FAST Act Modernization and Simplification of Regulation S-K, 50988-51049 [2017-22374]

Download as PDF 50988 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 229, 230, 232, 239, 240, 249, 270, 274 and 275 [Release No. 33–10425; 34–81851; IA–4791; IC–32858; File No. S7–08–17] RIN 3235–AM02 FAST Act Modernization and Simplification of Regulation S–K Securities and Exchange Commission. ACTION: Proposed rule. AGENCY: We are proposing amendments based on the recommendations made in the staff’s Report on Modernization and Simplification of Regulation S–K, as required by Section 72003 of the Fixing America’s Surface Transportation Act. The proposed amendments are intended to modernize and simplify certain disclosure requirements in Regulation S–K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors. The amendments are also intended to improve the readability and navigability of disclosure documents and discourage repetition and disclosure of immaterial information. To provide for a consistent set of rules to govern incorporation by reference and hyperlinking, we are also proposing parallel amendments to several rules and forms applicable to investment companies and investment advisers, including proposed amendments that would require certain investment company filings to be submitted in HyperText Markup Language (‘‘HTML’’) format. DATES: Comments should be received by January 2, 2018. ADDRESSES: Comments may be submitted by any of the following methods: SUMMARY: asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Electronic Comments • Use the Commission’s Internet comment forms (http://www.sec.gov/ rules/proposed.shtml); • Send an email to rule-comments@ sec.gov. Please include File Number S7– 08–17 on the subject line; or • Use the Federal Rulemaking Portal (http://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. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 All submissions should refer to File Number S7–08–17. This file number should be included in 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 Web site (http:// www.sec.gov/rules/proposed.shtml). Comments also are available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Room 1580, 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission’s Web site. To ensure direct electronic receipt of such notifications, sign up through the ‘‘Stay Connected’’ option at www.sec.gov to receive notifications by email. FOR FURTHER INFORMATION CONTACT: Shehzad Niazi, Daniel Morris, or Angie Kim, Office of Rulemaking, Division of Corporation Finance, at (202) 551–3430; Michael C. Pawluk or J. Matthew DeLesDernier, Investment Company Rulemaking Office, Division of Investment Management, at (202) 551– 6792; U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission is proposing to amend Items 10, 102, 202, 303, 401, 405, 407, 501, 503, 512, 601, and 1100 of Regulation S–K under the Securities Act of 1933 (the ‘‘Securities Act’’) and the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’); Rules 405, 411, and 491 of Regulation C under the Securities Act; Rules 11, 102, 105, 303, and 406 of Regulation S–T under the Securities Act and Exchange Act; Forms S–1, S–3, S– 6, S–11, N–14, S–4, F–1, F–3, F–4, F– 7, F–8, F–10, F–80, SF–1, and SF–3 under the Securities Act; Rules 12b–13, 12b–23, 14a–101 (Schedule 14A), and 16a–3 under the Exchange Act; Forms 3, 4, 5, 8–A, 10, 20–F, 40–F, 8–K, 10–Q, 10–K, and 10–D under the Exchange Act; Rule 0–4 under the Investment Company Act of 1940 (the ‘‘Investment Company Act’’); Forms N–1A, N–2, N–3, N–4, N–5, and N–6 under the PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 Investment Company Act and Securities Act; Form N–CSR under the Investment Company Act and Exchange Act; and Rule 0–6 under the Investment Advisers Act of 1940 (‘‘Investment Advisers Act’’). The Commission is also proposing to add new Item 105 to Regulation S–K and to remove Rule 12b–32 under the Exchange Act and Rules 8b–23, 8b–24, and 8b–32 under the Investment Company Act. Table of Contents I. Introduction A. Background B. Overview of the Proposed Amendments II. Proposed Amendments A. Description of Property (Item 102) B. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303) 1. Year-to-Year Comparisons (Instruction 1 to Item 303(a)) 2. Application to Foreign Private Issuers C. Management, Security Holders and Corporate Governance 1. Directors, Executive Officers, Promoters, and Control Persons (Item 401) 2. Compliance With Section 16(a) of the Exchange Act (Item 405) 3. Corporate Governance (Item 407) D. Registration Statement and Prospectus Provisions 1. Outside Front Cover Page of the Prospectus (Item 501(b)) 2. Risk Factors (Item 503(c)) 3. Plan of Distribution (Item 508) 4. Undertakings (Item 512) E. Exhibits 1. Description of Registrant’s Securities (Item 601(b)(4)) 2. Information Omitted From Exhibits (Item 601) 3. Material Contracts (Item 601(b)(10)(i)) 4. Subsidiaries of the Registrant and Entity Identifiers (Item 601(b)(21)(i)) 5. Application to Foreign Private Issuers F. Incorporation by Reference 1. Item 10(d) 2. Securities Act Rule 411, Exchange Act Rule 12b–23 and Rule 12b–32 and Related Rules Under the Investment Company Act and Investment Advisers Act 3. Forms G. Manner of Delivery 1. Tagging Cover Page Data 2. Exhibit Hyperlinks and HTML Format for Investment Companies H. General Request for Comment III. Economic Analysis A. Background 1. The Benefits of Information Disclosure 2. The Costs of Disclosure B. Baseline C. Economic Analysis of the Proposed Amendments: General Assessment, Including Impact on Efficiency, Competition, and Capital Formation D. Economic Analysis of the Specific Amendments: Proposals That Clarify and Update Existing Rules 1. Proposals That Clarify or Streamline a Rule’s Requirements E:\FR\FM\02NOP2.SGM 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules 2. Proposals To Update Rules To Account for Subsequent Developments E. Economic Analysis of the Specific Amendments: Proposals That Simplify the Disclosure Process or Eliminate Disclosures 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303) 2. Information Omitted From Exhibits (Item 601): Item 601(a)(5), Item 601(a)(6), and Item 601(b)(10)(iv) F. Economic Analysis of the Specific Amendments: Proposals That Require More Disclosure or the Incorporation of New Technology 1. Description of Registrant’s Securities (Item 601(b)(4)) 2. Subsidiaries of the Registrant and Entity Identifiers (Item 601(b)(21)) 3. Tagging Cover Page Data 4. Proposals for Additional Disclosure With Minimal Additional Costs to Registrants G. Economic Analysis of HTML and Hyperlinking Requirements of Forms Under the Investment Company Act IV. Paperwork Reduction Act A. Background B. Summary of the Proposed Amendments’ Impact on Collection of Information 1. Proposed Amendments Expected To Decrease Burdens 2. Proposed Amendments Expected To Increase Burdens 3. Proposed Amendments Not Expected to Meaningfully Affect Burdens C. Burden and Cost Estimates to the Proposed Amendments 1. Form 10–K and Form 10–Q; Schedule 14A and Schedule 14C 2. Form S–1, Form S–3, Form S–4, Form F–3, Form F–4, Form SF–1, Form SF–3, Form 10, and Form 20–F 3. Form 8–A, Form 10–D, Form 40–F, Form F–7, Form F–8, Form F–10, and Form F–80 4. Form S–6, Form N–1A, Form N–2, Form N–3, Form N–4, Form N–5, Form N–6, Form N–14, and Form N–CSR D. Request for Comment V. Small Business Regulatory Enforcement Fairness Act VI. Initial Regulatory Flexibility Act Analysis A. Reasons for, and Objectives of, the Proposed Action B. Legal Basis C. Small Entities Subject to the Proposed Rules D. Reporting, Recordkeeping, and Other Compliance Requirements E. Duplicative, Overlapping, or Conflicting Federal Rules F. Significant Alternatives G. Request for Comment VII. Statutory Authority and Text of Proposed Rule and Form Amendments I. Introduction A. Background We are proposing amendments to modernize and simplify certain disclosure requirements in Regulation S–K and related rules and forms to implement Section 72003 of the Fixing VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 America’s Surface Transportation Act (the ‘‘FAST Act’’).1 As required by Section 72003(c) of the FAST Act, the staff published its Report on Modernization and Simplification of Regulation S–K (the ‘‘FAST Act Report’’) on November 23, 2016.2 Consistent with Section 72003, the FAST Act Report provided ‘‘specific and detailed recommendations on modernizing and simplifying the requirements in Regulation S–K in a manner that reduces the costs and burdens on companies while still providing all material information’’ and ‘‘[recommendations] on ways to improve the readability and navigability of disclosure and to discourage repetition and the disclosure of immaterial information.’’ 3 Also consistent with Section 72003, the FAST Act Report reflected consultations with the Investor Advisory Committee (‘‘IAC’’) and the Advisory Committee on Small and Emerging Companies. This release proposes amendments based on the recommendations in the FAST Act Report. The proposed amendments largely implement these recommendations, as required by Section 72003(d) of the FAST Act. However, in some cases, and as discussed in more detail below, we have chosen to alter or supplement the staff’s previously recommended approach based on our consideration of the issues and the statutory mandate.4 This release reflects perspectives developed during the staff’s broader review of the Commission’s disclosure regime. As part of that effort, the staff requested public input on how the disclosure system could be improved,5 and the Commission issued a concept release on the business and financial disclosure requirements in Regulation S-K (the ‘‘Concept Release’’).6 1 Public Law No. 114–94, Sec. 72003, 129 Stat. 1312 (2015). 2 Report on Modernization and Simplification of Regulation S–K (Nov. 23, 2016), available at https:// www.sec.gov/reportspubs/sec-fast-act-report2016.pdf. 3 See FAST Act § 72003(c). 4 The FAST Act Report presented recommendations for the Commission’s consideration. The FAST Act Report also noted that many of the recommendations in the report were necessarily preliminary in nature and that ongoing outreach and study would be necessary in connection with any rulemaking to implement the recommendations. See FAST Act Report, supra note 2, at n.15. 5 Comment letters related to this request are available at https://www.sec.gov/spotlight/ disclosure-effectiveness.shtml. We refer to these letters throughout as ‘‘Disclosure Effectiveness’’ letters. 6 See Business and Financial Disclosure Required by Regulation S–K, Release No. 33–10064 (Apr. 13, 2016) [81 FR 23916 (Apr. 22, 2016)]. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 50989 In developing the proposed amendments, we considered the comment letters we received on the Concept Release; 7 the prior staff study of Regulation S–K (the ‘‘S–K Study’’) mandated by the Jumpstart Our Business Startups Act (the ‘‘JOBS Act’’); 8 the Commission’s request for comment on the requirements relating to management, security holders, and corporate governance matters in Subpart 400 of Regulation S-K (the ‘‘Regulation S-K Subpart 400 Release’’); 9 and the FAST Act Report.10 Throughout this release, we discuss these comments as further context for the proposed amendments.11 The proposed amendments also reflect the Commission’s experience with Regulation S-K arising from the Division of Corporation Finance’s disclosure review program. In this release, we focus on amendments to implement Section 72003(d) of the FAST Act. Accordingly, we are not at this time proposing amendments that extend substantially 7 Comment letters related to this request are available at https://www.sec.gov/comments/s7-0616/s70616.htm. 8 Public Law No. 112–106, Sec. 108, 126 Stat. 306 (2012). See also Rule 12b–2 under the Exchange Act [17 CFR 240.12b–2] and Rule 405 under the Securities Act [17 CFR 230.405]. Section 108 of the JOBS Act required the Commission to comprehensively evaluate its disclosure requirements to determine how they could be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for emerging growth companies (‘‘EGCs’’). The resulting recommendations are in the staff’s Report on Review of Disclosure Requirements in Regulation S–K, available at https://www.sec.gov/news/ studies/2013/reg-sk-disclosure-requirementsreview.pdf. In connection with the S–K Study, we received public comments on regulatory initiatives to be undertaken in response to the JOBS Act. See Comments on SEC Regulatory Initiatives Under the JOBS Act: Title I—Review of Regulation S–K, available at http://www.sec.gov/comments/jobstitle-i/reviewreg-sk/reviewreg-sk.shtml. 9 Request for Comment on Subpart 400 of Regulation S–K Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance Matters, Release No. 33– 10198 (Aug. 25, 2016) [81 FR 59927 (Aug. 31, 2016)]. Comment letters related to this request are available at https://www.sec.gov/comments/s7-1816/s71816.htm. We refer to these letters throughout as ‘‘Subpart 400’’ letters. 10 Comment letters related to the FAST Act Report are available at https://www.sec.gov/ comments/fast/fast.htm. After the FAST Act Report was published, the staff updated the IAC on the recommendations included in the report at its December 8, 2016 meeting. See Minutes of the IAC Meeting on December 8, 2016 available at https://www.sec.gov/ spotlight/investor-advisory-committee-2012/ iac120816-minutes.htm. The staff did not discuss with the IAC or the ACSEC potential modifications to those recommendations as reflected in this release. 11 Unless otherwise indicated, comment letters cited in this release are to the Concept Release. E:\FR\FM\02NOP2.SGM 02NOP2 50990 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules beyond the staff’s recommendations in the FAST Act Report.12 We are continuing to consider potential additional changes to our disclosure regime in connection with recent proposing releases and requests for comment.13 In addition, we are proposing parallel amendments to several rules and forms applicable to investment companies and investment advisers to provide for a consistent set of rules governing incorporation by reference and hyperlinking, including proposed amendments that would require certain investment company filings to be submitted in HTML format.14 B. Overview of the Proposed Amendments asabaliauskas on DSKBBXCHB2PROD with PROPOSALS We are proposing amendments to several individual rules that would update, streamline, or otherwise improve our well-established and robust disclosure framework. These include proposed changes to: • Description of Property (Item 102); 12 As discussed in relevant sections below, some of the proposed amendments in this release would apply to Form 20–F or Form 40–F. Form 20–F is the combined registration statement and annual report form for foreign private issuers under the Exchange Act. It also sets forth disclosure requirements for registration statements filed by foreign private issuers under the Securities Act. Form 40–F is the registration statement and annual report used by eligible Canadian issuers under the Multijurisdictional Disclosure System. While Section 72003 of the FAST Act is focused on Regulation S–K, we are proposing to make corresponding changes to the disclosure requirements applicable to foreign private issuers where Forms 20–F and 40–F include provisions that are substantially similar to those found in Regulation S–K. 13 See Request for Comment on Possible Changes to Industry Guide 3 (Statistical Disclosure by Bank Holding Companies), Release No. 33–10321 (Mar. 1, 2017) [82 FR 12757 (Mar. 7, 2017)]; Concept Release, supra note 6; Regulation S–K Subpart 400 Release, supra note 9; Disclosure Update and Simplification, Release No. 33–10110 (Jul. 13, 2016) [81 FR 51607 (Aug. 4, 2016)] (the ‘‘Disclosure Update and Simplification Proposing Release’’); Amendments to Smaller Reporting Company Definition, Release No. 33–10107 (Jun. 27, 2016) [81 FR 43130 (Jul. 1, 2016)]; and Modernization of Property Disclosures for Mining Registrants, Release No. 33–10098 (Jun. 16, 2016) [81 FR 41651 (Jun. 27, 2016)] (the ‘‘Modernization for Mining Registrants Proposing Release’’). 14 The Commission has adopted requirements for exhibit hyperlinks and HTML format for operating companies. See Exhibit Hyperlinks and HTML Format, Release No. 33–10322 (Mar. 1, 2017) [82 FR 14130 (Mar. 17, 2017)] (‘‘Exhibit Hyperlinks Adopting Release’’) (adopting amendments to require registrants to hyperlink to each exhibit listed in the exhibit index and, to enable the inclusion of hyperlinks, requiring registrants to submit all such filings in HTML format). Nonaccelerated filers and smaller reporting companies (‘‘SRCs’’) may continue to file in American Standard Code for Information Interchange (‘‘ASCII’’) until September 1, 2018 and are therefore not required to include exhibit hyperlinks until that date. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 • Management’s Discussion and Analysis (Item 303); • Directors, Executive Officers, Promoters, and Control Persons (Item 401); • Compliance with Section 16(a) of the Exchange Act 15 (Item 405); • Outside Front Cover Page of the Prospectus (Item 501(b)); 16 • Risk Factors (Item 503(c)); • Plan of Distribution (Item 508); 17 • Material Contracts (Item 601(b)(10)); and • Various rules related to incorporation by reference. Other proposed amendments would update some of our rules to account for developments since their adoption or last amendment. These include proposed changes to Corporate Governance (Item 407), Outside Front Cover Page of the Prospectus (Item 501(b)(10)), and Undertakings (Item 512). Some of the proposed amendments would simplify disclosure or the disclosure process. These include proposed changes to Management’s Discussion and Analysis (Item 303(a)) that would allow for flexibility in discussing historical periods and the addition of new subparagraphs to Exhibits (Item 601) to permit omission of portions of exhibits that do not contain material information. Some of our proposed amendments would require additional disclosure or incorporation of new technology. These include proposed changes to: • Outside Front Cover Page of the Prospectus (Item 501(b)(4)); • Description of Registrant’s Securities (Item 601(b)(4)); • Subsidiaries of the Registrant (Item 601(b)(21)(i)); and • Various regulations and forms to require all of the information on the cover pages of some Exchange Act forms to be tagged in Inline XBRL format. We discuss the proposed amendments generally in the order that each Item appears in Regulation S–K; however, we have consolidated the discussion of the rules and item requirements related to incorporation by reference. We have also consolidated our discussion of rules requiring the incorporation of new technology. II. Proposed Amendments A. Description of Property (Item 102) Item 102 requires disclosure of the location and general character of the principal plants, mines, and other 15 15 U.S.C. 78a et seq. proposed amendments to Item 501(b)(1), (b)(3) and (b)(4). 17 Our proposals would amend Rule 405 and Rule 491. 16 See PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 materially important physical properties of the registrant and its subsidiaries.18 Instruction 1 to Item 102 states that registrants must disclose such information as reasonably will inform investors as to the suitability, adequacy, productive capacity, and extent of utilization of the facilities by the registrant.19 Instruction 2 provides that, in determining whether properties are material to an understanding of the registrant’s business taken as a whole, registrants should take into account both quantitative and qualitative factors.20 Currently, Item 102 specifies disclosure of ‘‘principal’’ plants, mines, and other ‘‘materially important’’ physical properties. The staff has observed, however, that the item may elicit disclosure that is not material.21 For example, some registrants—such as those in the services or information technology industry—may not have material physical properties, and accordingly, these registrants tend to disclose information about their corporate headquarters, office space, and other facilities in response to this item. To address this concern, in the FAST Act Report, the staff recommended that the Commission consider revising Item 102 to require a description of property only to the extent that physical properties are material to the registrant’s business.22 Similarly, several commenters stated that Item 102 is not relevant to all registrants or can result in immaterial disclosure.23 Two of these commenters 18 Item 102 of Regulation S–K [17 CFR 229.102]. descriptions of the physical characteristics of individual properties or legal descriptions by metes and bounds are not required. See Instruction 1 to Item 102 of Regulation S–K. 20 Disclosure specific to the mining, oil and gas, and real estate industries is outside the scope of this release. Instructions 3, 5, and 7 apply to the mining industry. The Commission has separately proposed revisions to the property disclosure requirements for mining registrants. See Modernization for Mining Registrants Proposing Release, supra note 13. Instructions 4, 6, and 8 apply to the oil and gas industry. The Commission considered disclosure specific to the oil and gas industry in 2008. See Modernization of Oil and Gas Reporting, Release No. 33–8995 (Dec. 31, 2008) [74 FR 2158 (Jan. 14, 2009)]. Instruction 9 applies to the real estate industry. 21 See FAST Act Report, supra note 2, at Recommendation B.1. See also Concept Release, supra note 6, at Section IV.A.6.b and SEC Staff’s Report of the Task Force on Disclosure Simplification (Mar. 5, 1996) available at https:// www.sec.gov/news/studies/smpl.htm. 22 FAST Act Report, supra note 2, at Recommendation B.1. 23 See, e.g., Letters from Ernst & Young (Sept. 11, 2012) [S–K Study letter] (‘‘Ernst & Young 1’’); U.S. Chamber of Commerce (July 29, 2014) [Disclosure Effectiveness letter] (‘‘Chamber 1’’); Society of Corporate Secretaries and Governance Professionals (Sept.10, 2014) [Disclosure Effectiveness letter] (‘‘Society of Corporate Secretaries’’); Shearman & 19 Detailed E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS noted that, if material to a registrant’s business, Item 303, Management’s Discussion and Analysis of Financial Condition and Results of Operations (‘‘MD&A’’),24 would require a discussion of the importance of a property or facility and, in these instances, Item 102 may result in duplicative disclosure.25 A number of commenters also supported revising Item 102 to be more principles-based or require disclosure only when property is material.26 One of these commenters asserted that the lack of a materiality overlay in Instruction 2 to Item 102 results in immaterial disclosure.27 Another commenter noted different triggers for disclosure in Item 102, such as the item’s reference to ‘‘materially important’’ physical properties and ‘‘major’’ encumbrance.28 This commenter suggested harmonizing these and similarly varied formulations to lessen ambiguity in their application.29 A few commenters, however, suggested retaining this item in its current form,30 with one commenter noting the importance of this disclosure for mining companies.31 Additionally, Sterling LLP (Nov. 26, 2014) [Disclosure Effectiveness letter] (‘‘Shearman 1’’) (stating that disclosure of physical properties does not, in most cases, provide investors meaningful information, particularly for registrants not engaged in manufacturing); Allstate Insurance Company (July 1, 2016) (‘‘Allstate’’); Fenwick West LLP (Aug. 1, 2016) (‘‘Fenwick’’); U.S. Chamber of Commerce (July 20, 2016) (‘‘Chamber 2’’); Corporate Governance Coalition for Investor Value (July 20, 2016) (‘‘CGCIV’’); Securities Industry and Financial Markets Association (July 21, 2016) (‘‘SIFMA’’); Ernst & Young (July 21, 2016) (‘‘Ernst &Young 3’’); and Davis Polk & Wardwell LLP (July 22, 2016) (‘‘Davis Polk 1’’). 24 17 CFR 229.303. 25 See Letters from Chamber 1 and Society of Corporate Secretaries. 26 See, e.g., Letters from Allstate; National Association of Real Estate Investment Trusts (July 21, 2016); Fenwick; Davis Polk 1; FedEx Corporation (July 21, 2016) (‘‘FedEx’’); Chamber 2; and CGCIV (both the Chamber 2 and CGCIV letters recommended eliminating this disclosure requirement except to the extent property disclosure is material or is necessary to make other disclosures not misleading and stated that, if this disclosure requirement is retained, it should not be expanded and the Commission should clarify that for registrants who do not have material physical properties, disclosure about their corporate headquarters, office space, and other facilities is optional, not required). 27 See Letter from Fenwick. 28 See Letter from American Bar Association (Mar. 6, 2015) [Disclosure Effectiveness letter] (‘‘ABA’’). 29 Id. 30 See, e.g., Letters from US SIF: The Forum for Sustainable and Responsible Investment (Sept., 18, 2014) [Disclosure Effectiveness letter] (‘‘US SIF 1’’); US SIF: The Forum for Sustainable and Responsible Investment (July 14, 2016) (‘‘US SIF 2’’); Elise J. Bean (July 6, 2016) (‘‘E. Bean’’); and CFA Institute (Oct. 6, 2016) (‘‘CFA Institute’’). 31 See Letter from US SIF 2. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 two commenters recommended expanding the item to include additional disclosure.32 One of these commenters recommended disclosure of risks resulting from the potential lack of availability and rising cost of properties.33 The other commenter recommended property disclosure specific to the manufacturing industry, including manufacturing locations that promote and retain jobs within the United States. This commenter stated that enhanced disclosures would inform investors about the benefits of manufacturing in the United States.34 Consistent with several commenters’ suggestions and the staff’s recommendation in the FAST Act report, we are proposing to revise Item 102 to emphasize materiality. While the FAST Act Report recommended amending Item 102 to require disclosure only to the extent physical properties are material to the registrant’s business, our proposals would require this disclosure to the extent material to the registrant. Our proposal is intended to encompass properties that are material to the registrant, which would include those properties that are material to the registrant’s business.35 We are also proposing to clarify that the disclosure required under Item 102 should focus on physical properties that are material to the registrant and may be provided on a collective basis, if appropriate. As suggested by one commenter, we are also proposing to harmonize the various non-industry-specific triggers for disclosure in Item 102.36 For example, we are proposing to replace the references to ‘‘major’’ encumbrances and ‘‘materially important’’ physical properties in Item 102 with references to a materiality threshold. By using a consistent materiality threshold, we intend to facilitate application of the proposed amendments. In light of the particular significance of this disclosure for registrants in the mining, real estate, and oil and gas industries, we are not proposing to modify any of the instructions of Item 102 specific to those industries in this release.37 32 See Letters from Stephen P. Percoco (July 24, 2016) (‘‘S. Percoco’’) and Sen. Feinstein, et al. (Feb. 27, 2017) (‘‘Sen. Feinstein, et al.’’). 33 See Letter from S. Percoco. 34 See Letter from Sen. Feinstein, et al. 35 We believe this approach is clearer and does not inadvertently omit disclosures that would be material to the registrant, but not its ongoing business, for example properties that had value that was material to the registrant but that were no longer important to its operations. 36 See Letter from ABA. 37 For example, Instruction 3 of Item 102 refers to ‘‘major significance’’ and is specific to the mining industry. The Modernization for Mining Registrants Proposing Release proposes to eliminate this instruction. See supra note 13. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 50991 In the FAST Act Report, the staff also recommended that the Commission consider combining the description of material physical properties with the description of business in Item 101(c) of Regulation S–K.38 A number of commenters on the Concept Release also recommended incorporating Item 102 into the broader description of business disclosure requirements in Item 101.39 Several of these commenters recommended revising Item 101 to require broad disclosure of a registrant’s resources or assets, whether physical or otherwise, that are critical to a registrant’s business.40 One of these commenters stated that the specific requirements of Item 102 are obsolete, but that a description of physical properties in Item 101 would remain relevant to certain types of registrants.41 We have considered the recommendations of the staff and commenters but are not proposing to combine Item 102 and Item 101. We believe that any effort to combine these items should follow a broader evaluation of how the disclosure should address material core assets, whether physical or otherwise, including material resources such as human capital or intellectual property. Such a broader inquiry was not included in the FAST Act Report and is therefore outside the scope of this release. Request for Comment 1. Should we revise Item 102 to clarify that a description of property is required only to the extent that physical properties are material to the registrant and may be provided on a collective basis, if appropriate, as proposed? Under what circumstances is the flexibility to provide property disclosure on a collective basis useful (e.g., information about the percentage of material properties within and outside the United States)? 2. Should we harmonize nonindustry-specific disclosure thresholds by replacing them with a materiality threshold as proposed? 3. The S–K Study recommended that, for businesses that have material properties, disclosure requirements 38 Item 101(c) of Regulation S–K [17 CFR 229.101(c)]. See FAST Act Report, supra note 2, at Recommendation B.1. 39 See, e.g., Letters from Ernst & Young 3; SIFMA; New York State Society of Certified Public Accountants (July 19, 2016) (‘‘NYSSCPA’’); Davis Polk 1; General Motors Company (Sept. 30, 2016) (‘‘General Motors’’); and Financial Executives International (Oct. 3, 2016) (‘‘Financial Executives International’’). 40 See Letters from Ernst & Young 3; Davis Polk 1; General Motors; and Financial Executives International. 41 See Letter from Davis Polk 1. E:\FR\FM\02NOP2.SGM 02NOP2 50992 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules could be refocused on material facts about those properties that would inform investors about the significance of the property to the business, including uncertainties in connection with these properties.42 Should Item 102 require additional disclosure about material properties, including uncertainties such as information about properties that are located near designated areas where natural disasters are more likely to occur? If so, what should be required and why? Would this elicit more meaningful disclosure or would this duplicate disclosure in MD&A? B. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303) 43 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 1. Year-to-Year Comparisons (Instruction 1 to Item 303(a)) Item 303(a) requires registrants to discuss their financial condition, changes in financial condition, and results of operations.44 Instruction 1 to Item 303(a) states that the discussion and analysis shall be of the financial statements and other statistical data that the registrant believes will enhance a reader’s understanding of its financial condition, changes in financial condition, and results of operations. This instruction also provides that, generally, the discussion shall cover the three-year period covered by the financial statements and either use yearto-year comparisons or any other formats that in the registrant’s judgment would enhance a reader’s understanding. The instruction states that reference to the five-year selected financial data may be necessary where trend information is relevant. In the FAST Act Report, the staff recommended that we consider revising 42 See S–K Study at pp. 99–100 (recommending that ‘‘[f]or businesses that do have properties that are material, disclosure requirements could be refocused on material facts about those properties that would inform investors about the significance of the property to the business and any trends or uncertainties in connection with that property, rather than requiring a list of locations, capacity and ownership. Changes in the way that businesses operate may also make other disclosures relevant that are not expressly addressed under current requirements. For example, requirements could be more specific as to additional disclosure that would be necessary where a business relies heavily on intellectual property owned by a third party or relies on service agreements with third parties to perform necessary business functions.’’). 43 After consideration of the staff’s recommendation C.2. in the FAST Act Report, we are not, proposing to eliminate or revise the table of contractual obligations. See FAST Act Report, supra note 2, at n.15. See also letter from Jack Ciesielski (Dec. 12, 2016) [FAST Act Letter] (opposing the staff’s recommendation to delete or revise the table of contractual obligations). 44 Item 303(a) of Regulation S–K [17 CFR 229.303(a)]. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 Item 303(a) to clarify that a registrant need only provide a period-to-period comparison for the two most recent fiscal years covered by the financial statements and may hyperlink to the prior year’s annual report for the earlier of the year-to-year comparisons.45 Many commenters on the Concept Release recommended modifying Item 303 to reduce duplicative disclosure, although these commenters recommended simply eliminating the earlier of the year-toyear comparisons.46 A number of these commenters stated that this discussion is readily available in a registrant’s prior year annual report on EDGAR.47 Two of these commenters stated that repetition of the earlier of the year-to-year comparisons could distract investors from new, material information and result in confusion.48 A few of these commenters recommended requiring the earlier of the year-to-year comparisons only if there is a significant trend that is discernible through a multiple yearto-year comparison 49 or if prior results have been restated.50 Some of the commenters who suggested eliminating the earlier of the year-to-year comparisons recommended allowing registrants to hyperlink to the filing with the earlier of the year-to-year comparisons.51 One commenter opposed a requirement to hyperlink to the prior filing, stating that EDGAR is sufficiently user-friendly for investors to 45 See FAST Act Report, supra note 2, at Recommendation C.1. 46 See, e.g., Letters from Ernst & Young 1 (stating that the existing requirements in Item 303 should be sufficient to result in a comprehensive discussion of a three-year trend without a year-toyear comparison); Chamber 1; Society of Corporate Secretaries (also stating that the existing requirements in Item 303 are sufficient to elicit a discussion of trends over the relevant three-year period, if such a trend exists and is material); IBM Corporation (Aug. 7, 2014) [Disclosure Effectiveness letter]; Arthur J. Radin (May 29, 2015) [Disclosure Effectiveness letter] (‘‘A. Radin 1’’); Arthur J. Radin (July 5, 2016) (‘‘A. Radin 2’’); UnitedHealth Group Inc. (July 21, 2016) (‘‘United Health’’); SIFMA; Ernst & Young (Nov. 20, 2015) [Disclosure Effectiveness letter] (‘‘Ernst &Young 2’’); Ernst & Young 3; PNC Financial Services Group (July 21, 2016) (‘‘PNC’’); Investment Program Association (July 21, 2016) (‘‘Investment Program Association’’); Prologis Inc. (July 21, 2016) (‘‘Prologis’’); Allstate; Davis Polk 1; S. Percoco; Fenwick; NYSSCPA; Institute of Management Accountants; Chamber 2; FedEx; CGCIV; Northrop Grumman Corporation (Sept. 27, 2016); General Motors; and Financial Executives International. 47 See, e.g., Letters from A. Radin 1 and A. Radin 2; Ernst &Young 3; PNC; Prologis; Allstate; Fenwick; NYSSCPA; Chamber 2; FedEx; CGCIV; Investment Program Association; General Motors; and Financial Executives International. 48 See Letters from Chamber 1; Chamber 2; and CGCIV. 49 See Letters from SIFMA and PNC. 50 See Letter from S. Percoco. 51 See, e.g., Letters from United Health; Investment Program Association; Allstate; and General Motors. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 readily obtain the relevant report.52 Another commenter, however, disagreed with eliminating the requirement to include the earlier of the year-to-year comparisons stating that this would require investors to look for the information elsewhere.53 We are proposing to amend Item 303 to eliminate discussion of the earliest year in some situations.54 Under the amendments we propose today, when financial statements included in a filing cover three years, discussion about the earliest year would not be required if (i) that discussion is not material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations, and (ii) the registrant has filed its prior year Form 10–K 55 on EDGAR containing MD&A of the earliest of the three years included in the financial statements of the current filing. By allowing registrants to eliminate MD&A disclosure about the earliest year in these situations, our proposals are intended to discourage repetition of disclosure that is no longer material, which we believe would further our mandate under the FAST Act to modernize and simplify Regulation S–K in a manner that reduces costs and burdens on companies while still providing all material information. Our proposed amendments to Item 303(a) are consistent with our existing interpretive guidance on MD&A. In the 2003 MD&A Interpretive Release, the Commission stated that, in preparing MD&A, companies should evaluate issues presented in previous periods and consider reducing or omitting discussion of those that may no longer be material or helpful, or revise discussions where a revision would make the continuing relevance of an issue more apparent.56 The Commission 52 See Letter from Fenwick. Letters from CFA Institute (Nov. 12, 2014 [Disclosure Effectiveness letter] and Oct. 6, 2016). 54 Our proposed amendments to Item 303(a)(3) would not affect SRCs, as SRCs may limit their disclosure to the two-year period covered by their financial statements. See Instruction 1 to Item 303(a) of Regulation S–K. See also Rule 12b–2 under the Exchange Act and Rule 405 under the Securities Act. Similarly, our proposed amendments would not affect EGCs that provide two years of audited financial statements. EGCs are only required to provide two years of audited financial statements in an initial public offering of common equity securities and may limit their MD&A to only those audited periods presented in the financial statements. Public Law 112–106, Sec. 102(b)–(c), 126 Stat. 306 (2012). See also Instruction 1 to Item 303(a) of Regulation S–K. 55 17 CFR 249.310. 56 See Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results of Operation, Release No. 53 See E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS also encouraged companies and management to take a ‘‘fresh look’’ at MD&A with a view to enhancing its quality.57 The Commission observed that the effectiveness of MD&A decreases with the accumulation of unnecessary detail or duplicative or uninformative disclosure that obscures material information.58 In furtherance of this prior interpretive guidance, our proposals are intended to encourage companies to re-evaluate disclosures in their prior year MD&A and take a ‘‘fresh look’’ to determine whether such disclosure remains material. To this end, we are not proposing the staff’s recommendation in the FAST Act Report to hyperlink to the prior year’s annual report for the earlier of the yearto-year comparison. We believe that encouraging companies to take a ‘‘fresh look’’ at their prior year MD&A to determine whether it remains material and eliminating disclosure of the earliest of the three years when specified conditions are met, rather than hyperlinking to disclosure that may no longer be material, would more effectively achieve our FAST Act mandate to reduce the costs and burdens on companies while continuing to provide all material information.59 Our proposals would also eliminate the reference to five-year selected financial data in Instruction 1 to Item 303(a). Instruction 1 provides that, where trend information is relevant, reference to the five-year selected financial data in Item 301 may be necessary. Because disclosure requirements for liquidity, capital resources, and results of operations already require trend disclosure,60 we are proposing to simplify Instruction 1 by eliminating the reference to trend information. This proposed amendment is intended to eliminate duplication and is not intended to discourage registrants from providing trend disclosure in MD&A. We are also proposing to simplify Instruction 1 to Item 303(a) to emphasize that registrants may use any presentation that, in the registrant’s judgment, would enhance a reader’s understanding. Instruction 1 currently 33–8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)] (‘‘2003 MD&A Interpretive Release’’). 57 Id. 58 Id. See also Basic, Inc., v. Levinson, 485 U.S. 224 (1998) at 231 quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976) at 448–449. 59 We also are mindful that a number of registrants with segments or different lines of business may present their MD&A by segment or line of business. In these instances, numerous hyperlinks in MD&A may fragment readability. 60 See Item 303(a)(1), 303(a)(2)(ii) and 303(a)(3)(ii) of Regulation S–K [17 CFR 229.303(a)(1), (a)(2)(ii), (a)(3)(ii)]. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 specifies that the discussion cover the three-year period covered by the financial statements and use year-toyear comparisons or any other format that, in the registrant’s judgment, would enhance a reader’s understanding. Although the staff has observed that almost all registrants provide year-toyear comparisons,61 we believe that registrants may, in some cases, determine that a narrative discussion for some or all of the years in the three-year period is a more appropriate format. For instance, in a situation where some information about the earliest year in a three-year period is needed because it remains material to an understanding of the registrant’s financial condition, a registrant may decide that narrative disclosure about the earliest year and a year-to-year comparison for the two most recent years in the three-year period is appropriate. The proposed amendments underscore our intent to allow registrants to tailor the presentation of their disclosure to reflect their varying circumstances, provided that registrants continue to disclose the information required by Item 303.62 Request for Comment 4. Should we revise Item 303 as proposed? 5. Should we expand the proposal, with similar conditions, to other forms such as Form S-1 63 or Form 8–K? 64 6. Instead of allowing registrants to eliminate the earliest of the three years of MD&A in some situations, should we retain the earliest year requirement and instead amend Item 303 to allow registrants to hyperlink to the prior year’s annual report for that disclosure in lieu of repeating the disclosure in the current year’s report? 7. Should we include additional conditions on allowing registrants to exclude the earliest of the three years or provide guidance on when a discussion of the earliest of the three years would be material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations? For example, should we not allow registrants to exclude discussion of the earliest year if there has been a material change to either of the two earlier years due to a restatement or a retrospective adoption of a new accounting principle? 8. Should we revise Instruction 1 to Item 303(a) as proposed to eliminate the reference to year-to-year comparisons? 61 See Concept Release, supra note 6, at n.350 and accompanying text. 62 See 2003 MD&A Interpretive Release, supra note 53. 63 17 CFR 239.11. 64 17 CFR 249.308. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 50993 Would eliminating that reference encourage registrants to use a different presentation? Alternatively, should we retain the references to year-to-year comparisons and revise the instruction to identify specific alternatives to yearto-year comparisons? If so, what alternatives should we include? 