Form 10-K Summary, 37132-37138 [2016-13328]

Download as PDF 37132 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations K. Incorporation by Reference The OFR has regulations concerning incorporation by reference. 1 CFR part 51. Under these regulations, agencies must discuss, in the preamble of the final rule, ways that the materials the agency incorporates by reference are reasonably available to interested persons and how interested parties can obtain the materials. In addition, the preamble to the final rule must summarize the material. 1 CFR 51.5(b). In accordance with the OFR’s requirements, section B of this preamble summarizes the ASTM F833–15 standard that the Commission incorporates by reference into 16 CFR part 1227. The standard is reasonably available to interested parties and interested parties may purchase a copy of the standard from ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428–2959 USA, phone: 610–832– 9585; https://www.astm.org/. A copy of the standard can also be inspected at CPSC’s Office of the Secretary, U.S. Consumer Product Safety Commission, Room 820, 4330 East West Highway, Bethesda, MD 20814, telephone 301– 504–7923. List of Subjects in 16 CFR Part 1227 Consumer protection, Imports, Incorporation by reference, Infants and children, Law enforcement, Safety, Toys. For the reasons stated above, the Commission amends title 16 CFR chapter II as follows: PART 1227—SAFETY STANDARD FOR CARRIAGES AND STROLLERS 1. The authority citation for part 1227 continues to read as follows: ■ Authority: The Consumer Product Safety Improvement Act of 2008, Public Law 110– 314, 104, 122 Stat. 3016 (August 14, 2008); Public Law 112–28, 125 Stat. 273 (August 12, 2011). ■ 2. Revise § 1227.2 to read as follows: rmajette on DSK2TPTVN1PROD with RULES § 1227.2 Requirements for carriages and strollers. Each carriage and stroller shall comply with all applicable provisions of ASTM F833–15, Standard Consumer Safety Specification for Carriages and Strollers, approved November 1, 2015. The Director of the Federal Register approves the incorporation by reference listed in this section in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You may obtain a copy of this ASTM standard from ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428–2959 USA; phone: 610–832–9585; https:// VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 www.astm.org/. You may inspect a copy at the Office of the Secretary, U.S. Consumer Product Safety Commission, Room 820, 4330 East West Highway, Bethesda, MD 20814, telephone 301– 504–7923, or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202–741– 6030, or go to: https://www.archives.gov/ federal_register/code_of_ federalregulations/ibr_locations.html. Dated: June 8, 2016. Todd A. Stevenson, Secretary, U.S. Consumer Product Safety Commission. [FR Doc. 2016–13663 Filed 6–8–16; 8:45 am] BILLING CODE 6355–01–P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 249 [Release No. 34–77969; File No. S7–09–16] RIN 3235–AL89 Form 10–K Summary Securities and Exchange Commission. ACTION: Interim final rule; request for comment. AGENCY: We are adopting an interim final amendment to implement Section 72001 of the Fixing America’s Surface Transportation (‘‘FAST’’) Act. The interim final amendment provides that a registrant may, at its option, include a summary in its Form 10–K provided that each item in the summary includes a cross-reference by hyperlink to the material contained in the registrant’s Form 10–K to which such item relates. DATES: Effective Date: The interim final rule is effective on June 9, 2016. Comment Date: Comments should be received on or before July 11, 2016. ADDRESSES: Comments may be submitted by any of the following methods: SUMMARY: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/interim-final-temp.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number S7– 09–16 on the subject line; or • Use the Federal eRulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number S7–09–16. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/interim-finaltemp.shtml). Comments are also available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: N. Sean Harrison, Special Counsel, at (202) 551–3430, in the Office of Rulemaking, Division of Corporation Finance, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. We are adopting an interim final amendment to Form 10–K 1 under the Securities Exchange Act of 1934.2 SUPPLEMENTARY INFORMATION: I. Introduction We are adopting an interim final amendment to Form 10–K that implements Section 72001 of the FAST Act,3 which became law on December 4, 2015. Section 72001 of the FAST Act directs the Commission, not later than 180 days after the date of enactment, to issue regulations to permit ‘‘issuers’’ 4 to submit a ‘‘summary page’’ 5 on Form 10–K, but only if each item on such summary page includes a crossreference (by electronic link or otherwise) to the material contained in Form 10–K to which such item relates. II. Discussion of Amendment Although our current rules do not prohibit a registrant from including voluntary information, such as a 1 17 CFR 249.310. U.S.C. 78a et seq. 3 Public Law 114–94, 129 Stat. 1312 (Dec. 4, 2015). 4 We use the terms ‘‘issuer’’ and ‘‘registrant’’ interchangeably throughout this release to refer to a company that is subject to Section 13 [15 U.S.C. 78m] or 15(d) of the Exchange Act [15 U.S.C. 78o(d)] and is required to file an annual report on Form 10–K. 5 As used in this release, the term ‘‘summary page’’ should not be construed to mean that the summary needs to be a single page, or of any specific length. 2 15 E:\FR\FM\09JNR1.SGM 09JNR1 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations rmajette on DSK2TPTVN1PROD with RULES summary, in its Form 10–K,6 we are amending Part IV of Form 10–K 7 to add new Item 16. This new item will expressly allow a registrant, at its option, to include a summary in the Form 10–K. To implement the statutory requirement that each item in the summary be accompanied by an electronic or other cross-reference, new Item 16 requires that each summary topic be hyperlinked to the related, more detailed disclosure item in the Form 10–K. In light of the varied nature of registrants’ size and operations, we believe that registrants should have the flexibility to determine how best to prepare the summary. Accordingly, the amendment does not prescribe the length of the summary (other than to state that the summary shall be brief), specify the Form 10–K disclosure items that should be covered by the summary,8 or dictate where the summary must appear in the Form 10–K. We recognize that it might not be practicable or necessary to summarize every Form 10–K disclosure item. The amendment is principles-based and affords a registrant choosing to include a summary the flexibility to decide which items to summarize,9 as long as 6 Voluntary information included in Exchange Act filings is subject to the antifraud provisions of the federal securities laws and the officer certifications required by Exchange Act Rules 13a– 14(a) and 15d–14(a) [17 CFR 240.13a–14(a) and 240.15d–14(a)]. 7 Part IV of Form 10–K sets forth the requirements for financial statement schedules, exhibits and certain supplemental information to be furnished to the Commission. 8 Form 10–K is organized in four parts with each part containing distinct disclosure requirements. Part I (Items 1–4) contains disclosure requirements that relate to, among other things, the registrant’s business, risk factors, properties, legal proceedings, and mine safety disclosure, if applicable. Part II (Items 5–9B) contains disclosure requirements that relate to market information, selected financial data, management’s discussion and analysis of financial condition and results of operations (‘‘MD&A’’), quantitative and qualitative disclosures about market risk, financial statements and supplementary data, a description of changes in and disagreements with accountants on accounting and financial disclosure, controls and procedures and other information. Part III (Items 10–14) contains disclosure requirements that relate to directors and executive officers, management remuneration, beneficial ownership, related party transactions and principal accountants’ fees and services and other information. Lastly, Part IV (Item 15, signatures and supplemental information) contains requirements that relate to financial statement schedules and exhibits. 9 The flexible and non-prescriptive nature of new Item 16 is similar to other principles-based requirements under our rules, such as Item 503 Regulation S–K [17 CFR 229.503] and Item 1001 of Regulation M–A [17 CFR 229.1001]. As set forth below in the Request for Comment, we solicit and encourage comment on whether further guidance on preparing the summary should be provided. VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 the information is presented fairly and accurately. We are also including an instruction in Item 16 of Form 10–K that addresses information incorporated by reference into the Form 10–K that a registrant may choose to summarize. Exchange Act Rule 12b–23 allows registrants to incorporate information by reference in answer, or partial answer, to any item of an Exchange Act registration statement or report subject to certain conditions.10 Generally, the incorporated information must be filed as an exhibit to the registration statement or report.11 Under General Instruction G to Form 10–K, a registrant may incorporate by reference the information required by Parts I or II of Form 10–K from the registrant’s annual report to security holders.12 The information required by Part III of Form 10–K also may be incorporated by reference from a proxy or information statement involving the election of directors, if filed within 120 days of the end of the fiscal year.13 As stated above, the interim final amendment to Form 10–K requires the summary to include hyperlinks to the related, more detailed disclosure item in the Form 10–K, regardless of whether the more detailed disclosure appears in the sections of the Form 10–K that follow the summary or in a Form 10–K exhibit. Currently, registrants can hyperlink to different sections within the same document, as well as to specific sections of exhibits that are part of the same filing. Therefore, the interim final amendment requires registrants electing to prepare a Form 10–K summary that discusses information that is incorporated by reference into the Form 10–K and for which an exhibit is filed with the form to include a hyperlink from the summary to the discussion in the accompanying exhibit. Under the interim final amendment, a registrant choosing to include a summary will only be able to summarize information that is included in the Form 10–K at the time the form is filed, and will not have to file a Form 10–K amendment to summarize Part III information that is incorporated by reference from a proxy 10 17 CFR 240.12b–23. 12b–23(a)(3)(i) [17CFR 240.12b– 23(a)(3)(i)] provides an exception that does not require a proxy or information statement incorporated by reference in response to Part III of Form 10–K to be filed as an exhibit. 12 Information incorporated from the annual report to security holders to fulfill the requirements of Part I of Form 10–K must contain the information required by Items 1–3 of Part I of Form 10–K to the extent applicable. See Note 1 to General Instruction G(2) to Form 10–K. 13 See Note 2 to General Instruction G(2) to Form 10–K. 11 Rule PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 37133 or information statement that will be filed after the date that the registrant files its Form 10–K.14 In that case, however, the registrant must indicate that the summary omits the Part III information. Request for Comment We request and encourage any interested person to submit comments on any aspect of the interim final amendment, other matters that might have an impact on the amendment, and any suggestions for further revisions. In addition, we seek comment on the following: 1. Are companies and investors likely to find a Form 10–K summary useful? If so, should we propose mandating a summary? 15 2. Would it be helpful to EDGAR users for the Form 10–K summary or a link to the summary to be displayed on a registrant’s EDGAR search results landing page? 16 3. Should we impose a length limitation on the summary? If so, what limitation would be appropriate (e.g., a page limit, word limit, character limit)? 4. Should we provide further guidance on preparation of the summary? For example, should we include language similar to Item 503(a) of Regulation S–K, which covers a prospectus summary? 