that entered into effect within the two years prior to the filing of the Form 20-F even if such contracts were fully performed before such filing of the Form 20-F. Under the new rules, only newly reporting issuers, rather than all issuers, are required to file fully performed material contracts that entered into effect within two years prior to the filing of the Form 20-F. For all other (non-newly) reporting issuers, such contracts would be available on EDGAR from previous years’ filings, but only material contracts to be performed in whole or in part at or after the filing of the Form 20-F are required to be included on the exhibit list of the Form 20-F and filed.
Description of Securities
Issuers were previously required to include a description of each class of securities only in registration statements (and not in Form 20-F). To increase the investor access to information regarding their classes of securities, FPIs are now required to provide a description of each class of their securities, including type, rights and other terms, as an exhibit to Form 20-F. If an FPI has previously filed such an exhibit and the information remains unchanged, it can incorporate that exhibit by reference and provide a hyperlink to the previously filed exhibit.
Cover Page Disclosure
FPIs are now required to disclose on the cover page of their Form 20-F the national exchange or principal U.S. market for their securities, their trading symbol and the title of each class of their securities.
Hyperlinks to Documents Incorporated by Reference into Registration Statements and Prospectuses
Following rule changes adopted by the SEC a few years ago, FPI’s must provide in the exhibit list of their Form 20-F and registration statements an active hyperlink to each exhibit previously filed with the SEC rather than just referring to the location of the previously filed document.
Under the most recent amendments, the SEC expanded the hyperlink requirement beyond exhibits to provide that issuers must include an active hyperlink for information previously filed with the SEC that is being incorporated by reference in registration statements and prospectuses. Therefore, when listing in a registration statement or prospectus the documents (such as Form 20-F’s and Form 6-K’s) that are incorporated by reference, it is now required that an active hyperlink be provided for each document being incorporated by reference.