9. Should we eliminate the reference to five-year selected financial data in Instruction 1 to Item 303(a) as proposed? Would there be a significant impact on the total mix of information available? Would eliminating this reference discourage registrants from providing trend disclosure in their MD&A? 2. Application to Foreign Private Issuers The disclosure requirements for Item 5 of Form 20–F 65 (Operating and Financial Review and Prospects) are substantively comparable to the MD&A requirements under Item 303 of Regulation S–K.66 To maintain a consistent approach to MD&A for domestic registrants and foreign private issuers, we are proposing changes to Form 20–F that conform to our proposed amendments to Instruction 1 to Item 303(a). Accordingly, our proposals would amend the instructions to Item 5 of Form 20–F to provide that, when financial statements included in a filing cover three years, discussion about the earliest year would not be required if (i) that discussion is not material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations and (ii) the registrant has filed its prior year Form 20–F on EDGAR containing Item 5 disclosure of the earliest of the three years included in the financial statements of the current filing. Similar to our proposals for Item 303, we are proposing to amend the instructions to Item 5 of Form 20–F to emphasize that registrants may use any presentation that, in the registrant’s judgment, would enhance a reader’s understanding. We are not proposing similar changes to Form 40–F.67 Form 40–F generally permits Canadian issuers to use Canadian disclosure documents to satisfy the Commission’s registration and disclosure requirements. As a result, the MD&A contained in Form 65 17 CFR 249.220f. the Commission revised the wording of Item 5 of Form 20–F in 1999, the adopting release noted that the requirements correspond with Item 303 of Regulation S–K. See International Disclosure Standards, Release No. 33–7745 (Sept. 28, 1999) [64 FR 53900 (Oct. 5, 1999)], at 53904. 67 17 CFR 249.240f. 66 When E:\FR\FM\02NOP2.SGM 02NOP2 50994 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules 40–F is largely prepared in accordance with Canadian disclosure standards. Request for Comment 10. Should we make corresponding changes to the instructions to Item 5 in Form 20–F as proposed? Why or why not? Are there any unique considerations with respect to foreign private issuers in this context? 11. Should we include additional conditions on allowing registrants to exclude the earliest of the three years or provide guidance on when a discussion of the earliest of the three years would be material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations when providing Item 5 disclosure on Form 20–F? For example, should we not allow registrants to exclude discussion of the earliest year if there has been a material change to either of the two earlier years due to a restatement or a retrospective adoption of a new accounting principle? 12. Should we make corresponding changes to Form 40–F? Why or why not? 13. Would the proposed amendments conflict with home-country requirements in some jurisdictions? If so, please explain. C. Management, Security Holders and Corporate Governance 1. Directors, Executive Officers, Promoters, and Control Persons (Item 401) Item 401 68 requires disclosure of identifying and background information about a registrant’s directors, executive officers, and significant employees.69 The information required by Item 401 must be included in several of the Commission’s disclosure forms, including Part III of an annual report on Form 10–K. General Instruction G of Form 10–K allows Part III disclosure to be incorporated into the Form 10–K by reference to the registrant’s definitive proxy or information statement.70 68 17 CFR 229.401. 401 of Regulation S–K [17 CFR 229.401] was adopted in 1982 as part of the Commission’s integrated disclosure initiative, although similar requirements can be traced back to Schedule A of the Securities Act. See Adoption of Integrated Disclosure System, Release No. 33–6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)] (the ‘‘Integrated Disclosure System Adopting Release’’). See also Securities Act, Schedule A, Paragraph 4 [15 U.S.C. 77aa(4)]. 70 General Instruction G.3 allows the information required by Item 401, along with other items required by Part III of Form 10–K, to be incorporated by reference from the registrant’s proxy statement if it is filed with the Commission within 120 days after the end of the fiscal year covered by the Form 10–K. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 69 Item VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 As an alternative to incorporating all of the Part III disclosure by reference to a definitive proxy or information statement, Instruction 3 to Item 401(b) allows disclosure of information about executive officers required under Item 401 to be included in Part I of Form 10– K. If a registrant elects to follow this instruction, it is not required to repeat that information in its definitive proxy or information statement. This instruction was introduced in 1978, when the executive officer and director disclosure requirements were moved from separate parts of Form 10– K into what was then Item 3 of Regulation S–K.71 The instruction was intended to allow registrants to continue the practice of disclosing information about their executives in Form 10–K while incorporating disclosure about directors and other matters by reference to their definitive proxy or information statement.72 As the staff observed in the FAST Act Report, the instruction’s location may cause confusion because it is included under paragraph (b), despite the fact that other paragraphs of Item 401 also require disclosure about executive officers.73 Although Instruction 3 refers to ‘‘this Item’’ (rather than to paragraph (b) narrowly), the staff issued interpretive guidance stating that disclosure of the business experience of executive officers pursuant to Item 401(e) need not be duplicated in proxy statements if it is already presented in Part I of Form 10-K.74 To eliminate any confusion arising from the current location of the instruction, we are proposing to clarify the instruction by moving it from Item 401(b) and making it a general instruction to Item 401. The amended instruction is intended to clarify its application to any disclosure about executive officers required by Item 401. We are also proposing to revise the required caption for the disclosure if it is included in Part I of Form 10–K to 71 See Uniform and Integrated Reporting Requirements, Release No. 33–5949 (July 28, 1978) [43 FR 34402 (Aug. 3, 1978)]. 72 Id. At the time, Part I of Form 10–K required disclosure regarding executive officers of the registrant and Part II required disclosure about directors. Registrants could exclude the Part II information if it would be included in the registrant’s proxy statement. 73 FAST Act Report, supra note 2, at Recommendation D.1. 74 See Regulation S–K Compliance and Disclosure Interpretation 116.02, available at https:// www.sec.gov/divisions/corpfin/guidance/regskinterp.htm (last updated July 26, 2016). General Instruction G to Form 10–K also refers generally to the ‘‘information regarding executive officers required by Item 401’’ when discussing the accommodation provided in Instruction 3 to Item 401(b). PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 reflect a ‘‘plain English’’ approach. The required caption would be ‘‘Information about our Executive Officers’’ instead of ‘‘Executive officers of the registrant.’’ Request for Comment 14. Should we amend Instruction 3 to Item 401(b) as proposed? 15. The proposed instruction would apply to all of the disclosure about executive officers required by Item 401. Should we limit this instruction to only certain paragraphs of Item 401, such as paragraphs (b) and (e) but exclude paragraph (f)? 75 16. Where a registrant relies on General Instruction G to forward incorporate by reference to its definitive proxy or information statement, is there other Part III disclosure about executive officers that we should specify need not be duplicated in the proxy or information statement if it is already presented in Part I of Form 10–K? For example, should we specify that disclosure about transactions with executive officers pursuant to Item 404 does not need to be duplicated in the proxy or information statement if it is already disclosed in Part I of Form 10– K? 17. Instead of clarifying how Instruction 3 to Item 401(b) applies, should we require disclosure about executive officers to be included in a registrant’s Form 10–K filing, so that it is easier to locate? 76 Alternatively, should we require all Item 401 disclosure to be included in a registrant’s proxy or information statement instead of its Form 10–K if the registrant is required to file a proxy or information statement? 77 2. Compliance With Section 16(a) of the Exchange Act (Item 405) Section 16(a) of the Exchange Act requires officers, directors, and specified types of security holders to report their beneficial ownership of a registrant’s equity securities using forms 75 Item 401(b) (Identification of executive officers); Item 401(e) (Business experience) and Item 401(f) (Involvement in certain legal proceedings). 76 See Letter from Davis Polk (Oct. 31, 2016) [Subpart 400 letter] (‘‘Davis Polk 2’’) (stating that requiring disclosure about executive officers in Form 10–K would make it easier to find and would be more appropriate because shareholders ‘‘are not generally asked to vote on matters related to a registrant’s executive officers other than with respect to executive compensation, and that information is provided in the proxy statement’’). 77 See Letter from Ernst & Young LLP (Nov. 30, 2016) [Subpart 400 letter] (recommending that all Item 401 disclosure be required in a registrant’s proxy or information statement because splitting that disclosure is ‘‘not conducive to investors assessing the diversity and complementary mix of experience of the board in conjunction with that of executive officers’’). E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules prescribed by the Commission.78 Item 405 79 requires registrants to disclose each reporting person 80 who failed to file on a timely basis Section 16 reports during the most recent fiscal year or prior fiscal years.81 The disclosure is required under the caption ‘‘Section 16(a) Beneficial Ownership Reporting Compliance.’’ Rule 16a–3(e) requires reporting persons to furnish a duplicate of those Section 16 reports to the registrant.82 Item 405(a) states that registrants shall provide the required disclosure based solely on a review of such furnished reports and any written representation provided by such persons that no Form 5 is required.83 In the FAST Act Report, the staff recommended that we consider eliminating the delivery requirement in Rule 16a–3(e) and revising Item 405 to permit registrants to rely only on (i) a review of Section 16 reports submitted on EDGAR and (ii) any written representation that no Form 5 is required, when determining whether there are any Section 16 delinquencies that must be disclosed pursuant to Item 405.84 Reporting persons have been required to file their Section 16 reports electronically on EDGAR since 2003.85 78 See Form 3, Form 4, and Form 5. CFR 229.405. 80 Item 405(a)(1) of Regulation S–K [17 CFR 229.405(a)(1)] defines a ‘‘reporting person’’ as ‘‘each person who, at any time during the fiscal year, was a director, officer, beneficial owner of more than ten percent of any class of equity securities of the registrant registered pursuant to Section 12 of the Exchange Act, or any other person subject to Section 16 of the Exchange Act with respect to the registrant because of the requirements of Section 30 of the Investment Company Act.’’ 81 Item 405 was initially proposed in 1988 in an attempt to reduce the high delinquency rate for Section 16 reports. See Ownership Reports and Trading by Officers, Directors and Principal Stockholders, Release No. 34–26333 (Dec. 2, 1988) [53 FR 49997 (Dec. 13, 1988)] and Ownership Reports and Trading by Officers, Directors and Principal Security Holders, Release No. 34–27148 (Aug. 18, 1989) [54 FR 35667 (Aug. 29, 1989)] (reproposing Item 405 in response to comments on the 1988 proposing release). 82 See 17 CFR 240.16a–3(e). 83 See 17 CFR 229.405(a) and (b)(1). 84 FAST Act Report, supra note 2, at Recommendation D.2. 85 See Mandated Electronic Filing and Web Site Posting for Forms 3, 4 and 5, Release No. 33–8230 (May 7, 2003) [68 FR 25788 (May 13, 2003)] (the ‘‘Section 16 Mandatory Electronic Filing Release’’). In addition, all registrants who maintain a corporate website are required to post any Section 16 reports relating to the equity securities of the registrant on such website pursuant to Rule 16a–3(k) of the Exchange Act [17 CFR 240.16a–3(k)], and many registrants satisfy this requirement by providing hyperlinks directly to the electronic filings once they are made on EDGAR. The Commission has noted that any concerns a registrant may have about obtaining an electronic copy of the filing from a Section 16 reporting person in order to satisfy the web posting requirement ‘‘would not arise for issuers that rely on a hyperlink (for example, to asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 79 17 VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 The Commission has stated that ‘‘[b]y reviewing Section 16 reports posted on EDGAR, an issuer is readily able to evaluate their timeliness’’ 86 and ‘‘issuers also may consult EDGAR to obtain notice of new filings.’’ 87 Consistent with the staff’s recommendations, we are proposing to amend Item 405 to focus on a review of Section 16 reports available on EDGAR rather than reports furnished to the registrant. We are also proposing to eliminate the requirement in Rule 16a– 3(e) that reporting persons furnish Section 16 reports to the registrant. We believe that a shift to reliance on electronically filed Section 16 reports, while retaining the written representation in Item 405(b)(1), would modernize and simplify compliance with Item 405 while still providing all material information. In the FAST Act Report, the staff recommended that the Commission consider adding an instruction that permits a registrant to rely on the information in the Section 16 reports submitted on EDGAR unless it knows, or has reason to believe, that the information is not complete or accurate or that a report or an amendment should have been filed but was not.88 While there is a similar instruction in Item 403 of Regulation S–K with respect to the contents of Section 13(d) and 13(g) statements filed with the Commission,89 we have concerns that, if implemented, this recommendation could lead to uncertainty about when a registrant has a reporting obligation because of the difficulty ascertaining when a registrant may have knowledge of delinquencies or a reason to believe that delinquencies have occurred. Therefore, at this time, we are not proposing to expand reporting under Item 405 in this manner. We are, however, proposing to change the language of Item 405 to clarify that registrants may rely on Section 16 reports filed on EDGAR but are not required to limit their inquiry to those filings. Item 405 currently states that the registrant ‘‘shall’’ make its disclosure ‘‘based solely upon’’ the Section 16 reports that are furnished to it pursuant to Rule 16a–3(e) and any written representation from a reporting person that no Form 5 is required. This EDGAR) instead of, or in addition to, direct website posting.’’ Id. at 25790. 86 See Ownership Reports and Trading by Officers, Directors and Principal Security Holders, Release 33–8600 (Aug. 3, 2005) [70 FR 46080 (Aug. 9, 2005)], at 46086. 87 Section 16 Mandatory Electronic Filing Release, supra note 85, at 25790. 88 FAST Act Report, supra note 2, at n.55. 89 See Instruction 3 to Item 403 [17 CFR 229.403]. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 50995 language could be read to suggest that registrants may not rely on information outside of the Section 16 reports furnished to the registrant pursuant to Rule 16a–3(e). As proposed, Item 405(b) would state that registrants ‘‘may’’ rely only on the Section 16 reports and the written representation. Therefore, if a registrant was aware that information in a Section 16 report submitted on EDGAR was not complete or accurate, or that a reporting person failed to file a required report, it could provide appropriate disclosure pursuant to Item 405. We are also soliciting comment on the benefits and challenges of the proposed approach and how it may affect compliance with Section 16(a) reporting obligations. The staff’s final recommendation for revising Item 405 was to eliminate the use of the ‘‘Section 16(a) Beneficial Ownership Reporting Compliance’’ heading when the registrant does not have Section 16(a) delinquencies to report.90 The staff has observed that some registrants have included this heading to disclose that they have nothing to report pursuant to Item 405.91 To reduce unnecessary disclosure and improve the ability to search a registrant’s filings for disclosure of Section 16(a) reporting delinquencies, we are proposing to add an instruction to Item 405 that encourages registrants to exclude the heading if they have no delinquencies to report. We are also proposing to change the heading to ‘‘Delinquent Section 16(a) Reports’’ to more precisely describe the required disclosure and to further encourage registrants to exclude the heading if they do not have delinquencies to report. We are also proposing to eliminate the checkbox on the cover page of Form 10– K relating to Item 405 disclosures and the related instruction in Item 10 of Form 10–K.92 Currently, registrants are required to check a box on the cover page of Form 10–K to indicate that disclosure pursuant to Item 405 is not contained in the Form 10–K and will not be contained, to the best of the registrant’s knowledge, in any definitive proxy or information statement that is incorporated by reference.93 This checkbox was included in Form 10–K to 90 See FAST Act Report, supra note 2, at Recommendation D.3. 91 Rule 12b–13 [17 CFR 240.12b–13] states that, unless expressly provided otherwise, if any item is inapplicable or the answer thereto is negative, an appropriate statement to that effect shall be made. Item 405, however, only requires the use of this heading when responsive disclosure is included. See Item 405(a)(1). 92 17 CFR 229.10. 93 See 17 CFR 249.310. E:\FR\FM\02NOP2.SGM 02NOP2 50996 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules assist the Commission and security holders in identifying registrants that were disclosing delinquent filings by insiders.94 The related instruction in Item 10 of Form 10–K is also intended to facilitate the Form’s processing and review.95 We believe that the proposed amendments would lessen the need for this checkbox by reducing the unnecessary use of the heading and thereby facilitating document searches. Moreover, the checkbox may have limited use, because most registrants defer their Item 405 disclosure to their definitive proxy or information statement pursuant to General Instruction G of Form 10-K.96 Request for Comment asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 18. Would allowing registrants to rely on Section 16 reports filed on EDGAR instead of reports furnished to them reduce the burden of complying with Item 405 while preserving their ability to disclose delinquencies? What effect, if any, would the proposed approach have on compliance with the Section 16(a) reporting requirements? Should we continue to require Section 16 reporting persons to furnish reports to registrants, or should we require them to provide notice to the registrant when the reporting person files a report on EDGAR? 19. Should we, instead of permitting, require a registrant to disclose delinquencies under Item 405 if it knows, or has reason to believe, that 94 See Ownership Reports and Trading by Officers, Directors and Principal Security Holders, Release No. 34–28869 [56 FR 7242 (Feb. 21, 1991)] (‘‘Ownership Reports and Trading Release’’), at Section VI.B. 95 The Instruction to Item 10 specifies that checking the box on the cover page to indicate that Item 405 disclosure of delinquent Form 3, 4, or 5 filers is not contained is intended to facilitate Form processing and review. The instruction also states that failure to provide such indication will not create liability for violation of the federal securities laws and that the space should be checked only if there is no disclosure in the Form of reporting person delinquencies in response to Item 405 and if the registrant, at the time of filing the Form 10– K, has reviewed the information necessary to ascertain, and has determined that, Item 405 disclosure is not expected to be contained in Part III of the Form 10–K or incorporated by reference. 96 See Ownership Reports and Trading Release at 7260 (‘‘If at the time of filing the Form 10–K the registrant does not yet know whether such disclosure will be contained in the proxy or information statement or the Form 10–K amendment containing the Part III information, the box should not be checked. If the box is not checked, this will not be taken as a statement that there will be Item 405 disclosure of delinquent filers, but rather that the registrant may not have the requisite knowledge at the time the Form 10–K is filed.’’). The proposed approach would also have the advantage of allowing for this disclosure to be located with a simple text search whether it is included in the registrant’s annual report or its definitive proxy or information statement. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 there is a delinquency that is not reflected on EDGAR? Why or why not? 20. Should we revise the ‘‘Section 16(a) Beneficial Ownership Reporting Compliance’’ heading as proposed? Is there an alternative heading that would be more appropriate? 21. Should we continue to include a checkbox on Form 10–K, or include a checkbox on Schedule 14A 97 or Schedule 14C, to indicate when the disclosure required by Item 405 is included in a filing? If so, what benefits would it provide compared to our proposed approach of encouraging registrants to exclude the proposed ‘‘Delinquent Section 16(a) Reports’’ heading if they do not have delinquencies to report? 3. Corporate Governance (Item 407) Several disclosure requirements related to corporate governance are consolidated in Item 407.98 In the FAST Act Report, the staff recommended updating a reference to an outdated auditing standard in Item 407(d)(3)(i)(B) and revising Item 407(e)(5) to clarify that EGCs are not required to provide a compensation committee report.99 We are proposing amendments to implement both of these recommendations. a. Audit Committee Discussions With Independent Auditor (Item 407(d)(3)(i)(B)) Under existing Item 407(d)(3)(i)(B), when a registrant files a proxy or information statement relating to an annual or special meeting of security holders at which directors are elected or written consents are provided in lieu of a meeting, a registrant’s audit committee must state whether it has discussed with the independent auditor the matters required by AU section 380, Communication with Audit Committees (‘‘AU sec. 380’’).100 AU sec. 380 was part of the interim standards previously adopted by the Public Company Accounting Oversight Board (‘‘PCAOB’’) on April 16, 2003.101 As noted in the Commission’s concept release on audit committee disclosures (the ‘‘Audit 97 17 CFR 240.14a–101. CFR 229.407. Item 407 was adopted in 2006 to consolidate various corporate governance requirements under a single disclosure item. See Executive Compensation and Related Person Disclosure, Release No. 33–8732A (Aug. 29, 2006) [71 FR 53158 (Sept. 8, 2006)]. 99 See FAST Act Report, supra note 2, at Recommendations D.4 and D.5. 100 See Instruction 3 to Item 407(d) of Regulation S–K. 101 See PCAOB Release No. 2003–006 (Apr. 16, 2003). AU sec. 380 required an auditor to discuss various matters related to the conduct of an audit with those who have responsibility for oversight of the financial reporting process. 98 17 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 Committee Concept Release’’), the reference to AU sec. 380 is outdated, because it was superseded by PCAOB Auditing Standard No. 16, Communications with Audit Committees (‘‘AS 16’’).102 Furthermore, on March 31, 2015, the PCAOB formally reorganized its auditing standards resulting in the codification of AS 16 as Auditing Standard No. 1301, Communications with Audit Committees (‘‘AS 1301’’).103 Commenters on the Audit Committee Concept Release that addressed this issue generally supported updating the AU sec. 380 reference.104 Commenters differed on how best to update this reference, as AS 1301 is not the only requirement addressing communications between an auditor and the audit committee. Specifically, both the Commission and PCAOB have other rules and standards that require matters to be communicated to a company’s audit committee.105 Accordingly, several commenters suggested aligning the disclosure requirements with the communication requirements specific to the standards and rules of the PCAOB,106 while others suggested a more encompassing requirement that would refer to all audit committee communications with the independent auditors required by not only the PCAOB but also the Commission.107 102 See Possible Revisions to Audit Committee Disclosures, Release No. 33–9862 (July 1, 2015) [80 FR 38995 (July 8, 2015)], at 39003. 103 See PCAOB Release No. 2015–02 (Mar. 31, 2015). The PCAOB completed a reorganization of its auditing standards into a topical structure and a single, integrated numbering system (the ‘‘Reorganization’’). The Commission approved the Reorganization on September 17, 2015. See Order Granting Approval of Proposed Rules to Implement the Reorganization of PCAOB Auditing Standards and Related Changes to PCAOB Rules and Attestation, Quality Control, and Ethics and Independence Standards, Release No. 34–75935 (Sept. 17, 2015) [80 FR 57263 (Sept. 22, 2015)]. 104 Comments on the Audit Committee Concept Release are available at https://www.sec.gov/ comments/s7–13–15/s71315.shtml. We refer to these letters throughout as ‘‘Audit Committee’’ letters. 105 See, e.g., Appendix B to AS 1301; Section 10A(k) of the Exchange Act [15 U.S.C. § 78j–1(k)]; Rule 2–07 of Regulation S–X [17 CFR 210.2–07]; and Rule 10A–3 [17 CFR 240.10A–3]. 106 See, e.g., Letters from AngloGold Ashanti Limited (Sept. 7, 2015) [Audit Committee letter]; Deloitte & Touche LLP (Sept. 2, 2015) [Audit Committee letter]; National Association of State Boards of Accountancy (Sept. 3, 2015) [Audit Committee letter]; and James H. Edwards (Sept. 8, 2015) [Audit Committee letter]. 107 See, e.g., Letters from AT&T Inc. (Sept. 8, 2015) [Audit Committee letter]; Federal Regulation of Securities, Law and Accounting, and Corporate Governance Committees of the American Bar Association (Feb. 9, 2016) [Audit Committee letter]; and The Home Depot, Inc. (Sept. 17, 2015) [Audit Committee letter]. One commenter on the Regulation S–K Subpart 400 Release also E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules After consideration of the comments we have received and the recommendation of the staff in the FAST Act Report, we are proposing to update the reference to AU sec. 380 by referring more broadly to the applicable requirements of the PCAOB and the Commission. We believe such an approach would accommodate future changes to audit committee communication requirements. Request for Comment 22. Should we amend Item 407(d)(3)(i)(B) to refer to the ‘‘applicable requirements of the PCAOB and the Commission rules’’ as proposed? Is there a better reference or additional guidance that we should provide to facilitate audit committee compliance and investor understanding of this requirement? b. Compensation Committee Report (Item 407(e)(5)) Item 407(e)(5) requires a registrant’s compensation committee to state whether it has reviewed and discussed the Compensation Discussion and Analysis (‘‘CD&A’’) required by Item 402(b).108 Based on this review and discussion, Item 407(e)(5) requires that the compensation committee state whether it recommended to the board of directors that the CD&A be included in the registrant’s annual report, proxy statement or information statement. As recommended by the staff, we are proposing to amend Item 407 to explicitly exclude EGCs from the Item 407(e)(5) requirement, because they are not subject to a requirement to include a CD&A in their public disclosures.109 Specifically, we are proposing to add a reference to EGCs in Item 407(g) instead of amending Item 407(e)(5). Item 407(g) currently excludes SRCs from Item 407(e)(5), among other provisions of Item 407. Request for Comment 23. Instead of amending Item 407(g) as proposed, should we amend Item 407(e)(5)? asabaliauskas on DSKBBXCHB2PROD with PROPOSALS D. Registration Statement and Prospectus Provisions 1. Outside Front Cover Page of the Prospectus (Item 501(b)) Item 501 110 includes disclosure requirements related to the forepart of the registration statement and the outside front cover page of the recommended updating Item 407(d) to refer to AS 16. See Letter from Davis Polk 2. 108 17 CFR 229.402(b). 109 See Item 402(l) of Regulation S–K. 110 17 CFR 229.501. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 prospectus. In the FAST Act Report, the staff made several recommendations to streamline the requirements and to provide registrants with greater flexibility in designing a cover page tailored to their business and the particular offering.111 The proposed amendments discussed below would implement these recommendations. a. Name (Item 501(b)(1)) Item 501(b)(1) requires disclosure of a registrant’s name, including an English translation of the name of foreign registrants. The instruction to Item 501(b)(1) states that if a registrant’s name is the same as that of a ‘‘well known’’ company, or if the name leads to a misleading inference about the registrant’s line of business, the registrant must include information to eliminate any possible confusion with the other company. If disclosure is insufficient to eliminate the confusion, the registrant may be required to change its name. An exception, however, is available when the registrant is an ‘‘established company,’’ the character of the registrant’s business has changed, and the ‘‘investing public is generally aware of the change and the character of [the registrant’s] current business.’’ The policy reflected in Item 501(b)(1) with regards to misleading company names was first articulated in 1969 in response to an increase in the number of registrants using names that the staff considered to be misleading.112 Although we continue to believe that a registrant’s name could mislead investors, the staff’s experience administering this provision suggests that these situations can typically be addressed with clarifying disclosure. The Commission and the staff may be able to address situations in which the registrant’s name is either confusingly similar or misleading in connection with any public interest finding necessary to declare the filing effective.113 Accordingly, we are proposing to streamline the instruction 111 FAST Act Report, supra note 2, at Recommendations E.1–5. 112 At the time, the Commission noted that registrants were using words such as ‘‘nuclear,’’ ‘‘missile,’’ ‘‘space,’’ ‘‘nucleonics,’’ and ‘‘electronics’’ in their names when they were not engaged in activity normally associated with those words, or were engaged to a limited extent. See Guide for Preparation and Filing of Registration Statements; Misleading Names of Registrants, Release No. 33– 4959 (Apr. 16, 1969) [34 FR 6575 (Apr. 17, 1969)]. This policy was contained in Guide 53 of the Commission’s Guides for Preparation and Filing of Registration Statements before being moved into Item 501 in 1982. See Integrated Disclosure System Adopting Release, supra note 69; Rescission of Guides and Redesignation of Industry Guides, Release No. 33–6384 (Mar. 3, 1982) [47 FR 11476 (Mar. 16, 1982)]. 113 15 U.S.C. 77h. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 50997 to Item 501(b)(1) by eliminating the portion that discusses when a name change may be required and the exception to that requirement. Request for Comment 24. Should we eliminate the language about a registrant’s being required to change its name in the instruction to Item 501(b)(1) as proposed, or should we retain the current version of the instruction? Are there situations where disclosure would not be sufficient to eliminate misleading inferences about the company or its line of business? b. Offering Price of the Securities (Item 501(b)(3)) Item 501(b)(3) requires disclosure of the price of the securities being offered, the underwriter’s discounts and commissions, and the net proceeds that the registrant and any selling security holders will receive.114 The disclosure must be provided on an aggregate and per share basis, but registrants may present the required information in any format that fits the design of the cover page and is clear, easily read, and not misleading. Although in many cases the disclosure required by Item 501(b)(3) will be straightforward, Instruction 2 states that ‘‘[i]f it is impracticable to state the price to the public, explain the method by which the price is to be determined.’’ 115 In the FAST Act Report, the staff recommended providing registrants with greater flexibility in explaining the method by which the price is to be determined when it is impracticable to state the price on the cover page.116 We are proposing to amend Instruction 2 to explicitly allow registrants to include a clear statement that the offering price will be determined by a particular method or formula that is more fully explained in the prospectus. Under the proposed instruction, registrants would be required to accompany that statement with a cross-reference to the offering price method or formula disclosure, including a page number that is 114 17 CFR 229.501(b)(3). Item 501(b)(3) also includes specific disclosure requirements for offerings being made on a minimum/maximum basis. 115 The instruction also provides that if the securities are to be offered at the market price, or if the offering price is to be determined by a formula relating to the market price, indicate the market and market price of the securities as of the latest practicable date. We are not proposing any change to this portion of the instruction. 116 See FAST Act Report, supra note 2, at Recommendation E.2. E:\FR\FM\02NOP2.SGM 02NOP2 50998 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules highlighted by prominent type or in another manner.117 Request for Comment 25. As proposed, Item 501(b)(3) would allow registrants to choose to include a cross-reference to the explanation of the method in which the offering price will be determined when it is impracticable to state the price method or formula to the public on the cover page. Should we instead retain the requirement to present the explanation on the prospectus cover page? Why or why not? 26. Should we amend Instruction 2 to Item 501(b)(3) to require the crossreference to be accompanied by a hyperlink? Item 501(b)(5) currently requires on the prospectus cover page a cross-reference to the risk factors section. Should we similarly amend Item 501(b)(5) to also require a hyperlink? c. Market for the Securities (Item 501(b)(4)) asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Item 501(b)(4) requires a registrant to name the national securities exchanges that list the securities being offered and to disclose the trading symbols for those securities. A ‘‘national securities exchange’’ is a securities exchange that has registered with the Commission under Section 6 of the Exchange Act.118 Under Item 501(b)(4), registrants are not required to name markets that are not a ‘‘national securities exchange.’’ Consistent with the staff’s recommendation in the FAST Act Report,119 we believe that information about markets that are not a ‘‘national securities exchange’’ could be important to investors and should be disclosed on the prospectus cover page. Accordingly, we are proposing to amend Item 501(b)(4) to require disclosure of the principal United States market or markets for the securities being offered and the corresponding trading symbols.120 117 This cross-reference would be similar to the cross-reference that is required for risk factor disclosure pursuant to Item 501(b)(5) of Regulation S–K [17 CFR 229.501(b)(5)]. In the FAST Act Report, the staff recommended the Commission consider amending Instruction 2 to Item 501(b)(3) to require the cross-reference to the offering price method or formula to be accompanied by a hyperlink. Because the cross-reference to risk factors required under Item 501(b)(5) does not currently require a hyperlink, we are not proposing to require a hyperlink for the disclosure called for by Item 501(b)(3). 118 See Section 6 of the Securities Exchange Act of 1934 [15 U.S.C. 78f]. 119 See FAST Act Report, supra note 2, at Recommendation E.3. 120 Our proposed changes to Item 501(b)(4) align with our proposals to amend Item 201(a) [17 CFR 229.201(a)] in the Disclosure Update and VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 Also consistent with the staff’s recommendation,121 we are limiting disclosure of markets that are not national securities exchanges to those principal United States markets where the registrant, through the engagement of a registered broker-dealer, has actively sought and achieved quotation. We agree with the staff that a registrant cannot always control whether its securities are quoted on an over-thecounter market and should not be burdened with making that determination. Request for Comment 27. Should we expand the disclosure required by Item 501(b)(4) to include markets other than national securities exchanges as proposed? Would expanding the disclosure requirement make it difficult for registrants to determine which United States markets to disclose? 28. Should we limit the disclosure requirement to those principal United States markets where the registrant has actively sought and achieved quotation through the engagement of a registered broker-dealer as proposed? Should there be any other limitations on the markets the registrant would be required to disclose? 29. Should a domestic or foreign registrant be required to identify principal foreign markets where the registrant, through the engagement of a registered broker-dealer, has actively sought and achieved quotation for the class of security being offered? 30. If a registrant discloses another trading market elsewhere in its registration statement, should Item 501(b)(4) require disclosure of that market on the cover page, even if it is not a national securities exchange and even if the registrant did not actively seek quotation through the engagement of a registered broker-dealer? For example, Item 201(a) of Regulation S–K 122 requires disclosure of the principal United States market or markets in which each class of the registrant’s common equity is traded. 31. Should we provide additional guidance on when a market other than a national securities exchange must be disclosed or when a registrant would be considered to have actively sought quotation through the engagement of a registered broker-dealer? Simplification Proposing Release. See Disclosure Update and Simplification Proposing Release supra note 13, at 51688. 121 See FAST Act Report, supra note 2, at Recommendation E.3. 122 Item 201(a) of Regulation S–K. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 d. Prospectus ‘‘Subject to Completion’’ Legend (Item 501(b)(10)) Item 501(b)(10) requires a registrant that is using a preliminary prospectus to include a legend advising readers that the information will be amended or completed. The legend also must include a statement that the prospectus is not an offer to sell or a solicitation of an offer to buy securities in any state where the offer or sale is not permitted. The latter statement was introduced in 1958 to harmonize the legend with what was required by state securities administrators at the time.123 The legend requirement has remained mostly unchanged since 1958, even after the National Securities Markets Improvement Act (‘‘NSMIA’’) allowed for preemption of state blue sky laws in many offerings.124 Consistent with the staff’s recommendations in the FAST Act Report,125 we are proposing to amend Item 501(b)(10) to permit registrants to exclude from the prospectus the portion of the legend relating to state law for offerings that are not prohibited by state blue sky law. This change would allow for a more tailored prospectus cover page in recognition of the changes to securities law brought by NSMIA. Also consistent with the staff’s recommendations,126 we are proposing to streamline Item 501(b) by combining paragraphs (b)(10) and (11) without substantive change. Thus, our proposed amendments to paragraph (b)(10) would also require the ‘‘subject to completion’’ legend to be included if a registrant relies on Rule 430A 127 to omit pricing information and the prospectus is used after the effectiveness of the registration statement but before the public offering price is determined. Correspondingly, we are proposing to delete paragraph (b)(11). Request for Comment 32. Should we allow registrants the discretion to exclude the portion of the legend required by Item 501(b)(10) that relates to state law prohibitions on offers or sales when it would not apply, as proposed? 2. Risk Factors (Item 503(c)) Item 503(c) requires disclosure of the most significant factors that make the 123 See Amendment of Rules 134 and 433, Release No. 33–3885 (Jan. 7, 1958) [23 FR 184 (Jan. 10, 1958)]. This requirement was originally in Rule 433, a predecessor to the current requirement. 124 Public Law No. 104–290, 110 Stat. 3416 (1996). 125 See FAST Act Report, supra note 2, at Recommendation E.4. 126 See id., at Recommendation E.5. 127 17 CFR 230.430A. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules offering speculative or risky.128 The item specifies that the discussion should be concise and organized logically. Although the requirement is principles-based, it includes the following specific examples as factors that may make an offering speculative or risky: • A registrant’s lack of an operating history, • a registrant’s lack of profitable operations in recent periods, • a registrant’s financial position, • a registrant’s business or proposed business, or • the lack of a market for a registrant’s common equity securities or securities convertible into or exercisable for common equity securities.129 The item directs registrants to explain how each risk affects the issuer or the securities being offered. Additionally, the item discourages disclosure of risks that could apply to any issuer or offering. Risk factor disclosure was initially called for only in the offering context.130 Accordingly, when Item 503(c) was adopted in 1982 as part of the integrated disclosure system, it was included with other offering-related disclosure requirements in Subpart 500 of Regulation S-K.131 In 2005, risk factor disclosure requirements were extended to periodic reports and registration statements on Form 10.132 As recommended by the staff in the FAST Act Report, we are proposing to relocate Item 503(c) from Subpart 500 to Subpart 100 to reflect the application of risk factor disclosure requirements to registration statements on Form 10 133 and periodic reports.134 Subpart 100 128 17 CFR 229.503(c). factors were derived from previous stop order proceedings under Section 8(d) of the Securities Act where the Commission suspended the effectiveness of previously filed registration statements due, in part, to inadequate disclosure about speculative aspects of the registrant’s business. See Guides for Preparation and Filing of Registration Statements, Release No. 33–4936 (Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)] (citing In the Matter of Doman Helicopters, Inc., 41 S.E.C. 431 (Mar. 27, 1963); In the Matter of Universal Camera Corp., 19 S.E.C. 648 (June 28, 1945)). 130 See Guides for Preparation and Filing of Registration Statements, Release No. 33–4666 (Feb. 7, 1964) [29 FR 2490 (Feb. 15, 1964)] and Guides for Preparation and Filing of Registration Statements, Release No. 33–4936 (Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)]. 131 See Integrated Disclosure System Adopting Release, supra note 69. 132 See Securities Offering Reform, Release No. 33–8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (‘‘Securities Offering Reform Adopting Release’’). 133 17 CFR 249.210. 134 See FAST Act Report, supra note 2, at Recommendation E.6. Additionally, the proposed amendments would use the term ‘‘registrant’’ instead of ‘‘issuer.’’ Use of and reference to asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 129 These VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 covers a broad category of business information and is not limited to offering-related disclosure. Accordingly, our proposed amendments would move Item 503(c)’s requirement for risk factor disclosure to new Item 105.135 Additionally, our proposed amendments would eliminate the risk factor examples that are currently enumerated in Item 503(c). Although not addressed in the FAST Act Report, we solicited comment in the Concept Release on whether we should retain or eliminate the examples and whether we should revise our requirements to include additional or different examples. A number of commenters recommended retaining and revising the examples in Item 503(c).136 Several of these commenters supported a revision to specify examples of risk factors that are generic and therefore should not be disclosed.137 For example, one of these commenters recommended that the Commission prohibit disclosure of generalized risks that affect all registrants or all registrants in a particular industry, the risk of stock volatility, organizational structure risks, and summaries of applicable regulation.138 Two commenters recommended revising the examples to include risk factors applicable to wellestablished Exchange Act registrants,139 while another two supported expanding the list of examples.140 One of the commenters that recommended expanding the list of examples pointed ‘‘registrant’’ instead of ‘‘issuer’’ is intended to better reflect the application of risk factor disclosure outside of the offering context. The term ‘‘registrant’’ is defined under both the Exchange Act and Securities Act. See Rule 12b–2 [17 CFR 240.12b–2] and Rule 405 [17 CFR 230.405]. 135 See proposed Item 105. Consistent with this change, we are also proposing amendments to several Commission forms that require risk factor disclosure and reference Item 503(c). These proposed amendments would revise references to Item 503 to specify new Item 105. A number of forms that require risk factor disclosure do not reference Item 503(c). Our proposed amendments do not include revisions to these forms. For example, Forms 10–Q and 20–F require risk factor disclosure but do not reference Item 503(c). 136 See, e.g., Letters from Center for Audit Quality (July 21, 2016) (‘‘CAQ’’); California Public Employees’ Retirement System (July 21, 2016) (‘‘CalPERS’’); PricewaterhouseCoopers LLP (July 21, 2016) (‘‘PWC’’); Edison Electric Institute and American Gas Association (July 21, 2016) (‘‘Edison Electric and AGA’’); Investment Program Association; Davis Polk 1; National Investor Relations Institute (Aug. 4, 2016) (‘‘NIRI’’); Shearman & Sterling (Aug. 31, 2016) (‘‘Shearman 2’’); NYSSCPA. 137 See, e.g., Letters from Edison Electric and AGA; Investment Program Association; Davis Polk 1; NIRI; and Shearman 2. 138 See Letter from Investment Program Association. 139 See Letters from CAQ and PWC. 140 See Letters from CalPERS and NYSSCPA. PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 50999 to guidelines produced by the investor community as a source of additional examples.141 A few commenters recommended eliminating the examples in Item 503(c).142 One of these commenters supported eliminating the examples so as to emphasize the principles-based nature of the disclosure requirement and to focus registrants on their own risk identification process.143 Another of these commenters expressed a view that the examples were outdated and only helpful when the requirement to disclose risk factors was first introduced.144 As part of our mandate under the FAST Act to modernize and simplify our disclosure requirements while still providing all material information, we are proposing to eliminate these examples. These examples may not apply to all registrants and may not correspond to the material risks of any particular registrant. In addition, the inclusion of these examples could suggest that a registrant must address each one in its risk factor disclosures, regardless of the significance to its business. Finally, several commenters suggested expanding the list of examples or revising them to specify examples of generic risks that should not be disclosed. We are concerned that inclusion of examples could anchor or skew the registrant’s risk analysis in the direction of the examples.145 We believe that eliminating the examples would encourage registrants to focus on their own risk identification processes. Request for Comment 33. Should we move the requirement to provide risk factor disclosure in Item 503(c) to a new Item 105 as proposed? Why or why not? 34. Should we relocate Item 503(c)’s requirements to another subsection of Regulation S–K? If so, which subsection and why? 35. Should we eliminate the risk factor examples as proposed, or do they provide useful guidance to registrants? Instead of eliminating the examples, should we provide different or 141 See Letter from CalPERS (referring to several sets of guidelines such as the Principles for Responsible Investment and those issued by the International Corporate Governance Network, among others). 142 See Letters from Chris Barnard (June 23, 2016) (‘‘Barnard’’); Fenwick; and SIFMA (stating that the five examples are not ‘‘cutting edge’’ and ‘‘could be eliminated,’’ but that most registrants recognize that Item 503(c) is focused on principles-based disclosure of the most significant factors that make the offering speculative or risky). 143 See Letter from Barnard. 144 See Letter from Fenwick. 145 See infra note 349 and accompanying text. E:\FR\FM\02NOP2.SGM 02NOP2 51000 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules additional examples that would be more helpful to registrants? If so, what examples would be most helpful? 3. Plan of Distribution (Item 508) Item 508 requires disclosure about the plan of distribution for securities in an offering, including information about underwriters.146 Paragraph (a) requires disclosure about the principal underwriters and underwriters that have a material relationship with the registrant, while paragraph (h) requires disclosure of the discounts and commissions to be allowed or paid to dealers. If a dealer is paid any additional discounts or commissions for acting as a ‘‘sub-underwriter,’’ paragraph (h) allows the registrant to include a general statement to that effect without giving the additional amounts to be sold. ‘‘Sub-underwriter’’ is not a defined term, and its application may be unclear. ‘‘Principal underwriter,’’ however, is defined in Regulation C as ‘‘an underwriter in privity of contract with the issuer of the securities as to which he is an underwriter.’’ 147 Consistent with the staff’s recommendation in the FAST Act Report,148 and in light of the definition of ‘‘principal underwriter’’ and the disclosure required by Item 508(a), we are proposing to amend Rule 405 149 to define the term ‘‘sub-underwriter’’ as a dealer that is participating as an underwriter in an offering by committing to purchase securities from a principal underwriter for the securities but is not itself in privity of contract with the issuer of the securities.150 Request for Comment 36. Should we amend Rule 405 to define ‘‘sub-underwriter’’ as proposed? Should we define the term differently? For example, is the concept of ‘‘privity of contract’’ sufficiently clear? 4. Undertakings (Item 512) Item 512 151 provides undertakings that a registrant must include in Part II of its registration statement, depending 146 17 CFR 229.508. CFR 230.405. 148 See FAST Act Report, supra note 2, at Recommendation E.7. 149 17 CFR 230.405. 150 The only other use of the term ‘‘subunderwriter’’ or ‘‘subunderwriter’’ in Regulation S– K, the Securities Act rules, or the Exchange Act rules is in Rule 491 [17 CFR 230.491]. We are proposing to amend Rule 491 to reference ‘‘subunderwriter,’’ consistent with our proposed amendments here. The proposed definition of subunderwriter would not change the meaning of that term in Rule 491 and appears to be consistent with its use in that context. 151 17 CFR 229.512. on the type of offering. In the FAST Act Report, the staff recommended that the Commission consider eliminating undertakings that are duplicative of other rules or that have become unnecessary due to developments since their adoption. We are proposing the following amendments to implement the staff’s recommendations. Item 512(c) sets forth undertakings that a registrant must include if it registers a warrant or rights offering to existing security holders and the securities not purchased by those security holders will be reoffered to the public.152 The undertaking requires a registrant, after the expiration of the subscription period, to supplement the prospectus to disclose the results of the subscription offer and the terms of any subsequent reoffer to the public. If any public reoffer is made on terms different from the offer to existing security holders, then the registrant must undertake to file a post-effective amendment to disclose the terms of that offering. We are proposing to eliminate this undertaking because it is no longer necessary. A registrant conducting the type of offering described in Item 512(c) would already have been required to register and disclose the offering to existing security holders as well as the reoffering to the public. Furthermore, Item 512(a)(1) requires registrants to undertake to file a post-effective amendment to disclose fundamental changes in the information set forth in the registration statement and material information with respect to the plan of distribution or changes in the plan of distribution.153 Thus, disclosure of material changes in the terms of the reoffering would also be required as part of the Item 512(a)(1) undertaking, thus obviating the need for the Item 512(c) undertaking. Consistent with the recommendations made in the FAST Act Report, we are also proposing to eliminate the Item 512(d), Item 512(e), and Item 512(f) undertakings, because they are obsolete.154 Item 512(d) requires a registrant to include undertakings if the securities it registers are to be offered at competitive bidding.155 The asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 147 17 VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 152 17 CFR 229.512(c). The Item 512(c) undertaking was included in the Securities Act forms and guides, prior to the enactment of the integrated disclosure system in 1982. See, e.g., Notice of Proposed Revision of Form S-4, Release No. 33–3667 (July 31, 1956) [21 FR 6025 (Aug. 11, 1956)] and Notice of Proposed Form S–11 for Registration of Securities of Certain Real Estate Companies, Release No. 33–4347 (Apr. 10, 1961) [26 FR 3280 (Apr. 18, 1961)]. 153 17 CFR 229.512(a)(1). 154 See FAST Act Report, supra note 2, at Recommendation E.9. 155 17 CFR 229.512(d). PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 undertaking requires a registrant to use its best efforts to distribute a Section 10(a) prospectus to prospective bidders, underwriters, and dealers and to file a post-effective amendment reflecting the results of the bidding and any related terms. This undertaking arises from former Rule 50 under the Public Utility Holding Company Act of 1935 (‘‘PUHCA’’), which formerly required public utility company securities to be sold through competitive bids.156 We propose eliminating this undertaking because the Commission rescinded Rule 50 in 1994,157 and because Congress repealed PUHCA in 2005.158 Furthermore, this undertaking was put into place prior to the adoption of Rule 430A, which permits the omission of pricing and underwriter related terms from the effective registration statement if the issuer includes that information in a prospectus or post-effective amendment after the effective date.159 To the extent that competitive bidding is still used, registrants may file prospectuses that contain the pricing and underwriter disclosure pursuant to Rule 430A and those documents will be subject to the liability imposed by that rule.160 Item 512(e) provides that, if a registrant’s prospectus directly incorporates by reference the registrant’s annual report to security holders meeting the requirements of Rule 14a– 4 161 or Rule 14c–3,162 the registrant must undertake to deliver the latest 156 See Notice of Proposal to Adopt Rule 415 Relating to Competitive Bidding Registration Statements, to Amend Rules 424, 455, 471 and 472 and to Rescind Rule 460, Release No. 33–3491–Z (Nov. 10, 1953) [18 FR 7300 (Nov. 18, 1953)]; Adoption of Rule 415 Relating to Competitive Bidding Registration Statements, Amendment of Rules 424, 427, 455, 471 and 472 and Rescission of Rule 460, Release No. 33–3494 (Jan. 13, 1954) [19 FR 399 (Jan. 22, 1954)]; and Phase One Recommendations of Task Force on Disclosure Simplification, Release No. 33–7300 (May 31, 1996) [61 FR 30397 (June 14, 1996)] (‘‘1996 Disclosure Simplification Recommendations’’). 157 See 1996 Disclosure Simplification Recommendations (citing Public Utility Holding Company Act Rules, Release No. 35–26031 (Apr. 20, 1994) [59 FR 21922 (Apr. 28, 1994)]). 158 See Energy Policy Act of 2005, Public Law No. 109–58, 119 Stat. 594 (2005). 159 17 CFR 230.430A. 160 We understand that registration statements filed in connection with securities to be offered through competitive bidding are rarely used. See Louis Loss, Joel Seligman, & Troy Paredes, Securities Regulation (5th ed. 2016) (‘‘Loss et al.’’) § 2.A.4. Competitive Bidding. According to Loss et al., competitive bidding is now used by ‘‘municipalities and public instrumentalities.’’ Rule 430A provides that information omitted in reliance on that rule is deemed part of the registration statement as of the time it was declared effective, thus subjecting those disclosures to liability under Section 11 of the Securities Act. 161 17 CFR 240.14a–4. 162 17 CFR 240.14c–3. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules annual report with the prospectus.163 If interim information is required but is not included in the prospectus, the registrant must undertake to deliver the latest quarterly report that is incorporated by reference in the prospectus. The purpose of this undertaking is to ensure that the registrant delivers incorporated annual and quarterly reports with the prospectus, as required by former Form S-2.164 The disclosure and delivery requirements of former Form S–2 were intended to minimize duplicative reporting while still requiring delivery of incorporated information.165 The Commission rescinded Form S–2 as part of Securities Offering Reform, since its underlying purpose was outdated because of EDGAR, other technological developments, and the rapid dissemination of information in the market.166 Similarly, we are now proposing to eliminate the related undertaking, since any material information in a registrant’s annual or quarterly reports to security holders should be publicly available. Finally, the undertaking in Item 512(f) applies to registrants that prior to the offering had no obligation to file reports with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act.167 If such a registrant conducts an underwritten equity offering, it must undertake to provide the securities certificates required by the underwriter at closing to permit prompt delivery to each purchaser. The purpose of this undertaking is to ensure that the registrant delivers sufficient certificates to the underwriter at closing to permit aftermarket trading in new issues.168 We 163 17 CFR 229.512(e). Proposed Comprehensive Revision to System for Registration of Securities Offerings, Release No. 33–6235 (Sept. 2, 1980) [45 FR 63693 (Sept. 25, 1980)]. 165 See Securities Offering Reform Adopting Release, supra note 132. 166 See id. 167 17 CFR 229.512(f). 168 See Hot Issues, Release No. 33–5274 (July 26, 1972) [37 FR 16005 (Aug. 9, 1972)] (‘‘Hot Issues Release’’); Notice of Adoption of Amendments to Registration Forms S–1 and S–2 under the Securities Act of 1933 and to Forms 10, 10–K and 10–Q and Rules 13a–13 and 15d–13 under the Securities Exchange Act of 1934, Release No. 33– 5395 (June 1, 1973) [38 FR 17202 (June 29, 1973)]. In 1972, the Commission conducted public hearings on the matter of hot issues securities markets, which revealed that ‘‘one of the imperfections affecting aftermarket trading in new issues is the occasional failure of issuers to furnish securities in such denominations and registered in such manner as to permit adequate and prompt delivery to each purchaser. Accordingly, one of the proposals is that non-reporting registrants formally undertake in registration statements filed on Forms S–1 and S– 2 that they will deliver the certificates to the underwriter at the closing for prompt delivery to customers.’’ See Hot Issues Release, supra at 16007. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 164 See VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 are proposing to eliminate this undertaking because the need to deliver certificates to underwriters has decreased dramatically since this undertaking was adopted in the early 1970s. Today, equity securities trades in the United States are typically cleared and settled using the depository and book-entry services of the Depository Trust and Clearing Corporation’s clearing agency subsidiaries.169 Request for Comment 37. Should we retain or modify any of the undertakings that we have proposed eliminating? If so, please explain why. 38. In what instances are physical securities certificates still delivered today? Should we retain the undertaking for those situations? 39. Are there other undertakings that we have not addressed in this release that are duplicative, no longer necessary or that should be eliminated for other reasons? 40. Are there undertakings we should consider requiring to modernize and address developments for novel securities offerings? E. Exhibits 1. Description of Registrant’s Securities (Item 601(b)(4)) Item 202 requires registrants to provide a brief description of their registered capital stock, debt securities, warrants, rights, American Depositary Receipts, and other securities.170 Registrants provide Item 202 disclosure about registered securities in their registration statements 171 but are not required to provide this disclosure in their Form 10–K or Form 10–Q.172 169 See Loss et al. § 7.E.2. Current Law (‘‘Virtually all equities securities trades in the United States are cleared and settled through the National Securities Clearing Corporation (NSCC) and the Depository Trust Company (DTC), clearing agency subsidiaries of the Depository Trust and Clearing Corporation (DTCC).’’); Depository Trust & Clearing Corporation, FAQs: How Issuers Work With DTC available at http://www.dtcc.com/matching-settlement-andasset-services/issuer-services/how-issuers-workwith-dtc (last visited Feb. 22, 2017) (‘‘DTC provides (i) settlement services for virtually all equity, corporate and municipal debt trades and Money Market Instruments in the U.S.’’). 170 Items 202(a)–(d) and (f) [17 CFR 229.202(a)– (d) and (f)]. Item 202(e), ‘‘Market information for securities other than common equity,’’ is outside the scope of this release; it requires that if securities other than common stock are to be registered and there is an established trading market for such securities, registrants are required to provide market information for such securities comparable to that required by Item 201(a) of Regulation S–K. 171 Item 202 disclosure is often incorporated by reference into a registration statement on Form 8– A from a prior registration statement on Form S– 1. See Concept Release, supra note 6, at Section IV.D.2. Registrants are not currently required to include Item 202 disclosure as an exhibit to any filings with the Commission. 172 17 CFR 249.308a. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 51001 Consistent with the staff’s recommendation in the FAST Act Report,173 we are proposing to amend Item 601(b)(4) 174 to require registrants to provide the information required by Item 202(a)–(d) and (f) as an exhibit to Form 10–K, rather than limiting this disclosure to registration statements.175 Proposed Item 601(b)(4)(vi) would require Item 202 disclosure only for securities that are registered under Section 12 of the Exchange Act.176 Because Item 202(e) requires Item 201(a) market information for securities other than common equity where there is an established trading market for those securities, proposed Item 601(b)(4)(vi) does not include Item 202(e). The proposed requirement is intended to increase investors’ ease of access to information about the rights and obligations of each class of securities registered. The proposed amendments would not change existing disclosure obligations under Form 8–K and Schedule 14A, which currently require registrants to disclose certain modifications to the rights of their security holders and amendments to their articles of incorporation or bylaws.177 As Registrants are required to file complete copies of their articles and bylaws as exhibits to Form 10–K, but they are not required to provide the descriptions called for by Item 202. See Item 601(b)(3) [17 CFR 229.601(b)(3)]. Also, under Accounting Standards Codification (‘‘ASC’’) Topic 505–10–50–3, registrants are required to summarize the ‘‘pertinent rights and privileges of the various securities outstanding’’ in the notes to their financial statements. ASC Topic 470–10–50–5 requires the same information for debt securities. While the date of sale is not required, registrants usually include it in their discussions of the rights and privileges of securities sold. 173 See FAST Act Report, supra note 2, at Recommendation F.1. 174 17 CFR 229.601(b)(4). 175 To the extent that a registrant has previously filed an exhibit containing Item 202 disclosure, it could incorporate that exhibit by reference and hyperlink to the previously-filed exhibit in future Form 10–K filings, assuming that the information contained therein remains unchanged. See Exhibit Hyperlinks Adopting Release supra note 15. 176 The proposed amendment includes an instruction requiring disclosure for those classes of a registrant’s securities that have not been retired by the end of the period covered by the report. We are also proposing to amend Item 202 to specify that Section 305(a)(2) of the Trust Indenture Act of 1939, 15 U.S.C. 77aa et seq., as amended, would not affect a registrant’s disclosure obligations under proposed Item 601(b)(4)(vi). 177 Item 3.03 of Form 8–K requires disclosure of material modifications to rights of security holders while Item 5.03 requires disclosure of amendments to the articles of incorporation or bylaws for amendments not disclosed in a proxy or information statement. Item 5.03 of Form 8–K also requires disclosure of changes in fiscal year other than by means of a submission to a vote of security holders through the solicitation of proxies (or otherwise) or an amendment to the articles of incorporation or bylaws [17 CFR 249.308]. E:\FR\FM\02NOP2.SGM Continued 02NOP2 51002 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS proposed, any modifications and amendments during a fiscal year would now also be reflected in the Item 202 disclosure provided in an exhibit to the registrant’s next annual report.178 The proposed amendments would be in addition to the current requirement to file a complete copy of the amended articles of incorporation or bylaws under Item 601(b)(3).179 We recognize that some commenters opposed requiring Item 202 disclosure in periodic reports, stating that this information can easily be found in registration statements,180 while other commenters noted that the information overlaps with disclosure required under U.S. GAAP.181 Requiring Item 202 disclosure as an exhibit to annual reports could improve the ability of investors to gain access to information about their rights as security holders. The proposed Item 601(b)(4)(vi) would allow investors to easily locate an updated description of their rights as security holders in the most recent annual report rather than require investors to search through prior filings to find this disclosure. Where a registrant has previously filed the Item 202 information as an exhibit, and so long as there has not been any change to the information called for by Item 202, the registrant may incorporate the information by reference and provide a hyperlink to the previously filed exhibit. Therefore, we believe that any additional compliance cost associated Item 12 of Schedule 14A requires disclosure if action is to be taken regarding the modification of any class of securities of the registrant, or the issuance or authorization for issuance of securities of the registrant in exchange for outstanding securities. Section (b) of Item 12 requires disclosure of any material differences between the outstanding securities and the modified or new securities in respect of any of the matters concerning which information would be required in the description of the securities in Item 202 of Regulation S–K. Item 19 of Schedule 14A requires disclosure of amendments to the registrant’s charter, bylaws, or other documents. 178 Over the course of a given fiscal year, it is possible that a registrant may make various nonmaterial changes to the rights and privileges of its securities that do not require separate disclosure on Form 8–K. However, if any changes are made, whether material or non-material, the proposed amendments would require a registrant to update the description of securities in the exhibit filed with its Form 10–K. 179 See Item 601(b)(3) of Regulation S–K [17 CFR 229.601(b)(3)]. The proposal would amend Item 601(b)(4) instead of Item 601(b)(3) because (b)(4) is consistent with Item 202’s requirement to provide a description of capital stock that is registered while (b)(3) is specific to the articles of incorporation and bylaws. 180 See, e.g., Letters from Fenwick; CGCIV; Chamber 2; and FedEx. See also Davis Polk 1. 181 See Letters from CAQ and KPMG LLP (July 21, 2016) (‘‘KPMG’’). Both commenters referenced Item 202 in the context of broader recommendations to the Commission to work with the FASB and the PCAOB to eliminate redundancies. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 with the proposed amendment should not be unduly burdensome. Request for Comment 41. Should the proposed amendments include a requirement to file Item 202 disclosure for each class of securities registered under Section 12 of the Exchange Act as an exhibit to the annual report? Why or why not? Should registrants also be required to include descriptions of securities that are not registered under Section 12 of the Exchange Act? For example, should issuers reporting only under Section 15(d) of the Exchange Act (e.g., assetbacked issuers) be required to file Item 202 disclosure as a Form 10–K exhibit? 42. Do the requirements for Item 202, and our proposal to require that the Item 202 information be provided as an exhibit to the annual report, provide sufficient disclosure about debt securities or other classes of stock with different or preferential voting rights? 43. Would the new requirements result in significantly higher compliance costs? Would the new requirements provide benefits to investors and facilitate informed investment decisions? Would the proposed amendments require disclosure that is adequately provided elsewhere in the annual report or on EDGAR? 182 44. Would compliance with the proposed amendment be problematic for issuers with multiples classes of registered securities (e.g., well-known seasoned issuers or asset-backed issuers)? If so, how should we revise the proposed amendments to avoid unnecessary burdens that may be imposed on these issuers? 2. Information Omitted From Exhibits (Item 601) Item 601 of Regulation S–K generally requires registrants to file complete copies of exhibits.183 Securities Act Rule 406 184 and Exchange Act Rule 24b–2 185 permit registrants to request confidential treatment of information included in an exhibit to a filing or any other document required to be filed under either the Securities Act or the Exchange Act. Item 601(b)(2) states that registrants shall not file schedules or similar attachments to material plans of acquisition, reorganization, arrangement, liquidation, or succession unless they contain information material to an investment decision and unless that information is not otherwise 182 See supra notes 172 and 181 and accompanying text. 183 Item 601 of Regulation S–K [17 CFR 229.601]. 184 17 CFR 230.406. 185 17 CFR 240.24b–2. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 disclosed in the agreement or the disclosure document.186 The Commission staff generally has not objected where a registrant omits personally identifiable information from exhibits without submitting a confidential treatment request. To modernize and simplify the disclosure requirements under Item 601, we are proposing to add new paragraphs (a)(5) and (a)(6) to expand the existing accommodation in Item 601(b)(2) to include all exhibits filed under Item 601 and permit the omission of personally identifiable information. We also propose to add paragraph (b)(10)(iv) to Item 601 to reduce significantly the need for registrants to submit applications for confidential treatment of information in material contract exhibits required by that item.187 The proposals to add paragraphs (a)(6) and (b)(10)(iv) are broader than the staff’s recommendations in the FAST Act Report. As explained more fully below, we believe that they are consistent with our mandate under the FAST Act to modernize and simplify our disclosure requirements while still providing all material information.188 a. Schedules and Attachments to Exhibits Proposed Item 601(a)(5) would permit registrants to omit entire schedules and similar attachments to exhibits unless they contain material information and unless that information is not otherwise disclosed in the exhibit or the disclosure document. This exception, which is similar to the existing accommodation in Item 601(b)(2) for plans of acquisition, reorganization, arrangement, liquidation, or succession, would be expanded to all exhibits under the proposed amendments. Similar to the current provisions in Item 601(b)(2), proposed Item 601(a)(5) would require registrants to provide with each exhibit a list briefly identifying the contents of any omitted schedules and attachments. 186 17 CFR 229.601(b)(2). domestic forms include their exhibits requirements in the form and/or do not separately reference Item 601 of Regulation S–K (e.g., Schedule 13E–3 and Schedule 13D). As such, we are considering whether the rationale for the proposed amendments to Item 601 of Regulation S– K is also applicable to the exhibit requirements in these forms. For example, Schedule 13E–3 and Schedule 13D require registrants to file as exhibits certain material agreements that may be deemed analogous to the exhibits required under Item 601 of Regulation S–K. We are requesting further comment to assist in our evaluation of this issue. 188 See FAST Act Report, supra note 2, at Recommendation F.2 (recommending only that the Commission permit registrants to omit attachments and schedules filed with exhibits unless they contain information that is material to an investment decision that has not been otherwise disclosed). 187 Certain E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS In addition, registrants would be required to provide, on a supplemental basis, a copy of any omitted schedules or attachments to the Commission staff upon request.189 The Commission requested comment in the Concept Release on whether to allow registrants to omit schedules and attachments to all exhibits, provided that the omitted schedules and attachments do not include material information that is not otherwise included in the exhibit or the disclosure document. Commenters uniformly supported expanding the exception under Item 601(b)(2).190 Some noted that the current requirement to file complete exhibits is unnecessarily cumbersome and expensive where the schedules do not contain material information.191 Commenters also stated that these burdens are exacerbated where those schedules contain, as is frequently the case, confidential information that would require registrants to file confidential treatment requests.192 A few commenters that supported allowing registrants to omit schedules opposed requiring registrants to provide a list of their omitted schedules.193 Another commenter supported a requirement to include a list, but stated that requiring registrants to provide a materiality analysis 189 See proposed Item 601(a)(5) of Regulation S– K. Securities Act Rule 418 [17 CFR 230.418] states that the Commission or its staff may, where it is deemed appropriate, request supplemental information concerning the registrant or a registration statement, among other things. Exchange Act Rule 12b–4 [17 CFR 240.12b–4] similarly indicates that the Commission or its staff may, where it is deemed appropriate, request supplemental information concerning the registrant, a registration statement, and a periodic or other report filed under the Exchange Act. Unlike the current version of Item 601(b)(2), registrants would not be required to include with its list identifying the contents of all omitted schedules an agreement to furnish a supplemental copy of any omitted schedule to the Commission upon request. Instead, proposed Item 601(a)(5) would require registrants to provide a copy of any omitted schedule to the Commission staff upon request. 190 See, e.g., Letters from Committee on Securities Law of the Business Law Section of the Maryland State Bar Association (‘‘Maryland Bar Securities Committee’’) (July 21, 2016); ABA; NYSSCPA; FedEx; Fenwick; and Davis Polk 1. See also Letter from CGCIV (supporting exemption from filing immaterial attachments to material agreements for smaller reporting companies). 191 See, e.g., Letters from Fenwick and Davis Polk 1. 192 See, e.g., Letters from Fenwick; Fenwick and West LLP, Cooley LLP and Wilson Sonsini Goodrich & Rosati, PC (June 19, 2012) [S–K Study Letter] (‘‘Silicon Valley’’); and Mike Liles (Apr. 10, 2013) [S–K Study Letter] (endorsing the comments expressed in the Silicon Valley Letter). 193 See Letter from Fenwick (stating that it does not believe ‘‘the burden of completing such a list of omitted schedules is offset by any meaningful advantage to investors’’); see also letters from NYSSCPA and FEI. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 supporting the decision to omit the schedules was unnecessary.194 We believe that a list of omitted schedules, similar to current Item 601(b)(2), would be informative for investors. Request for Comment 45. Should the proposed amendments permit registrants to omit entire schedules and attachments to exhibits unless the schedules or attachments contain material information and unless that information is not otherwise disclosed in the exhibit or the disclosure document? Similarly, should we amend our investment company rules or forms to permit investment companies to omit entire schedules and attachments? 46. Should Item 601(a)(5) require registrants to provide a list of the contents of the omitted schedules and attachments as proposed? Would a list of the titles of the schedules and attachments be sufficient to identify the contents of the omitted schedules and attachments? Should we provide guidance on the registrant’s description of any omitted schedule or attachment? 47. As proposed, Item 601(a)(5) would expand the existing Item 601(b)(2) accommodation to all exhibits. Should we require exhibits filed pursuant to certain subsections of Item 601(b) to include all schedules and attachments even if they are not material? If so, which exhibits and subsections? b. Personally Identifiable Information The Commission generally does not publish or make available information that ‘‘would constitute a clearly unwarranted invasion of personal privacy.’’ 195 This information includes personally identifiable information (‘‘PII’’). Exhibits filed pursuant to Item 601 may include PII such as bank account numbers, social security numbers, home addresses and similar information. The staff generally does not object where a registrant omits PII from exhibits without submitting a confidential treatment request. In the Concept Release, the Commission requested comment about whether to continue or modify the current accommodation on PII. Numerous commenters recommended codifying the current staff practice of permitting registrants to omit PII from 194 See Letter from Maryland Bar Securities Committee. 195 17 CFR 200.80(b)(6) (exempting personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy). PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 51003 exhibits without making a formal confidential treatment request.196 Consistent with our mandate under the FAST Act to modernize and simplify our disclosure requirements while still providing all material information, Item 601(a)(6), as proposed, would permit registrants to omit PII without submitting a confidential treatment request under Rule 406 or Rule 24b–2. Allowing registrants to omit PII without submitting a confidential treatment request is also intended to better safeguard PII by limiting its dissemination. Under the proposed amendment, registrants also would not be required to provide an analysis to redact PII from exhibits. Request for Comment 48. Should we codify the current staff practice of permitting registrants to omit PII without making a formal confidential treatment request as proposed? Similarly, should we amend our investment company rules or forms to similarly permit investment companies to omit PII? c. Redaction of Confidential Information in Material Contract Exhibits The proposed revisions to Item 601(b)(10) would permit registrants to omit confidential information from material contracts filed pursuant to that item where such information is both (i) not material and (ii) competitively harmful if publicly disclosed, even where the registrant has not submitted a confidential treatment request to the Commission. Instead, registrants would be required to mark the exhibit index to indicate that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of each redacted exhibit that information in the marked sections of the exhibit has been omitted from the filed version of the exhibit. Registrants would also be required to indicate with brackets where the information has been omitted from the filed version of the exhibit.197 Although registrants would not be required to file a confidential treatment request in accordance with Rule 406 or Rule 24b–2 in connection with the redacted exhibit, the responsibility of a registrant to determine whether all material information has been disclosed and whether they may redact the 196 See, e.g., Letters from NYSSCPA; Chamber 2; FedEx; CGCIV; Maryland Bar Securities Committee; General Motors; and Financial Executives International. 197 These proposals are consistent with the marking requirements for confidential treatment requests under Rule 406 and Rule 24b–2. E:\FR\FM\02NOP2.SGM 02NOP2 51004 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS information under the proposed rules would remain unchanged.198 The Commission staff would continue its selective review of registrant filings and would selectively assess whether redactions from exhibits appear to be limited to information that is not material and that would subject the registrant to competitive harm if publicly disclosed. As is currently the case, the redacted information should include no more text than necessary to prevent competitive harm to the registrant. Upon request, registrants would be expected to promptly provide supplemental materials to the staff similar to those currently required in a confidential treatment request, including an unredacted paper copy of the exhibit and an analysis of why the redacted information is both (i) not material and (ii) would cause competitive harm if publicly disclosed.199 The timing of any staff review would not alleviate a registrant’s obligation to disclose all material information and its obligation to limit redactions to those provisions and terms that are both (i) not material and (ii) would cause competitive harm if publicly disclosed. Registrants could request confidential treatment of this supplemental information pursuant to Rule 83 while it is in the staff’s possession. If the registrant’s supplemental materials do not support its redactions, similar to the process the staff currently follows for confidential treatment requests under Rule 406 and Rule 24b–2, the staff may request that the registrant file an amendment that includes some, or all, of the previously redacted information.200 The Concept Release did not request comment on the confidential treatment process, other than its request for comment about omitting schedules and attachments to exhibits; however, two commenters noted that the requirement to file material agreements causes registrants to expend significant resources in preparing confidential treatment requests.201 We believe that simplifying and streamlining this process would be consistent with the 198 See Rule 12b–20 [17 CFR 240.12b–20], Rule 408(a) [17 CFR 230.408(a)] and proposed Item 601(b)(10)(iv). 199 This analysis would be substantially the same as is currently required in confidential treatment requests submitted in reliance on Rule 80(b)(4) [17 CFR 200.80(b)(4)] pursuant to Rule 406 or Rule 24b–2. 200 Upon completion of the staff’s review, the materials would be returned or destroyed if the registrant complies with the procedures outlined in Rule 418 or 12b–4. 201 See Letter from Fenwick and letter from Davis Polk 1 (requesting that the Commission reconsider the utility of the (b)(10) exhibit filing requirement). VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 FAST Act mandate to revise Regulation S–K in a manner that reduces the costs and burdens on registrants while providing investors all material information. In addition, we believe the proposal would result in limiting the dissemination of sensitive information because registrants would not be required to provide an un-redacted copy of each exhibit at the time of filing in order to request confidential treatment. Instead, this information would only be required on request in connection with a staff filing review. Request for Comment 49. Should registrants be permitted to omit confidential information from exhibits filed pursuant to Item 601(b)(10) that is both (i) not material and (ii) competitively harmful if publicly disclosed without submitting a confidential treatment request as proposed? Similarly, should we amend our investment company forms to permit investment companies to omit confidential information from exhibits? 50. Would the disclosure provided in exhibits change under the proposed amendments? Why or why not? 51. Under the proposed amendments, if the registrant’s supplemental materials do not support its redactions, the staff may request that the registrant file an amendment that includes some, or all, of the previously redacted information. In these situations, should we require registrants to include an explanatory note describing why the amendment is being provided? Should we also require that any amendment highlight the previously redacted information? 52. Should we allow registrants to omit confidential information from exhibits other than those filed pursuant to Item 601(b)(10) that is both (i) not material and (ii) competitively harmful if publicly disclosed? For instance, should registrants be allowed to omit similar information from exhibits filed pursuant to Item 601(b)(2)? Should they be allowed to omit similar information from exhibits filed pursuant to other subsections of Item 601? If so, which subsections and why? 53. Should we apply the proposed amendments discussed in Section II.E.2. (Information Omitted from Exhibits) to forms that include their exhibits requirements in the form or do not separately reference Item 601 of Regulation S–K (e.g., Schedule 13E–3 and Schedule 13–D)? If so, what forms should be amended and to what extent? If not, why? Are there special considerations associated with change of control transactions, going private transactions, or beneficial ownership PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 reporting that render the provision of information in exhibits material to an investment or voting decision? What are the costs and benefits of applying the proposed amendments to these forms? How do they differ from the costs and benefits of applying the proposed amendments to Regulation S–K? 202 3. Material Contracts (Item 601(b)(10)(i)) Item 601(b)(10)(i) requires registrants to file every material contract not made in the ordinary course of business, provided that one of two tests is met: (i) The contract must be performed in whole or in part at or after the filing of the registration statement or report, or (ii) the contract was entered into not more than two years before that filing.203 The first test captures contracts that have not been fully performed prior to the filing date. The second test—the two-year look back—captures material contracts that were fully performed before the filing date.204 Currently, all registrants subject to Item 601 must consider both tests when deciding whether a material, non-ordinary course contract must be filed as an exhibit. Consistent with the recommendations in the FAST Act Report,205 we are proposing amendments to Item 601(b)(10)(i) that would limit the twoyear look back test to newly reporting registrants. Proposed Instruction 1 to Item 601(b)(10)(i) defines a ‘‘newly reporting registrant’’ as any registrant filing a registration statement that, at the time of such filing, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, whether or not such registrant has ever previously been subject to the reporting requirements of Section 13(a) or 15(d), and any registrant that has not filed an annual report since the revival of a previously suspended reporting 202 We are proposing to apply the proposed amendments to Form 20–F to maintain a consistent approach to the exhibit filing requirements for domestic registrants and foreign private issuers. See infra Section II.E.5 (Exhibits—Application to Foreign Private Issuers). 