17 14 See Instruction 1 to new Item 16 of Form 10– K. In addition, if the Part III information that is incorporated by reference contains a summary, such as commonly provided in proxy statements for executive compensation disclosure, that summary need not include hyperlinks. 15 In 2008, the Advisory Committee on Improvements to Financial Reporting issued to the Commission a report that, among other things, recommended an executive summary in the forepart of a company’s annual report on Form 10–K (with material updates in quarterly reports on Form 10– Q) that would describe concisely the most important themes or other significant matters with which management is primarily concerned, along with a page index showing where investors could find more detailed information in the document. See Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission (Aug. 1, 2008), available at https://www.sec.gov/about/ offices/oca/acifr/acifr-finalreport.pdf. 16 We are considering ways to further enhance the presentation and usability of the Form 10–K summary. In this regard, we could require registrants to include HTML tags to identify the Form 10–K summary in their EDGAR submissions. This would make it possible for EDGAR to extract the summary from the Form 10–K, so that the information could be included on the registrant’s search results EDGAR landing page. This could allow investors to more easily access the information. 17 Among other provisions, Item 503(a) states ‘‘The summary should be brief. The summary should not contain, and is not required to contain, all of the detailed information in the prospectus. If you provide summary business or financial information, even if you do not caption it as a E:\FR\FM\09JNR1.SGM Continued 09JNR1 37134 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations 5. Should we require that the summary appear at the beginning of the Form 10–K? Should we require certain content or a specific format for the Form 10–K summary? For example, should we propose to require registrants choosing to prepare a summary to include specified Form 10–K items, such as the MD&A? Are there some items that registrants should not be permitted to include in a summary? If so, which items should be required to be included in, or excluded from, the summary? 6. Should we require registrants that cannot include a summary of the Part III information (because that information will be incorporated by reference from a later filed proxy or information statement involving the election of directors) to file a Form 10–K amendment to update the summary to reflect the Part III information when that information is filed with the proxy or information statement? 7. Are there other cross-reference methods that we should allow in lieu of, or in addition to, hyperlinks? 8. Should we propose to amend other annual reporting forms, such as Form 20–F 18 filed by foreign private issuers, or Form 1–K 19 filed by issuers that have conducted a Regulation A offering,20 to expressly allow a summary similar to the approach we are adopting for Form 10–K? Would such revisions be useful given that our rules do not prohibit such registrants from voluntarily including a summary in their annual reports? With respect to any comments, we note that they are of greatest assistance if accompanied by supporting data and analysis of the issues addressed in those comments. rmajette on DSK2TPTVN1PROD with RULES III. Procedural and Other Matters The Administrative Procedure Act (‘‘APA’’) generally requires an agency to publish notice of a rulemaking in the Federal Register and provide an opportunity for public comment. This requirement does not apply, however, if the agency ‘‘for good cause finds . . . that notice and public procedure are impracticable, unnecessary, or contrary to the public interest.’’ 21 Because the amendment conforms the specified form to the requirements of a newly enacted statute, the FAST Act, and involves minimal exercise of discretion, the Commission finds that notice and summary, you still must provide that information in plain English.’’ 18 17 CFR 249.220f. 19 17 CFR 239.93. 20 17 CFR 230.251–230.263. 21 5 U.S.C. 553(b)(3)(B). VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 public comment are unnecessary.22 As discussed above, Section 72001 of the FAST Act directs the Commission, not later than 180 days after the date of enactment, to issue regulations to permit issuers to submit a summary page on Form 10–K, but only if each item on such summary page includes a cross-reference (by electronic link or otherwise) to the material contained in Form 10–K to which such item relates. The amendment to Form 10–K that we are adopting revises the form to make it consistent with this provision of the FAST Act by expressly providing that a registrant may, at its option, include a summary in its Form 10–K (subject to certain conditions), something that registrants currently are permitted to do under existing rules. For similar reasons, although the APA generally requires publication of a rule at least 30 days before its effective date, the Commission finds there is good cause for the amendment to take effect on June 9, 2016.23 IV. Economic Analysis As discussed above, we are amending Form 10–K to implement Section 72001 of the FAST Act. The interim final amendment will provide that a registrant may, at its option, include a summary in its Form 10–K provided that each item in the summary includes a cross-reference by hyperlink to the material contained in the registrant’s Form 10–K to which such item relates. Under the amendment, a registrant will have the flexibility to determine the content of the summary and its length. We are sensitive to the costs and benefits of the amendment.24 In this economic analysis, we examine the existing baseline, which consists of the current regulatory framework and market practices, and discuss the potential benefits and costs of the 22 This finding also satisfies the requirements of 5 U.S.C. 808(2), allowing the amendment to become effective notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency finds that notice and public comment are impractical, unnecessary or contrary to the public interest, a rule shall take effect at such time as the federal agency promulgating the rule determines). The amendment also does not require analysis under the Regulatory Flexibility Act. See 5 U.S.C. 604(a) (requiring a final regulatory flexibility analysis only for rules required by the APA or other law to undergo notice and comment). 23 See 5 U.S.C. 553(d)(3). 24 Exchange Act Section 23(a)(2) requires us, when adopting rules, to consider the impact that any new rule would have on competition. In addition, Section 3(f) of the Exchange Act directs us, when engaging in rulemaking that requires us to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 amendment, relative to this baseline, and its potential effects on efficiency, competition, and capital formation. We also consider the potential costs and benefits of reasonable alternatives to the amendment. Where practicable, we attempt to quantify the economic effects of the amendment; however, in certain cases, we are unable to do so because we lack the necessary data. We do, however, provide a qualitative assessment of the likely economic effects. A. Introduction As discussed above, new Item 16 to Form 10–K provides that a registrant may, at its option, include a summary in its Form 10–K provided that each item in the summary includes a hyperlink to the detailed information in the registrant’s Form 10–K to which such item relates. In light of the varied nature of registrants’ size and operations, the amendment will provide registrants with flexibility in preparing the summary. The amendment does not prescribe the length of the summary, specify the Form 10–K disclosure items that should be covered in the summary, or dictate where the summary must appear in the Form 10–K. A registrant may decide which items to summarize as long as the information is presented fairly and accurately. A summary should provide more information than a table of contents, which is often included in Form 10–K and generally shows the complete organizational structure of Form 10–K by listing each disclosure item without a summary of the disclosure. A summary with hyperlinked crossreferences will allow users to easily locate the corresponding items in Form 10–K where the disclosure is fully presented, with the potential effect of enhancing the ability of investors and other users of the disclosure to process relevant information and/or reducing their processing time and search costs. B. Baseline and Affected Parties The amendment will potentially affect all registrants subject to Section 13 or 15(d) of the Exchange Act that are required to file an annual report on Form 10–K. However, given that current rules do not prohibit a registrant from voluntarily including a summary in its Form 10–K, the amendment likely will not have a substantial impact on the disclosure practices of registrants and on the information processing ability of investors and other users of the disclosure. In particular, we expect that registrants that do not currently include a summary in their Form 10–Ks will not E:\FR\FM\09JNR1.SGM 09JNR1 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations rmajette on DSK2TPTVN1PROD with RULES be likely to begin doing so in response to the amendment. Also, registrants that currently include a summary in their Form 10–K with a hyperlink for each disclosure topic in the summary to the related material contained in their Form 10–K will not be affected by the amendment because this practice will be in compliance with the hyperlink requirement. Among the registrants that are required to file a Form 10–K, the amendment will affect registrants that currently include a summary in their Form 10–Ks and that (1) do not crossreference items; (2) use cross-references other than hyperlinks; or (3) use hyperlinks but not for all disclosure topics included in the summary. Under the amendment, if these registrants chose to continue to include a summary in their Form 10–K, they will be required to include hyperlinks to each disclosure topic that is mentioned. We estimate that, in calendar year 2015, we received 7,844 Form 10–K filings. To draw a baseline indicative of the current disclosure practices among Form 10–K filers, we selected a random sample of 150 of these filings to review. Although small, the random sample was representative of the overall 2015 population of Form 10–K filers and consisted of 42 large accelerated filers, 29 accelerated filers, 27 non-accelerated filers, and 52 smaller reporting companies. None of the filings in the sample included a summary. A large majority (70%) of the 150 sampled filings included a table of contents that was fully hyperlinked to the corresponding items. Due to the greater complexity of their operations, larger registrants generally have more extensive disclosures that are reflected in lengthier Form 10–Ks and may be more inclined to include a summary to assist investors and other users in navigating their filings.25 Since we did not find any registrants in the random sample that included a summary in their Form 10–K, we also reviewed the most recent Form 10–K filed by each of the companies on the Fortune 100 list, which includes the largest 100 U.S. companies.26 Of these companies, we found one large accelerated filer that included a 25 In addition to structural complexity, there may be other reasons for the length of disclosure documents. One study argues that firms may try to obscure mandated earnings-relevant information by burying the results in longer documents. Additionally, litigation risk may create an incentive to disclose information whether it is useful or not. See Tim Loughran & Bill McDonald, Measuring Readability in Financial Disclosures, 69 J. of FIN. 1643¥1671 (2014). 