203 Item 601(b)(10)(i) of Regulation S–K [17 CFR 229.601(b)(10)(i)]. 204 The two-year look back is included in Schedule A of the Securities Act [15 U.S.C. 77aa(24)] and serves as a ‘‘cutoff period’’ so registrants would not have to file material contracts that may have been fully performed many years prior to registration. When Section 12(g) was added to the Exchange Act in 1964, the Commission was authorized to issue rules requiring such material contracts to be filed with Exchange Act reports. See Section 12(b)(1)(I) of the Exchange Act; H.R. Rep. No. 88–1418, 83rd Cong., 2nd Sess., 1964. Prior to the enactment of Section 12(g), the Exchange Act reporting requirements were applicable only to listed companies. 205 See FAST Act Report, supra note 2, at Recommendation F.3. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS obligation.206 As an example, a registrant that is filing its first registration statement under the Securities Act or the Exchange Act, or filing its first Form 10–K since the revival of its reporting obligation,207 would be required to file material agreements under Item 601(b)(10)(i) for the two-year look back period.208 The definition of ‘‘newly reporting registrant’’ under the proposed instruction also would include any registrant that (a) was a shell company, other than a business combination related shell company, as defined in Rule 12b–2 under the Exchange Act, immediately before completing a transaction that has the effect of causing it to cease being a shell company, and (b) has not filed a registration statement or Form 8–K, as required by Item 2.01 and Item 5.06 of that form, since the completion of the transaction (or, in the case of foreign private issuers, has not filed a Form 20–F since the completion of the transaction).209 Under the proposed amendments, a registrant meeting this definition would be required to file material agreements for the two-year look back period. The proposed amendments would help ensure that investors receive access to agreements containing material information, including agreements entered into by newly reporting registrants up to two years prior to the commencement of their reporting obligations. Registrants with established reporting histories would not be required to comply with the two-year look back requirement because investors would continue to have access to any material agreements previously filed on EDGAR.210 As such, the proposed 206 See proposed Instruction 1 to paragraph (b)(10) of Item 601. 207 See Exchange Act Rules Compliance and Disclosure Interpretation 153.02 (stating that a Form 10–K for the previous fiscal year is the first report due after a reporting obligation is revived), available at https://www.sec.gov/divisions/corpfin/ guidance/exchangeactrules-interps.htm (last updated December 8, 2016). 208 In the case of a registrant with a suspended reporting obligation that, less than two years later, is revived, the proposed requirement to file material agreements for the two-year look back period may be satisfied by incorporating by reference and hyperlinking to agreements previously filed on EDGAR and filing any material agreements entered into while the registrant was not reporting. See Exhibit Hyperlinks Adopting Release, supra note 14, at 14135. 209 Under the proposed amendment, the definition of ‘‘newly reporting registrant’’ would not include reporting companies completing merger transactions with business combination-related shell companies. 210 Schedule A of the Securities Act requires that registrants file ‘‘every material contract made, not in the ordinary course of business, which contract is to be executed in whole or in part at or after the filing of the registration statement or which contract VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 amendments would streamline reporting obligations while maintaining investor protections. Request for Comment 54. Should we revise Item 601(b)(10)(i) to limit the two-year look back test to newly reporting registrants as proposed? 55. Should the two-year look back requirement apply to a registrant completing a reverse merger involving any public shell company that is not a business combination-related shell company as proposed? Why or why not? 56. Should the proposed amendment be broadened to require that a public company acquiring or merging with a non-public company must apply the two-year look back test to agreements entered into by the non-public company prior to the transaction date? 57. Should registrants that have revived reporting obligations be required as proposed, to file material contracts for the full two-year look back period, regardless of how long their prior reporting obligation was suspended? Alternatively, if the registrant’s reporting obligation was suspended for less than two years prior to revival, should the registrant only be required to file agreements entered into while the obligation was suspended? 4. Subsidiaries of the Registrant and Entity Identifiers (Item 601(b)(21)(i)) Item 601(b)(21) requires a registrant to list as an exhibit all of its subsidiaries, the state, or other jurisdiction of incorporation or organization of each, and the names under which those subsidiaries do business.211 The name of particular subsidiaries may be omitted if the unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a ‘‘significant subsidiary’’ under Rule 1–02(w) of Regulation S–X.212 Consistent with the staff’s recommendation in the FAST Act Report,213 we are proposing amendments to Item 601(b)(21)(i) that would require registrants to include in the exhibit the legal entity identifier (‘‘LEI’’), if one has been obtained, of the registrant and each subsidiary listed. An has been made not more than two years before such filing.’’ See Schedule A, paragraph 24 [15 U.S.C. 77aa(24)]. Due to the availability of filings on EDGAR, as noted above, we believe the two-year look back requirement does not provide additional investor protection when applied to registrants with a reporting history. 211 Item 601(b)(21)(i) of Regulation S–K [17 CFR 229.601(b)(21)(i)]. 212 Item 601(b)(21)(ii) of Regulation S–K [17 CFR 229.601(b)(21)(ii)]. 213 See FAST Act Report, supra note 2, at Recommendation F.4. PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 51005 LEI is a 20-character, alpha-numeric code that allows for unique identification of entities engaged in financial transactions. LEIs are intended to improve market transparency by providing clear identification of participants.214 Fees are not imposed on investors for use of, or access to, LEIs. All of the associated reference data needed to understand, process, and use LEIs is widely and freely available. These associated reference data also are not subject to any usage restrictions. There is a cost of obtaining an LEI for registrants: A one-time fee of $75–$119 and $50–$99 in annual maintenance fees.215 In the Concept Release, we solicited comment on whether we should require registrants to disclose their LEI and the LEIs of their subsidiaries (if available) in Exhibit 21 and how this information would benefit investors. Many commenters supported requiring disclosure of LEIs,216 with most of them 214 See Arthur B. Kennickell, Bd. of Governors of the Fed. Reserve Sys., Identity, Identification and Identifiers: The Global Legal Entity Identifier System (Nov. 8, 2016), available at https:// www.federalreserve.gov/econresdata/feds/2016/ files/2016103pap.pdf. 215 See Glob. Legal Entity Identifier Found., Frequently Asked Questions—Fees, Payment and Taxes, available at https://lei.bloomberg.com/docs/ faq; and Glob. Mkt. Entity Identifier Util., GMEI Utility Pricing, available at https:// www.gmeiutility.org/gmeiUtilityPricing.jsp. See also, Letter from SIFMA. 216 See, e.g., Letters from Data Coalition (July 21, 2016) (‘‘Data Coalition’’) (recommending that the Commission adopt the ‘‘if available’’ disclosure standard as an interim step prior to requiring registrants to obtain and disclose LEIs); Bloomberg (recommending that filers should be required to obtain an LEI); SIFMA (noting that regulators have driven the expansion of the LEI system and expressing support for recent regulations that impose requirements upon certain investment companies to obtain an LEI); and XBRL US (recommending that the Commission require registrants to obtain an LEI for every company in their corporate structure; stating that use of LEIs would improve the functionality of filings by identifying participants in financial transactions and bringing clarity to interrelationships between entities). See also Letters from E. Bean; SEC Investor Advisory Committee (June 15, 2016) (‘‘IAC 1’’) (stating that LEIs could facilitate the work of the Commission and other prudential regulators related to systemic risk, firm interconnectivity, and leverage at broker-dealers, asset managers, and other market participants and benefit investors trying to understand complex structures); Owner Subcommittee of the SEC’s Investor Advisory Committee (Nov. 22, 2016) (‘‘IAC 2’’); Main Street Alliance (July 5, 2016); The Financial Accountability and Corporate Transparency Coalition (July 6, 2016); Citizens for Tax Justice; GRI (July 21, 2016); American Sustainable Business Council, Citizens for Tax Justice, FACT Coalition, Fair Share, Global Financial Integrity and Main Street Alliance (July 21, 2016); Americans for Tax Fairness (July 21, 2016); AFL–CIO (July 21, 2016); Oxfam America (July 21, 2016); S. Percoco; Americans for Financial Reform (Aug. 10, 2016); NYSCRF; Global Legal Identity Identifier Foundation (July 21, 2016); and CFA Institute. See E:\FR\FM\02NOP2.SGM Continued 02NOP2 51006 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS recommending that we require both the registrant and its subsidiaries to obtain and disclose LEIs.217 These commenters generally stated that the use of LEIs would improve investors’ ability to understand registrants’ risk profiles. In this regard, commenters observed that LEIs would allow investors to link thirdparty data with structured data from the Commission to produce more meaningful analysis.218 The proposed amendment is intended to modernize the disclosure requirements under Regulation S–K by requiring registrants to provide any LEIs obtained for themselves or their listed subsidiaries to investors. This proposal would allow investors to use the LEI to more quickly and precisely identify registrants and their subsidiaries. Our proposal is consistent with prior regulatory efforts. For example, as part of our recent investment company reporting modernization efforts, we adopted rules requiring certain registrants and funds to obtain LEIs to provide a consistent means of identification.219 Due in part to these and other similar global regulatory efforts, the usage of LEIs has increased over the last few years.220 also letter from TagniFi, LLC (Jan. 27, 2016) [Disclosure Effectiveness letter] (‘‘TagniFi’’). 217 See id. Two commenters opposed an LEI requirement, stating that ‘‘there is no global standard for LEI.’’ See Letters from Financial Executives International and General Motors. 218 See, e.g., Letters from SIFMA, Bloomberg, and Data Coalition. See also Nationally Recognized Statistical Rating Organizations, Release No. 34– 72936 (Aug. 27, 2014) [79 FR 55077 (Sept. 15, 2014)] (the ‘‘2014 NRSRO Amendments Release’’) and Credit Risk Retention, Release No. 34–73407 (Oct. 22, 2014) [79 FR 77601 (Dec. 24, 2014)] (the ‘‘Credit Risk Retention Release’’). 219 See Investment Company Reporting Modernization, Release No. 33–10231 (Nov. 18, 2016) [81 FR 81870]) (the ‘‘IM Modernization Adopting Release’’). See also id. at n. 61 (discussing additional contexts in which the Commission has required LEIs, including Form PF—Reporting Form for Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors, available at http://www.sec.gov/ rules/final/2011/ia-3308-formpf.pdf); Regulation SBSR–Reporting and Dissemination of SecurityBased Swap Information, Release No. 34–74244 (Feb. 11, 2015) [80 FR 14564 (Mar. 19, 2015)]. See also 2014 NRSRO Amendments Release, supra note 218; Credit Risk Retention Release, supra note 218. 220 See, e.g., Legal Entity Identifier Regulatory Oversight Comm., The Global LEI System and regulatory uses of the LEI (Nov. 5, 2015), available at http://www.leiroc.org/publications/gls/lou_ 20151105-1.pdf (progress report by the Legal Identifier Regulatory Oversight Committee, including an annex listing regulatory actions in the United States, the EU countries, and eight other countries which require, request, or allow the use of LEIs). The global LEI system currently has over 580,000 registrations and is growing. See Global LEI Foundation daily updated ‘‘concatenated file,’’ which includes all LEIs issued globally and related LEI reference data, available at https:// www.gleif.org/en/lei-data/gleif-concatenated-file/ lei-download#or http://openleis.com. See also Glob. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 We recognize that many registrants and their subsidiaries may not have LEIs. Accordingly, our proposals would require disclosure of LEIs only for those registrants and subsidiaries that choose to obtain this identifier. Below, we solicit comment as to whether to require registrants and their subsidiaries to obtain LEIs. Request for Comment 58. Should we require registrants to include in Exhibit 21 the LEI (if one has been obtained) of the registrant and each subsidiary required to be listed in the exhibit? Would requiring registrants to disclose LEIs in Exhibit 21 as proposed, provide investors with sufficient access to that information? Is there another location in registrant filings, other than Exhibit 21, where LEI information would be more accessible to investors? For example, should a registrant be required to disclose its LEI, if it has one, on the cover page of each registration statement, periodic filing, or current report and provide the LEIs for its significant subsidiaries in an exhibit? 59. If we require registrants to include LEIs in Exhibit 21 as proposed, should we also require them to provide that information as machine-readable data? If so, what structured data format would be the most useful to investors? For example, the Commission recently adopted amendments requiring investment companies to provide LEIs in XML format.221 Should we require registrants that have already obtained LEIs to disclose their LEIs in XML format? Or, for consistency with the proposal to tag information on the cover page of certain forms using Inline XBRL format,222 should we require disclosure of LEIs in Inline XBRL format? What would be the additional cost to registrants to provide LEIs in XML, Inline XBRL, or another machinereadable format? 60. In light of the many comments received on the costs and benefits of LEIs,223 should our rules encourage or require registrants and each subsidiary thereof required to be listed in Exhibit 21 to obtain an LEI? If so, how should Legal Entity Identifier Found., Regulatory Use of the LEI (providing an overview of current and proposed global regulatory activities involving LEI), available at https://www.gleif.org/en/about-lei/regulatoryuse-of-the-lei; Global LEI Data Quality Reports Archive, available at https://www.gleif.org/en/leidata/gleif-data-quality-management/about-thedata-quality-reports/archive# (showing total number of LEIs issued, renewed, reactivated and lapsed from January 2016 through April 2017). 221 See IM Modernization Adopting Release, supra note 219. 222 See infra Section II.G.1 (Tagging Cover Page Data). 223 See supra notes 216 to 218 and accompanying text. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 we structure our rules to achieve this purpose? 61. Some registrants have numerous subsidiaries or affiliates operating globally, while other registrants have simple corporate structures. Should we require certain types of registrants, such as larger registrants or subsidiaries, to obtain LEIs? For example, should we limit the requirement to large accelerated filers, well-known seasoned issuers, or foreign private issuers? 5. Application to Foreign Private Issuers The Commission previously adopted amendments to conform the exhibit requirements in Form 20–F to the requirements in Item 601.224 To maintain a consistent approach to the exhibit requirements for domestic registrants and foreign private issuers, the proposed amendments would require foreign private issuers to provide information in exhibit filings comparable to the information provided by domestic registrants under Item 601(a)(5), Item 601(a)(6), Item 601(b)(4)(vi), Item 601(b)(10)(i), Item 601(b)(10)(iv), and Item 601(b)(21), as proposed. In each case, we believe that the justifications for the proposed amendments to Item 601 are equally applicable to Form 20–F. We are not proposing similar changes to Form 40–F. Form 40–F generally permits Canadian issuers to use Canadian disclosure documents to satisfy the Commission’s registration and disclosure requirements. As a result, the exhibit requirements in Form 40–F are largely in accordance with Canadian disclosure standards. Request for Comment 62. Should we amend the exhibit requirements of Form 20–F so that they are consistent with the requirements under Item 601 as proposed? Why or why not? Are there any unique considerations with respect to foreign private issuers in this context? 63. Should we make corresponding changes to the exhibit requirements in Form 40–F? Why or why not? 64. Would the proposed amendments conflict with home-country requirements in some jurisdictions? If so, please explain. 224 See International Disclosure Standards Release, Release No. 33–7637 (Feb. 2, 1999) [64 FR 6261 (Feb. 9, 1999)] (expressing the Commission’s intention ‘‘to conform the exhibit requirements for Form 20–F with the exhibit requirements for registration statements filed by U.S. issuers under the Exchange Act’’ and stating that all of the Form 20–F exhibit requirements ‘‘are required for domestic issuers filing a registration statement on Form 10 or an annual report on Form 10–K’’). E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS F. Incorporation by Reference To reduce duplicative disclosure, registrants have been permitted to incorporate previously filed information into their filings since the enactment of the Securities Act and the Exchange Act.225 Initially, incorporation by reference was limited to exhibits, but over time we have increasingly permitted incorporation by reference in other contexts. The rules and instructions governing incorporation by reference are now found in a variety of regulations, including Regulation S–K, Regulation C, Regulation 12B and many of the Commission’s forms. In the FAST Act Report, the staff recommended that the Commission consider consolidating, clarifying, and updating Item 10(d) of Regulation S–K and the other rules governing incorporation by reference.226 Consistent with our mandate under the FAST Act, our proposed amendments would revise Item 10(d), Rule 411,227 Rule 12b–23,228 and a number of our forms to simplify and modernize these rules while still providing all material information. Our proposed amendments would also rescind Rule 12b–32.229 In addition, to provide for a consistent set of incorporation by reference rules for investment companies and investment advisers, we are proposing parallel amendments to Rule 0–4 230 and a number of forms under the Investment Company Act,231 certain conforming amendments to Rule 0–6 232 under the Investment Advisers Act,233 and the rescission of Rule 8b–23,234 Rule 8b– 24,235 and Rule 8b–32 236 under the Investment Company Act (certain provisions of which would be consolidated into proposed new Rule 0–4). The proposed amendments would streamline the requirements associated with incorporation by reference and facilitate investor access to incorporated documents through the use of hyperlinks. The proposed amendments are also consistent with the 225 See Federal Trade Commission Release No. 33–47 (Sept. 22, 1933) (allowing for incorporation by reference of exhibits filed with registration statements); Release No. 34–51 (Nov. 27, 1934) (allowing for incorporation by reference of exhibits filed with the Commission under the Exchange Act or filed with an exchange). 226 See FAST Act Report, supra note 2, at Recommendations A.1 and A.2. 227 17 CFR 230.411. 228 17 CFR 240.12b–23. 229 17 CFR 240.12b–32. 230 17 CFR 270.0–4. 231 15 U.S.C. 80a–1 et seq. 232 17 CFR 275.0–6. 233 15 U.S.C. 80b–1 et seq. 234 17 CFR 270.8b–23. 235 17 CFR 270.8b–24. 236 17 CFR 270.8b–32. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 Commission’s longstanding acceptance of incorporation by reference in the interests of encouraging registrants to eliminate duplicative disclosures. Our proposed amendments respond to some of the recommendations from commenters on the Concept Release. Commenters generally supported the use of incorporation by reference.237 A number of commenters recommended expanding the ability to incorporate by reference.238 Some commenters, while supporting the use of incorporation by reference, cautioned that it should not excessively fragment disclosure or make disclosure more difficult to access.239 1. Item 10(d) Item 10 of Regulation S–K 240 contains general requirements on the application of Regulation S–K. Item 10(d) focuses on incorporation by reference.241 Item 10(d) states that, where rules, regulations, or instructions to the forms permit incorporation by reference, a document may be incorporated by reference to the specific document and to the prior filing or submission in which that document was physically filed or submitted. Item 10(d) generally prevents registrants from incorporating by reference a portion of a document that itself also incorporates pertinent information by reference.242 It also prohibits incorporating documents by reference if they have been on file with the Commission for more than five years and do not fall within one of the exceptions provided in the rule.243 Consistent with the staff’s recommendation in the FAST Act Report, we are proposing to eliminate the five-year limit in Item 10(d). This requirement originated from the Commission’s policy on retention of hard copy records of filings, as set forth 237 See Letters from Wachtell, Lipton, Rosen & Katz (May 16, 2016) (‘‘Wachtell’’); Ball Corporation (July 19, 2016) (‘‘Ball’’); Chamber 2; FedEx; CGCIV; International Integrated Reporting Council (July 20, 2016) (‘‘IIRC’’); California State Teachers’ Retirement System (July 21, 2016) (‘‘CalSTRS’’); Edison Electric and AGA; American Federation of State, County and Municipal Employees (July 21, 2016) (‘‘AFSCME’’); Fenwick; and NIRI. 238 See Letters from Wachtell; Chamber 2; FedEx; CGCIV; IIRC; Edison Electric and AGA; Fenwick; IAC 1; and NIRI. 239 See Letters from IIRC and CalSTRS. The IIRC recommended emphasizing the use of incorporation by reference for ‘‘supplementary’’ information so as to focus the disclosure in a document on ‘‘core’’ information. 240 17 CFR 229.10. 241 17 CFR 229.10(d). 242 Indirect incorporation by reference is permitted when the registrant is expressly required to incorporate a document by reference and, in the case of asset-backed issuers, under Item 1100(c) of Regulation AB [17 CFR 229.1100(c)]. See Item 10(d). 243 See infra note 247 and accompanying text (discussing the exceptions). PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 51007 in the Commission’s Rules of Practice.244 This requirement previously imposed a 10-year limit but was reduced to five years in 1977 to allow for the Commission’s ‘‘orderly destruction of unneeded filings.’’ 245 At the time, the Commission noted that the ‘‘cost of storage outweighs the usefulness to the Commission and to the public of many if not most of these records.’’ 246 Nevertheless, exceptions were added for documents contained in registration statements of reporting registrants and for documents that a registrant identifies by file number that have not been disposed of pursuant to the Commission’s Records Control Schedule.247 Given these broad exceptions and the current practice of retaining documents electronically, the five-year limit now serves little purpose and may lead to confusion about which documents may be incorporated by reference.248 Without the provisions relating to the five-year limit, little substance remains in Item 10(d). Therefore, to simplify the requirements, we are proposing to move the remaining provision in Item 10(d) prohibiting indirect incorporation by reference into the other rules governing incorporation by reference.249 In the 244 See Rules of Practice, Release No. 34–35833 (June 9, 1995) [60 FR 32738 (June 23, 1995)] (moving the requirements from Rule 24 of the Commission’s Rules of Practice to Item 10(d)). We are also proposing to eliminate remaining references to Rule 24 in Regulation S–K and other rules and forms. See, e.g., Rule 411(d) and Form N– 2. 245 See 25 FR 6719 (July 15, 1960) (adopting Rule 24); Incorporation by Reference, Release No. 33– 5818 (Mar. 18, 1977) [42 FR 16922 (Mar. 30, 1977)] (adopting an amendment to Rule 24 reducing the 10-year limit to five years). 246 Notice of (1) Proposed Amendments to Rule 24 of the Rules of Practice and All Other Commission Rules Relating to Incorporation By Reference and Basic Documents and (2) Proposed Revocation of Securities Exchange Act Rule 12b–34, Release No. 33–5711 (May 21, 1976) [41 FR 105 (May 28, 1976)] (proposing a three-year limit with certain ‘‘basic documents’’ being retained for a longer period). 247 See Item 10(d)(1)–(2) and the Commission’s Records Control Schedule [17 CFR 200.80f]. 248 We believe that it is very unlikely that a registrant would attempt to incorporate by reference to a document that was filed with the Commission but is no longer available because it was not submitted on EDGAR and has been destroyed pursuant to the Records Control Schedule. For example, the Commission retains Securities Act and Exchange Act registration statements, reports and proxy materials that have not been filed on EDGAR for 30 years. See Records Control Schedule [17 CFR 200.80f]. Under the proposed amendments, a registrant would not be permitted to incorporate by reference to a destroyed document because it would render its disclosure incomplete, unclear, or confusing. See, e.g., proposed Rule 411(e) and Rule 12b–23(e). 249 See the proposed amendments to Rule 411, Rule 12b–23, Rule 0–4, and Rule 0–6. Paragraph (d) of Item 10 also states that, when incorporation by reference is permitted, a document may be E:\FR\FM\02NOP2.SGM Continued 02NOP2 51008 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules FAST Act Report, the staff recommended consolidating the incorporation by reference rules in Item 10(d). After considering this recommendation, we believe that consolidating these procedural rules in Regulation C and Regulation 12B (and, for investment companies and investment advisers, in Rule 0–4 under the Investment Company Act and Rule 0–6 under the Investment Advisers Act, respectively 250) would better align with the Commission’s original intent of focusing Regulation S–K on substantive disclosure requirements.251 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Request for Comment 65. Should we consolidate the requirements governing incorporation by reference as proposed? Would the proposed structure of the incorporation by reference rules be simpler for registrants, particularly smaller registrants, to follow? Instead of preserving the different rules for incorporation by reference under Regulation C and Regulation 12B, should we combine Rule 411, Rule 12b– 23, and Rule 12b–32 in a single item of Regulation S–K? Would that facilitate or streamline compliance with the rules? 66. Should we eliminate Item 10(d)’s five-year limit on incorporation by incorporated by reference to the specific document and to the prior filing or submission in which such document was physically filed or submitted. We are proposing to eliminate this provision because similar provisions exist in Rule 411(d), Rule 12b– 23(b), Rule 0–4(c), and Rule 0–6(c). 250 As part of these amendments, we are proposing amendments to various Investment Company Act forms to eliminate references to Item 10(d), along with outdated references in our forms and Rule 0–4 and Rule 0–6 to 17 CFR 228.10(f), a former rule under Regulation S–B which was rescinded in 2007. See Smaller Reporting Company Regulatory Relief and Simplification, Release No. 33–8876 (Dec. 19, 2007) [73 FR 934 (Jan. 4, 2008)]. 251 See FAST Act Report, supra note 2, at Recommendation A.2 (‘‘These rules could be consolidated in Item 10(d) for submissions that are required to comply with Regulation S–K.’’). When the Commission adopted the integrated disclosure system, it indicated that it intended to bifurcate the regulations into procedural requirements and substantive disclosure requirements. See Proposed Revision of Regulation C, Registration and Regulation 12B, Registration and Reporting, Release No. 33–6333 (Aug. 6, 1981) [46 FR 41971 (Aug. 18, 1981)] (‘‘In its development of an integrated disclosure system, the Commission has sought to consolidate requirements relating to substantive disclosure and document content in Regulation S– K. The proposals in this release reflect the continuation of that process and also the effort to simplify and consolidate procedural requirements in Regulations C and 12B.’’); Integrated Disclosure System Adopting Release, supra note 69 (‘‘The third aspect of the integrated disclosure system consists of Regulation C and Regulation 12B, which contain the procedures to be used in preparing and filing registration statements and reports under the Securities Act and the Exchange Act, respectively.’’). Nevertheless, the rules governing incorporation by reference could be consolidated in Regulation S–K. We are soliciting comment on whether such an approach would be preferable. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 reference as proposed? Given the exceptions that exist and the Commission’s electronic filing requirements, is the five-year limit obsolete? Would eliminating the fiveyear limit make it difficult for investors to locate information that a registrant incorporates by reference? 67. For investment companies and investment advisers, should we consolidate the different rules for incorporation by reference into Rule 0–4 and Rule 0–6, respectively as proposed? Would this structure be simpler for investment companies and investment advisers to follow, or are there special considerations regarding investment companies and investment advisers that make the current or another structure more appropriate? 2. Securities Act Rule 411, Exchange Act Rule 12b–23 and Rule 12b–32 and Related Rules Under the Investment Company Act and Investment Advisers Act Rule 12b–23 governs incorporation by reference for registration statements filed pursuant to Sections 12(b) and 12(g) of the Exchange Act and reports filed pursuant to Sections 13 and 15(d) of the Exchange Act.252 Rule 12b–23 broadly allows for incorporation by reference in answer, or partial answer, to any item of an Exchange Act registration statement or report. Rule 12b–32 governs incorporation by reference for exhibits filed with registration statements and reports. Rule 411 governs incorporation by reference for registration statements filed under the Securities Act, including exhibits thereto.253 Rule 411 restricts incorporation by reference in a prospectus unless otherwise provided in the appropriate form but allows for incorporation by reference similar to Rule 12b–23 for the non-prospectus portions of a registration statement.254 Under the Investment Company Act, Rule 0–4 provides general incorporation by reference rules for investment company registration statements, applications, and reports filed with the Commission. Rule 8b–23 (additional 252 See Rule 12b–1 [17 CFR 240.12b–1] (setting forth the scope of Regulation 12B). 253 See Rule 400 [17 CFR 230.400] (setting forth the scope of Regulation C). 254 See Integrated Disclosure System Adopting Release, supra note 69; Proposed Revision of Regulation C, Registration and Regulation 12B, Registration and Reporting, Release No. 33–6333 (Aug. 6, 1981) [46 FR 41971 (Aug. 18, 1981)] (‘‘While it is generally proper to prevent prospectuses from incorporating exhibits which are not delivered, the Commission does not believe it is necessary to impose such limits in connection with Exchange Act reports which are not actually delivered in registered public offerings of securities.’’). PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 incorporation by reference rules for registration statements and reports), Rule 8b–24 (rules regarding summaries or outlines of documents), and Rule 8b– 32 (incorporation of exhibits by reference) provide additional incorporation by reference rules for investment company registration statements and reports. Under the Investment Advisers Act, Rule 0–6 governs incorporation by reference for investment adviser applications for Commission orders under the Investment Advisers Act other than applications for registration as an investment adviser. a. Exhibit and Other Filing Requirements Rule 12b–23(a)(3) under the Exchange Act requires that copies of any information incorporated by reference must be filed as an exhibit, with limited exceptions.255 This provision was introduced in 1971 so that then-existing microfiche technology for the public dissemination of reports and documents filed with the Commission could function properly.256 Rule 411(b)(4) under the Securities Act has a more limited exhibit filing provision for nonprospectus information that is incorporated by reference into a document that does not comply with the five-year limit in Item 10(d). Rule 8b–23 under the Investment Company Act generally requires investment company registrants to file with a registration statement or report a copy of any registration statement, report, or prospectus from which information is incorporated by reference, except in cases where the registration statement, report, or prospectus was filed electronically.257 We are proposing to 255 See Rule 12b–23(a)(3) [17 CFR 240.12b– 23(a)(3)](providing exceptions for a proxy or information statement incorporated by reference in response to Part III of Form 10–K, a form of prospectus filed pursuant to Rule 424(b) [17 CFR 230.424(b)] incorporated by reference in response to Item 1 of Form 8–A, and information filed on Form 8–K). 256 See Registration and Reporting and Form for Annual Reports of Employee Stock Purchase Plans, Release No. 34–9048 (Jan. 4, 1971) [36 FR 4483 (Mar. 6, 1971)] (‘‘In order that the microfiche system for the public dissemination of reports and documents filed with [the] Commission may work, the amended rule requires that copies of information or financial statements incorporated by reference, or copies of the pertinent pages of any document containing such information or statement, be filed with the registration statement or report in which it is so incorporated.’’). 257 See Rule 8b–23(a) [17 CFR 270.8b–23(a)]. In addition, Rule 0–4 under the Investment Company Act and Rule 0–6 under the Investment Advisers Act permit the incorporation by reference as an exhibit in any registration statement, application or report (in the case of Rule 0–4) or in any application (in the case of Rule 0–6) any document or part thereof previously or concurrently filed with the E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS eliminate these requirements, consistent with commenters’ suggestions and the staff’s recommendation in the FAST Act Report to make the rules for incorporation by reference more consistent, and to apply consistent rules for incorporation by reference under the Investment Company Act and Investment Advisers Act.258 We no longer believe that these requirements are necessary as most Exchange Act filings are made publicly available on EDGAR, and as we generally do not have similar exhibit filing requirements for Securities Act registration statements.259 In connection with these proposed amendments, we are also proposing to eliminate the corresponding exhibit requirement in Item 601(b)(99)(ii) of Regulation S–K, which was adopted in connection with Rule 12b–23(a) and Rule 411(b)(4).260 In addition to Item 601(b)(99), other provisions in Item 601 require documents to be filed as exhibits only when they are incorporated by reference into a filing. For example, Commission. Both rules also permit the incorporation by reference of financial statements (or parts thereof), although Rule 0–6 specifies that the financial statements (or parts thereof) that are incorporated are to be filed as exhibits. For consistent rules under both Acts, we are proposing amendments to Rule 0–4 to specify that financial statements may be filed as exhibits to investment company applications, as Rule 0–6 currently specifies with respect to applications filed under the Investment Advisers Act. Furthermore, if the number of copies of any document from which information is incorporated by reference is less than the number of copies required to be filed with a registration statement, application, or report, Rule 0–4 and Rule 0–6 require an investment company or applicant, respectively, to file as many additional copies of the document incorporated by reference as may be necessary to meet the requirements of the registration statement, application, or report. See Rule 0–4(a), Rule 0–6(a). We are proposing to eliminate the requirement to file additional copies from Rule 0–4 because most investment company filings are available on EDGAR. Although investment adviser applications are filed in paper format, in the staff’s experience, those applications rarely incorporate by reference information as permitted by Rule 0–6. For our regulatory purposes, we do not believe that the number of copies specified in current Rule 0–6 is needed. Thus, for the foregoing reasons and for consistency purposes, we are similarly proposing to eliminate the requirement to file additional copies from Rule 0– 6. 258 See Letters from ABA and Fenwick. See also FAST Act Report, supra note 2, at Recommendation A.2. 259 We note that investment advisers register and submit some filings to the Commission electronically through the Investment Adviser Registration Depository (‘‘IARD’’). 260 See Integrated Disclosure System Adopting Release, supra note 69 (adopting Item 601(b)(28)(ii), which is now found in Item 601(b)(99)(ii)) and Proposed Revision of Regulation S–K and Proposed Rescission of Guides for the Preparation and Filing of Registration Statements and Reports, Release No. 33–6332 (Aug. 6, 1981) [46 FR 41925 (Aug. 18, 1981)]. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 Item 601(b)(13) requires a registrant to file an annual report to security holders, Form 10–Q or quarterly report to security holders as an exhibit when the registrant incorporates all or a portion of such reports by reference. Although annual reports to security holders are readily available to investors and the staff outside of EDGAR, we believe it is appropriate to retain the exhibit requirement in these circumstances because some registrants satisfy their disclosure requirements by incorporating a significant amount of disclosure from these reports. We are not proposing to eliminate these other exhibit filing requirements in Item 601. Nonetheless, we are proposing to eliminate the requirement in Item 601(b)(13) to file a Form 10-Q as an exhibit when it is specifically incorporated by reference into a prospectus. This provision would no longer be necessary because, under the proposed rules, a registrant would be required to include a hyperlink to any information that is incorporated by reference to a document available on EDGAR.261 Request for Comment 68. Should we eliminate the requirement in Rule 12b–23(a)(3) and Rule 411(b)(4) that copies of information incorporated by reference be filed as exhibits to registration statements or reports? Would eliminating these requirements encourage incorporation by reference as suggested by some commenters? 262 Would eliminating the requirement make it difficult for investors to locate the incorporated information on EDGAR? 69. Should we modify, as proposed, the exhibit filing provisions in Rule 0–4, Rule 8b–23, and Rule 0–6 regarding materials incorporated by reference? Are there special considerations regarding investment companies and applications under the Investment Advisers Act that merit maintaining or modifying the current provisions we are proposing to eliminate? Should we specify in Rule 0–4, as proposed, that financial statements may be filed as exhibits to investment company applications, as Rule 0–6 currently specifies with respect to applications filed under the Investment Advisers Act? Given that applications under the Investment Advisers Act are filed with the Commission in paper, should our final rules continue to require the filing of additional copies of materials incorporated by reference? 261 See infra Section II.F.2.b. (Incorporation by Reference—Hyperlinks). 262 See Letters from ABA and Fenwick. PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 51009 70. Some documents are required to be filed as exhibits only when they are incorporated by reference into a filing. For example, Item 601(b)(13) requires an annual report to security holders to be filed as an exhibit to a Form 10–K when all or part of the annual report is incorporated by reference into the text of Form 10–K. Should we amend Item 601(b)(13) or other provisions in Item 601 to eliminate these requirements (or is the proposed elimination of Rule 12b–23(a)(3) sufficient to encourage incorporation by reference)? Please address the availability of the information called for by Item 601 to investors and the Commission in your response.263 b. Hyperlinks Consistent with the recommendation of commenters and the staff, we are proposing to facilitate greater investor access to disclosure by amending Rule 411, Rule 12b–23, and Rule 0–4 to require hyperlinks to information that is incorporated by reference if that information is available on EDGAR.264 The Commission recently adopted rules requiring hyperlinks to most exhibits filed pursuant to Item 601, Form F– 10 265 or Form 20–F.266 To accommodate hyperlinks, those filings must be made in HTML format.267 The requirement to file documents in HTML format would be expanded under the proposed rules to include filings that are subject to the proposed hyperlinking requirements in Rule 411, Rule 12b–23, and Rule 0–4.268 We believe that 263 For example, annual reports are required to be delivered to security holders. See Rule 14a–3(b) and Rule 14c–3(a) [17 CFR 240.14a–3(b) and 14c–3]. Such reports must also be provided to the Commission. See Rule 14a–3(c) [17 CFR 240.14a– 3] and Rule 14c–3(b) (requiring hard copies of these reports to be delivered to the Commission). 264 See Letters from Chamber; FedEx; Fenwick; and CGCIV. See also FAST Act Report, supra note 2, at n.34. We are not proposing similar amendments to Rule 0–6 because applications under the Investment Advisers Act filed pursuant to that rule are not required to be filed electronically. In addition, applications filed pursuant to Rule 0–6 may incorporate information that may not be filed on EDGAR. 265 17 CFR 239.40. 266 See Exhibit Hyperlinks Adopting Release, supra note 14, at 14130. 267 See id. at 14130. Larger registrants were required to comply with the rules requiring exhibit hyperlinks for filings submitted on or after September 1, 2017. Id. The rules we adopted at that time did not generally apply to investment companies. However, as discussed below, we are proposing to apply similar requirements to certain filings by investment companies in this release. See infra Section II.G.2. 