26 Eight entities included in the Fortune 100 list are privately-held companies; therefore, no Form 10–K was available for them. VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 summary in its Form 10–K. This summary provided an overview of several disclosure topics with crossreferences, but not hyperlinks, to the more detailed discussion contained in the Form 10–K. While we found only one registrant that included a summary in its most recent Form 10–K, we found that a large majority of the companies (87%) included a table of contents that was fully hyperlinked to the corresponding items. There may be several reasons why a summary is not widely used in Form 10–Ks. As with any other voluntary disclosure, registrants presumably weigh the potential incremental disclosure costs, including any liability considerations, against the potential benefits associated with including a summary in a Form 10–K. Among other factors, the perceived net benefit will depend on the presence of alternative disclosures that serve a similar purpose as a summary and on investor interest in such summary. For example, a table of contents may already provide an outline of the Form 10–K and indicate where investors can find additional information in the document. In conclusion, based on our analysis of two relatively small samples of Form 10–K filings, it appears that the use of a summary in Form 10–Ks is currently extremely limited. While we cannot draw definite conclusions on the current use of a summary or on the current use of hyperlinks in summaries for the entire population of Form 10–K filers due to the size of the samples in our analysis, we believe that the amendment is likely to affect a limited number of Form 10–K filers that currently opt to include a summary in their Form 10–K. As a result of the hyperlink requirement, these filers will need to include a hyperlink for each disclosure topic that is not currently hyperlinked. C. Potential Economic Effects As noted above, Section 72001 of the FAST Act directs the Commission to issue regulations to permit registrants to submit a summary on Form 10–K with cross-references to the related discussion in the report. In implementing this mandate, the amendment will provide that registrants may include a summary in their Form 10–K if each item in the summary includes a hyperlink to the related material contained in the Form 10–K to which such item relates. Relative to cross-references that supply users with only a page reference to the specific Form 10–K items, hyperlinks will not only supply the location but also allow PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 37135 users to reach that location more easily and quickly. By presenting an overview of the information contained in Form 10–K, a summary with hyperlinks could make disclosure more effective by enhancing the ability of investors and other users to process relevant information and/or by reducing their processing time and search costs. A summary can be particularly useful to investors and other users in the case of more complex 27 and larger 28 Form 10–Ks. Academic literature has examined the readability of Form 10 Ks and suggested that concisely written documents are more likely to be read, and their information more effectively incorporated into stock prices, compared to longer Form 10 Ks.29 To the extent that a summary contains a concise overview of the information included in the more detailed disclosure items, the usefulness of the summary for investors may translate into potential positive effects on allocative efficiency and capital formation for registrants who opt to include it.30 This, in turn, may have positive effects on competition for registrants, relative to, for example, registrants who do not opt to include a summary. For example, a summary could increase investors’ interest in the business of a registrant because it may attract investors who otherwise would not be inclined to read the more detailed and lengthy information in the full Form 10–K. We 27 See Feng Li, Annual Report Readability, Current Earnings, and Earnings Persistence, 45 J. of ACCT. & ECON. 221–47 (2008). Using the Fog index and word count of Form 10 Ks, the author found that firms with annual reports that are easier to read have more persistent positive earnings and argues that firm managers may try to hide poor future earnings from investors by increasing the complexity of their written documents. The Fog index is a commonly used measure of the readability of a document. 28 See Loughran & McDonald, supra note 25. While word count and file size are highly correlated, the authors found there is evidence that Form 10–K file size (in megabytes) is a better inverse proxy for readability than a commonly used metric of readability like the Fog index. Larger Form 10–Ks are significantly associated with high return volatility, earnings forecast errors, and earnings forecast dispersion, after controlling for other variables such as firm size, book-to-market, past volatility, industry effects, and prior stock performance. 29 See Haifeng You & Xiao-jun Zhang, Financial Reporting Complexity and Investor Under-Reaction to 10–K Information, 14 REV. of ACCT. STUD. 559¥86 (2009). Using the number of words in a Form 10–K as a measure of financial reporting complexity, the authors found that firms above the annual median word count have a delayed stock market reaction over the following 12 months. 30 See Alastair Lawrence, Individual Investors and Financial Disclosure, 56 J. of ACCT. & ECON. 130¥47 (2013). Using detailed data of individual investors, this study shows that, on average, individuals invest more in firms with clear and concise financial disclosures. E:\FR\FM\09JNR1.SGM 09JNR1 rmajette on DSK2TPTVN1PROD with RULES 37136 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations note that, if users were to rely only on the summary to make investment decisions without considering the more extensive disclosure provided elsewhere in the Form 10–K or other disclosure documents of the registrant, this could lead to less informed investment decisions with a corresponding decrease in allocative efficiency. Overall, relative to the current baseline, we expect that the amendment will have incremental positive effects on efficiency, competition, and capital formation, although, for the reasons discussed above, we do not expect these effects to be particularly significant. Permitting registrants to determine the content, length, and location of a summary will enable them to tailor the format and presentation of the summary to best suit the specific aspects of their business and operational and financial results. It also will enable registrants to focus on topics or items they consider important to communicate to investors, subject to the overall requirement to present the summary fairly and accurately. While a summary is potentially useful for investors and registrants, registrants who include a summary in their Form 10–Ks will incur increased disclosure costs to prepare the summary. As discussed above, given that Form 10–K filers can already voluntarily include a summary, we expect that, as a result of the amendment, registrants will not significantly change their disclosure practices by electing to include a summary if they currently do not. Relative to the current baseline, we expect the potential benefits and costs stemming from the amendment to be limited and primarily related to those registrants—and their investors—who already include a summary in their Form 10–K but do not currently hyperlink or hyperlink only in part. Registrants that have voluntarily included a summary in the past and have not hyperlinked the items in the summary to the relevant sections in the Form 10–K will incur compliance costs to add hyperlinks. There are potential benefits from adding cross-references to the Form 10– K summary. A summary that briefly discusses items in the Form 10–K without any type of cross-references may disconnect the information in the summary from the disclosure contained in other parts of Form 10–K. The required hyperlinks will serve not only as a reminder for investors that a summary complements the more extensive disclosure presented in other parts of the document, but also as a compass for users to navigate the document more easily and quickly. The VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 required hyperlinks will easily direct users to a particular item, allowing users to avoid searching the Form 10–K in its entirety, thereby significantly reducing their search costs. Relative to other types of crossreferences that registrants may currently use, such as a footnote or plain text that points to a certain page number or location in the document, the inclusion of hyperlinks should direct users to relevant parts of Form 10–K more easily and quickly. To the extent that hyperlinks are implemented properly, they are able to automatically take the reader to that document or section. Cross-referencing through hyperlinks should make it easier for users to navigate the disclosure and decrease their search time and costs. Finally, requiring hyperlinks for all topics in a summary that currently has only partial hyperlinks will prevent registrants from selectively steering investors and other users toward particular sections in the Form 10–K. D. Alternatives We considered three alternatives to the amendment. First, instead of providing registrants with the option of including a summary in their Form 10– K, we could have required all registrants to include a summary. By requiring a summary, investors and users could more extensively benefit from the potential usefulness of the summary. In particular, as discussed above, a summary could enhance investors’ ability to process relevant material information in the filing. To the extent that a required summary contains useful and concise information, it could translate to potential positive effects on allocative efficiency for a greater number of registrants than under a voluntary approach. These potential benefits could be particularly relevant in the case of registrants with more complex operations that typically file larger reports that investors may find more time-consuming to read. They may be less relevant in the case of smaller registrants that typically have simpler operations and shorter Form 10–Ks. Consequently, requiring a mandatory summary for all registrants may impose additional compliance costs that are not justified by the overall benefits to investors and registrants, although the flexibility to determine the format of the summary could mitigate these additional compliance costs. Second, instead of providing registrants with the flexibility to determine length, content, and location of the summary in Form 10–K, we could have prescribed a specific format of the summary. This could achieve PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 consistency across filings and may enable users to compare the summaries of multiple registrants more efficiently. A specific format may also ease the preparation of a summary for some registrants, thereby encouraging them to provide a voluntary summary in their Form 10–Ks. At the same time, prescribing a specific format may discourage registrants from including a summary in their Form 10–K if they find the format not useful for their specific circumstances. Further, if the prescribed format includes sections that are unnecessary to effectively assess the registrant, it could detract from, rather than facilitate, investors’ ability to process information efficiently. Third, instead of requiring hyperlinks, we could have required registrants to use any type of cross-references, electronic or otherwise, to the extent that it would serve the function of locating the corresponding material in the Form 10–K.31 This alternative would allow greater flexibility to registrants to use either hyperlinks or non-electronic cross-references, such as footnotes or plain text that points to a certain page number or other location in the document, or a combination of the two types in the summary. However, to the extent that registrants choose to use non-electronic cross-references under this alternative, the ability of investors to navigate the disclosure contained in the Form 10–K would be diminished relative to the proposal. V. Paperwork Reduction Act A. Background Certain provisions of Form 10–K that will be affected by the interim final amendment contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (‘‘PRA’’).32 The Commission is submitting the interim final amendment to the Office of Management and Budget (‘‘OMB’’) for review in accordance with the PRA.33 The title for the collections of information is: ‘‘Form 10–K’’ (OMB Control No. 3235– 0063). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information requirement unless it displays a currently valid OMB control number. Compliance with the information 31 Section 72001 of the FAST Act requires that each item on the summary page include a ‘‘crossreference’’ to the material contained in the Form 10–K, but the statute does not mandate any particular type of cross-reference. 32 44 U.S.C. 3501 et seq. 33 44 U.S.C. 3507(d) and 5 CFR 1320.11. E:\FR\FM\09JNR1.SGM 09JNR1 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations collections is mandatory. Responses to the information collections are not kept confidential and there is no mandatory retention period for the information disclosed. Form 10–K was adopted under the Exchange Act and sets forth the disclosure requirements for annual reports filed by registrants to help investors make informed investment decisions. The hours and costs associated with preparing and filing Form 10–K constitute reporting and cost burdens imposed by each collection of information. B. Summary of the Amendment As described in more detail above, we are adopting an interim final amendment to Form 10–K to implement Section 72001 of the FAST Act. We are amending Form 10–K to add new Item 16. This new item will explicitly allow a registrant, at its option, to include a summary in the Form 10–K. Each disclosure topic included in the summary is required to contain a hyperlink to the related, more detailed disclosure item in the Form 10–K. Under the interim final amendment, a registrant has the flexibility to determine the content and the length of the summary. C. Burden and Cost Estimates Related to the Amendment We anticipate that new Item 16 of Form 10–K will increase the burdens and costs for companies that elect to prepare a summary. We derived our burden hour and cost estimates by estimating the average amount of time it would take a registrant to prepare and review the summary, as well as the average hourly rate for outside professionals who assist with such preparation. In addition, our burden estimates are based on several assumptions. First, we assumed that registrants that elect to prepare a summary will not summarize every item in the Form 10– K. Therefore, to estimate the average burden hours of the interim final amendment, we have looked to the burden estimates carried internally by registrants for Form 10,34 an Exchange Act registration form that requires many of same item disclosures as does Form 10–K. For purposes of the PRA, we have estimated the total burden per response for preparing and filing Form 10 to be 215 hours and that 25% of that burden (53.75 hours) is carried internally by the registrant. We estimate that the burden to prepare the Form 10–K summary would be less than that required to prepare the Form 10 because the summary would call for less information than required by Form 10. We estimate that the average incremental burden for a registrant to prepare the summary would be 50 hours. This estimate represents the average burden for all registrants, both large and small. In deriving our estimates, we recognize that the burdens will likely vary among individual registrants based on a number of factors, 37137 including the size and complexity of their operations. We believe that some registrants will experience costs in excess of this average in the first year of compliance with the amendments and some registrants may experience less than the average costs. Second, we assumed that 10% of Form 10–K filers would elect to prepare a summary. The number of registrants that would choose to do a summary, however, is uncertain. We request comment and supporting empirical data, for purposes of the PRA, on the number of registrants that are expected to prepare a summary as a result of the interim final amendment. The table below shows the total annual compliance burden, in hours and in costs, of the collection of information resulting from the interim final amendment.35 The burden estimates were calculated by multiplying the estimated number of responses by the estimated average amount of time it would take an issuer to prepare and review a Form 10–K summary. The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried by the issuer internally is reflected in hours. For purposes of the PRA, we estimate that 75% of the burden of preparation of Form 10–K is carried by the registrant internally and that 25% of the burden of preparation is carried by outside professionals retained by the registrant at an average cost of $400 per hour.36 TABLE 1—INCREMENTAL PAPERWORK BURDEN UNDER THE INTERIM FINAL AMENDMENT Estimated number of affected responses Incremental burden hours/form Total incremental burden hours 75% company 25% professional Professional costs (A) (B) (C) = (A) * (B) (D) = (C) * 0.75 (E) = (C) * 0.25 (F) = (E) * $400 37 814 50 40,700 30,525 10,175 $4,070,000 Form 10–K Summary ........................... rmajette on DSK2TPTVN1PROD with RULES D. Request for Comment We request comments in order to evaluate: (1) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information would have practical utility; (2) the accuracy of our estimate of the burden of the collection of 34 17 CFR 249.210. convenience, the estimated hour and cost burdens in the table have been rounded to the nearest whole number. 36 We recognize that the costs of retaining outside professionals may vary depending on the nature of 35 For VerDate Sep<11>2014 14:17 Jun 08, 2016 Jkt 238001 information; (3) whether there are ways to enhance the quality, utility and clarity of the information to be collected; and (4) whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology.38 Specifically, we request comment on the estimated number or percentage of registrants that are likely to include a summary in their Form 10– K. Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing the burdens. Persons who desire to submit comments on the collection of the professional services, but for purposes of this PRA analysis we estimate that such costs will be an average of $400 per hour. This estimate is based on consultations with several registrants, law firms and other persons who regularly assist registrants in preparing and filing periodic reports with the Commission. 37 This number is our estimate of the number of registrants that will choose to include a summary in their Form 10–K. 38 We request comment pursuant to 44 U.S.C. 3506(c)(2)(B). PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\09JNR1.SGM 09JNR1 37138 Federal Register / Vol. 81, No. 111 / Thursday, June 9, 2016 / Rules and Regulations information requirements should direct their comments to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a copy of the comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090, with reference to File No. S7–09–16. Requests for materials submitted to the OMB by us with regard to these collections of information should be in writing, refer to File No. S7–09–16 and be submitted to the Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington DC 20549–0213. Interested persons are encouraged to send comments to the OMB by July 11, 2016. VI. Statutory Authority Section 249.330 is also issued under secs. 3(a), 406, and 407, Pub. L. 107–204, 116 Stat. 745. Section 249.331 is also issued under 15 U.S.C. 78j–1, 7202, 7233, 7241, 7264, 7265; and 18 U.S.C. 1350. Section 249.617 is also issued under Pub. L. 111–203, § 939, 939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o–7 note). Section 249.819 is also issued under 12 U.S.C. 5465(e). Section 249.1400 is also issued under sec. 943, Pub. L. 111–203, 124 Stat. 1376. Section 249.1800 is also issued under Pub. L. 111.203, § 922(a), 124 Stat 1841 (2010). Section 249.1801 is also issued under Pub. L. 111.203, § 922(a), 124 Stat 1841 (2010). 2. Amend Form 10–K (referenced in § 249.310) by adding new Item 16 to Part IV to read as follows: ■ Note: The text of Form 10–K does not, and this amendment will not, appear in the Code of Federal Regulations. The amendment contained in this release is being adopted under the authority set forth in Sections 3, 12, 13, 15(d), and 23(a) of the Exchange Act, and Section 72001 of the FAST Act. UNITED STATES SECURITIES AND EXCHANGE COMMISSION List of Subjects in 17 CFR Part 249 * Reporting and recordkeeping requirements, Securities. Part IV Text of the Interim Final Amendment Item 16. Form 10–K Summary. For the reasons set out in the preamble, the Commission is amending Title 17, Chapter II of the Code of Federal Regulations as follows: Registrants may, at their option, include a summary of information required by this form, but only if each item in the summary is presented fairly and accurately and includes a hyperlink to the material contained in this form to which such item relates, including to materials contained in any exhibits filed with the form. Instruction: The summary shall refer only to Form 10–K disclosure that is included in the form at the time it is filed. A registrant need not update the summary to reflect information required by Part III of Form 10–K that the registrant incorporates by reference from a proxy or information statement filed after the Form 10–K, but must state in the summary that the summary does not include Part III information because that information will be incorporated by reference from a later filed proxy or information statement involving the election of directors. * * * * * 1. The authority citation for part 249 is revised to read as follows: rmajette on DSK2TPTVN1PROD with RULES ■ Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111–203, 124 Stat. 1904; Sec. 102(a)(3), Pub. L. 112–106, 126 Stat. 309 (2012); Sec. 107, Pub. L. 112–106, 126 Stat. 313 (2012), and Sec. 72001, Pub. L. 114–94, 129 Stat. 1312 (2015), unless otherwise noted. Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 306(a), 401(a), 401(b), 406 and 407, Pub. L. 107–204, 116 Stat. 745. Section 249.240f is also issued under secs. 3(a), 202, 208, 302, 306(a), 401(a), 406 and 407, Pub. L. 107–204, 116 Stat. 745. Section 249.308 is also issued under 15 U.S.C. 80a–29 and 80a–37. Section 249.308a is also issued under secs. 3(a) and 302, Pub. L. 107–204, 116 Stat. 745. Section 249.308b is also issued under secs. 3(a) and 302, Pub. L. 107–204, 116 Stat. 745. Section 249.310 is also issued under secs. 3(a), 202, 208, 302, 406 and 407, Pub. L. 107– 204, 116 Stat. 745. Section 249.326(T) also issued under section 13(f)(1) (15 U.S.C. 78m(f)(1)). 14:17 Jun 08, 2016 Jkt 238001 FORM 10–K * PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 VerDate Sep<11>2014 Washington, DC 20549 * * * * * * * * By the Commission. Dated: June 1, 2016. Brent J. Fields, Secretary. [FR Doc. 2016–13328 Filed 6–8–16; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 SOCIAL SECURITY ADMINISTRATION 20 CFR Parts 404 and 416 [Docket No. SSA–2006–0149] RIN 0960–AF58 Revised Medical Criteria for Evaluating Respiratory System Disorders Social Security Administration. Final rule. AGENCY: ACTION: We are revising the criteria in the Listing of Impairments (listings) that we use to evaluate claims involving respiratory disorders in adults and children under titles II and XVI of the Social Security Act (Act). The revisions reflect our program experience and advances in medical knowledge since we last comprehensively revised this body system in 1993, as well as comments we received from medical experts and the public. DATES: These final rules are effective October 7, 2016. FOR FURTHER INFORMATION CONTACT: Cheryl A. Williams, Office of Disability Policy, Social Security Administration, 6401 Security Boulevard, Baltimore, Maryland 21235–6401, (410) 965–1020. For information on eligibility or filing for benefits, call our national toll-free number, 1–800–772–1213, or TTY 1– 800–325–0778, or visit our Internet site, Social Security Online, at https:// www.socialsecurity.gov. SUPPLEMENTARY INFORMATION: SUMMARY: Background We are revising and making final the rules for evaluating respiratory disorders we proposed in a Notice of Proposed Rulemaking (NPRM) published in the Federal Register on February 4, 2013 (78 FR 7968). The preamble to the NPRM provided an explanation of the changes from the current rules and our reasons for proposing those changes. To the extent that we are adopting the proposed rules as published, we are not repeating that information here. You can view the NPRM by visiting www.regulations.gov and searching for document ‘‘SSA– 2006–0149–0024.’’ We are making a number of changes because of public comments we received in response to the NPRM. We explain those changes in our summary of public comments and our responses later in this preamble. We are also making minor editorial changes for clarity throughout these final rules. Why are we revising the listings for evaluating respiratory disorders? We are revising the listings for evaluating respiratory disorders to E:\FR\FM\09JNR1.SGM 09JNR1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 111 (Thursday, June 9, 2016)]
[Rules and Regulations]
[Pages 37132-37138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13328]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 249