268 See proposed Rule 105(e) of Regulation S–T. We do not believe that the proposed amendments would significantly increase the number of filings that must be in HTML format. Filings that are not subject to Rule 411 or Rule 12b–-23, such as proxy E:\FR\FM\02NOP2.SGM Continued 02NOP2 51010 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS expanding the hyperlinking requirement to other information that is incorporated by reference would improve the readability and navigability of disclosure documents and discourage repetition, consistent with our FAST Act mandate. The proposed requirements for hyperlinking are similar to the requirements for exhibit hyperlinking. Specifically, under the proposed amendments, registrants would not be required to file an amendment to a document solely to correct an inaccurate hyperlink unless, that hyperlink was included in a pre-effective registration statement. An inaccurate hyperlink alone would neither render the filing materially deficient nor affect a registrant’s eligibility to use Form S– 3 269 or Form F–3.270 Lastly, we are not proposing to require refiling of information that is incorporated by reference from a document that was previously filed with the Commission in paper. Similar to our reasoning in the Exhibit Hyperlinks Adopting Release, we believe that requirement would have limited utility given that electronic filing has been required for over two decades and paper filings are currently made in very limited circumstances.271 Unlike the requirements for exhibit hyperlinking, however, a registrant would not be required to correct inaccurate hyperlinks in an effective registration statement by including a corrected hyperlink in a subsequent periodic report or a post-effective amendment. We preliminarily believe that it would result in more confusion than clarity if we were to require registrants to re-file disclosure to correct a hyperlink or to include a section solely devoted to corrected hyperlinks in the body of a periodic report or posteffective amendment. This differs from exhibit hyperlinks where the corrected hyperlink would be unobtrusively located in the exhibit index with other exhibits. The requirement in proposed Rule 411, Rule 12b–23, and Rule 0–4 to describe the location of the information incorporated by reference should mitigate the impact of any inaccurate hyperlinks. Request for Comment 71. As proposed, in most cases a registrant would be required to include a hyperlink to information that it incorporates by reference. Would the statements on Schedule 14A, would not be affected by this proposal. 269 17 CFR 239.13. 270 17 CFR 239.33. 271 See Exhibit Hyperlinks Adopting Release, supra note 14, at 14131. See also FAST Act Report, supra note 2, at n.31 and accompanying text. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 proposed hyperlinking requirements significantly increase the compliance burden on registrants? Should we provide a delayed compliance date for smaller reporting companies and ASCII filers? 272 If so, what compliance date would be appropriate? Should we provide any exceptions to the proposed hyperlinking requirement? For example, should we exclude references to entire forms that are readily accessible on EDGAR, such as Form 10–K, or for particular types of disclosure? If so, which forms or types of disclosure would be appropriate and why? 72. Should investment companies be required to include a hyperlink to information incorporated by reference as proposed? Are there special considerations regarding filings by investment companies that merit modifying the requirement in any way? For example, should investment company applications be required to include a hyperlink to information that is incorporated by reference? 73. When should registrants be required to update inaccurate hyperlinks? Should these updating requirements differ from the requirements to update inaccurate exhibit hyperlinks as proposed? 273 Should we instead require registrants to update hyperlinks in a post-effective amendment or subsequent periodic report? 74. Should we amend our forms to clarify that information incorporated by reference must include a hyperlink to where that information may be found on EDGAR? Would the requirements be sufficiently clear if we include them only in the rules as proposed? c. Financial Statements In addition to addressing incorporation by reference, the FAST Act Report recommended that we consider revising our rules and forms to allow for consistent cross-referencing to disclosure found elsewhere in a filing.274 To address the concern that cross-referencing to non-financial information from within the financial statements may raise questions about the scope of an audit or review, the staff recommended that we consider prohibiting the use of such crossreferencing. Several commenters on the Concept Release also supported using cross-references to reduce repetitive disclosure while recommending that the Commission clarify or delineate what 272 See Exhibit Hyperlinks Adopting Release, at 14130. 273 See Exhibit Hyperlinks Adopting Release, supra note 14, at n.73. 274 See FAST Act Report, supra note 2, at Recommendation A.2. PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 information constitutes the set of audited or reviewed financial statements.275 In most cases, there is no prohibition on cross-referencing to or incorporating information from the financial statements to satisfy the narrative disclosure requirements of Regulation S–K.276 In some cases cross-referencing is specifically permitted.277 Therefore, although we encourage registrants to make use of the disclosure in their financial statements to satisfy other disclosure requirements,278 we are not proposing clarifying amendments to our rules or forms to address incorporation by reference from the financial statements at this time. By contrast, where financial statements cross-reference or incorporate information from outside the financial statements, it can raise questions as to the scope of an auditor’s responsibilities.279 To address this concern, we are proposing amendments to our rules and forms that would prohibit that type of incorporation by reference or cross-referencing.280 These amendments would not prohibit crossreferences to other parts of a filing when otherwise specifically permitted by our rules.281 These amendments would also not prohibit incorporating financial information from other filings to satisfy 275 See Letters from Deloitte & Touche LLP (July 15, 2016); CAQ; Ernst & Young 3; PNC; Grant Thornton LLP (July 21, 2016); KPMG; PWC; Crowe Horwath LLP (July 21, 2016) (‘‘Crowe Horwath’’); and CFA Institute. 276 Although Rule 411 restricts incorporation by reference in a prospectus, it does not prohibit crossreferences within a prospectus. Also, Securities Act forms, such as Forms S–1 and S–3, permit incorporation by reference in the prospectus if specified conditions are met. 277 See, e.g., Item 101(b) and Item 101(d)(2) of Regulation S–K [17 CFR 229.101(b) and (d)(2)]. 278 For example, disclosure about legal proceedings, transactions with related persons and matters relevant to MD&A might be disclosed in the financial statements. 279 See supra note 275 and accompanying text. 280 See our proposed amendments to Rule 411, Rule 12b–23, and Rule 0–4 and Securities Act Forms S–1, S–3, S–11, and F–1. This approach would also avoid the concern raised by one commenter that registrants may lose their Securities Act Section 27A [15 U.S.C. 77z–2] safe harbor by cross-referencing to the body of a periodic report within their financial statements. See Letter from General Motors. Because Rule 0–6 governs incorporation by reference only for applications filed under the Investment Advisers Act, we are not proposing to make similar amendments to that rule, but request comment on whether the final rule should include such provision. 281 For example, registrants would continue to be permitted to include cross-references in the financial statements to information outside of the financial statements about segments when that information conforms with generally accepted accounting principles. See Item 101(b) of Regulation S–K. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules financial reporting requirements when otherwise permitted or required.282 We are also proposing an amendment to Rule 0–4 that, except as provided in the Commission’s rules, would restrict the incorporation of financial information required to be given in comparative form for two or more fiscal years or periods unless the information incorporated by reference includes the entire period for which the comparative data is given.283 We are proposing this amendment to provide for consistency with similar restrictions under both current and proposed Rule 411 and Rule 12b-23 and request comment on whether this amendment is appropriate. Request for Comment 75. Should we amend our rules or forms to clarify or expand when financial statement disclosure may be used to satisfy other disclosure requirements? If so, are there particular areas of disclosure that we should address? 76. To clarify the scope of the financial statements and an auditor’s responsibilities, we have proposed prohibiting registrants from incorporating or cross-referencing information outside of the financial statements into their financial statements unless otherwise specifically permitted or required by the Commission’s rules. Is the proposed approach appropriate or would an alternative approach better achieve this goal? Should we provide other exceptions to the proposed rule? 77. Are the proposed amendments appropriate for investment companies? Do investment companies raise special considerations that our rules and forms should address? Should we amend Rule 0–6 to provide for similar rules regarding the incorporation by reference of financial statements into applications under the Investment Advisers Act? Why or why not? asabaliauskas on DSKBBXCHB2PROD with PROPOSALS d. Other Amendments We are also proposing several nonsubstantive changes to Rule 411, Rule 12b–23 and Rule 0–4 to streamline, clarify, and conform these rules. One of these proposed changes relates to the current provisions governing how financial information from another filing may be incorporated by 282 For example, registrants using Form S–3 would continue to be permitted to incorporate financial statements filed with a Form 8–K that reports the acquisition of a significant business. Also, registrants using Form S–4 to report a merger with another registrant would continue to be able to incorporate the financial statements of the registrant filed on Form 10–K and Form 10–Q. 283 See proposed Rule 0–4(b). VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 reference.284 Rule 12b–23 states that financial information incorporated by reference must comply with the requirements of the form or report into which it is incorporated. Rule 411 and Rule 0–4 contain similar language.285 These provisions could be read to imply that the financial statements must comply with the form on which they were originally filed, rather than the form into which they are being incorporated. We are proposing to eliminate these provisions because all information, not just information incorporated by reference or financial information, must comply with the requirements of the form in which it is used unless otherwise permitted by rule or statute. The proposed amendments would also eliminate several redundant provisions in Rule 411 and Rule 12b–23. Rule 411(b) provides that information may be incorporated by reference in answer, or partial answer, to any item that calls for information not required to be included in a prospectus ‘‘subject to the following provisions.’’ Although presented as conditions to using incorporation by reference, the provisions that follow mostly discuss situations where incorporation by reference is permitted by other parts of these rules. For example, Rule 411(b)(1) states that non-financial information may be incorporated by reference to any document in response to the nonprospectus disclosure requirements in filings under the Securities Act. Rule 12b–23(a) contains a similar structure for any item of a registration statement or report. Further, Rule 411(b)(3) (for non-prospectus disclosure requirements) and Rule 12b–23(a)(2) both state that incorporating information by reference to other parts of the same filing is generally permitted. Incorporation by reference in all of these contexts is permitted by the broader provisions of Rule 411(b) and Rule 12b– 23(a). Accordingly, we are proposing to eliminate paragraphs (b)(1) and (b)(3) of Rule 411 and paragraph (a)(2) of Rule 12b-23, as these provisions are unnecessary. We are also proposing to move the provisions relating to incorporating exhibits by reference from Rule 12b–32 into Rule 12b–23. Previously, Regulation C had a bifurcated structure, similar to Rule 12b–32 and Rule 12b–23, with both Rule 411 and Rule 447 governing the incorporation of exhibits 284 See Rule 411(b)(2) (discussing the incorporation by reference of financial information in the non-prospectus portion of a registration statement) and Rule 12b–23(a)(1). 285 Similar language also exists in Rule 8b–23, which we are proposing to rescind. PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 51011 by reference for Securities Act filings. Rule 447 was consolidated into Rule 411 in 1982.286 Although Rule 12b–32 is currently found under the exhibits subheading of Regulation 12B, we believe that reducing the number of separate rules governing incorporation by reference would simplify compliance. We are not proposing any substantive changes to Rule 12b–32.287 For similar reasons, we are proposing to move the provisions relating to incorporating exhibits by reference from Rule 8b–32 into Rule 0–4, with one exception.288 Under Rule 8b–32(c), an investment company may only incorporate by reference into a registration statement or report required to be filed electronically an exhibit that was filed in electronic format, unless the exhibit was filed in paper under a hardship exemption and any required confirming copy has been submitted.289 Given that EDGAR is now the primary method for the filing of investment company registration statements, applications, and reports with the Commission and our rules require the filing of electronic format copies of paper format documents filed under a hardship exemption,290 this provision is obsolete, and therefore, we are proposing to eliminate it.291 We are also proposing additional modifications to Rule 0–4 and Rule 0– 6 to modernize and simplify these rules. First, we are proposing to eliminate the requirement that if a certificate of an independent public accountant previously or concurrently filed is incorporated by reference by an investment company (with respect to the filing of a registration statement, application, or report) or an investment adviser (with respect to the filing of an application) a written consent of the accountant must be filed with the filing.292 We note that Rule 439 under 286 See Integrated Disclosure System Adopting Release, supra note 69. 287 The proposed amendments would conform the language of Rule 12b–32 (as incorporated into Rule 12b–23) with similar language currently found in Rule 411(c). References to 17 CFR 228.10(f), which no longer exists, would be eliminated. 288 As with the proposed amendments to Rule 12b–23, we are proposing to conform the language of paragraphs (a) and (b) of Rule 8b–32 (as incorporated into Rule 0–4) with similar language currently found in Rule 411(c). References to 17 CFR 228.10(f), which no longer exists, would similarly be eliminated. 289 See Rule 8b–32(c). 290 See, e.g., Rule 201(b) of Regulation S–T [17 CFR 232.201(b)], Notes 2 and 3 to Rule 202 of Regulation S–T [17 CFR 232.202]. 291 See paragraph (a)(iv) of Rule 101 of Regulation S–T [17 CFR 232.101] (specifying the investment company filings required to be submitted electronically). 292 See Rule 0–4(b), Rule 0–6(b). E:\FR\FM\02NOP2.SGM 02NOP2 51012 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules the Securities Act 293 provides a similar requirement for these types of consents for registration statements under the Securities Act. We further note that our investment company registration forms do not require the filing of these consents where a registration statement or amendment is filed only under the Investment Company Act.294 We are unaware of circumstances under which a consent would be required in connection with an investment company report or an application filed by an investment company or investment adviser. Therefore, we are proposing to eliminate this requirement from Rule 0–4 and Rule 0–6 but request comment on whether the final rules should retain it. Second, we are proposing to eliminate the restrictions currently contained in Rule 0–4(d) and Rule 0–6(d) on incorporating by reference exhibits or financial statements made in certain filings.295 Given that EDGAR is now the primary method for the filing of registration statements and reports with the Commission, and that documents filed on EDGAR remain available regardless of whether a filing is withdrawn, whether a registration statement ceases to be effective, and whether the other circumstances outlined in Rule 0–4(d) and Rule 0–6(d) apply to a particular filing, these provisions are no longer necessary.296 For our regulatory purposes, we do not believe that the restrictions are needed. Thus, for the foregoing reasons and for consistency purposes, we are proposing to eliminate this provision from Rule 0– 4 and Rule 0–6 but request comment on whether the final rules should retain it. Finally, we are proposing to eliminate the provisions currently contained in Rule 0–4(e) and Rule 0–6(e). These provisions provide that the Commission may refuse to permit incorporation by reference in any case in which, in the Commission’s judgment, such 293 17 CFR 239.439. e.g., General Instruction B.2(b) of Form asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 294 See, N–1A. 295 Specifically, the rules restrict the incorporation by reference of exhibits or financial statements which (1) have been withdrawn, (2) were filed in connection with certain registration statements that have ceased to be effective, (3) are contained in filings subject to pending proceedings under (i) Section 8(b) or 8(d) of the Securities Act, (ii) Section 8(e) of the Investment Company Act, (iii) in the case of applications under Rule 0–6, Section 203(e)(1) of the Investment Advisers Act, or (iv) orders under any of the foregoing, and (4) in the case of investment companies, were documents filed in paper and with respect to an electronic filer under a temporary hardship exemption under Rule 201 of Regulation S–T and an electronic copy has not been submitted. 296 As noted earlier, investment advisers register and submit some filings to the Commission electronically through IARD. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 incorporation would render a registration statement or report of an investment company or an application filed by an investment adviser incomplete, unclear, or confusing. Instead, for consistency with proposed Rule 411(e) and proposed Rule 12b– 23(e), we are proposing to amend Rule 0–4 and Rule 0–6 to contain a general requirement that information must not be incorporated by reference in any case where such information would render the disclosure incomplete, unclear, or confusing.297 Request for Comment 78. We are proposing to eliminate several redundant parts of the rules that address incorporation by reference. Are those provisions helpful to understanding whether and when incorporation by reference is permitted? Should we include those provisions in instructions to the rules or in other guidance? 79. Are the proposed amendments appropriate with respect to investment companies, or do investment companies raise special considerations that our rules should address? For example, should our rules maintain the current restriction contained in Rule 8b–32(c) regarding exhibits filed as part of registration statements and reports required to be filed electronically? Should our rules retain the current requirement that a consent be filed where an independent public accountant certificate is incorporated by reference? Should our rules retain the current prohibitions on incorporating by reference information filed as part of certain filings specified in Rule 0–4(d) and Rule 0–6(d)? In these cases, should our rules retain the current provisions of our rules, or should they be modified in any way? If so, how? 80. Are the proposed amendments to Rule 0–4 and Rule 0–6 sufficient to help ensure that information incorporated by reference into a registration statement, report, or application does not render the disclosure in these documents incomplete, unclear, or confusing? If so, should we, as proposed to provide regulatory consistency between operating companies on the one hand and investment companies and investment advisers on the other, eliminate the current provisions in Rule 0–4(e) and Rule 0–6(e) that the Commission may refuse to permit incorporation by reference in any case 297 See proposed Rule 0–4(e), proposed Rule 0– 6(b). A substantially similar provision exists in current Rule 8b–23(c) (which we are proposing to rescind) pertaining to information incorporated by reference into an investment company registration statement or report. PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 in which in its judgment the incorporation would render a registration statement, report, or application incomplete, unclear, or confusing? Why or why not? If retained, should the provisions be modified in any way, and if so, how? 81. Are the proposed rules governing incorporation by reference under the Investment Company Act or Investment Advisers Act sufficiently clear? Should we modify them in any other respect? For example, should our rules expressly permit or prohibit information to be incorporated into the body of an application? 3. Forms Incorporation by reference is also addressed in our forms.298 Accordingly, we are proposing revisions to several of the Commission’s forms to implement the proposed amendments discussed above. In addition to conforming changes, we are proposing amendments to Form 10, Form 10–K and Form 20– F to allow registrants to exclude item numbers and captions or to create their own captions tailored to their disclosure.299 The proposed amendments would not affect captions that are expressly required by the forms or Regulation S-K. For example, Form 10–K and Form 20–F require captions for ‘‘audit fees,’’ ‘‘audit-related fees,’’ ‘‘tax fees,’’ and ‘‘all other fees.’’ Regulation S–K requires a caption for ‘‘risk factors.’’ 300 These proposed amendments are intended to reduce the use of unnecessary cross-references 298 Although, as stated above, Rule 411, Rule 12b– 23 and Rule 12b–32 generally govern incorporation by reference for filings subject to Regulation C or Regulation 12B, provisions in the forms that cover the same subject matter are controlling. See Rule 400 [17 CFR 230.400] (stating that the provisions in a form, or an item of Regulation S–K referred to in such form, will control when they cover the same subject matter as a rule in Regulation C, unless otherwise specifically provided in Regulation C) and Rule 12b–1 (stating that provisions in a form will control when they cover the same subject matter as a rule in Regulation 12B). 299 Rule 12b–13 requires registrants to include the numbers and captions of all items in these forms. Although provisions in a form control when they cover the same subject matter as a rule in Regulation 12B, these forms do not contradict Rule 12b–13. 300 The proposed amendments are not intended to change instances where the staff has interpreted a requirement to allow for a caption to be excluded. See, e.g., Regulation S–K Compliance and Disclosure Interpretation 233.02 (discussing the caption called for by Item 407(e)(4)). The proposed amendments would also not eliminate General Instruction G.4 of Form 10–K, which requires captions when the registrant incorporates all of the information in its Form 10–K by reference to its annual report to security holders and its definitive proxy or information statement. In connection with this proposal, we are also proposing to amend Rule 12b–13 to make it clearer that the provisions of a form control over the requirements of that rule. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules when information may be responsive to more than one disclosure item in the Exchange Act forms.301 While item numbers and captions are generally not required in the prospectus portion of most Securities Act filings, they are required in many Exchange Act forms.302 Although clear disclosure will often call for appropriate headings or captions, the proposed amendments would provide registrants with more flexibility in how they present their disclosure. Increasing flexibility in this manner may reduce repetitive disclosure or unnecessary crossreferences when information may be responsive to more than one item and thereby enhance the overall readability of required disclosures. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Request for Comment 82. Should we amend Form 10, Form 10–K, and Form 20–F to eliminate the requirements to include most item numbers and captions as proposed? Would the proposed amendments to these forms lead to disclosure that is less clear or less comparable across registrants? Under the proposed amendments, a few required captions would remain, such as the caption for ‘‘risk factors’’ and the captions required by General Instructions G.4 of Form 10– K.303 Should we retain these requirements, or should they also be eliminated? 83. Would increasing flexibility in how the disclosure in Form 10, Form 10–K, and Form 20–F is presented lead to less repetitive disclosure? Should we eliminate the requirements to include item numbers and captions in other forms, such as in Part II of Form 10–Q or in Form 8–K? 84. In addition to or in lieu of eliminating the requirements for most item numbers and captions, should we amend our rules to provide guidance on the use of cross-references, as suggested by one commenter? 304 If so, how should the guidance discourage excessive crossreferencing while acknowledging that some cross-references may be necessary to provide clear disclosure? Should the 301 A commenter recommended amending our rules to include a ‘‘policy’’ on avoidance of duplication that would clarify that a registrant is not required to repeat or include cross-references to disclosure found elsewhere in a document when responding to specific line item requirements; however, we believe amending our forms in the manner proposed would provide clearer guidance for registrants. See Letter from ABA. 302 See Securities Act Rule 404 [17 CFR 230.404] and Exchange Act Rule 12b–13 [17 CFR 240.12b– 13]. Rule 404 does not require the numbers or captions of items to be included in a prospectus, but does require them for the non-prospectus portion of a registration statement. See Rule 404(d). 303 See supra note 300 and accompanying text. 304 See Letter from ABA. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 cross-referencing guidance differ based on the nature of the document or the disclosure? For example, should the guidance treat a prospectus differently from a Form 10–K filing, or treat information in the financial statements differently from narrative disclosure? 85. The proposed amendments would not alter the general rule that a prospectus may not incorporate information by reference unless permitted by the appropriate form. Our forms, however, typically provide registrants with significant latitude to incorporate information by reference when specified conditions are met.305 Should we change the information that may be incorporated by reference into a prospectus under any of our forms? If so, which information, and why? G. Manner of Delivery 306 1. Tagging Cover Page Data Currently, operating company registrants are required to file their financial statements as an exhibit in a machine-readable format using eXtensible Business Reporting Language (‘‘XBRL’’).307 This disclosure is required as an exhibit to periodic reports and Securities Act registration statements, including reports on Form 8–K or Form 6–K that contain revised or updated financial statements. Registrants must also tag in XBRL a specific group of data points that appears on the cover page of the filing. These specific data points, which are tagged according to Regulation S–T and the EDGAR Filer Manual, are known as document and entity identifier elements (‘‘DEIs’’) and include, among others, form type, company name, filer size, and public float.308 This information 305 For example, subject to certain conditions, Form S–1 allows registrants to incorporate information by reference in most of the items of Part I—Information Required in Prospectus. See General Instruction VII and Item 12 of Form S–1. 306 After consideration of the staff’s recommendation G.2. in the FAST Act Report, we are not, at this time, proposing to require the use of external hyperlinks whenever our rules call for the inclusion of an internet address. In the FAST Act Report, the staff recommended requiring external hyperlinks provided that the appropriate technology is available to prevent these hyperlinks from jeopardizing the security and integrity of the EDGAR system. See FAST Act Report, supra note 2, at n.15. 307 For domestic disclosure forms, the XBRL datatagging requirements are imposed through Item 601(b)(101) of Regulation S–K and Rule 405(b) of Regulation S–T. See Item 601(b)(101) of Regulation S–K and Rule 405(b) of Regulation S–T [17 CFR 232.405(b)]. For foreign disclosure forms, analogous XBRL tagging requirements are included in the instructions to the relevant forms. See, e.g., paragraphs 100 and 101 of the Instructions to Exhibits to Form 20–F. 308 See Rule 405 of Regulation S–T [17 CFR 232.405]; See also Interactive Data to Improve PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 51013 corresponds to some, but not all, of the information that registrants are required to include on the filing cover page. For example, the Form 10-K cover page contains approximately 25 data points. Less than half of those data points are currently required to be tagged in XBRL. The non-tagged data points include, among others, the exchange on which securities are registered and the state (or jurisdiction) of incorporation. In the FAST Act Report, the staff recommended that the Commission consider requiring operating company registrants to tag in XBRL all the data points on the cover pages of Form 10– K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F. The staff also recommended that the Commission consider revising the cover page of these forms to include the trading symbol for each class of securities registered under the Exchange Act and require registrants to format this additional data point in XBRL.309 We are proposing amendments to require all of the information on the cover pages of Form 10–K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F to be tagged in Inline XBRL in accordance with the EDGAR Filer Manual. Under the proposed amendments, the cover page data would appear in HTML format with embedded XBRL data. We recently proposed to require the use of the Inline XBRL format, where XBRL data is embedded into an HTML document, instead of the traditional XBRL format 310 for the submission of operating company financial statements.311 We intend for Financial Reporting, Release No. 33–9002 (Jan. 30, 2009) [74 FR 15666] (discussing the requirement to tag document and entity identifier elements, such as form type, company name, and public float, according to Regulation S–T and the EDGAR Filer Manual). 309 See FAST Act Report, supra note 2, at Recommendations G.1. 310 In the traditional XBRL format currently required for financial statements, none of the registrant’s XBRL data is embedded into an HTML document. Instead, an exhibit containing all XBRL data is filed with the relevant form. Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate document. 311 See Inline XBRL Filing of Tagged Data, Release No. 33–10323 (Mar. 1, 2017) [82 FR 14282 (Mar. 17, 2017)] (‘‘Inline XBRL Proposing Release’’). As part of the proposal, we also proposed to require the use of Inline XBRL format for the submission of mutual fund risk/return summary information. See also Order Granting Limited and Conditional Exemption Under Section 36(a) of the Securities Exchange Act of 1934 from Compliance with Interactive Data File Exhibit Requirement in Forms 6–K, 8–K, 10–Q, 10–K, 20–F and 40–F to Facilitate Inline Filing of Tagged Financial Data, Release No. 34–78041 (Jun. 13, 2016) [81 FR 39741 (June 17, 2016)] (exercising exemptive authority ‘‘to permit, but not require, operating companies to use Inline E:\FR\FM\02NOP2.SGM Continued 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 51014 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules the cover pages of Form 10–K, Form 20– F, and Form 40–F already require disclosure of the title of each class of securities registered pursuant to Section 12(b) of the Exchange Act and each exchange on which they are registered, our proposed amendments to these forms would revise the cover page to include a corresponding field for the trading symbol. Unlike Form 10–K, Form 20–F, and Form 40–F, however, the cover pages of Form 10–Q and Form 8–K do not currently require disclosure of the title of each class of securities and each exchange on which they are registered. Accordingly, to ensure that registrants and their registered securities are identified in a consistent manner across forms, we are proposing to revise the cover pages of Form 10–Q and Form 8–K to include this disclosure in addition to the trading symbol. Requiring the disclosure of trading symbols on the cover pages of periodic reports would facilitate investors’ efforts to search news websites and stock market databases for information about registrants and distinguish among similarly named companies. Further, we believe that requiring the tagging of trading symbols would allow investors to sort and compare filings and disclosures more easily and accurately. the cover page data to be tagged in the same format as this other information. Therefore, if the Inline XBRL proposal is not adopted, we are proposing, as an alternative, to require operating company filers to tag each cover page data point in an XBRL exhibit to the relevant filing. To implement the cover page tagging requirements, we propose to add new Rule 406 to Regulation S–T, new Item 601(b)(104) to Regulation S–K, new paragraph 104 to the ‘‘Instructions as to Exhibits’’ of Form 20–F and new paragraph B.17 to the ‘‘General Instructions’’ of Form 40–F to require registrants to file with each of the specified forms a ‘‘Cover Page Interactive Data File.’’ Under the proposed amendments, registrants filing Form 20–F and Form 40–F would be required to tag cover page data only when those forms are used as annual reports. The proposed amendments would not apply to Form 20–F and Form 40–F when used as registration statements. We are also proposing to revise Rule 11 of Regulation S–T to add the term ‘‘Cover Page Interactive Data File.’’ The term would be defined as the machine readable computer code that presents the information required by Rule 406 of Regulation S–T in Inline XBRL format. We believe that the proposal to require mandatory tagging of all data points on the cover pages of the specified forms would allow investors to automate their use of this information. This would enhance their ability to identify, count, sort, and analyze registrants and disclosures to the extent these data points otherwise would be formatted solely in ASCII or HTML. At the same time, we do not expect the incremental compliance burden associated with tagging the additional cover page information to be significant, given that registrants already are required to tag some of this information as well as information in their financial statements. We therefore believe that the enhanced comparability and usability of these proposed disclosures would justify the burden of requiring registrants to tag the additional data and would help to modernize our disclosure system in a manner consistent with the FAST Act mandate. We are also proposing amendments to the cover pages of these forms to include the trading symbol for each class of registered securities.312 Because Request for Comment 86. Should we require as proposed, all of the information on the cover pages of Form 10–K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F to be tagged in Inline XBRL? Should the proposed cover page tagging requirement apply to any other forms (e.g., Form 6–K)? 87. Should we amend the cover pages of Form 10–K, Form 20–F, and Form 40–F to include the trading symbol for each class of registered securities as proposed? Should we also revise the cover pages of Form 10–Q and Form 8– K as proposed, to include the title, trading symbol and exchange of each class of registered securities? 88. Under the proposed amendments, Form 10–K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F would require each registrant to identify on the cover page of those forms the exchange on which each class of securities is registered. The proposed amendments to Item 501(b)(4) would require each registrant to identify on the cover page of the prospectus its principal U.S. market or markets for the securities being offered. Should we reconcile these differing cover page disclosures? If so, how? XBRL in their periodic and current reports under the Exchange Act through March 2020’’). 312 In the Disclosure Update and Simplification Proposing Release, we have proposed to amend Item 201(a) to also require disclosure of the trading symbol(s) for each class of a registrant’s common equity. See Disclosure Update and Simplification Proposing Release, supra note 13, at 51637. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 89. If we do not adopt Inline XBRL for the submission of operating company financial statements, should we instead require the cover page data to be tagged using traditional XBRL format? 90. Instead of requiring the cover page data to be tagged using Inline XBRL or traditional XBRL format, should we require the cover page data to be submitted using an XML format? Why or why not? 91. Are there any changes we should make to the proposed amendments to better ensure accurate and consistent tagging? If so, which changes should we make and why? 92. Are there any disclosures discussed in this release that we should require to be provided in a structured format? For example, should we require the use of structured data within Item 303(a) to facilitate readability and navigability of this disclosure for investors? Are there specific elements of Item 303(a) disclosure, such as the table of contractual obligations, which should be provided in a machine-readable structured data format? Would it be useful to investors to require registrants to provide any of the property disclosures under Item 102 in a machine-readable format, such as geospatial coordinates? To the extent that we consider additional structured data requirements in periodic reports, what level and type of structured data requirements would be appropriate? For example, should we require registrants to identify sections, subsections or topics with ‘‘block text’’ labels, or should we require registrants to structure numeric elements and tables individually? What would be the challenges and costs of such an approach? What would be the benefits? 2. Exhibit Hyperlinks and HTML Format for Investment Companies As discussed above, the Commission recently adopted rules requiring hyperlinks to most exhibits filed pursuant to Item 601, Form F–10, and Form 20–F, and, to accommodate hyperlinks, those filings will be required to be made in HTML.313 In this release, we are proposing parallel amendments to certain of our forms that are used by investment companies and amendments to Rule 102 314 of Regulation S–T to apply similar hyperlinking and HTML requirements to those registrants to facilitate access to these exhibits for investors and other users of the information. 313 See Exhibit Hyperlinks Adopting Release, supra note 14 at 14130. 314 17 CFR 232.102. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Under the proposed amendments, affected registrants would be required to include a hyperlink to each exhibit identified in a filing’s exhibit index, unless the exhibit is filed in paper pursuant to a temporary or continuing hardship exemption under Rule 201 or Rule 202 of Regulation S-T, or pursuant to Rule 311 of Regulation S–T.315 This requirement would apply to registration statements on Form S–6, Form N–1A, Form N–2, Form N–3, Form N–4, Form N–5, Form N–6, and Form N–14 and to reports on Form N–CSR.316 Consistent with our rules for operating companies, we are not proposing to require registrants to refile electronically any exhibits filed only in paper.317 Under the proposed amendments, an electronic filer would also be required to correct an inaccurate or nonfunctioning link or hyperlink to an exhibit.318 In connection with the proposed exhibit hyperlinking requirements, we are also proposing amendments to Rule 105 of Regulation S-T to require investment company registrants to file registration statements and reports that include exhibits in HTML format. Currently, investment company registrants must submit electronic filings to the Commission using the EDGAR system in either ASCII format or HTML format. Because the ASCII format does not support hyperlink functionality, the exhibit hyperlinking 315 As with the rules for operating companies, the proposed rules for investment companies would exclude any XBRL exhibits. See id. at 14133. 316 See proposed Instructions as to Exhibits of Form S–6; proposed Instruction to Item 28 of Form N–1A; proposed Instruction 4 to Item 25.2 of Form N–2; proposed Instruction 3 to Item 29(b) of Form N–3; proposed Instruction 3 to Item 24(b) of Form N–4; proposed Instructions as to Exhibits of Form N–5; proposed Item 26 of Form N–6; proposed Instruction to Item 16 of Form N–14; proposed Instruction to Item 12 of Form N–CSR. We are also proposing to amend Forms N–3 and N–14 to clarify that Rule 303 of Regulation S–T applies to registration statements on Forms N–3 and N–14 that are electronically filed. See proposed General Instruction G to Form N–3; proposed Instruction to Item 16 of Form N–14. 317 See Exhibit Hyperlinks Adopting Release, supra note 14, at 14133. 318 17 CFR 232.105(d)(2). In the case of a registration statement that is not yet effective, the filer would be required to file an amendment to the registration statement containing the inaccurate or nonfunctioning link or hyperlink. In the case of a report on Form N–CSR, the filer would be required to correct the inaccurate or nonfunctioning link or hyperlink in its next report on Form N–CSR. In the case of a registration statement on Form S–6, Form N–14, Form N–5, Form N–1A, Form N–2, Form N– 3, Form N–4, or Form N–6 that has become effective, the filer would be required to correct an inaccurate or nonfunctioning link or hyperlink in the next post-effective amendment, if any, to the registration statement. Alternatively, an electronic filer may correct an inaccurate or nonfunctioning link or hyperlink in a registration statement that has become effective by filing a post-effective amendment to the registration statement. Id. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 requirement would be feasible only if registrants are required to file in HTML. Under the proposed requirement, registrants would be required to file registration statements and reports on Form S–6,319 Form N–1A,320 Form N– 2,321 Form N–3,322 Form N–4,323 Form N–5,324 Form N–6,325 Form N–14, and Form N–CSR 326 in HTML format. While the affected registration statements and reports would be required to be filed in HTML pursuant to the proposed amendments to Rule 105, registrants would continue to be permitted to file in ASCII any schedules or forms that are not subject to the exhibit filing requirements, such as proxy statements, or other documents included with a filing, such as an exhibit. Request for Comment 93. Should we require investment company registrants to include hyperlinks in the exhibit index for registration statements and reports as proposed? Should we amend Rule 105 of Regulation S-T to require investment company registrants to file registration statements and reports that include exhibits in HTML format as proposed? 