[Release No. 34-77969; File No. S7-09-16]
RIN 3235-AL89

Form 10-K Summary

AGENCY: Securities and Exchange Commission.

ACTION: Interim final rule; request for comment.

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SUMMARY: We are adopting an interim final amendment to implement
Section 72001 of the Fixing America's Surface Transportation (``FAST'')
Act. The interim final amendment provides that a registrant may, at its
option, include a summary in its Form 10-K provided that each item in
the summary includes a cross-reference by hyperlink to the material
contained in the registrant's Form 10-K to which such item relates.

DATES:
Effective Date: The interim final rule is effective on June 9,
2016.
Comment Date: Comments should be received on or before July 11,
2016.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/interim-final-temp.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number S7-09-16 on the subject line; or
Use the Federal eRulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-09-16. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/interim-final-temp.shtml).
Comments are also available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. All comments received will be posted without change; we do
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: N. Sean Harrison, Special Counsel, at
(202) 551-3430, in the Office of Rulemaking, Division of Corporation
Finance, U.S. Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting an interim final amendment
to Form 10-K \1\ under the Securities Exchange Act of 1934.\2\
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\1\ 17 CFR 249.310.
\2\ 15 U.S.C. 78a et seq.
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I. Introduction

We are adopting an interim final amendment to Form 10-K that
implements Section 72001 of the FAST Act,\3\ which became law on
December 4, 2015. Section 72001 of the FAST Act directs the Commission,
not later than 180 days after the date of enactment, to issue
regulations to permit ``issuers'' \4\ to submit a ``summary page'' \5\
on Form 10-K, but only if each item on such summary page includes a
cross-reference (by electronic link or otherwise) to the material
contained in Form 10-K to which such item relates.
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\3\ Public Law 114-94, 129 Stat. 1312 (Dec. 4, 2015).
\4\ We use the terms ``issuer'' and ``registrant''
interchangeably throughout this release to refer to a company that
is subject to Section 13 [15 U.S.C. 78m] or 15(d) of the Exchange
Act [15 U.S.C. 78o(d)] and is required to file an annual report on
Form 10-K.
\5\ As used in this release, the term ``summary page'' should
not be construed to mean that the summary needs to be a single page,
or of any specific length.
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II. Discussion of Amendment

Although our current rules do not prohibit a registrant from
including voluntary information, such as a

[[Page 37133]]

summary, in its Form 10-K,\6\ we are amending Part IV of Form 10-K \7\
to add new Item 16. This new item will expressly allow a registrant, at
its option, to include a summary in the Form 10-K. To implement the
statutory requirement that each item in the summary be accompanied by
an electronic or other cross-reference, new Item 16 requires that each
summary topic be hyperlinked to the related, more detailed disclosure
item in the Form 10-K.
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\6\ Voluntary information included in Exchange Act filings is
subject to the antifraud provisions of the federal securities laws
and the officer certifications required by Exchange Act Rules 13a-
14(a) and 15d-14(a) [17 CFR 240.13a-14(a) and 240.15d-14(a)].
\7\ Part IV of Form 10-K sets forth the requirements for
financial statement schedules, exhibits and certain supplemental
information to be furnished to the Commission.
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In light of the varied nature of registrants' size and operations,
we believe that registrants should have the flexibility to determine
how best to prepare the summary. Accordingly, the amendment does not
prescribe the length of the summary (other than to state that the
summary shall be brief), specify the Form 10-K disclosure items that
should be covered by the summary,\8\ or dictate where the summary must
appear in the Form 10-K.
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\8\ Form 10-K is organized in four parts with each part
containing distinct disclosure requirements. Part I (Items 1-4)
contains disclosure requirements that relate to, among other things,
the registrant's business, risk factors, properties, legal
proceedings, and mine safety disclosure, if applicable. Part II
(Items 5-9B) contains disclosure requirements that relate to market
information, selected financial data, management's discussion and
analysis of financial condition and results of operations
(``MD&A''), quantitative and qualitative disclosures about market
risk, financial statements and supplementary data, a description of
changes in and disagreements with accountants on accounting and
financial disclosure, controls and procedures and other information.
Part III (Items 10-14) contains disclosure requirements that relate
to directors and executive officers, management remuneration,
beneficial ownership, related party transactions and principal
accountants' fees and services and other information. Lastly, Part
IV (Item 15, signatures and supplemental information) contains
requirements that relate to financial statement schedules and
exhibits.
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We recognize that it might not be practicable or necessary to
summarize every Form 10-K disclosure item. The amendment is principles-
based and affords a registrant choosing to include a summary the
flexibility to decide which items to summarize,\9\ as long as the
information is presented fairly and accurately.
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\9\ The flexible and non-prescriptive nature of new Item 16 is
similar to other principles-based requirements under our rules, such
as Item 503 Regulation S-K [17 CFR 229.503] and Item 1001 of
Regulation M-A [17 CFR 229.1001]. As set forth below in the Request
for Comment, we solicit and encourage comment on whether further
guidance on preparing the summary should be provided.
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We are also including an instruction in Item 16 of Form 10-K that
addresses information incorporated by reference into the Form 10-K that
a registrant may choose to summarize. Exchange Act Rule 12b-23 allows
registrants to incorporate information by reference in answer, or
partial answer, to any item of an Exchange Act registration statement
or report subject to certain conditions.\10\ Generally, the
incorporated information must be filed as an exhibit to the
registration statement or report.\11\ Under General Instruction G to
Form 10-K, a registrant may incorporate by reference the information
required by Parts I or II of Form 10-K from the registrant's annual
report to security holders.\12\ The information required by Part III of
Form 10-K also may be incorporated by reference from a proxy or
information statement involving the election of directors, if filed
within 120 days of the end of the fiscal year.\13\
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\10\ 17 CFR 240.12b-23.
\11\ Rule 12b-23(a)(3)(i) [17CFR 240.12b-23(a)(3)(i)] provides
an exception that does not require a proxy or information statement
incorporated by reference in response to Part III of Form 10-K to be
filed as an exhibit.
\12\ Information incorporated from the annual report to security
holders to fulfill the requirements of Part I of Form 10-K must
contain the information required by Items 1-3 of Part I of Form 10-K
to the extent applicable. See Note 1 to General Instruction G(2) to
Form 10-K.
\13\ See Note 2 to General Instruction G(2) to Form 10-K.
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As stated above, the interim final amendment to Form 10-K requires
the summary to include hyperlinks to the related, more detailed
disclosure item in the Form 10-K, regardless of whether the more
detailed disclosure appears in the sections of the Form 10-K that
follow the summary or in a Form 10-K exhibit. Currently, registrants
can hyperlink to different sections within the same document, as well
as to specific sections of exhibits that are part of the same filing.
Therefore, the interim final amendment requires registrants
electing to prepare a Form 10-K summary that discusses information that
is incorporated by reference into the Form 10-K and for which an
exhibit is filed with the form to include a hyperlink from the summary
to the discussion in the accompanying exhibit. Under the interim final
amendment, a registrant choosing to include a summary will only be able
to summarize information that is included in the Form 10-K at the time
the form is filed, and will not have to file a Form 10-K amendment to
summarize Part III information that is incorporated by reference from a
proxy or information statement that will be filed after the date that
the registrant files its Form 10-K.\14\ In that case, however, the
registrant must indicate that the summary omits the Part III
information.
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\14\ See Instruction 1 to new Item 16 of Form 10-K. In addition,
if the Part III information that is incorporated by reference
contains a summary, such as commonly provided in proxy statements
for executive compensation disclosure, that summary need not include
hyperlinks.
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Request for Comment