94. Should we revise any additional forms to require exhibit hyperlinks? For example, should we revise a form to require exhibit hyperlinks even though all exhibits filed with this form will be attached to it? 95. Should we require, as proposed, that electronic filers correct an inaccurate or nonfunctioning link or hyperlink? If so, when should the correction be required to be filed? 96. Should we require registrants to refile electronically any exhibit previously filed in paper so that they can include a hyperlink in the exhibit index? 97. What compliance date would be appropriate for investment companies to begin filing in HTML format? Should the compliance date be the same for all affected investment companies, or should we distinguish between larger and smaller investment companies, for example, by providing an extended compliance date for smaller entities? If we provide an extended compliance date for smaller entities, what additional compliance period would be necessary and how should we define those smaller entities? For example, should we define smaller investment companies for these 319 17 CFR 239.16. CFR 239.15A and 17 CFR 274.11A. 321 17 CFR 239.14 and 17 CFR 274.11a–1. 322 17 CFR 239.17a and 17 CFR 274.11b. 323 17 CFR 239.17b and 17 CFR 274.11c. 324 17 CFR 239.24 and 17 CFR 274.5. 325 17 CFR 239.17c and 17 CFR 274.11d. 326 17 CFR 249.331 and 17 CFR 274.128. 320 17 PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 51015 purposes as investment companies that, together with other investment companies in the same group of related investment companies have net assets of less than $1 billion as of the end of the most recent fiscal year of the investment company? H. General Request for Comment We request and encourage any interested person to submit comments regarding the proposed amendments, specific issues discussed in this release and other matters that may have an effect on the proposals. We note that comments that are accompanied by supporting data and analysis are of particular assistance to us. III. Economic Analysis We are mindful of the costs and benefits of our rules. Section 2(b) of the Securities Act, Section 3(f) of the Exchange Act, Section 2(c) of the Investment Company Act, and Section 202(c) of the Investment Advisers Act require us, when engaging in rulemaking that requires us to consider or determine whether an action is necessary or appropriate in (or, with respect to the Investment Company Act, consistent with) the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.327 Additionally, Exchange Act Section 23(a)(2) requires us, when adopting rules under the Exchange Act, to consider, among other things, the impact that any new rule would have on competition and not to adopt any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the Exchange Act.328 In this release, we are proposing amendments to simplify and modernize disclosure requirements in Regulation S–K and related rules and forms as required by Section 72003 of the FAST Act.329 The proposed amendments are based on the staff’s recommendations in the FAST Act Report. The FAST Act Report was tailored to the statutory mandate of providing specific and detailed recommendations on modernizing and simplifying Regulation S–K in a manner that reduces costs and burdens on registrants while still providing all material information. As discussed above, the proposed amendments reflect the input of public commenters as well as the Commission’s experience with 327 15 U.S.C. 77b(b), 15 U.S.C. 78c(f), 15 U.S.C. 80a–2(c), and 15 U.S.C. 80b–2(c). 328 15 U.S.C. 78w(a)(2). 329 Public Law 114–94, Sec. 72003, 129 Stat. 1312 (2015). E:\FR\FM\02NOP2.SGM 02NOP2 51016 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Regulation S–K arising from the Division of Corporation Finance’s disclosure review program. To promote consistency, we are also proposing parallel amendments to certain rules and forms applicable to investment companies and investment advisers, including proposed amendments that would require certain investment company filings to be submitted in HTML format. A. Background asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 1. The Benefits of Information Disclosure The primary purpose of disclosure under the federal securities laws is to provide investors with the information they need to make informed investment and voting decisions. The separation of ownership and management typically prevents investors from directly observing many managerial decisions and requires them to rely on financial and qualitative disclosures for information. Absent regulation, managers may lack incentives to voluntarily disclose or standardize relevant information. As a result, in the absence of disclosure requirements, an information asymmetry often exists between managers and investors that limits the ability of investors to distinguish between well-run and poorly-run companies and can lead to under-supply and inefficient allocation of capital.330 A disclosure regime that facilitates the disclosure of material, reliable information can reduce informational asymmetries between managers of companies and investors, which can enhance capital formation and the allocative efficiency of the capital markets. Materiality is a key principle of public company reporting.331 Efforts to make disclosures more effective typically focus on evaluating whether existing or proposed disclosures provide material information to those using the disclosures. Material disclosures can reduce information asymmetries 330 See, Akerlof, George A., The Market for ‘‘Lemons’’: Quality Uncertainty and the Market Mechanism, 84 Q. J. ECON. 488–500 (1970). 331 See Report of the Advisory Committee on Corporate Disclosure to the Securities and Exchange Commission, Cmte. Print 95–29, House Cmte. On Interstate and Foreign Commerce, 95th Cong., 1st. Sess. (Nov. 3, 1977), at 320. available at http://opcad-ils/InmagicGenie/DocumentFolder/ report%20of%20the%20advisory%20committee %20on%20corporate%20disclosure%20to%20the %20sec%2011011977.pdf. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 between managers of companies and investors, decrease the cost of capital, and lead to more efficient share prices and heightened accountability of the managers of companies.332 2. The Costs of Disclosure Although disclosure requirements benefit investors and financial markets, there are potential drawbacks associated with these requirements. For example, disclosure can be costly for registrants to produce and disclosure of sensitive information can result in competitive disadvantages. Disclosure of information that is unnecessary or that may not be material also entails costs to investors, if it affects their ability to discern material information effectively. While material disclosures provide important information to investors about their investments, sorting through information that is unnecessary or not material can obscure material information that investors find useful. Consistent with this view, research has found that attention to one subject generally leaves less attention available for others.333 In the economic analysis that follows, we first examine the current regulatory and economic landscape that forms the baseline for our analysis. We then analyze the likely economic effects arising from the proposed amendments relative to that baseline. These economic effects include the costs and benefits and impact on efficiency, competition, and capital formation. B. Baseline To assess the economic effect of the proposed amendments, we are using as 332 See Bruggemann, Ulf and Kaul, Aditya and ¨ Leuz, Christian and Werner, Ingrid M., The Twilight Zone: OTC Regulatory Regimes and Market Quality (June 14, 2017). IGM Working Paper #95; Fisher College of Business Working Paper No. 2013–03–09; European Corporate Governance Institute (ECGI)— Law Working Paper No. 224/2013; Charles A. Dice Center Working Paper No. 2013–09. Available at SSRN: https://ssrn.com/abstract=2290492 or http:// dx.doi.org/10.2139/ssrn.2290492. See also C. Leuz and P. Wysocki, 2016, The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research, Journal of Accounting Research Vol. 54, 525–622 and M. Lang, K. Lins, and M. Maffett. Transparency, Liquidity, and Valuation: International Evidence on When Transparency Matters Most, Journal of Accounting Research 50 (2012): 729–774. 333 See Pashler, H.E., The Psychology of Board: Attention (Cambridge, MA: MIT Press 1998) and Hirshleifer, David & Siew Hong Teoh, Limited attention, information disclosure, and financial reporting, 36 J. Acct. & Econ. 337–386 (2003). PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 our baseline the current state of the Commission’s filing and disclosure regime. In characterizing the baseline, it is useful to distinguish between operating companies and investment companies. Although both types of registrants are subject to similar registration and reporting requirements, there are differences in the specific rules and forms applicable to each. In particular, on March 1, 2017, the Commission adopted amendments requiring registrants that file registration statements and reports subject to the exhibit requirements under Item 601 of Regulation S–K, or that file Form F–10 or Form 20–F, (i.e., operating companies) to submit these filings in HTML format and to include a hyperlink to each exhibit listed in the exhibit index of these filings.334 In contrast, there is currently no comparable requirement for investment companies; however, this proposal includes amendments to a set of forms under the Investment Company Act that would apply HTML and hyperlinking requirements to filers of those forms. For operating companies, the baseline includes the disclosure requirements in Regulation S–K and related rules and forms as well as Commission and staff guidance on the application of those requirements. Table 1 below suggests that the proposed amendments to Regulation S–K and related rules and forms would apply to a substantial number of operating companies. On average, 7,800 different registrants per year have filed periodic reports on Form 10–K and Form 10–Q in recent years. As shown in the table below, approximately 800 foreign private issuers provided periodic information to investors in the U.S. capital markets using Form 20–F and Form 40–F. The number of registrants filing definitive proxy statements on Schedule 14A has exceeded 5,000 each year.335 334 While compliance with these rules was required by September 1, 2017, smaller reporting companies, as well as registrants that are neither accelerated filers nor large accelerated filers, are not required to comply until September 1, 2018. Although these registrants are not yet required to comply with the exhibit hyperlinks and HTML rules, we are treating these rules as part of the baseline for all filers subject to Regulation S–K. 335 We note that, in addition to operating companies, registered investment companies file proxy statements as well. E:\FR\FM\02NOP2.SGM 02NOP2 51017 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules TABLE 1—NUMBER OF REGISTRANTS FILING VARIOUS DISCLOSURE FORMS FROM 2012–2016 Year 2012 2013 2014 2015 2016 10–K ..................................................................................... ..................................................................................... ..................................................................................... ..................................................................................... ..................................................................................... As discussed above, investment companies that file certain forms required by the Investment Company Act would also be affected by the proposed amendments. Table 2 below lists the number of filings filed by investment companies in fiscal year 2016 using EDGAR submission types potentially affected by the proposed amendments, broken out by the number of filings in HTML and ASCII format. From January 1, 2016 to December 31, 2016, investment companies filed 64,522 filings using EDGAR submission types potentially affected by the proposed amendments. Of these filings, the vast majority (58,429) were filed in HTML, while fewer than ten percent (6,093) were filed in ASCII format. As shown in Table 2, most of the filers had 10–Q 8240 7898 7857 7767 7373 20–F 40–F 8381 8031 7872 7676 7147 712 690 669 687 675 DEF 14A 153 145 143 131 126 5371 5382 5259 5390 5126 substantially more HTML filings than ASCII filings, while the Form S–6 filers had more ASCII filings than HTML filings in 2016. The proposed amendments would require registrants to include hyperlinks in the case of exhibits included with the forms and exhibits that are incorporated by reference from a previously filed TABLE 2—NUMBER OF POTENTIALLY document. To draw a baseline AFFECTED FILINGS FROM JANUARY indicative of current disclosure 1, 2016 TO DECEMBER 2016 336 practices, we selected a random sample of 400 filings (359 in HTML and 41 in Number Number ASCII) submitted in 2016 that may be of HTML of ASCII affected by the proposed amendments. Filings Filings Table 3 below shows the average and N–1A Filers ....... 48,150 1,280 median number of exhibits listed in the N–2 Filers ......... 2,965 77 sampled filings by the type of exhibit N–3 Filers ......... 42 6 (i.e., filed with the form vs. incorporated N–4 Filers ......... 5,247 758 N–6 Filers ......... 1,549 245 by reference). S–6 Filers ......... 476 3,727 Total .............. 58,429 6,093 TABLE 3—NUMBER OF EXHIBITS IN SAMPLED FILINGS 337 Number of exhibits listed in the index Average Median Number of exhibits filed with the filing Average Number of exhibits incorporated by reference Median Average Number of sampled filings Median N–1A ............................................................. N–2 ................................................................ N–3 ................................................................ N–4 ................................................................ N–6 ................................................................ N–14 .............................................................. N–CSR .......................................................... S–6 ................................................................ 5.8 7.4 0 13.6 11.1 38.0 2.3 36 0 2 0 0 0 38.5 3 36 0.6 2.1 0 0.7 0.8 1.5 1.9 5.0 0 2 0 0 0 1 0 5.0 5.2 5.0 0 12.9 10.3 36.5 0.1 31.0 0 0 0 0 0 37.0 0 31.0 267 21 1 31 11 6 43 30 All Filings ................................................ 6.7 N/A 0.9 N/A 5.8 N/A 400 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Table 3 shows a significant variation in the number of exhibits listed in the exhibit index across different types of filings. Registration statements on Form N–4, Form N–14, and Form S–6 typically contain a large number of exhibits and had significantly more exhibits incorporated by reference than filings on other forms affected by the proposed amendments. Of the 400 sampled filings, we found that none of them included hyperlinked indexes. As discussed above, disclosure requirements involve trade-offs between benefits to investors in terms of reducing information asymmetries and costs to registrants associated with producing disclosure. While the proposed amendments would apply to all registrants subject to the regulation, the trade-offs between the costs and benefits of disclosure requirements would vary across different types of registrants. For example, smaller companies typically have proportionately higher disclosure costs as well as proportionately higher disclosure benefits.338 That is, the fixed costs of disclosure requirements typically constitute a higher percentage of revenues for smaller companies than 336 The figures in this table are presented on the basis of filer type, not on the basis of the form on which the document was filed. Therefore, not all of the filings presented in the table would be subject to the proposed requirements. 337 In counting the number of exhibits, we did not include the following exhibits: 101.INS XBRL Instance Taxonomy; 101.SCH XBRL Taxonomy Extension Schema Document; 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document; 101.DEF XBRL Taxonomy Extension Definition Linkbase Document; 101.LAB XBRL Taxonomy Extension Labels Linkbase Document; and 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document because XBRL exhibits are not covered by the proposal. Average represents the sum of the number of exhibits divided by the number of sampled forms for each form type. Median represents the middle number of exhibits for each form type when the numbers of exhibits are listed from the smallest to the largest. For instance, for Form N–2, the number of exhibits listed in the index ranged from 0 to 55, with 2 as the middle number. 338 In its 2015 proposing release to amend the definition of ‘‘smaller reporting company,’’ the Commission observed that, based on a review of filings, approximately 42% of registrants qualified as smaller reporting companies. See Amendments to Smaller Reporting Company Definition, Release No. 33–10107 (Jun. 27, 2017) [81 FR 43130 (Jul. 1, 2016)], available at https://www.sec.gov/rules/ proposed/2016/33-10107.pdf. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 E:\FR\FM\02NOP2.SGM 02NOP2 51018 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS for larger companies. However, the benefits of disclosure may be greater for smaller companies because information asymmetries between investors and managers of smaller companies are typically higher than for larger, more seasoned companies with a large following.339 Compliance costs could be also higher for foreign registrants to the extent that the disclosure requirements in the United States are different from the disclosure requirements in their home countries. C. Economic Analysis of the Proposed Amendments: General Assessment, Including Impact on Efficiency, Competition, and Capital Formation In this subsection, we evaluate the broad economic effects of the proposed amendments, including a discussion of their impact on efficiency, competition, and capital formation. The proposals amend a well-established and robust disclosure regime that has existed for many years. As a result, we expect the aggregate impact of the proposed amendments to be incremental to the effects that have already been realized from the existing disclosure regime. As discussed above, disclosure provides benefits to participants in financial markets by reducing information asymmetries that exist between investors in a company and managers tasked with operating the company. Both registrants and investors alike would generally benefit from the proposed amendments, because they would simplify the requirements and resulting content of existing disclosures while still providing all material information. The proposed changes to the requirements and resulting improved presentation are expected to increase the usefulness of the disclosures for investors and generally lower the regulatory burden (and compliance costs) for registrants. In addition, the improved information environment associated with modernized and simplified disclosures is expected to incrementally enhance capital formation and the allocative efficiency of the capital markets through more accurate share prices, better accountability of managers and increased capital market liquidity. We expect some of the proposed amendments to entail modest initial implementation costs. However, we 339 See, e.g., R. Frankel and X. Li, Characteristics of a firm’s information environment and the information asymmetry between insiders and outsiders, 37 J. Acct. Econ. 229, 229–259 (June 2004). See also, L. Cheng, S. Liao, and H. Zhang, The Commitment Effect versus Information Effect of Disclosure—Evidence from Smaller Reporting Companies, 88 Acct. Rev. 1239, 1239–1263 (2013). VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 believe that the initial costs would be in manageable amounts. Furthermore, those costs would be offset by future savings as a result of simplified and streamlined disclosure requirements, after implementation. Some of the proposed amendments, such as those that impose new data tagging, hyperlinking, or disclosure requirements, would involve not only implementation costs but would also increase compliance costs for registrants going forward, although as discussed below, we do not expect these additional costs to be significant. While the purpose of the proposed amendments is to simplify and modernize public company disclosure requirements without loss of material information, we acknowledge that the proposed amendments could result in a loss of some information in specific cases, as discussed below. This loss of information could potentially increase information asymmetry in those cases, which may have negative implications for investor protection, market transparency, efficiency, and capital formation. In turn, such loss of information could raise the firm’s cost of capital.340 However, we believe this potential adverse effect would be mitigated by the fact that registrants will continue to be required to provide further material information, if any, as may be necessary to make the required statements, in the light of the circumstances under which they are made, not misleading.341 D. Economic Analysis of the Specific Amendments: Proposals That Clarify and Update Existing Rules 1. Proposals That Clarify or Streamline a Rule’s Requirements a. Description of Property (Item 102) Item 102 requires disclosure of the location and general character of the principal plants, mines, and other materially important physical properties of the registrant and its subsidiaries. The staff has observed, however, that the item may elicit disclosure that is not material.342 The proposed amendments to Item 102 would clarify that a description of property is required only to the extent physical properties are material to the registrant and make other 340 See Easley, D., Hvidkjaer, S., & M. O’Hara, Is information risk a determinant of asset returns? 57 J. Finance. 2185–2221 (2002). 341 See Rule 12b–20 [17 CFR 240.12b–20] and Rule 408(a) [17 CFR 230.408(a)]. 342 See FAST Act Report, supra note 2, at Recommendation B.1. See also Concept Release, supra note 6, at Section IV.A.6.b and SEC Staff’s Report of the Task Force on Disclosure Simplification (Mar. 5, 1996) available at https:// www.sec.gov/news/studies/smpl.htm. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 clarifying amendments.343 The proposed amendments would not modify the Item 102 requirements for companies in the mining, real estate, and oil and gas industries. The main benefit of the proposed amendments would be to reduce the amount of duplicative disclosure that is not material by emphasizing materiality and harmonizing the rule’s thresholds for disclosure. The proposed amendments also could facilitate compliance and avoid any confusion associated with different disclosure standards. The aggregate reduction in regulatory burden due to the proposed amendments to Item 102 may extend to approximately 6,500 registrants.344 When Item 102 was originally adopted, registrants were more likely to maintain large physical properties and other assets, such as mines and manufacturing plants.345 However, the nature of enterprise has changed dramatically over the last thirty years. Currently, many of the largest and most profitable firms operate in the services and technology industries that are often not characterized by large physical assets. Nevertheless, many modern firms are highly geographically dispersed. As a consequence, information about the geographic operations of these companies— including information about the location of physical properties—could be highly relevant for investors by providing information about important firm customers and employees. We expect that any risk of exclusion of relevant information under the proposed amendment would be minimal, because Item 102 explicitly solicits the disclosure of material information. This risk is further mitigated by the fact that registrants may disclose relevant property information elsewhere in their filings, such as in response to Item 101 (Description of Business). b. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303) We are proposing a series of amendments to Item 303. In this subsection, we discuss all amendments to Item 303 that are intended to clarify the rule’s requirements, while in 343 See Section II.A (Description of Property). derive this number by taking the average number of registrants filing annual reports as reported in Table 1 and excluding all companies in the mining, oil and natural gas, and real estate industries. 345 Since 1935, we have required disclosure similar to that required under Item 102. See Release No. 33–276 (January 14, 1935) [not published in the Federal Register]. 344 We E:\FR\FM\02NOP2.SGM 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Subsection E.1 below, we discuss proposals intended to amend the content of MD&A. Instruction 1 to Item 303(a) provides that, generally, MD&A shall cover the three-year period covered by the financial statements and either use year-to-year comparisons or any other formats that in the registrant’s judgment would enhance a reader’s understanding. Additionally, the instruction states that reference to the five-year selected financial data may be necessary where trend information is relevant. We are proposing to amend the instructions to Item 303(a) to emphasize that a registrant may use any presentation that would enhance a reader’s understanding. As discussed above, our proposed amendments to Item 303(a) are consistent with the Commission’s existing interpretive guidance on MD&A. We are also proposing to eliminate mention of the five-year selected financial data in the instructions to Item 303(a) because disclosure requirements for liquidity, capital resources, and results of operations already require trend disclosure. The proposed amendments emphasize the flexibility available to registrants with respect to the form of MD&A presentation. The major benefit of flexibility is that it allows registrants to frame the information in a way that emphasizes material information. One potential cost associated with this aspect of the rule is that, in framing the discussion in a way that emphasizes material information, registrants may inadvertently de-emphasize information that investors nevertheless find useful or relevant. To the extent the proposed amendment leads to more tailored disclosure, it also could make disclosure less comparable across registrants and over time. To maintain a consistent approach to MD&A for domestic registrants and foreign private issuers, we are proposing changes to Form 20–F similar to the proposed changes to Item 303(a).346 The disclosure requirements for Item 5 of Form 20–F are substantively comparable to the MD&A requirements under Item 303 of Regulation S–K. The economic effects of the proposed amendments to Form 20–F are therefore similar to those for the proposed amendments to Item 303(a) described above. c. Risk Factors (Item 503(c)) Item 503(c) requires disclosure of the most significant factors that make an offering speculative or risky. We are proposing to relocate Item 503(c) from 346 See supra Section II.C.B.2. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 Subpart 500 to Subpart 100 of Regulation S–K.347 We believe that Subpart 100 is a more appropriate location for the risk factor disclosure requirements, because it covers a broad category of business information and is not limited to offering-related disclosure. Additionally, our proposed amendments would eliminate the risk factor examples that are enumerated currently in Item 503(c).348 We do not expect that relocating the disclosure requirement within Regulation S–K would pose any additional costs to registrants or investors because we are only proposing to change the location of the requirement. The content of the requirement would not change. With respect to the proposed elimination of the examples in Item 503(c), we believe that this could prompt registrants to more carefully evaluate and classify their risk exposures, which could ultimately benefit investors through more specific and relevant risk factor disclosures. Although examples could be useful to registrants in some cases, they could also anchor or skew the registrant’s risk analysis in the direction of the examples. 349 An alternative to the proposed amendments, as suggested by some commenters, would be to expand or update the list of examples or revise them to specify generic risks that should not be disclosed. While such an approach might lead to incremental improvements in existing disclosures, it would not eliminate the anchoring effect discussed above nor would it serve to discourage generic or ‘‘boilerplate’’ disclosures as effectively as the proposed amendments. It is also possible that a list of generic risks could inadvertently be viewed as exhaustive. In addition, specifying a list of generic risks that should not be disclosed may create a rule that needs to be regularly updated. d. Plan of Distribution (Item 508) Item 508 requires disclosure about the plan of distribution for securities in an offering, including information about underwriters. We are proposing to amend Rule 405 to define the term ‘‘subunderwriter’’ to clarify its application in Item 508 of Regulation S–K.350 We 347 See supra Section II.D.2. id. 349 There is extensive evidence in psychology and economics that individuals tend to rely too heavily on the first piece of information offered (the ‘‘anchor’’) when making decisions. See e.g., Tversky, A. & Kahneman, D., Judgment under Uncertainty: Heuristics and Biases. 185 Science. 1124–1131 (1974). 350 See supra Section II.D.3. 348 See PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 51019 believe that defining the term ‘‘subunderwriter’’ would reduce compliance costs by helping registrants to more easily determine what disclosure is required under Item 508. We also believe that a defined term could help investors better understand the role of ‘‘sub-underwriters’’ in the offering process. We do not believe there would be additional costs associated with the proposed amendment, since it merely clarifies an existing disclosure requirement. e. Material Contracts (Item 601(b)(10)) Item 601(b)(10)(i) currently requires registrants to file every material contract not made in the ordinary course of business, provided that the contract meets one of two tests: (i) The contract must be performed in whole or in part at or after the filing of the registration statement or report, or (ii) the contract was entered into not more than two years before that filing. The second test, the two-year look back, captures material contracts that were fully performed before the filing date. We are proposing amendments to Item 601(b)(10)(i) that would limit the two-year look back test to newly reporting registrants.351 Proposed Instruction 1 to Item 601(b)(10)(i) defines a ‘‘newly reporting registrant’’ as any registrant filing a registration statement that, at the time of such filing, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, whether or not such registrant has ever previously been subject to the reporting requirements of Section 13(a) or 15(d), and any registrant that has not filed an annual report since the revival of a previously suspended reporting obligation.352 As an example, a registrant that is filing its first registration statement under the Securities Act or the Exchange Act, or filing its first Form 10–K since the revival of its reporting obligation, would be required to file material agreements under Item 601(b)(10)(i) for the two-year look back period. The definition of ‘‘newly reporting registrant’’ under the proposed instruction also would include any registrant that (a) was a shell company, other than a business combination related shell company, as defined in Rule 12b–2 under the Exchange Act, immediately before completing a transaction that has the effect of causing it to cease being a shell company, and (b) has not filed a registration statement or Form 8–K, as required by Item 2.01 and Item 5.06 of that form, since the completion of the 351 See 352 See E:\FR\FM\02NOP2.SGM supra Section II.E.3. supra Section II.E.3. 02NOP2 51020 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS transaction (or in the case of foreign private issuers, has not filed a Form 20– F since the completion of the transaction).353 Under the proposed amendments, a registrant meeting this definition would be required to file material agreements for the two-year look back period. We expect that the proposed amendments would streamline reporting obligations while maintaining investor protections. Although the twoyear look back test captures material contracts that were fully performed before the filing date, this test does not provide any new information to the market for registrants with established reporting histories. Excluding these registrants from the two-year look back requirement would marginally reduce their compliance burdens, because they would not need to re-file (or incorporate by reference) agreements that were previously filed and are no longer in effect. At the same time, investors would continue to have access to any material agreements that a registrant previously filed on EDGAR. f. Proposals With a Minor Effect on Disclosure The following proposed amendments are expected to have minor impacts on the disclosure provided: • Item 401—proposal would clarify what disclosure about executive officers does not need to be repeated in proxy or information statements if it is already included in Form 10–K. • Item 405—proposal would simplify the Section 16 reporting process by allowing registrants to rely on a review of Section 16 reports submitted on EDGAR instead of gathering reports furnished to the registrant.354 • Item 501(b)(1)—proposal would eliminate the portion of the item that discusses when a name change may be required and the exception to that requirement. • Item 501(b)(3)—proposal would allow registrants to move details of an offering price method or formula from the prospectus cover page to another location in the prospectus; the proposal also would require registrants to state that the price will be more fully explained in the prospectus and accompany that statement with a crossreference to the more detailed offering price disclosure. • Item 501(b)(10)—proposal would streamline the prospectus legend requirements. 353 See supra Section II.E.3 proposal would also eliminate the requirement for reporting persons to furnish Section 16 reports to registrants, which could ease the compliance burden on reporting persons. 354 The VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 • Incorporation by Reference— proposals would (i) provide clearer guidance on cross-referencing; (ii) consolidate the requirements for incorporation by reference in Securities Act Rule 411, Exchange Act Rule 12b– 23 and related rules under the Investment Company Act and Investment Advisers Act to eliminate redundant or unnecessary requirements; and (iii) allow registrants more flexibility in excluding item numbers and captions or creating their own captions tailored to their disclosure in Form 10, Form 10–K and Form 20–F. Since the proposed amendments listed above would alter existing disclosure practices only to a minor degree, their implementation would have little economic effect. We believe that the proposed amendments would allow registrants to improve the readability and navigability of disclosure documents and reduce repetition. The proposed amendments also would reduce compliance costs for registrants while preserving all material information. We do not envision any significant incremental costs associated with the proposed amendments because they do not significantly change the required disclosures. 2. Proposals To Update Rules to Account for Subsequent Developments The following proposed amendments would update existing rules to account for subsequent developments and are expected to have minor impacts on the disclosure provided: • Item 407(d)—proposal would update the outdated reference to AU sec. 380 in Item 407(d)(3)(i)(B). • Item 407(e)—proposal would update requirements for compensation committee disclosure to exclude EGCs because they are not required to include a CD&A. • Item 512—proposal would eliminate certain undertakings that are redundant and obsolete. We believe that the proposed amendments listed above would reduce potential confusion in applying our rules, result in more consistent disclosure practices, and ease compliance burdens for registrants, with a minimal impact on the information available to investors. We do not envision any significant incremental costs associated with the proposed amendments, because the substance of the rules would not change. PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 E. Economic Analysis of the Specific Amendments: Proposals That Simplify the Disclosure Process or Eliminate Disclosures 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303) Under the proposed amendments to Item 303 of Regulation S–K, when the financial statements included in a filing cover three years, discussion about the earliest year would not be required if (i) this discussion is not material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations, and (ii) the registrant has filed its prior year Form 10–K on EDGAR containing MD&A of the earliest of the three years included in the financial statements of the current filing. We believe that the main economic benefit of the proposed amendments would be to simplify and modernize MD&A as well as increase its readability while still providing all material information. This may facilitate a better understanding of the firm’s financial prospects. Because MD&A is typically one of the most labor-intensive pieces of disclosure to produce, eliminating the requirement to discuss the earliest year financial statements in some circumstances could meaningfully reduce compliance costs for registrants. One potential cost of the proposed amendments is that investors may receive less comparative discussion about earlier period financial results within a filing. Although previously disclosed information could provide helpful context for the new information being disclosed, this information would have been incorporated into market prices when it was originally presented. There may be certain situations in which this context may be particularly useful in assessing a firm’s financial condition—for example, in the case of restatements of prior period financials. Although we recognize these potential costs, we believe their impact would be mitigated by the fact that discussion of earlier year financial results could be excluded only under specified conditions, including that the discussion was not material to an understanding of the registrant’s financial condition, changes in financial condition, and results of operations. An alternative to the proposed amendments would be to retain the earliest year requirement but permit registrants to hyperlink to the prior year’s report in lieu of repeating this disclosure. This alternative would likely reduce search costs for investors and allow efficient access to previously E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules disclosed information about a firm’s financial condition. However, we believe that this alternative would not reduce compliance costs to registrants as effectively as the proposed amendments. Furthermore, this alternative may detract from investor understanding of material information about a firm’s financial condition to the extent that it resulted in hyperlinking to information that is no longer material to such an understanding. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 2. Information Omitted From Exhibits (Item 601): Item 601(a)(5), Item 601(a)(6), and Item 601(b)(10)(iv) Proposed Item 601(a)(5) would permit registrants to omit schedules and attachments to exhibits unless they contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document.355 The proposed amendments also would require registrants to provide with each exhibit a list briefly identifying the contents of all omitted schedules and attachments.356 In addition, registrants would be required to provide, on a supplemental basis, a copy of any of the omitted schedules or attachments to the Commission staff upon request.357 Allowing registrants to omit schedules and attachments that are not material to all exhibits would lower their filing costs. As noted in Section II.E.2.a above, some commenters have noted that these burdens are exacerbated if the schedules contain commercially sensitive information that would require registrants to file confidential treatment requests. The omission of schedules that are not material would also help investors more clearly focus on the material disclosures. Based on our review of confidential treatment requests submitted under Rule 406 and Rule 24b–2 granted in fiscal year 2016, we estimate that over 90% of confidential treatment requests are granted for material contracts based on competitive harm to the registrant, discussed below. For the subset of confidential treatment requests that were granted for reasons other than competitive harm to the registrant, we expect that many of those exhibits likely contain schedules or attachments that could be omitted under proposed Item 601(a)(5), although we are unable to reliably estimate how many, because 355 See supra Section II.E.2.a (Exhibits— Information Omitted from Exhibits, Schedules and Attachments). 356 See id. 357 See id. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 this would depend, in part, on whether the schedules contain material information. Any reduction in burden would be incremental to that attributable to the proposed amendments to Item 601(b)(10)(iv), which would likely address over 90% of confidential treatment requests. Item 601(a)(6), as proposed to be amended, would permit registrants to omit PII without submitting a confidential treatment request under Rule 406 or Rule 24b–2.358 Under the proposed amendment, registrants also would not be required to provide an analysis in order to redact PII from exhibits. Since the proposed amendment leaves the decision about omission of PII entirely to the registrant, it could result in more liberal redactions. Thus, there is a tradeoff between reduced compliance costs and the potentially adverse effects of reduced disclosure. However, our analysis indicates that the Commission granted very few confidential treatment requests in reliance on the Freedom of Information Act 359 (‘‘FOIA’’) exemption concerning PII. As an illustration, in fiscal year 2016 only nine confidential treatment requests were granted pursuant to this FOIA exemption. Presumably, most registrants are currently taking advantage of existing staff guidance that PII may be omitted without filing a confidential treatment request. As a result, we do not expect that codifying this accommodation would significantly alter existing disclosure practices. We are also proposing to add paragraph (b)(10)(iv) to Item 601 to permit registrants to omit confidential information in material contract exhibits filed pursuant to that item that is both (i) not material and (ii) competitively harmful if publicly disclosed, without submitting a confidential treatment request.360 Instead, registrants would be required to mark the exhibit index to indicate that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of each redacted exhibit that certain information is omitted from the filed version of the exhibit.361 The registrant would also be required to indicate with brackets where the information is omitted from the filed version of the exhibit.362 Registrants could be asked by the Commission staff to provide on a supplemental basis an unredacted copy 358 See supra Section II.E.2.b. U.S.C. 552. 