We request and encourage any interested person to submit comments
on any aspect of the interim final amendment, other matters that might
have an impact on the amendment, and any suggestions for further
revisions. In addition, we seek comment on the following:
1. Are companies and investors likely to find a Form 10-K summary
useful? If so, should we propose mandating a summary? \15\
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\15\ In 2008, the Advisory Committee on Improvements to
Financial Reporting issued to the Commission a report that, among
other things, recommended an executive summary in the forepart of a
company's annual report on Form 10-K (with material updates in
quarterly reports on Form 10-Q) that would describe concisely the
most important themes or other significant matters with which
management is primarily concerned, along with a page index showing
where investors could find more detailed information in the
document. See Final Report of the Advisory Committee on Improvements
to Financial Reporting to the United States Securities and Exchange
Commission (Aug. 1, 2008), available at https://www.sec.gov/about/offices/oca/acifr/acifr-finalreport.pdf.
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2. Would it be helpful to EDGAR users for the Form 10-K summary or
a link to the summary to be displayed on a registrant's EDGAR search
results landing page? \16\
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\16\ We are considering ways to further enhance the presentation
and usability of the Form 10-K summary. In this regard, we could
require registrants to include HTML tags to identify the Form 10-K
summary in their EDGAR submissions. This would make it possible for
EDGAR to extract the summary from the Form 10-K, so that the
information could be included on the registrant's search results
EDGAR landing page. This could allow investors to more easily access
the information.
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3. Should we impose a length limitation on the summary? If so, what
limitation would be appropriate (e.g., a page limit, word limit,
character limit)?
4. Should we provide further guidance on preparation of the
summary? For example, should we include language similar to Item 503(a)
of Regulation S-K, which covers a prospectus summary? \17\
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\17\ Among other provisions, Item 503(a) states ``The summary
should be brief. The summary should not contain, and is not required
to contain, all of the detailed information in the prospectus. If
you provide summary business or financial information, even if you
do not caption it as a summary, you still must provide that
information in plain English.''

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[[Page 37134]]

5. Should we require that the summary appear at the beginning of
the Form 10-K? Should we require certain content or a specific format
for the Form 10-K summary? For example, should we propose to require
registrants choosing to prepare a summary to include specified Form 10-
K items, such as the MD&A? Are there some items that registrants should
not be permitted to include in a summary? If so, which items should be
required to be included in, or excluded from, the summary?
6. Should we require registrants that cannot include a summary of
the Part III information (because that information will be incorporated
by reference from a later filed proxy or information statement
involving the election of directors) to file a Form 10-K amendment to
update the summary to reflect the Part III information when that
information is filed with the proxy or information statement?
7. Are there other cross-reference methods that we should allow in
lieu of, or in addition to, hyperlinks?
8. Should we propose to amend other annual reporting forms, such as
Form 20-F \18\ filed by foreign private issuers, or Form 1-K \19\ filed
by issuers that have conducted a Regulation A offering,\20\ to
expressly allow a summary similar to the approach we are adopting for
Form 10-K? Would such revisions be useful given that our rules do not
prohibit such registrants from voluntarily including a summary in their
annual reports?
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\18\ 17 CFR 249.220f.
\19\ 17 CFR 239.93.
\20\ 17 CFR 230.251-230.263.
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With respect to any comments, we note that they are of greatest
assistance if accompanied by supporting data and analysis of the issues
addressed in those comments.

III. Procedural and Other Matters

The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a rulemaking in the Federal Register and
provide an opportunity for public comment. This requirement does not
apply, however, if the agency ``for good cause finds . . . that notice
and public procedure are impracticable, unnecessary, or contrary to the
public interest.'' \21\ Because the amendment conforms the specified
form to the requirements of a newly enacted statute, the FAST Act, and
involves minimal exercise of discretion, the Commission finds that
notice and public comment are unnecessary.\22\ As discussed above,
Section 72001 of the FAST Act directs the Commission, not later than
180 days after the date of enactment, to issue regulations to permit
issuers to submit a summary page on Form 10-K, but only if each item on
such summary page includes a cross-reference (by electronic link or
otherwise) to the material contained in Form 10-K to which such item
relates. The amendment to Form 10-K that we are adopting revises the
form to make it consistent with this provision of the FAST Act by
expressly providing that a registrant may, at its option, include a
summary in its Form 10-K (subject to certain conditions), something
that registrants currently are permitted to do under existing rules.
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\21\ 5 U.S.C. 553(b)(3)(B).
\22\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the amendment to become effective notwithstanding
the requirement of 5 U.S.C. 801 (if a federal agency finds that
notice and public comment are impractical, unnecessary or contrary
to the public interest, a rule shall take effect at such time as the
federal agency promulgating the rule determines). The amendment also
does not require analysis under the Regulatory Flexibility Act. See
5 U.S.C. 604(a) (requiring a final regulatory flexibility analysis
only for rules required by the APA or other law to undergo notice
and comment).
---------------------------------------------------------------------------

For similar reasons, although the APA generally requires
publication of a rule at least 30 days before its effective date, the
Commission finds there is good cause for the amendment to take effect
on June 9, 2016.\23\
---------------------------------------------------------------------------

\23\ See 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------

IV. Economic Analysis

As discussed above, we are amending Form 10-K to implement Section
72001 of the FAST Act. The interim final amendment will provide that a
registrant may, at its option, include a summary in its Form 10-K
provided that each item in the summary includes a cross-reference by
hyperlink to the material contained in the registrant's Form 10-K to
which such item relates. Under the amendment, a registrant will have
the flexibility to determine the content of the summary and its length.
We are sensitive to the costs and benefits of the amendment.\24\ In
this economic analysis, we examine the existing baseline, which
consists of the current regulatory framework and market practices, and
discuss the potential benefits and costs of the amendment, relative to
this baseline, and its potential effects on efficiency, competition,
and capital formation. We also consider the potential costs and
benefits of reasonable alternatives to the amendment.
---------------------------------------------------------------------------

\24\ Exchange Act Section 23(a)(2) requires us, when adopting
rules, to consider the impact that any new rule would have on
competition. In addition, Section 3(f) of the Exchange Act directs
us, when engaging in rulemaking that requires us to consider or
determine whether an action is necessary or appropriate in the
public interest, to consider, in addition to the protection of
investors, whether the action will promote efficiency, competition,
and capital formation.
---------------------------------------------------------------------------

Where practicable, we attempt to quantify the economic effects of
the amendment; however, in certain cases, we are unable to do so
because we lack the necessary data. We do, however, provide a
qualitative assessment of the likely economic effects.

A. Introduction

As discussed above, new Item 16 to Form 10-K provides that a
registrant may, at its option, include a summary in its Form 10-K
provided that each item in the summary includes a hyperlink to the
detailed information in the registrant's Form 10-K to which such item
relates. In light of the varied nature of registrants' size and
operations, the amendment will provide registrants with flexibility in
preparing the summary. The amendment does not prescribe the length of
the summary, specify the Form 10-K disclosure items that should be
covered in the summary, or dictate where the summary must appear in the
Form 10-K.
A registrant may decide which items to summarize as long as the
information is presented fairly and accurately. A summary should
provide more information than a table of contents, which is often
included in Form 10-K and generally shows the complete organizational
structure of Form 10-K by listing each disclosure item without a
summary of the disclosure. A summary with hyperlinked cross-references
will allow users to easily locate the corresponding items in Form 10-K
where the disclosure is fully presented, with the potential effect of
enhancing the ability of investors and other users of the disclosure to
process relevant information and/or reducing their processing time and
search costs.

B. Baseline and Affected Parties

The amendment will potentially affect all registrants subject to
Section 13 or 15(d) of the Exchange Act that are required to file an
annual report on Form 10-K. However, given that current rules do not
prohibit a registrant from voluntarily including a summary in its Form
10-K, the amendment likely will not have a substantial impact on the
disclosure practices of registrants and on the information processing
ability of investors and other users of the disclosure.
In particular, we expect that registrants that do not currently
include a summary in their Form 10-Ks will not

[[Page 37135]]

be likely to begin doing so in response to the amendment. Also,
registrants that currently include a summary in their Form 10-K with a
hyperlink for each disclosure topic in the summary to the related
material contained in their Form 10-K will not be affected by the
amendment because this practice will be in compliance with the
hyperlink requirement. Among the registrants that are required to file
a Form 10-K, the amendment will affect registrants that currently
include a summary in their Form 10-Ks and that (1) do not cross-
reference items; (2) use cross-references other than hyperlinks; or (3)
use hyperlinks but not for all disclosure topics included in the
summary. Under the amendment, if these registrants chose to continue to
include a summary in their Form 10-K, they will be required to include
hyperlinks to each disclosure topic that is mentioned.
We estimate that, in calendar year 2015, we received 7,844 Form 10-
K filings. To draw a baseline indicative of the current disclosure
practices among Form 10-K filers, we selected a random sample of 150 of
these filings to review. Although small, the random sample was
representative of the overall 2015 population of Form 10-K filers and
consisted of 42 large accelerated filers, 29 accelerated filers, 27
non-accelerated filers, and 52 smaller reporting companies. None of the
filings in the sample included a summary. A large majority (70%) of the
150 sampled filings included a table of contents that was fully
hyperlinked to the corresponding items.
Due to the greater complexity of their operations, larger
registrants generally have more extensive disclosures that are
reflected in lengthier Form 10-Ks and may be more inclined to include a
summary to assist investors and other users in navigating their
filings.\25\ Since we did not find any registrants in the random sample
that included a summary in their Form 10-K, we also reviewed the most
recent Form 10-K filed by each of the companies on the Fortune 100
list, which includes the largest 100 U.S. companies.\26\ Of these
companies, we found one large accelerated filer that included a summary
in its Form 10-K. This summary provided an overview of several
disclosure topics with cross-references, but not hyperlinks, to the
more detailed discussion contained in the Form 10-K. While we found
only one registrant that included a summary in its most recent Form 10-
K, we found that a large majority of the companies (87%) included a
table of contents that was fully hyperlinked to the corresponding
items.
---------------------------------------------------------------------------

\25\ In addition to structural complexity, there may be other
reasons for the length of disclosure documents. One study argues
that firms may try to obscure mandated earnings-relevant information
by burying the results in longer documents. Additionally, litigation
risk may create an incentive to disclose information whether it is
useful or not. See Tim Loughran & Bill McDonald, Measuring
Readability in Financial Disclosures, 69 J. of FIN. 1643-1671
(2014).
\26\ Eight entities included in the Fortune 100 list are
privately-held companies; therefore, no Form 10-K was available for
them.
---------------------------------------------------------------------------

There may be several reasons why a summary is not widely used in
Form 10-Ks. As with any other voluntary disclosure, registrants
presumably weigh the potential incremental disclosure costs, including
any liability considerations, against the potential benefits associated
with including a summary in a Form 10-K. Among other factors, the
perceived net benefit will depend on the presence of alternative
disclosures that serve a similar purpose as a summary and on investor
interest in such summary. For example, a table of contents may already
provide an outline of the Form 10-K and indicate where investors can
find additional information in the document.
In conclusion, based on our analysis of two relatively small
samples of Form 10-K filings, it appears that the use of a summary in
Form 10-Ks is currently extremely limited. While we cannot draw
definite conclusions on the current use of a summary or on the current
use of hyperlinks in summaries for the entire population of Form 10-K
filers due to the size of the samples in our analysis, we believe that
the amendment is likely to affect a limited number of Form 10-K filers
that currently opt to include a summary in their Form 10-K. As a result
of the hyperlink requirement, these filers will need to include a
hyperlink for each disclosure topic that is not currently hyperlinked.

C. Potential Economic Effects

As noted above, Section 72001 of the FAST Act directs the
Commission to issue regulations to permit registrants to submit a
summary on Form 10-K with cross-references to the related discussion in
the report. In implementing this mandate, the amendment will provide
that registrants may include a summary in their Form 10-K if each item
in the summary includes a hyperlink to the related material contained
in the Form 10-K to which such item relates. Relative to cross-
references that supply users with only a page reference to the specific
Form 10-K items, hyperlinks will not only supply the location but also
allow users to reach that location more easily and quickly.
By presenting an overview of the information contained in Form 10-
K, a summary with hyperlinks could make disclosure more effective by
enhancing the ability of investors and other users to process relevant
information and/or by reducing their processing time and search costs.
A summary can be particularly useful to investors and other users in
the case of more complex \27\ and larger \28\ Form 10-Ks. Academic
literature has examined the readability of Form 10 Ks and suggested
that concisely written documents are more likely to be read, and their
information more effectively incorporated into stock prices, compared
to longer Form 10 Ks.\29\ To the extent that a summary contains a
concise overview of the information included in the more detailed
disclosure items, the usefulness of the summary for investors may
translate into potential positive effects on allocative efficiency and
capital formation for registrants who opt to include it.\30\ This, in
turn, may have positive effects on competition for registrants,
relative to, for example, registrants who do not opt to include a
summary. For example, a summary could increase investors' interest in
the business of a registrant because it may attract investors who
otherwise would not be inclined to read the more detailed and lengthy
information in the full Form 10-K. We

[[Page 37136]]

note that, if users were to rely only on the summary to make investment
decisions without considering the more extensive disclosure provided
elsewhere in the Form 10-K or other disclosure documents of the
registrant, this could lead to less informed investment decisions with
a corresponding decrease in allocative efficiency. Overall, relative to
the current baseline, we expect that the amendment will have
incremental positive effects on efficiency, competition, and capital
formation, although, for the reasons discussed above, we do not expect
these effects to be particularly significant.
---------------------------------------------------------------------------

\27\ See Feng Li, Annual Report Readability, Current Earnings,
and Earnings Persistence, 45 J. of ACCT. & ECON. 221-47 (2008).
Using the Fog index and word count of Form 10 Ks, the author found
that firms with annual reports that are easier to read have more
persistent positive earnings and argues that firm managers may try
to hide poor future earnings from investors by increasing the
complexity of their written documents. The Fog index is a commonly
used measure of the readability of a document.
\28\ See Loughran & McDonald, supra note 25. While word count
and file size are highly correlated, the authors found there is
evidence that Form 10-K file size (in megabytes) is a better inverse
proxy for readability than a commonly used metric of readability
like the Fog index. Larger Form 10-Ks are significantly associated
with high return volatility, earnings forecast errors, and earnings
forecast dispersion, after controlling for other variables such as
firm size, book-to-market, past volatility, industry effects, and
prior stock performance.
\29\ See Haifeng You & Xiao-jun Zhang, Financial Reporting
Complexity and Investor Under-Reaction to 10-K Information, 14 REV.
of ACCT. STUD. 559-86 (2009). Using the number of words in a Form
10-K as a measure of financial reporting complexity, the authors
found that firms above the annual median word count have a delayed
stock market reaction over the following 12 months.
\30\ See Alastair Lawrence, Individual Investors and Financial
Disclosure, 56 J. of ACCT. & ECON. 130-47 (2013). Using detailed
data of individual investors, this study shows that, on average,
individuals invest more in firms with clear and concise financial
disclosures.
---------------------------------------------------------------------------

Permitting registrants to determine the content, length, and
location of a summary will enable them to tailor the format and
presentation of the summary to best suit the specific aspects of their
business and operational and financial results. It also will enable
registrants to focus on topics or items they consider important to
communicate to investors, subject to the overall requirement to present
the summary fairly and accurately.
While a summary is potentially useful for investors and
registrants, registrants who include a summary in their Form 10-Ks will
incur increased disclosure costs to prepare the summary. As discussed
above, given that Form 10-K filers can already voluntarily include a
summary, we expect that, as a result of the amendment, registrants will
not significantly change their disclosure practices by electing to
include a summary if they currently do not.
Relative to the current baseline, we expect the potential benefits
and costs stemming from the amendment to be limited and primarily
related to those registrants--and their investors--who already include
a summary in their Form 10-K but do not currently hyperlink or
hyperlink only in part. Registrants that have voluntarily included a
summary in the past and have not hyperlinked the items in the summary
to the relevant sections in the Form 10-K will incur compliance costs
to add hyperlinks.
There are potential benefits from adding cross-references to the
Form 10-K summary. A summary that briefly discusses items in the Form
10-K without any type of cross-references may disconnect the
information in the summary from the disclosure contained in other parts
of Form 10-K. The required hyperlinks will serve not only as a reminder
for investors that a summary complements the more extensive disclosure
presented in other parts of the document, but also as a compass for
users to navigate the document more easily and quickly. The required
hyperlinks will easily direct users to a particular item, allowing
users to avoid searching the Form 10-K in its entirety, thereby
significantly reducing their search costs.
Relative to other types of cross-references that registrants may
currently use, such as a footnote or plain text that points to a
certain page number or location in the document, the inclusion of
hyperlinks should direct users to relevant parts of Form 10-K more
easily and quickly. To the extent that hyperlinks are implemented
properly, they are able to automatically take the reader to that
document or section. Cross-referencing through hyperlinks should make
it easier for users to navigate the disclosure and decrease their
search time and costs.
Finally, requiring hyperlinks for all topics in a summary that
currently has only partial hyperlinks will prevent registrants from
selectively steering investors and other users toward particular
sections in the Form 10-K.

D. Alternatives

We considered three alternatives to the amendment. First, instead
of providing registrants with the option of including a summary in
their Form 10-K, we could have required all registrants to include a
summary. By requiring a summary, investors and users could more
extensively benefit from the potential usefulness of the summary. In
particular, as discussed above, a summary could enhance investors'
ability to process relevant material information in the filing. To the
extent that a required summary contains useful and concise information,
it could translate to potential positive effects on allocative
efficiency for a greater number of registrants than under a voluntary
approach. These potential benefits could be particularly relevant in
the case of registrants with more complex operations that typically
file larger reports that investors may find more time-consuming to
read. They may be less relevant in the case of smaller registrants that
typically have simpler operations and shorter Form 10-Ks. Consequently,
requiring a mandatory summary for all registrants may impose additional
compliance costs that are not justified by the overall benefits to
investors and registrants, although the flexibility to determine the
format of the summary could mitigate these additional compliance costs.
Second, instead of providing registrants with the flexibility to
determine length, content, and location of the summary in Form 10-K, we
could have prescribed a specific format of the summary. This could
achieve consistency across filings and may enable users to compare the
summaries of multiple registrants more efficiently. A specific format
may also ease the preparation of a summary for some registrants,
thereby encouraging them to provide a voluntary summary in their Form
10-Ks. At the same time, prescribing a specific format may discourage
registrants from including a summary in their Form 10-K if they find
the format not useful for their specific circumstances. Further, if the
prescribed format includes sections that are unnecessary to effectively
assess the registrant, it could detract from, rather than facilitate,
investors' ability to process information efficiently.
Third, instead of requiring hyperlinks, we could have required
registrants to use any type of cross-references, electronic or
otherwise, to the extent that it would serve the function of locating
the corresponding material in the Form 10-K.\31\ This alternative would
allow greater flexibility to registrants to use either hyperlinks or
non-electronic cross-references, such as footnotes or plain text that
points to a certain page number or other location in the document, or a
combination of the two types in the summary. However, to the extent
that registrants choose to use non-electronic cross-references under
this alternative, the ability of investors to navigate the disclosure
contained in the Form 10-K would be diminished relative to the
proposal.
---------------------------------------------------------------------------

\31\ Section 72001 of the FAST Act requires that each item on
the summary page include a ``cross-reference'' to the material
contained in the Form 10-K, but the statute does not mandate any
particular type of cross-reference.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

A. Background

Certain provisions of Form 10-K that will be affected by the
interim final amendment contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\32\ The Commission is submitting the interim final amendment
to the Office of Management and Budget (``OMB'') for review in
accordance with the PRA.\33\ The title for the collections of
information is:
---------------------------------------------------------------------------

\32\ 44 U.S.C. 3501 et seq.
\33\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.