360 See supra Section II.E.2.c. 361 See id. 362 See id. 359 5 PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 51021 of the exhibit.363 The staff also could request that the registrant provide an analysis of why the redacted information is both (i) not material and (ii) competitively harmful.364 Registrants could request confidential treatment of this supplemental information pursuant to Rule 83 while it is in the possession of the staff. The proposed amendment would significantly reduce the costs associated with preparing confidential treatment requests and expedite the filing process. In this regard, one commenter on the Concept Release reviewed seven different confidential treatment requests on which it assisted clients since 2012 and found that legal fees alone ranged from approximately $35,000 to over $200,000.365 Because more than 90% of the confidential treatment requests granted by the Commission in fiscal year 2016 were made in reliance on the FOIA exemption concerning competitive harm, the proposed amendments to Item 601(b)(10) to allow registrants to omit competitively harmful information that is not material without filing a confidential treatment request could correspondingly reduce the number and cost of confidential treatment requests pursuant to Rule 406 and Rule 24b–2 by over 90%. However, this reduction in cost would be partially offset by the proposed amendment’s provision that the staff may request an analysis similar to the current competitive harm analysis. Registrants would incur costs to prepare and provide this analysis in response to any request from the staff. One potential cost of the proposed amendments is that information may be redacted that would not otherwise be afforded confidential treatment by the staff. However, based on previous experience and a review of confidential treatment requests, we believe that such instances would be rare. Over the past five fiscal years, very few confidential treatment requests were denied by the staff. Specifically, of the confidential treatment requests filed over the last five fiscal years, on average, approximately 1.0% were withdrawn because the staff determined that the information likely was material to investors.366 During this time, on 363 See id. id. 365 See Letter from Fenwick. 366 The following confidential treatment requests were filed and withdrawn for likely materiality during the last five fiscal years: 2016: 1,271 filed and approximately 7 withdrawn; 2015: 1,369 filed and approximately 14 withdrawn; 2014: 1,413 filed and approximately 19 withdrawn; 2013: 1,290 filed and approximately 16 withdrawn; and 2012: 1,466 filed and approximately 6 withdrawn. 364 See E:\FR\FM\02NOP2.SGM 02NOP2 51022 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules average, approximately 95% of confidential treatment requests filed were granted, and requests were rarely denied.367 Also during the past five fiscal years, on average, approximately 12% of confidential treatment requests filed were revised prior to the request being granted to limit the number of terms redacted based on likely materiality or over broad redactions.368 Under the proposed amendments, the Commission staff would continue its selective review of registrant filings and would selectively assess whether redactions from exhibits appear to be limited to information that is not material and that would subject the registrant to competitive harm if publicly disclosed. F. Economic Analysis of the Specific Amendments: Proposals That Require More Disclosure or the Incorporation of New Technology asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 1. Description of Registrant’s Securities (Item 601(b)(4)) Item 202 requires registrants to provide a brief description of their registered capital stock, debt securities, warrants, rights, American Depositary Receipts, and other securities. We are proposing to amend Item 601(b)(4) to require registrants to provide Item 202 disclosure as an exhibit to Form 10–K for each class of securities that is registered under the Exchange Act, rather than limiting this disclosure to registration statements. The proposed amendments would not change existing disclosure obligations under Form 8–K and Schedule 14A, which currently require registrants to disclose certain modifications to the rights of their security holders and amendments to their articles of incorporation or bylaws. Any modifications and amendments during a fiscal year to the information called for by Item 202 would now also be reflected in an exhibit to the registrant’s next annual report. Information about Exchange Act registered securities allows investors to assess the existing capital structure of 367 In fiscal years 2016 and 2015, no confidential treatment requests were denied. In fiscal years 2014, 2013, and 2012, one, two and one CTR(s) were denied, respectively. On average, during the last five fiscal years, approximately 95% of confidential treatment requests were granted in full and approximately 5% were withdrawn. In addition to withdrawals based on staff determinations that the information was likely material, other reasons confidential treatment requests are withdrawn include that the offering is no longer going forward, the information is already public, or the contract is no longer material. 368 Confidential treatment requests revised based on materiality and/or overbroad redactions in fiscal years 2016, 2015, 2014, 2013, and 2012, were approximately 119, 139, 183, 184, and 182, respectively. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 registrants, which can help investors understand better their exposure to risks and their control rights. Requiring Item 202 disclosure as an exhibit to annual reports would improve investors’ access to information about their rights as security holders, thereby facilitating more informed investment and voting decisions. The proposed requirements would impose some incremental compliance costs for registrants to include the proposed disclosure with their annual reports. Table 1 above shows that on average 7,800 registrants file Form 10– K each year and therefore would be subject to the new Item 601(b)(4) exhibit filing requirement. However, because registrants already prepare very similar disclosure to satisfy existing disclosure obligations under Form 8–K and Schedule 14A and would be able to incorporate by reference and hyperlink to prior disclosure, so long as there has not been any change to the information called for by Item 202, we expect these incremental costs to be minimal. 2. Subsidiaries of the Registrant and Entity Identifiers (Item 601(b)(21)) Item 601(b)(21) requires a registrant to list in an exhibit its subsidiaries, the state or other jurisdiction of incorporation or organization of each, and the names under which those subsidiaries do business. We are proposing amendments to Item 601(b)(21)(i) that would require registrants to include in the exhibit the LEI, if one has been obtained, of the registrant and each subsidiary listed.369 A key benefit of LEIs is that they allow for unique identification of entities engaged in commercial and financial transactions. For various reasons, firm and subsidiary names can be spelled and recorded differently across filings, corporate websites, and standard databases. In addition, subsidiaries can share the same (or very similar) names. These issues can make names poor identifiers of market participants, which could be an obstacle in some forms of investment analysis involving computerized data access. In contrast, LEIs provide clear and unique identification of market participants that facilitates the statistical analysis and aggregation of firm financial data. In this regard, some commenters have observed that improved identifiers would allow investors to link third-party data with structured data from Commission filings to produce more meaningful analysis.370 As a consequence, a standard identifier 369 See 370 See PO 00000 supra Section II.E.4. id. Frm 00036 Fmt 4701 Sfmt 4702 of firms and firm subsidiaries has the potential to improve not only individual investment decisions but also the efficiency of the overall market. Disclosure of LEIs would also facilitate the ability of investors and the Commission to link the information disclosed in Commission filings with data from other filings or sources as LEIs become more widely used by regulators and the financial industry. This could aid in the performance of market analysis studies, surveillance activities, and systemic risk monitoring by the Commission and other regulators. The proposed amendments would impose an incremental cost on registrants to include LEIs in the Item 601(b)(21) exhibit. We do not expect this incremental cost to be significant, however, given that this information should be readily available to registrants. Our proposals would require disclosure of LEIs only for those registrants and subsidiaries that have obtained this identifier, thereby not imposing additional costs.371 As a result, the benefits of LEI disclosure outlined above may be limited to the extent that not all reporting entities obtain an identifier. Moreover, standard identifiers, such as LEIs, are most beneficial to registrants and investors when a broad array of firms in the market adopt them. For example, a widely adopted identifier would facilitate the electronic link and cross-referencing of various informational items over a large group of registrants. Staff experience indicates that LEI adoption rates are currently low, which limits its benefits to investors and other users of financial information.372 If LEIs are not widely used, firms may not have incentives to obtain an LEI. Since coordination among firms with regard to adoption is difficult to accomplish, LEIs could remain underutilized. 371 The use of and access to LEIs is free for investors. All of the associated reference data needed to understand, process and use LEIs is also widely and freely available. However, the cost of obtaining a LEI for registrants currently entails a one-time fee of $75-$119, and $50-$99 per year in annual maintenance fees. 372 For example, in the context of Form ADV, which similarly requires an LEI to be reported only if the entity already has one, the Commission has noted that just 6.8% of registered investment advisers report an LEI when filing the form. See Form ADV and Investment Advisers Act Rules, Release No. IA–4509 (Aug. 25, 2016) [81 FR 60417 (Sept. 1, 2016)], at 114. However, see also the discussion in the text around note 220, supra. Although overall adoption rates appear low, the use of LEIs may be increasing as a result of global regulatory efforts. See Glob. Legal Entity Identifier Found., Regulatory Use of the LEI, available at https://www.gleif.org/en/about-lei/ regulatory-use-of-the-lei (last visited July 13, 2017). E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 3. Tagging Cover Page Data We are proposing to require registrants to tag all of the information on the cover page of Form 10–K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F using Inline XBRL (or, if the Commission’s recent proposal to require Inline XBRL for the submission of operating company financial statements is not adopted, in an XBRL exhibit to the relevant filing) in accordance with the EDGAR Filer Manual. To implement the cover page tagging requirements, we propose to add new Rule 406 to Regulation S–T, new Item 601(b)(104) to Regulation S–K, new paragraph 104 to the ‘‘Instructions as to Exhibits’’ of Form 20–F and new paragraph B.17 to the ‘‘General Instructions’’ of Form 40–F to require registrants to file with each of the specified forms a ‘‘Cover Page Interactive Data File’’ containing cover page data. We are also proposing to revise Rule 11 of Regulation S–T to add the term ‘‘Cover Page Interactive Data File.’’ Our proposals also would amend the cover pages of these forms to include the trading symbol for each class of the registrant’s registered securities.373 Investment analysis increasingly relies on quantitative statistical methods. Machine-readable formats greatly facilitate quantitative analysis because they allow for the corresponding items to be imported directly into various platforms for data analysis. Thus, tagging all the data points on the cover pages of Form 10– K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F could decrease the costs to investors for implementing quantitative data analysis. We acknowledge that the amendment would impose additional costs on registrants but expect the additional burden to be minimal, given that registrants already furnish a substantial amount of information contained in these forms in a structured format. An alternative to the Inline XRBL or traditional XBRL format is to specify an XML format for the cover pages of Form 8–K, Form 10–K, Form 10–Q, Form 20– 373 Because the cover pages of Form 10–K, Form 20–F, and Form 40–F already require disclosure of the title of each class of securities registered pursuant to Section 12(b) of the Exchange Act and each exchange on which they are registered, our proposed amendments to these forms would revise the cover page to include a corresponding field for the trading symbol. Unlike these forms, however, the cover pages of Form 10–Q and Form 8–K do not currently require disclosure of the title of each class of securities and each exchange on which they are registered. Accordingly, to ensure that registrants and their registered securities are identified in a consistent manner across forms, we are proposing to revise the cover pages of Form 10–Q and Form 8–K to include this disclosure in addition to the trading symbol. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 F, and Form 40–F. An XML format could have a variety of implementations ranging from filers submitting the data according to a designated technical framework to inputting the cover page information in a web-fillable format within EDGAR. We are not proposing this approach, because the Inline XBRL and traditional XBRL format provide more precise rules that facilitate consistent input and data validation by filers and enhance the analytical capabilities of data users. Moreover, the Inline XBRL and traditional XBRL format have more robust data validation capabilities, which could help to ensure better data quality for investors. Inline XBRL also would not suffer from possible data quality discrepancies that may occur from filers rekeying the information from their cover page for submission in XBRL or XML. 4. Proposals for Additional Disclosure With Minimal Additional Costs to Registrants The following proposed amendments are expected to impose only limited compliance costs on registrants: • Incorporation by Reference— proposal would require hyperlinks internal to EDGAR for documents incorporated by reference.374 • Item 501(b)(4)—proposal would require disclosure on the prospectus cover page of any national securities exchange where the securities being offered are listed or, if not listed, the principal United States market or markets for the securities being offered and the corresponding trading symbols, if any. 375 Requiring registrants to include hyperlinks to information that is incorporated by reference could improve the readability and navigability of disclosure documents by allowing users to be taken directly to the incorporated information by clicking on a link rather than having to locate the information on EDGAR. Although requiring the inclusion of hyperlinks for incorporated information would impose an additional compliance burden on registrants, we do not expect this burden to be significant given that hyperlinks are relatively easy to implement and involve minimal cost. In the case of Item 501(b)(4), expanding the existing requirements for trading market disclosure to encompass information about markets that are not ‘‘national securities exchanges’’ would benefit investors by helping them to better assess their trading costs. The disclosure would impose some 374 See 375 See PO 00000 supra Section II.F.2. supra Section II.D.1.c. Frm 00037 Fmt 4701 Sfmt 4702 51023 additional disclosure costs on registrants. However, we do not expect these costs to be significant given that registrants should have ready access to this information. In this regard, we note that the required disclosure would be limited to the principal United States market or markets where the registrant, through the engagement of a registered broker-dealer, has actively sought and achieved quotation. G. Economic Analysis of HTML and Hyperlinking Requirements of Forms Under the Investment Company Act As discussed above, we are proposing HTML and hyperlinks requirements for filers of certain forms under the Investment Company Act. Broadly speaking, we believe the proposed amendments would reduce search costs for investors. In particular, we believe that exhibit hyperlinks would help investors and other users to access a particular exhibit more efficiently as they would not need to search within the filing or through different filings made over time to locate the exhibit. Requiring exhibit hyperlinks may make it easier for investors and other users to find and access a particular exhibit that was originally filed with a previous filing. To the extent that hyperlinks ease the navigation process for investors and other users, hyperlinks may also facilitate a more thorough review of a registrant’s registration statements, applications, and reports and encourage more effective monitoring over time. The potential reduction of search costs and the enhanced ability of investors to review a registrant’s disclosure may result in more informed investment and voting decisions, potentially enhancing allocative efficiency, and capital formation by registrants. We expect that hyperlinks would be more beneficial in reducing search costs in the case of exhibits incorporated by reference than in the case of exhibits filed with the filing, and in particular, we expect these benefits to be most pronounced in the case of incorporation by reference from a filing that was not recently filed because more recent filings are displayed first on the EDGAR search results page. Further, we expect hyperlinks would have greater benefits in the case of registrants that submit more filings. As a result of the proposed amendments, we expect that both HTML and ASCII registrants would incur compliance costs to include hyperlinks in their exhibit indexes. The cost of inserting a hyperlink to an exhibit incorporated by reference would likely be greater than the cost of E:\FR\FM\02NOP2.SGM 02NOP2 51024 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules inserting a hyperlink to an exhibit filed with the document. While the average cost itself of inserting a hyperlink is minimal, the total hyperlinking costs for registrants would be a function of two main factors: (1) How many registration statements, applications and reports a registrant files that require an exhibit index; and (2) how many exhibits in the exhibit index of these registration statements, applications, and reports are either filed with the filing or incorporated by reference. Filers reporting in ASCII would incur costs to switch to HTML, in addition to the costs of including hyperlinks in their exhibit indexes. We expect that the costs of switching to HTML would not be significant because the cost of software with built-in HTML and hyperlink features is minimal. Overall, given the modest costs involved, we do not expect that the proposed amendments would have significant competitive effects for registrants. Request for Comment We request comment on all aspects of our economic analysis, including the potential costs and benefits of the proposed amendments and whether the rules, if adopted, would promote efficiency, competition, and capital formation or have an impact on investor protection. Commenters are requested to provide empirical data, estimation methodologies, and other factual support for their views, in particular, on costs and benefits estimates. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS IV. Paperwork Reduction Act A. Background Certain provisions of our rules and forms that would be affected by the proposed amendments contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (‘‘PRA’’).376 The Commission is submitting the proposal to the Office of Management and Budget (‘‘OMB’’) for review in accordance with the PRA.377 The hours and costs associated with preparing and filing the forms and reports constitute reporting and cost burdens imposed by each collection of information. 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 collections is mandatory. Responses to the information collections are not kept confidential and there is no mandatory retention period for the 376 44 377 44 U.S.C. 3501 et seq. U.S.C. 3507(d) and 5 CFR 1320.11. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 information disclosed. The titles for the collections of information are: ‘‘Regulation S–K’’ (OMB Control No. 3235–0071); 378 ‘‘Regulation S–T’’ (OMB Control No. 3235–0424); ‘‘Regulation 12B’’ (OMB Control No. 3235–0062); ‘‘Regulation C’’ (OMB Control No. 3235–0074); ‘‘Family of rules under section 8(b) of the Investment Company Act of 1940’’ (OMB Control No. 3235–0176); ‘‘Form S–1’’ (OMB Control No. 3235– 0065); ‘‘Form S–3’’ (OMB Control No. 3235– 0073); ‘‘Form S–4’’ (OMB Control No. 3235– 0324); ‘‘Form S–6’’ (OMB Control No. 3235– 0184); ‘‘Form S–11’’ (OMB Control No. 3235–0067); ‘‘Form N–14’’ (OMB Control No. 3235–0336); ‘‘Form F–1’’ (OMB Control No. 3235– 0258); ‘‘Form F–3’’ (OMB Control No. 3235– 0256); ‘‘Form F–4’’ (OMB Control No. 3235– 0325); ‘‘Form F–7’’ (OMB Control No. 3235– 0325); ‘‘Form F–8’’ (OMB Control No. 3235– 0378); ‘‘Form F–80’’ (OMB Control No. 3235–0404); ‘‘Form F–10’’ (OMB Control No. 3235–0380); ‘‘Form SF–1’’ (OMB Control No. 3235–0707); ‘‘Form SF–3’’ (OMB Control No. 3235–0690); ‘‘Form 10’’ (OMB Control No. 3235– 0064); ‘‘Form 20–F’’ (OMB Control No. 3235–0288); ‘‘Form 40–F’’ (OMB Control No. 3235–0381); ‘‘Form 10–K’’ (OMB Control No. 3235–0063); ‘‘Form 10–Q’’ (OMB Control No. 3235–0070); ‘‘Form 8–A’’ (OMB Control No. 3235– 0056); ‘‘Form 8–K’’ (OMB Control No. 3235– 0060); ‘‘Form 10–D’’ (OMB Control No. 3235–0604); ‘‘Schedule 14A’’ (OMB Control No. 3235–0059); 378 The paperwork burdens for Regulation S–K, Regulation S–T, Regulation C and Regulation 12B are imposed through the forms that are subject to the requirements in these regulations and are reflected in the analysis of those forms. To avoid a PRA inventory reflecting duplicative burdens and for administrative convenience, we assign a onehour burden to each of these regulations. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 ‘‘Schedule 14C’’ (OMB Control No. 3235–0057); ‘‘Form N–1A’’ (OMB Control No. 3235–0307); ‘‘Form N–2’’ (OMB Control No. 3235–0026); ‘‘Form N–3’’ (OMB Control No. 3235–0316); ‘‘Form N–4’’ (OMB Control No. 3235– 0318); ‘‘Form N–5’’ (OMB Control. No. 3235–0169); ‘‘Form N–6’’ (OMB Control No. 3235–0503); and ‘‘Form N–CSR’’ (OMB Control No. 3235–0570). The forms, reports, and regulations listed above were adopted under the Securities Act, the Exchange Act or the Investment Company Act. The regulations, schedules, and forms set forth the disclosure requirements for registration statements, periodic and current reports, distribution reports and proxy, and information statements filed by registrants to help investors make informed investment and voting decisions. Other forms and reports are filed by entities regulated by the Investment Company Act in connection with the Commission’s oversight of these entities. We are proposing amendments, which are described in more detail in Section II above, based on the recommendations made in the FAST Act Report, as required by Section 72003 of the FAST Act. The proposed amendments are intended to modernize and simplify certain disclosure requirements in Regulation S–K and related rules and forms in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors. The proposed amendments are also intended to improve the readability and navigability of the Commission’s disclosure documents and discourage repetition and disclosure of immaterial information. In addition, we are proposing parallel amendments to several rules and forms applicable to investment companies and investment advisers to provide for a consistent set of incorporation by reference and hyperlinking rules for these entities, including proposed amendments that would require certain investment company filings to be submitted in HTML format. B. Summary of the Proposed Amendments’ Impact on Collection of Information In this section, we summarize the proposed amendments and their general impact on the paperwork burden associated with the forms listed in Section IV.A. In Section IV.C. below, we provide revised burden estimates for each form. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules 1. Proposed Amendments Expected To Decrease Burdens a. Description of Property (Item 102) The proposed amendments to Item 102 of Regulation S–K would clarify that a description of property is only required to the extent physical properties are material to the registrant and make other clarifying amendments.379 The staff has observed that the current disclosure standard may lead registrants, in some instances, to devote resources to providing disclosure on properties that are not material. Although the proposed amendments to Item 102 are expected to help registrants avoid unnecessary disclosure in some instances, the amendments are clarifying in nature and therefore we do not believe they would significantly affect the paperwork burden associated with affected forms. Accordingly, we estimate that the paperwork burden would be reduced by 0.5 hours for each form affected by the proposed amendments. We expect that Form S– 1,380 Form S–4,381 Form 10, and Form 10–K would be affected by this proposed amendment. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS b. Management’s Discussion and Analysis (Item 303) The proposed amendments to Item 303 would allow registrants, in some circumstances, to eliminate the earliest year of the MD&A discussion.382 The proposed amendments would also eliminate the reference to five-year selected financial data in Instruction 1 to Item 303(a) and clarify that registrants may use their discretion in selecting the best format for their MD&A presentation.383 The combined effects of these amendments would be to eliminate the burden on registrants to prepare and provide repetitive disclosure that is not material. The proposed amendments are of particular significance, because MD&A is typically one of the most labor-intensive sections of any form in which it is required. We anticipate that the proposed amendments to simplify and clarify the MD&A requirements would reduce the paperwork burden associated with related forms. We estimate that the aggregate impact of the proposed amendments would be a four hour reduction in paperwork burden each time Item 303 information is required to be included in a form. We estimate that the aggregate impact of the 379 See supra Section II.A. CFR 239.11. 381 17 CFR 239.25. 382 See supra Section II.B. 383 See supra id. 380 17 VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 proposed corresponding amendments to Form 20–F would result in a four hour reduction each time information under Item 5 of that form is required. We expect that Form S–1,384 Form S–4,385 Form S–11,386 Form F–1,387 Form F– 4,388 Form 10, Form 10–K, Form 10–Q, and Form 20–F would be affected by this proposed amendment. c. Directors, Executive Officers, Promoters and Control Persons (Item 401, Item 405 and Item 407) The proposed amendments to Item 401, Item 405, and Item 407 of Regulation S–K would simplify and modernize executive officer, Section 16(a) compliance and corporate governance disclosure requirements. The proposed amendments to Item 401 would simplify the rules for determining what disclosure about executive officers may be included in Form 10–K when other disclosure in Part III of Form 10–K will be incorporated by reference to the registrant’s definitive proxy or information statement.389 The proposed amendments to Item 405 would allow registrants to rely on a review of Section 16 reports submitted on EDGAR rather than reports furnished to the registrant when providing disclosure about Section 16(a) compliance.390 Finally, the proposed amendments to Item 407 clarify the applicable auditing standard and the disclosure requirements for the compensation committees of EGCs.391 The proposed amendments to Item 401, Item 405, and Item 407 would clarify and streamline existing disclosure requirements, and in that respect are expected to marginally reduce compliance costs for registrants. We estimate that the proposed amendments would reduce the paperwork burden for each affected form by 0.5 hours. We expect that Form S–1, Form S–4, Form S–11, Form 8–K, Form 10, Form 10–K, and Form 10–Q would be affected by this proposed amendment. d. Exhibits (Item 601) i. Information Omitted From Exhibits (Item 601(a)(5), Item 601(a)(6), and Item 601(b)(10)(iv)) We are proposing several amendments to Item 601 of Regulation S–K. Many of these amendments affect 384 17 CFR 239.11. CFR 239.25. 386 17 CFR 239.18. 387 17 CFR 239.31. 388 17 CFR 239.34. 389 See supra Section II.C. 390 See id. 391 See id. 385 17 PO 00000 Frm 00039 Fmt 4701 51025 provisions related to the Commission’s confidential treatment process. Specifically, the proposed amendments to Item 601(a)(5), Item 601(a)(6), and Item 601(b)(10)(iv) would permit registrants to omit, without submitting a confidential treatment request, schedules and attachments that are not material, personally identifiable information and confidential information in material contract exhibits that is both (i) not material and (ii) competitively harmful if publicly disclosed. For purposes of the PRA, we consider the time and cost to prepare and submit a confidential treatment request to be part of the paperwork burden associated with preparing and filing the related disclosure form. We estimate that elimination of the need to prepare and submit a confidential treatment request to omit confidential information from exhibits filed pursuant to Item 601(b)(10) that is both (i) not material and (ii) competitively harmful if publicly disclosed would reduce internal burden hours by ten hours per request for an estimated 20% of registrants that prepare the confidential treatment request without relying on outside counsel, and reduce external costs by $4,000 per request for an estimated 80% of registrants that retain outside counsel for this work.392 Proposed Item 601(a)(5) would permit registrants to omit entire schedules and attachments to exhibits unless the schedules contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. The threshold for omission under proposed Item 601(a)(5) is lower than for omission under the proposed amendment to Item 601(b)(10) because registrants would not be required to show that the information would cause competitive harm if publicly disclosed. Based on our review of confidential treatment requests granted in fiscal year 2016, we estimate that over 90% of these requests were granted for material contracts based on competitive harm to the registrant. For the remainder, we expect that many of those exhibits likely contain schedules that could be omitted under proposed Item 601(a)(5). However, we are unable to reliably estimate how many of these requests would be unnecessary under the proposed amendments to Item 601(a)(5) because this would depend, in part, on whether the schedules contain material 392 The $4,000 cost estimate is calculated as follows: 10 hours × $400 per hour of outside counsel work = $4,000. See infra note 412. Sfmt 4702 E:\FR\FM\02NOP2.SGM 02NOP2 51026 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules information. Given that the proposed amendments to Item 601(b)(10) would likely address over 90% of the confidential treatment requests submitted to the Commission, and to avoid overestimating the decrease in paperwork burden arising from the proposed amendments, we are not making an additional adjustment to our burden estimates in respect of the amendment to Item 601(a)(5) but are soliciting comment on ways to reasonably estimate such an adjustment.393 Based on these assumptions, we expect the annual internal burden hours and professional costs devoted to the confidential treatment process to decrease each time exhibit information described in Item 601(a)(5), Item 601(a)(6), or Item 601(b)(10)(iv) is omitted or redacted. In fiscal year 2016, 43% of confidential treatment requests were filed for Form 10–Q, 18% for Form 10–K, 13% for Form 8–K, 8% for Form S–1, 4% for Form 20–F, and 1% each for Form 10 and Form F–1. We are therefore ascribing changes in paperwork burdens and costs to these forms in these same proportions. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS ii. Material Contracts Exhibits (Item 601(b)(10)(i)) The proposed amendment to Item 601(b)(10)(i) would limit the two-year look back filing requirement for material contracts to newly reporting registrants. Registrants that are not newly reporting registrants would no longer be required to comply with this filing requirement and thus would incur reduced compliance burdens. However, we believe that the current burden associated with the two-year look back requirement is minimal. Therefore, the proposed amendments are not expected to result in a significant reduction of the paperwork burden associated with the affected forms. We estimate that the paperwork burden would be reduced by 0.5 hours for each form affected by the proposed amendment. We expect that Form 10, Form 10–K, Form S–1, Form S–4, Form F–1, Form F–3, Form F–4, Form S–11, and Form SF–1 would be affected by this proposed amendment. 393 For similar reasons, we are making no additional adjustment to our burden estimates in respect of the amendments to Item 601(a)(6). In fiscal year 2016, only nine confidential treatment requests were granted by the Commission for documents containing PII. This suggests that most registrants are currently taking advantage of existing staff guidance that PII may be omitted without filing a confidential treatment request. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 2. Proposed Amendments Expected To Increase Burdens a. Registration Statement and Prospectus Provisions (Item 501(b)) We are proposing to amend Item 501(b) to require disclosure on the cover page of the prospectus of any national securities exchange where the securities being offered are listed or, if not listed, the principal United States market or markets for the securities being offered and the corresponding trading symbols, if any.394 The proposed amendments would incrementally increase the compliance burden on registrants by requiring them to provide disclosure about trading markets other than national exchanges. Because we are proposing to limit the incremental disclosure to those trading markets where the registrants, through the engagement of a registered brokerdealer, has actively sought and achieved quotation, we believe this information should be readily available to registrants and impose only a minimal paperwork burden. Accordingly, we estimate that the proposed amendment would slightly increase the paperwork burden associated with each affected form by 0.25 hours. We expect that Form S–1, Form S–3, Form S–4, Form S–11, Form F–1, Form F–3, Form F–4, Form SF– 1,395 and Form SF–3 396 would be affected by this proposed amendment. b. Exhibits (Item 601(b)(4)(vi) and (b)(21)) Proposed new Item 601(b)(4)(vi) would require registrants to file an Item 202 description of their Exchange Act registered securities as an exhibit to Form 10–K. The proposed amendments to Item 601(b)(21) would require disclosure of an LEI (if one has been obtained) for each registrant and any subsidiaries required to be disclosed in the exhibit. We expect that the new requirements under Item 601(b)(4)(vi) would slightly increase the paperwork burden on registrants because registrants would be required to provide a description of registered securities annually. However, registrants would be able to incorporate by reference and hyperlink to prior disclosure if the information called for by Item 202 remains unchanged from prior years, thus mitigating any increase in the anticipated burden. Accordingly, we estimate the proposed amendments would increase the paperwork burden 394 See supra Section II.D. CFR 239.44. 396 17 CFR 239.45. 395 17 PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 associated with Form 10–K and Form 20–F by 0.5 hours. We expect that the proposed amendments to Item 601(b)(21) would also increase the burden on registrants; however, we expect this increase to be slight because LEI information should be readily available and would be only required if an identifier has already been obtained. Those registrants that have not obtained LEIs would not incur an additional burden. Accordingly, we estimate that the proposed amendments to Item 601(b)(21) would increase the paperwork burden associated with each affected form by 0.25 hours. We expect that Form S–1, Form S–4, Form F–1, Form 10, Form 10–K, Form S–11, Form SF–1, and Form SF–3 would be affected by the proposed amendment to Item 601(b)(21). c. Manner of Delivery Proposed new Rule 406, proposed new Item 601(b)(104), proposed new paragraph 104 to ‘‘Instructions as to Exhibits’’ of Form 20–F and proposed new Instruction 17 to ‘‘Information To Be Filed on this Form’’ of Form 40–F would require registrants to tag every data point on the cover pages of Form 10–K, Form 10–Q, Form 8–K, Form 20– F, and Form 40–F using Inline XBRL, including certain new data points added pursuant to the proposed amendments.397 Although expanded data tagging would result in an increase in the burden associated with related forms, we note that registrants are already required to tag certain cover page information as well as financial statement information. For this reason, we believe most registrants already will have developed the internal resources or engaged outside professionals to assist them in complying with existing data tagging requirements.398 In this respect, we do not believe the cover page tagging requirement would result in significant additional burdens for registrants. Accordingly, we estimate that the requirement to tag additional cover page items would impose an increased paperwork burden of one hour for each affected form. We expect that Form 10– 397 See supra Section II.G.1. discussed above, the Commission recently proposed to require the use of the Inline XBRL format instead of the traditional XBRL format for the submission of operating company financial statements, and we intend for the cover page data to be tagged in the same format as this other information. See id. In the Inline XBRL Proposing Release, we provided estimates of the change in paperwork burden associated with the transition to Inline XBRL. See supra note 310. Because we expect to require the Inline XBRL format for tagging cover page data only if the Inline XBRL proposal has been adopted, we are not including PRA burden estimates related to the transition to Inline XBRL in this release. 398 As E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules K, Form 10–Q, Form 8–K, Form 20–F, and Form 40–F would be affected by the proposed new rules and form amendments. As described in more detail above, we are proposing amendments to certain of our forms that are used by investment companies and amendments to Rule 102 of Regulation S–T to apply hyperlinking and HTML requirements to those registrants to facilitate access to most exhibits for investors and other users of the information.399 We anticipate that the proposed amendments will increase the burdens and costs for registrants to prepare and file registration statements and reports on the affected forms. Because the software tools to prepare and file documents in HTML are widely used and available at minimal cost, we do not believe this requirement would appreciably change the existing burden estimates for the affected registration statements or reports, which already include the time and expense to prepare and file in electronic format on EDGAR. We believe the burdens associated with hyperlinking exhibits would be small as the registrant would already be preparing the exhibits and exhibit index for the related filing and would have readily available all the information necessary to create the hyperlinks. We assume that the average burden hours of requiring exhibit hyperlinks would vary based on the number of exhibits that are included with a filing, as discussed in detail below.400 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS 3. Proposed Amendments Not Expected to Meaningfully Affect Burdens a. Registration Statement and Prospectus Provisions (Item 501(b), Item 503(c), Item 508 and Item 512) The proposed amendments to Item 501(b)(1), Item 501(b)(3), and Item 501(b)(10) would, respectively, eliminate misleading company name disclosure requirements, explicitly allow registrants to include a clear statement that the offering price will be determined by a particular method or formula (and require a cross reference to the offering price method or formula disclosure), and permit registrants to exclude some portion of the legend relating to state law in the prospectus for an offering that is not prohibited by state blue sky law.401 The proposed amendments to Item 503(c) would relocate the current risk factor disclosure requirements to Subpart 100 and eliminate the risk factor examples without substantively changing the underlying disclosure requirements.402 The proposed amendment to Item 508 would define the term ‘‘subunderwriter’’ to clarify one aspect of the required disclosure about the plan of distribution for a registered securities offering.403 The proposed amendments to Item 512 would eliminate certain undertakings that are redundant or obsolete.404 We believe these proposed amendments would not meaningfully affect the paperwork burden associated with the related forms because these amendments modernize and clarify certain requirements and do not substantively change the required disclosure. Therefore, we are not making any adjustments to the paperwork burden of affected forms due to these proposed amendments. b. Incorporation by Reference We are proposing amendments to simplify and modernize the rules and forms governing incorporation by reference. Under the proposed amendments, certain existing requirements for incorporation by reference would be consolidated into Rule 411, Rule 12b-23, Rule 0–4, and Rule 0–6.405 The proposed amendments would also eliminate several redundant or outdated requirements. In addition, the proposed amendments would provide registrants with additional flexibility in organizing the disclosure in Form 10, Form 10–K, and Form 20– F by permitting them to exclude item numbers and captions or create their own captions tailored to the disclosure in these forms 406 These proposals are expected to decrease reporting burdens associated with incorporating information by reference in Commission filings, leading to an estimated 0.5 hour reduction in paperwork burden per affected form. However, this decrease would be offset by an estimated 0.5 hour increase in paperwork burden per affected form due to the proposed amendments requiring registrants to include hyperlinks to information incorporated by reference when that information is available on EDGAR.407 Accordingly, we are not making any adjustments to the paperwork burden of affected forms due to these proposed amendments. 402 See 399 See supra Section II.G.2. 400 See infra Section IV.C.4. 401 The proposed amendments would also streamline 501(b) by combining paragraphs (b)(10) and (b)(11) without substantive change. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 supra Section II.D.2. supra Section II.D.3. 404 See supra Section II.D.4. 405 See supra Section II.F. 406 See id. 407 See id. 403 See PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 51027 C. Burden and Cost Estimates to the Proposed Amendments As discussed below, we expect that the proposed amendments would, in the aggregate, reduce the paperwork burden on respondents. The change in burden, however, would differ depending on the form because not all of the proposed amendments would apply to each form. These estimates represent 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 nature of their business. The burden estimates were calculated by multiplying the estimated number of responses by the estimated average amount of time it would take a registrant to prepare and review disclosure required under the proposed amendments. The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried by the registrant internally is reflected in hours. 1. Form 10–K and Form 10–Q; Schedule 14A and Schedule 14C The proposed amendments are estimated to significantly reduce the paperwork burdens associated with Form 10–K 408 and Form 10–Q as well as Schedule 14A and Schedule 14C.409 For purposes of the PRA, we estimate that 75% of the burden of preparation for these Exchange Act reports is carried by the registrant internally and that 25% of the burden of preparation is carried by outside professionals retained by the company at an average cost of $400 per hour.410 Table 4 below illustrates the total annual compliance burden, in hours and in costs, 411 of the affected 408 Schedules 14A and 14C require disclosure under Subpart 400 of Regulation S–K. This disclosure is often incorporated, in relevant part, into Part III of a registrant’s Form 10–K. Therefore, our burden estimates for Form 10–K contemplate that Part III disclosure may be incorporated by reference to Schedules 14A or 14C. 409 Schedule 14A requires that registrants, under certain circumstances, provide disclosure under Item 303. Our burden estimate for Schedule 14A assumes that registrants would duplicate the disclosure provided under this Item in the most recent Form 10–K and/or Form 10–Q. 410 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 would 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 reports with the Commission. 