---------------------------------------------------------------------------
``Form 10-K'' (OMB Control No. 3235-0063).

An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information requirement unless it
displays a currently valid OMB control number. Compliance with the
information

[[Page 37137]]

collections is mandatory. Responses to the information collections are
not kept confidential and there is no mandatory retention period for
the information disclosed. Form 10-K was adopted under the Exchange Act
and sets forth the disclosure requirements for annual reports filed by
registrants to help investors make informed investment decisions. The
hours and costs associated with preparing and filing Form 10-K
constitute reporting and cost burdens imposed by each collection of
information.

B. Summary of the Amendment

As described in more detail above, we are adopting an interim final
amendment to Form 10-K to implement Section 72001 of the FAST Act. We
are amending Form 10-K to add new Item 16. This new item will
explicitly allow a registrant, at its option, to include a summary in
the Form 10-K. Each disclosure topic included in the summary is
required to contain a hyperlink to the related, more detailed
disclosure item in the Form 10-K. Under the interim final amendment, a
registrant has the flexibility to determine the content and the length
of the summary.

C. Burden and Cost Estimates Related to the Amendment

We anticipate that new Item 16 of Form 10-K will increase the
burdens and costs for companies that elect to prepare a summary. We
derived our burden hour and cost estimates by estimating the average
amount of time it would take a registrant to prepare and review the
summary, as well as the average hourly rate for outside professionals
who assist with such preparation. In addition, our burden estimates are
based on several assumptions.
First, we assumed that registrants that elect to prepare a summary
will not summarize every item in the Form 10-K. Therefore, to estimate
the average burden hours of the interim final amendment, we have looked
to the burden estimates carried internally by registrants for Form
10,\34\ an Exchange Act registration form that requires many of same
item disclosures as does Form 10-K. For purposes of the PRA, we have
estimated the total burden per response for preparing and filing Form
10 to be 215 hours and that 25% of that burden (53.75 hours) is carried
internally by the registrant. We estimate that the burden to prepare
the Form 10-K summary would be less than that required to prepare the
Form 10 because the summary would call for less information than
required by Form 10. We estimate that the average incremental burden
for a registrant to prepare the summary would be 50 hours. This
estimate represents the average burden for all registrants, both large
and small. In deriving our estimates, we recognize that the burdens
will likely vary among individual registrants based on a number of
factors, including the size and complexity of their operations. We
believe that some registrants will experience costs in excess of this
average in the first year of compliance with the amendments and some
registrants may experience less than the average costs.
---------------------------------------------------------------------------

\34\ 17 CFR 249.210.
---------------------------------------------------------------------------

Second, we assumed that 10% of Form 10-K filers would elect to
prepare a summary. The number of registrants that would choose to do a
summary, however, is uncertain. We request comment and supporting
empirical data, for purposes of the PRA, on the number of registrants
that are expected to prepare a summary as a result of the interim final
amendment.
The table below shows the total annual compliance burden, in hours
and in costs, of the collection of information resulting from the
interim final amendment.\35\ The burden estimates were calculated by
multiplying the estimated number of responses by the estimated average
amount of time it would take an issuer to prepare and review a Form 10-
K summary. The portion of the burden carried by outside professionals
is reflected as a cost, while the portion of the burden carried by the
issuer internally is reflected in hours. For purposes of the PRA, we
estimate that 75% of the burden of preparation of Form 10-K is carried
by the registrant internally and that 25% of the burden of preparation
is carried by outside professionals retained by the registrant at an
average cost of $400 per hour.\36\
---------------------------------------------------------------------------

\35\ For convenience, the estimated hour and cost burdens in the
table have been rounded to the nearest whole number.
\36\ We recognize that the costs of retaining outside
professionals may vary depending on the nature of the professional
services, but for purposes of this PRA analysis we estimate that
such costs will be an average of $400 per hour. This estimate is
based on consultations with several registrants, law firms and other
persons who regularly assist registrants in preparing and filing
periodic reports with the Commission.

Table 1--Incremental Paperwork Burden Under the Interim Final Amendment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
number of Incremental Total 25% Professional
affected burden hours/ incremental 75% company professional costs
responses form burden hours
(A) (B) (C) = (A) *(D) = (C) * (E) = (C) (F) = (E) * $400
0.75 0.25
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K Summary............................... \37\ 814 50 40,700 30,525 10,175 $4,070,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Request for Comment
---------------------------------------------------------------------------

\37\ This number is our estimate of the number of registrants
that will choose to include a summary in their Form 10-K.
---------------------------------------------------------------------------

We request comments in order to evaluate: (1) Whether the
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information would
have practical utility; (2) the accuracy of our estimate of the burden
of the collection of information; (3) whether there are ways to enhance
the quality, utility and clarity of the information to be collected;
and (4) whether there are ways to minimize the burden of the collection
of information on those who are to respond, including through the use
of automated collection techniques or other forms of information
technology.\38\ Specifically, we request comment on the estimated
number or percentage of registrants that are likely to include a
summary in their Form 10-K.
---------------------------------------------------------------------------

\38\ We request comment pursuant to 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
the burdens. Persons who desire to submit comments on the collection of

[[Page 37138]]

information requirements should direct their comments to the Office of
Management and Budget, Attention: Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and send a copy of the comments to Brent J.
Fields, Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090, with reference to File No. S7-09-16.
Requests for materials submitted to the OMB by us with regard to these
collections of information should be in writing, refer to File No. S7-
09-16 and be submitted to the Securities and Exchange Commission,
Office of FOIA Services, 100 F Street NE., Washington DC 20549-0213.
Interested persons are encouraged to send comments to the OMB by July
11, 2016.

VI. Statutory Authority

The amendment contained in this release is being adopted under the
authority set forth in Sections 3, 12, 13, 15(d), and 23(a) of the
Exchange Act, and Section 72001 of the FAST Act.

List of Subjects in 17 CFR Part 249

Reporting and recordkeeping requirements, Securities.

Text of the Interim Final Amendment

For the reasons set out in the preamble, the Commission is amending
Title 17, Chapter II of the Code of Federal Regulations as follows:

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
1. The authority citation for part 249 is revised to read as follows:

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
Section 249.220f is also issued under secs. 3(a), 202, 208, 302,
306(a), 401(a), 401(b), 406 and 407, Pub. L. 107-204, 116 Stat. 745.
Section 249.240f is also issued under secs. 3(a), 202, 208, 302,
306(a), 401(a), 406 and 407, Pub. L. 107-204, 116 Stat. 745.
Section 249.308 is also issued under 15 U.S.C. 80a-29 and 80a-
37.
Section 249.308a is also issued under secs. 3(a) and 302, Pub.
L. 107-204, 116 Stat. 745.
Section 249.308b is also issued under secs. 3(a) and 302, Pub.
L. 107-204, 116 Stat. 745.
Section 249.310 is also issued under secs. 3(a), 202, 208, 302,
406 and 407, Pub. L. 107-204, 116 Stat. 745.
Section 249.326(T) also issued under section 13(f)(1) (15 U.S.C.
78m(f)(1)).
Section 249.330 is also issued under secs. 3(a), 406, and 407,
Pub. L. 107-204, 116 Stat. 745.
Section 249.331 is also issued under 15 U.S.C. 78j-1, 7202,
7233, 7241, 7264, 7265; and 18 U.S.C. 1350.
Section 249.617 is also issued under Pub. L. 111-203, Sec. 939,
939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o-7 note).
Section 249.819 is also issued under 12 U.S.C. 5465(e).
Section 249.1400 is also issued under sec. 943, Pub. L. 111-203,
124 Stat. 1376.
Section 249.1800 is also issued under Pub. L. 111.203, Sec.
922(a), 124 Stat 1841 (2010).
Section 249.1801 is also issued under Pub. L. 111.203, Sec.
922(a), 124 Stat 1841 (2010).

0
2. Amend Form 10-K (referenced in Sec. 249.310) by adding new Item 16
to Part IV to read as follows:

Note: The text of Form 10-K does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

* * * * *

Part IV

* * * * *

Item 16. Form 10-K Summary.

Registrants may, at their option, include a summary of information
required by this form, but only if each item in the summary is
presented fairly and accurately and includes a hyperlink to the
material contained in this form to which such item relates, including
to materials contained in any exhibits filed with the form.
Instruction: The summary shall refer only to Form 10-K disclosure
that is included in the form at the time it is filed. A registrant need
not update the summary to reflect information required by Part III of
Form 10-K that the registrant incorporates by reference from a proxy or
information statement filed after the Form 10-K, but must state in the
summary that the summary does not include Part III information because
that information will be incorporated by reference from a later filed
proxy or information statement involving the election of directors.
* * * * *

By the Commission.

Dated: June 1, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-13328 Filed 6-8-16; 8:45 am]
BILLING CODE 8011-01-P

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