411 For convenience, the estimated hour and cost burdens in the tables in this section have been rounded to the nearest whole number. E:\FR\FM\02NOP2.SGM 02NOP2 51028 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules collections of information resulting from the proposed amendments.412 TABLE 4—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS FOR EXCHANGE ACT FORMS Proposed number of affected responses Current annual responses 10–K ............................. 10–Q ............................ 8–K ............................... 8,137 22,907 118,387 Current burden hours 8,137 22,907 118,387 2. Form S–1, Form S–3, Form S–4, Form F–3, Form F–4, Form SF–1, Form SF– 3, Form 10, and Form 20–F The proposed amendments are estimated to significantly reduce the paperwork burden associated with Form S–1, Form S–3, Form S–4, Form F–3, Form F–4, and Form 20–F. For Change in company hours Change in burden hours 12,228,620 3,220,037 507,665 (32,703) (73,181) 116,867 Change in professional hours (23,325) (63,884) 88,490 registration statements on Form 10, Form S–1, Form S–3, Form S–4, Form F–1, Form F–3, Form F–4, Form SF–1, and Form SF–3, and Exchange Act report Form 20–F, we estimate that 25% of the burden of preparation is carried by the company internally and that 75% of the burden of preparation is carried (9,378) (9,297) 28,377 Change in professional costs ($3,715,600) (3,718,800) 11,350,800 by outside professionals retained by the company at an average cost of $400 per hour. Table 5 below illustrates the total annual compliance burden, in hours and in costs, of the affected collections of information resulting from the proposed amendments.413 TABLE 5—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS FOR REGISTRATION STATEMENTS Proposed number of affected responses Current annual reponses S–1 ............................... S–3 ............................... S–4 ............................... S–11 ............................. SF–3 ............................. F–1 ............................... F–3 ............................... F–4 ............................... 10 ................................. 20–F ............................. 40–F ............................. 901 1,082 551 100 71 63 107 68 238 725 160 Current burden hours 901 1,082 551 100 71 63 107 68 238 725 160 Change in company hours Change in burden hours 150,242 127,806 564,731 19,476 24,495 26,917 4,467 24,769 12,805 479,501 17,197 (5,514) (301) (2,803) (450) 36 (431) (10) (281) (1390) (2454) 160 Change in professional hours (1,325) (78) (700) (112) 9 (98) (1) (70) (342) (588) 40 (4,189) (223) (2,103) (338) 27 (333) (9) (211) (1,048) (1,866) 120 Change in professional costs ($1,675,600) (89,200) (841,200) (135,200) 10,800 (133,200) (3,600) (84,400) (419,200) (746,400) 40,000 TABLE 6—CURRENT AND REVISED BURDENS UNDER THE PROPOSED AMENDMENTS FOR SECURITIES ACT AND EXCHANGE ACT FORMS Current burden asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Burden hours (A) 10–K ......................................................................................................... 10–Q ........................................................................................................ 8–K ........................................................................................................... S–1 ........................................................................................................... S–3 ........................................................................................................... S–4 ........................................................................................................... S–11 ......................................................................................................... SF–3 ........................................................................................................ F–1 ........................................................................................................... F–3 ........................................................................................................... F–4 ........................................................................................................... 10 ............................................................................................................. 20–F ......................................................................................................... 412 The burdens associated with the proposed amendments to the forms listed in Table 4, other than the confidential treatment request proposal, have been estimated by assuming that 75% of the burden is borne by the company and 25% is borne by outside counsel at $400 per hour. The burdens associated with submitting confidential treatment requests in connection with the forms listed in Table 4 have been estimated by assuming that the VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 12,228,620 3,220,037 507,665 150,242 127,806 564,731 19,476 24,495 26,917 4,467 24,769 12,805 479,501 Cost (B) Frm 00042 Fmt 4701 Sfmt 4702 Burden hours (C) $1,631,470,000 429,368,808 67,688,700 180,290,100 153,367,008 677,677,104 23,371,200 29,394,000 32,300,100 5,360,700 29,722,800 15,366,042 575,400,600 average request requires approximately ten hours of preparation and that 20% of the burden is borne by the company and 80% of the burden is borne by outside counsel at $400 per hour. 413 The burdens associated with the proposed amendments to the forms listed in Table 5, other than the confidential treatment request proposal, have been estimated by assuming that 25% of the burden is borne by the company and 75% is borne PO 00000 Revised burden 12,205,295 3,156,153 596,155 148,917 127,728 564,031 19,364 24,504 26,819 4,465 24,699 12,463 478,913 Costs (D) $1,627,754,400 425,650,008 79,039,500 178,614,900 153,277,808 676,835,904 23,236,000 29,404,800 32,166,900 5,357,100 29,638,400 14,946,842 574,654,200 by outside counsel at $400 per hour. The burdens associated with submitting confidential treatment requests in connection with the forms listed in Table 5 have been estimated by assuming that the average request requires approximately ten hours of preparation and that 20% of the burden is borne by the company and 80% of the burden is borne by outside counsel at $400 per hour. E:\FR\FM\02NOP2.SGM 02NOP2 51029 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules TABLE 6—CURRENT AND REVISED BURDENS UNDER THE PROPOSED AMENDMENTS FOR SECURITIES ACT—Continued AND EXCHANGE ACT FORMS Current burden Burden hours (A) 40–F ......................................................................................................... 3. Form 8–A, Form 10–D, Form 40–F, Form F–7, Form F–8, Form F–10, and Form F–80 The proposed amendments to Form 8–A,414 Form 10–D, Form 40–F, Form F–7,415 Form F–8,416 Form F–10, and Form F–80 417 are not expected to meaningfully reduce the associated paperwork burden for these forms. Accordingly, we have not included a tabular presentation of the impact on the total annual compliance burden of these forms as a result of these proposed amendments. 4. Form S–6, Form N–1A, Form N–2, Form N–3, Form N–4, Form N–5, Form N–6, Form N–14, and Form N–CSR The proposed amendments to Form S–6,418 Form N–1A,419 Form N–2,420 Form N–3,421 Form N–4,422 Form N– 5,423 Form N–6,424 Form N–14, and Form N–CSR 425 are expected to 17,197 increase the burdens and costs for registrants to prepare and file registration statements and reports on the affected forms, but we believe the burdens associated with hyperlinking exhibits would be small.426 We assume that the average burden hours of requiring exhibit hyperlinks would vary based on the number of exhibits that are included with a filing. For purposes of the PRA, based on the average and median number of exhibits shown in Table 3 above and the staff’s experience, we estimate that the average burden for a registrant to hyperlink to exhibits would be one hour per response for each of the affected forms. As discussed above, we are not making any adjustments to the paperwork burden of affected forms due to the proposed amendments to simplify and modernize the rules and forms governing incorporation by reference.427 Revised burden Cost (B) Burden hours (C) 20,636,800 17,237 Costs (D) 20,684,800 The table below shows the total annual compliance burden, in hours and in costs, of the collections of information resulting from the proposed amendments.428 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 the exhibit hyperlinks. 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 25% of the burden of preparation is carried by the registrant internally and that 75% of the burden of preparation is carried by outside professionals retained by the company at an average cost of $400 per hour.429 TABLE 6—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS TO FORMS FOR INVESTMENT COMPANIES Proposed number of affected responses Form Form Form Form Form Form Form Form Form Incremental burden hours/form Total incremental burden hours 25% internal burden 75% outside professional Professional costs (A) Forms (B) (C) = (A) × (B) (D) = (C) × 0.25 (E) = (C) × 0.75 (F) = E × $400 S–6 ............. N–1A ........... N–2 ............. N–3 ............. N–4 ............. N–5 ............. N–6 ............. N–14 ........... N–CSR ....... 2,498 6,002 166 20 1,653 1 472 192 6,898 1 1 1 1 1 1 1 1 1 2,498 6,002 166 20 1,653 1 472 192 6,898 625 1,501 42 5 413 0 118 48 1,725 1,874 4,502 125 15 1,240 1 354 144 5,174 $749,600 1,800,800 50,000 6,000 496,000 400 141,600 57,600 2,069,600 Total .............. .............................. .............................. 17,902 .............................. .............................. 5,371,600 D. Request for Comment asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to: 414 17 CFR 249.208a. CFR 239.37. 416 17 CFR 239.38. 417 17 CFR 239.41. 418 17 CFR 239.16. 419 17 CFR 239.15A and 17 CFR 274.11A. 420 17 CFR 239.14 and 17 CFR 274.11a–1. 421 17 CFR 239.17a and 17 CFR 274.11b. 415 17 VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 • Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the Commission, including 422 17 CFR 239.17b and 17 CFR 274.11c. CFR 239.24 and 17 CFR 274.5. 424 17 CFR 239.17c and 17 CFR 274.11d. 425 17 CFR 249.331 and 17 CFR 274.128. 426 See supra Section IV.B.2.c. 427 See supra Section IV.B.3.b. 428 For convenience, the estimated hour and cost burdens in the table have been rounded to the nearest whole number. 423 17 PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 whether the information will have practical utility; • Evaluate the accuracy of our assumptions and estimates of the 429 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 would be an average of $400 per hour. These estimates are based on our estimates for the parallel requirement for operating companies. Exhibit Hyperlinks Adopting Release, supra note 14 at 14139. E:\FR\FM\02NOP2.SGM 02NOP2 51030 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules burden of the proposed collection of information; • Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; • Evaluate whether there are ways to minimize the burden of the collection of information on those who respond, including through the use of automated collection techniques or other forms of information technology; and • Evaluate whether the proposed amendments would have any effects on any other collection of information not previously identified in this section. Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing these burdens. Persons submitting comments on the collection of information requirements should direct their comments to the Office of Management and Budget, Attention: Desk Officer for the U.S. Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a copy to, Brent J. Fields, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549, with reference to File No. S7–08–17. Requests for materials submitted to OMB by the Commission with regard to the collection of information should be in writing, refer to File No. S7–08–17 and be submitted to the U.S. Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington DC 20549. OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this proposed rule. Consequently, a comment to OMB is best assured of having its full effect if the OMB receives it within 30 days of publication. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS V. Small Business Regulatory Enforcement Fairness Act For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996,430 a rule is ‘‘major’’ if it has resulted, or is likely to result in: • An annual effect on the U.S. economy of $100 million or more; • a major increase in costs or prices for consumers or individual industries; or • significant adverse effects on competition, investment, or innovation. We request comment on whether our proposal would be a ‘‘major rule’’ for purposes of the Small Business Regulatory Enforcement Fairness Act. 430 5 U.S.C. 801 et seq. VerDate Sep<11>2014 20:05 Nov 01, 2017 We solicit comment and empirical data on: • The potential effect on the U.S. economy on an annual basis; • any potential increase in costs or prices for consumers or individual industries; and • any potential effect on competition, investment, or innovation. VI. Initial Regulatory Flexibility Act Analysis This Initial Regulatory Flexibility Act Analysis has been prepared in accordance with the Regulatory Flexibility Act.431 It relates to proposed amendments to modernize and simplify certain disclosure requirements in Regulation S–K and related rules and forms to implement Section 72003 of the FAST Act and provide consistent incorporation by reference and hyperlinking requirements in the rules and forms applicable to investment companies and investment advisers. A. Reasons for, and Objectives of, the Proposed Action The purpose of the proposed amendments is to modernize and simplify Commission disclosure requirements in a manner that reduces costs and burdens on companies while still providing all material information. Specifically, the proposed amendments would modernize and simplify these disclosure requirements by clarifying, consolidating, relocating and eliminating, or updating various Commission rules that govern public company disclosure. The proposed amendments would also modernize the rules by requiring cover page data to be tagged in a machine-readable format, requiring disclosure of LEIs and requiring hyperlinks to be included in some documents filed on EDGAR. The proposed amendments would largely implement the staff’s recommendations in the FAST Act Report, as required by Section 72003(d) of the FAST Act. In addition, the proposed amendments would apply parallel incorporation by reference and hyperlinking requirements in the rules and forms used by investment companies and investment advisers to provide a consistent set of requirements for these registrants. B. Legal Basis We are proposing the rule and form amendments contained in this document under the authority set forth in Sections 7, 10, 19(a), and 28 of the Securities Act of 1933, as amended, Sections 3(b), 12, 13, 14, 15, 16, 23(a), 431 5 Jkt 244001 PO 00000 U.S.C. 601 et seq. Frm 00044 Fmt 4701 Sfmt 4702 and 36 of the Securities Exchange Act of 1934, as amended, Sections 6(c), 8, 24(a), 30, and 38 of the Investment Company Act of 1940, as amended and Sections 204, 206A, 210, and 211 of the Investment Advisers Act of 1940, as amended. C. Small Entities Subject to the Proposed Rules The proposed amendments would affect some registrants that are small entities. The Regulatory Flexibility Act defines ‘‘small entity’’ to mean ‘‘small business,’’ ‘‘small organization,’’ or ‘‘small governmental jurisdiction.’’ 432 For purposes of the Regulatory Flexibility Act, under our rules, an issuer, other than an investment company or an investment adviser, is a ‘‘small business’’ or ‘‘small organization’’ if it had total assets of $5 million or less on the last day of its most recent fiscal year and is engaged or proposing to engage in an offering of securities that does not exceed $5 million.433 An investment company, including a business development company,434 is considered to be a ‘‘small business’’ if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year.435 An investment adviser generally is a small entity if it: (1) Has assets under management having a total value of less than $25 million; (2) did not have total assets of $5 million or more on the last day of the most recent fiscal year; and (3) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year.436 We estimate that there are 837 issuers that file with the Commission, other than investment companies and investment advisers, that may be considered small entities.437 In addition, we estimate that, as of 432 5 U.S.C. 601(6). Securities Act Rule 157 [17 CFR 230.157] and Exchange Act Rule 0–10(a) [17 CFR 240.0– 10(a)]. 434 Business development companies are a category of closed-end investment company that are not registered under the Investment Company Act [15 U.S.C. 80a–2(a)(48) and 80a–53–64]. 435 See Investment Company Act Rule 0–10(a) [17 CFR 270.0–10(a)]. 436 See Investment Advisers Act Rule 0–7(a) [17 CFR 275.0–7(a)]. 437 This estimate is based on a review of Form 10– K and 20–F filings (from EDGAR XBRL) with fiscal periods ending between January 31, 2015 and January 31, 2016. 433 See E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules December 2016, there are 130 investment companies that would be subject to the proposed amendments that may be considered small entities. Finally, we estimate that, as of August 1, 2017, there are 557 investment advisers that may be subject to the proposed amendments that may be considered small entities.438 D. Reporting, Recordkeeping, and Other Compliance Requirements As noted above, the purpose of the proposed amendments is to modernize and simplify the Commission’s disclosure requirements and provide consistent incorporation by reference and hyperlinking rules for investment companies and investment advisers. If adopted, the majority of the proposed amendments are expected to have an incremental effect on existing reporting, recordkeeping and other compliance burdens for all issuers, including small entities.439 Many of the proposed amendments would simplify and streamline existing disclosure requirements in ways that are expected to reduce compliance burdens. Some of the proposed amendments, like those that impose new data tagging,440 hyperlinking 441 or disclosure requirements 442 would increase compliance costs for registrants, although we do not expect these additional costs to be significant. E. Duplicative, Overlapping, or Conflicting Federal Rules We believe that the proposed amendments would not duplicate, overlap, or conflict with other federal rules. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS F. Significant Alternatives The Regulatory Flexibility Act directs us to consider alternatives that would 438 This estimate is based on Commissionregistered investment adviser responses to Form ADV, Item 5.F and Item 12. 439 We recognize that the fixed costs of disclosure requirements typically constitute a higher percentage of revenues for smaller companies than for larger companies. However, the benefits of disclosure may be greater for smaller companies because information asymmetries between investors and managers of smaller companies are typically higher than for larger, more seasoned companies with a large following. See, e.g., R. Frankel and X. Li, Characteristics of a firm’s information environment and the information asymmetry between insiders and outsiders, 37 J. Acct. Econ. 229, 229–259 (June 2004). See also, L. Cheng, S. Liao, and H. Zhang, The Commitment Effect versus Information Effect of Disclosure—Evidence from Smaller Reporting Companies, 88 Acct. Rev. 1239, 1239–1263 (2013). 440 See, e.g., supra Section 0 (Tagging Cover Page Data). 441 See, e.g., supra Section 0 (Exhibit Hyperlinks and HTML format for Investment Companies). 442 See e.g., supra Section II.D.1.c (Market for the Securities (Item 501(b)(4)). VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 accomplish our stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered the following alternatives: • Establishing different compliance or reporting requirements that take into account the resources available to small entities; • Clarifying, consolidating, or simplifying compliance and reporting requirements under the rules for small entities; • Using performance rather than design standards; and • Exempting small entities from all or part of the requirements. We believe the proposed amendments would clarify, consolidate and simplify compliance and reporting requirements for small entities and other registrants. As discussed above, we believe the majority of the proposed amendments would simplify and streamline disclosure requirements in ways that are expected to reduce compliance burdens.443 We do not believe that the proposed amendments would impose any significant new compliance obligations. Accordingly, we generally do not believe it is necessary to establish different compliance and reporting requirements or timetables or to exempt small entities from all or part of the proposed amendments. We note in this regard that the Commission’s existing disclosure requirements provide for scaled disclosure requirements and other accommodations for small entities, and the proposed amendments would not alter these existing accommodations. Finally, with respect to using performance rather than design standards, the proposed amendments generally use design rather than performance standards in order to promote uniform filing requirements for all registrants. In some instances, the proposed amendments would modernize and simplify existing design standards. For example, the proposed amendments to Item 303(a) would emphasize the flexibility currently available to registrants with respect to the form of MD&A presentation.444 In other instances, the proposed amendments may result in additional flexibility when preparing disclosures. For example, proposed Item 601(a)(5) would expand registrants’ ability to omit schedules and attachments that are not material to exhibits.445 As another 443 See supra Sections (Economic Analysis) and IV (Paperwork Reduction Act). 444 See supra Section (Year-to-Year Comparisons (Instruction 1 to Item 303(a)). 445 See supra Section (Schedules and Attachments to Exhibits). PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 51031 example, the proposed amendments to Item 102 would clarify that the threshold for disclosure about registrants’ physical properties is based on materiality.446 G. Request for Comment We encourage the submission of comments with respect to any aspect of this Initial Regulatory Flexibility Analysis. In particular, we request comments regarding: • how the proposed rule and form amendments can achieve their objective while lowering the burden on small entities; • the number of small entity companies that may be affected by the proposed rule and form amendments; • the existence or nature of the potential effects of the proposed amendments on small entity companies discussed in the analysis; and • how to quantify the effects of the proposed amendments. Commenters are asked to describe the nature of any effect and provide empirical data supporting the extent of that effect. Comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed rules are adopted, and will be placed in the same public file as comments on the proposed rules themselves. VII. Statutory Authority and Text of Proposed Rule and Form Amendments We are proposing the rule and form amendments contained in this document under the authority set forth in Sections 7, 10, 19(a), and 28 of the Securities Act of 1933, as amended, Sections 3(b), 12, 13, 14, 15, 16, 23(a), and 36 of the Securities Exchange Act of 1934, as amended, Sections 6(c), 8, 24(a), 30, and 38 of the Investment Company Act of 1940, as amended, and Sections 204, 206A, 210, and 211 of the Investment Advisers Act of 1940, as amended. List of Subjects in 17 CFR Parts 229, 230, 232, 239, 240, 249, 270, 274, and 275 Administrative practice and procedure, Reporting and recordkeeping requirements, Securities. In accordance with the foregoing, we are proposing to amend Title 17, Chapter II of the Code of Federal Regulations as follows: 446 See E:\FR\FM\02NOP2.SGM supra Section (Description of Property). 02NOP2 51032 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules asabaliauskas on DSKBBXCHB2PROD with PROPOSALS PART 229—STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975— REGULATION S–K § 229.105 (Item 105) Risk factors. Where appropriate, provide under the caption ‘‘Risk Factors’’ a discussion of the most significant factors that make an investment in the registrant or offering speculative or risky. This discussion must be concise and organized logically. Do not present risks that could apply ■ 1. The authority citation for part 229 generically to any registrant or any continues to read as follows: offering. Explain how the risk affects the registrant or the securities being offered. Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z–2, 77z–3, 77aa(25), Set forth each risk factor under a 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, subcaption that adequately describes the 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j–3, 78l, risk. If the risk factor discussion is 78m, 78n, 78n–1, 78o, 78u–5, 78w, 78ll, 78 included in a registration statement, it mm, 80a–8, 80a–9, 80a–20, 80a–29, 80a–30, must immediately follow the summary 80a–31(c), 80a–37, 80a–38(a), 80a–39, 80b–11 section. If you do not include a and 7201 et seq.; 18 U.S.C. 1350; sec. 953(b), summary section, the risk factor section Pub. L. 111–203, 124 Stat. 1904 (2010); and must immediately follow the cover page sec. 102(c), Pub. L. 112–106, 126 Stat. 310 (2012). of the prospectus or the pricing information section that immediately § 229.10 [Amended]. follows the cover page. Pricing ■ 2. Remove and reserve paragraph (d) information means price and priceof § 229.10. related information that you may omit ■ 3. Amend § 229.102 by revising the from the prospectus in an effective introductory text, Instruction 1 and registration statement based on Rule Instruction 2 to read as follows: 430A (§ 230.430A(a) of this chapter). The registrant must furnish this § 229.102 (Item 102) Description of information in plain English. See property. § 230.421(d) of Regulation C of this To the extent material, disclose the chapter. location and general character of the ■ 5. Amend § 229.202 by revising registrant’s principal physical Instruction 3 under ‘‘Instructions to properties. In addition, identify the Item 202’’ to read as follows: segment(s), as reported in the financial statements, that use the properties § 229.202 (Item 202) Description of described. If any such property is not registrant’s securities. held in fee or is held subject to an * * * * * encumbrance that is material to the 3. Section 305(a)(2) of the Trust registrant, so state and describe briefly Indenture Act of 1939, U.S.C. 77aaa et how held. seq., as amended (‘‘Trust Indenture Instructions to Item 102: 1. What is Act’’), shall not be deemed to require required is information that will the inclusion in a registration statement, reasonably inform investors as to the prospectus, or annual report on Form suitability, adequacy, productive 10–K of any information not required by capacity, and extent of utilization of the this Item or Item 601(b)(4)(vi) of this principal physical properties of the chapter. registrant and its subsidiaries, to the * * * * * extent the described properties are ■ 6. Amend § 229.303 by revising material. A registrant should engage in Instruction 1 under ‘‘Instructions to a comprehensive consideration of the paragraph 303(a)’’ to read as follows: materiality of its properties. If appropriate, descriptions may be § 229.303 (Item 303) Management’s provided on a collective basis; detailed discussion and analysis of financial condition and results of operations. descriptions of the physical characteristics of individual properties * * * * * or legal descriptions by metes and Instructions to paragraph 303(a): 1. bounds are not required and shall not be The registrant’s discussion and analysis given. shall be of the financial statements and 2. Disclosures with respect to this other statistical data that the registrant item need only be provided to the extent believes will enhance a reader’s the properties are material to the understanding of its financial condition, registrant. In determining materiality changes in financial condition and under this Item, the registrant should results of operations. Generally, the take into account both quantitative and discussion shall cover the periods qualitative factors. See Instruction 1 to covered by the financial statements Item 101 of Regulation S–K (§ 229.101). included in the filing and the registrant may use any presentation that in the * * * * * registrant’s judgment enhances a ■ 4. Add § 229.105 to read as follows: VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 reader’s understanding. A smaller reporting company’s discussion shall cover the two-year period required in Article 8 of Regulation S–X and may use any presentation that in the registrant’s judgment enhances a reader’s understanding. For registrants providing financial statements covering three years in a filing, discussion about the earliest year would not be required if (i) that discussion is not material to an understanding of the registrant’s financial condition, changes in financial condition and results of operations and (ii) the registrant has filed its prior year Form 10–K on EDGAR containing management’s discussion and analysis of the earliest of the three years included in the financial statements of the current filing. An emerging growth company, as defined in Rule 405 of the Securities Act (§ 230.405 of this chapter) or Rule 12b–2 of the Exchange Act (§ 240.12b–2 of this chapter), may provide the discussion required in paragraph (a) of this Item for its two most recent fiscal years if, pursuant to Section 7(a) of the Securities Act of 1933 (15 U.S.C 77g(a)), it provides audited financial statements for two years in a Securities Act registration statement for the initial public offering of the emerging growth company’s common equity securities. * * * * * ■ 7. Amend § 229.401 by removing Instruction 3 to paragraph (b) of Item 401and adding an Instruction to Item 401 to read as follows: § 229.401 (Item 401) Directors, executive officers, promoters and control persons. * * * * * Instruction to Item 401. The information regarding executive officers called for by this Item need not be furnished in proxy or information statements prepared in accordance with Schedule 14A or Schedule 14C under the Exchange Act (§ 240.14a–101 and § 240.14c–101 of this chapter) if you are relying on General Instruction G of Form 10–K under the Exchange Act (§ 249.310 of this chapter), such information is furnished in a separate section captioned ‘‘Information about our Executive Officers,’’ and is included in Part I of your annual report on Form 10–K. ■ 8. Revise § 229.405 to read as follows: § 229.405 (Item 405) Compliance with Section 16(a) of the Exchange Act. (a) Reporting obligation. Every registrant having a class of equity securities registered pursuant to Section 12 of the Exchange Act (15 U.S.C. 78l) and every closed-end investment company registered under the E:\FR\FM\02NOP2.SGM 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) must: (1) Under the caption ‘‘Delinquent Section 16(a) Reports,’’ identify each person who, at any time during the fiscal year, was a director, officer, beneficial owner of more than ten percent of any class of equity securities of the registrant registered pursuant to Section 12 of the Exchange Act, or any other person subject to Section 16 of the Exchange Act with respect to the registrant because of the requirements of Section 30 of the Investment Company Act (‘‘reporting person’’) that failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years. (2) For each such person, set forth the number of late reports, the number of transactions that were not reported on a timely basis, and any known failure to file a required form. A known failure to file would include, but not be limited to, a failure to file a Form 3, which is required of all reporting persons, and a failure to file a Form 5 in the absence of the written representation referred to in paragraph (b)(3) of this section, unless the registrant otherwise knows that no Form 5 is required. Instruction 1 to paragraph (a) of Item 405. If no disclosure is required, registrants are encouraged to exclude the caption ‘‘Delinquent Section 16(a) Reports.’’ Instruction 2 to paragraph (a) of Item 405. The registrant is only required to disclose a failure to file timely once. For example, if in the most recently concluded fiscal year a reporting person filed a Form 4 disclosing a transaction that took place in the prior fiscal year, and should have been reported in that year, the registrant should disclose that late filing and transaction pursuant to this Item 405 with respect to the most recently concluded fiscal year, but not in material filed with respect to subsequent years. (b) Scope of the Inquiry. In determining whether disclosure is required pursuant to paragraph (a), the registrant may rely only on the following: (1) A review of Forms 3 and 4 (17 CFR 249.103 and 249.104) and amendments thereto filed electronically with the Commission during the registrant’s most recent fiscal year; (2) A review of Forms 5 (17 CFR 249.105) and amendments thereto filed electronically with the Commission with respect to the registrant’s most recent fiscal year; and (3) Any written representation from the reporting person that no Form 5 is required. The registrant must maintain VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 the representation in its records for two years, making a copy available to the Commission or its staff upon request. ■ 9. Amend § 229.407 by revising paragraphs (d)(3)(i)(B) and (g) to read as follows: § 229.407 (Item 407) Corporate governance. * * * * * (d) * * * (3)(i) * * * (B) The audit committee has discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (‘‘PCAOB’’) and the Commission; * * * * * (g) Smaller reporting companies and emerging growth companies. (1) A registrant that qualifies as a ‘‘smaller reporting company,’’ as defined by § 229.10(f)(1), is not required to provide: (A) The disclosure required in paragraph (d)(5) of this Item in its first annual report filed pursuant to Section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) following the effective date of its first registration statement filed under the Securities Act (15 U.S.C. 77a et seq.) or Exchange Act (15 U.S.C. 78a et seq.); and (B) The disclosure required by paragraphs (e)(4) and (e)(5) of this Item. (2) A registrant that qualifies as an ‘‘emerging growth company,’’ as defined in Rule 405 of the Securities Act (§ 230.405 of this chapter) or Rule 12b– 2 of the Exchange Act (§ 240.12b–2 of this chapter) , is not required to provide the disclosure required by paragraph (e)(5) of this Item. * * * * * ■ 10. Amend § 229.501 by: ■ a. Revising the instruction under ‘‘Instruction to paragraph 501(b)(1)’’, Instruction 2 under ‘‘Instructions to paragraph 501(b)(3)’’, paragraph (b)(4) and paragraph (b)(10); and ■ b. Removing paragraph (b)(11) to read as follows: § 229.501 (Item 501) Forepart of Registration Statement and Outside Front Cover Page of Prospectus. * * * * * (b) * * * (1) * * * Instruction to paragraph 501(b)(1): If your name is the same as that of a company that is well known, include information to eliminate any possible confusion with the other company. If your name indicates a line of business in which you are not engaged or in which you are engaged only to a limited extent, include information to eliminate PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 51033 any misleading inference as to your business. * * * * * Instructions to paragraph 501(b)(3): * * * 2. If it is impracticable to state the price to the public, explain the method by which the price is to be determined. Instead of explaining the method on the outside front cover page of the prospectus, you may state that the offering price will be determined by a particular method or formula that is described in the prospectus and include a cross-reference to the location of such disclosure in the prospectus, including the page number. Highlight the crossreference by prominent type or in another manner. If the securities are to be offered at the market price, or if the offering price is to be determined by a formula related to the market price, indicate the market and market price of the securities as of the latest practicable date. * * * * * (4) Market for the securities. The national securities exchange(s) where the securities being offered are listed. If the securities being offered are not listed on a national securities exchange, the principal United States market(s) where the registrant, through the engagement of a registered broker-dealer, has actively sought and achieved quotation. In each case, also disclose the corresponding trading symbol(s) for the securities on such market(s). * * * * * (10) Prospectus ‘‘Subject to Completion’’ legend. (i) If you use the prospectus before the effective date of the registration statement or if you use Rule 430A [§ 230.430A of this chapter] to omit pricing information and the prospectus is used before you determine the public offering price, include a prominent statement that: (A) The information in the prospectus will be amended or completed; (B) A registration statement relating to these securities has been filed with the Securities and Exchange Commission; (C) The securities may not be sold until the registration statement becomes effective; and (D) The prospectus is not an offer to sell the securities, and it is not soliciting an offer to buy the securities, in any state where offers or sales are not permitted. (ii) The legend called for by paragraph (b)(10)(i) of this Item may be in the following or other clear, plain language: The information in this prospectus is not complete and may be changed. We may not sell these securities until the E:\FR\FM\02NOP2.SGM 02NOP2 51034 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. (iii) Registrants may exclude the statement in paragraph (b)(i)(D) of this Item if the offering is not prohibited by state law. * * * * * § 229.503 [Amended]. 11. Amend § 229.503 by removing ‘‘risk factors’’ from the section heading and removing and reserving paragraph (c). ■ § 229.512 [Amended]. 12. Remove and reserve paragraphs (c), (d), (e), and (f) of § 229.512. ■ 13. Amend § 229.601 by: ■ a. Revising paragraph (a)(1); ■ b. Adding paragraphs (a)(5) and (a)(6); ■ c. Revising entry (b)(4) from the exhibit table in paragraph (a) to add a subsection (vi) titled ‘‘Description of registrant’s securities’’ and to add an ‘‘X’’ under column 10–K; ■ d. Revising entry (21) from the exhibit table in paragraph (a) to read ‘‘Subsidiaries of the registrant and entity identifiers ’’; ■ e. Revising entry (104) from the exhibit table in paragraph (a) to read ‘‘Cover Page Interactive Data File’’ and adding an ‘‘X’’ under columns 8–K, 10– Q and 10–K; ■ f. Adding paragraph (b)(4)(vi) and the instructions to paragraph (b)(4)(vi) and paragraph (b)(10)(iv); ■ g. Revising paragraphs (b)(2), (b)(10), (b)(13), (b)(21)(i), and (b)(99); and ■ h. Adding paragraph (b)(104) to read as follows: ■ asabaliauskas on DSKBBXCHB2PROD with PROPOSALS § 229.601 (Item 601) Exhibits. (a) Exhibits and index required. (1) Subject to Rule 411(c) (§ 230.411(c) of this chapter) under the Securities Act and Rule 12b–23(c) (§ 240.12b–23(c) of this chapter) under the Exchange Act regarding incorporation of exhibits by reference, the exhibits required in the exhibit table must be filed as indicated, as part of the registration statement or report. * * * * * (5) Schedules (or similar attachments) to the exhibits required by this Item are not required to be filed unless such schedules contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. Each exhibit filed must contain a list briefly identifying the contents of all omitted schedules. In VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 addition, the registrant must provide a copy of any omitted schedule to the Commission staff upon request. (6) The registrant may redact information from exhibits required to be filed by this Item if disclosure of such information would constitute a clearly unwarranted invasion of personal privacy (e.g., disclosure of bank account numbers, social security numbers, home addresses and similar information). * * * * * (b) * * * (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession. Any material plan of acquisition, disposition, reorganization, readjustment, succession, liquidation, or arrangement and any amendments thereto described in the statement or report. * * * * * (4) * * * (vi) For each class of securities that is registered under Section 12 of the Exchange Act, provide the information required by Item 202(a)-(d) and (f) of Regulation S–K (§ 229.202 of this chapter), Description of registrant’s securities. * * * * * Instruction 1 to paragraph (b)(4)(vi). A registrant is only required to provide the information called for by Item 601(b)(4)(vi) if it is filing an annual report under Exchange Act Section 13(a) or 15(d). Instruction 2 to paragraph (b)(4)(vi). For purposes of Item 601(b)(4)(vi), all references in Item 202 to securities to be or being registered, offered, or sold will mean securities that are registered as of the end of the period covered by the report with which the exhibit is filed. In addition, for purposes of this Item, the disclosure will be required for classes of securities that have not been retired by the end of the period covered by the report. Instruction 3 to paragraph (b)(4)(vi). The registrant may incorporate by reference to a prior annual report under Exchange Act Section 13(a) or 15(d) containing the disclosure required by Item 601(b)(4)(vi) of Regulation S–K, as applicable, so long as there has not been any change to the information called for by Item 202, (Description of the registrant’s securities) since the filing date of the linked filing. Such hyperlink will be deemed to satisfy the requirements of Item 601(b)(4)(vi) for the current filing. * * * * * (10) Material contracts. (i) Every contract not made in the ordinary course of business that is material to the registrant and is to be performed in PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 whole or in part at or after the filing of the registration statement or report. In addition, for newly reporting registrants, every contract not made in the ordinary course of business that is material to the registrant and that was entered into not more than two years before the date on which such registrant: (A) First files a registration statement or report; or (B) completes a transaction that had the effect of causing it to cease being a public shell company. The only contracts that need to be filed are those to which the registrant or a subsidiary of the registrant is a party or has succeeded to a party by assumption or assignment or in which the registrant or such subsidiary has a beneficial interest. * * * * * (iv) The registrant may redact provisions or terms of exhibits required to be filed by paragraph (b)(10) of this Item if those provisions or terms are both (i) not material and (ii) competitively harmful to the registrant if publicly disclosed. If it does so, the registrant should mark the exhibit index to indicate that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of the redacted exhibit that certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) competitively harmful to the registrant if publicly disclosed. The registrant also must indicate by brackets where the information is omitted from the filed version of the exhibit. If requested by the Commission staff, the registrant must promptly provide an unredacted paper copy of the exhibit on a supplemental basis. The Commission staff also may request the registrant to provide its materiality and competitive harm analyses on a supplemental basis. Upon evaluation of the registrant’s supplemental materials, the Commission staff may request the registrant to amend its filing to include in the exhibit any previously redacted information that is not adequately supported by the registrant’s materiality and competitive harm analyses. The registrant may request confidential treatment of the supplemental material submitted under paragraph (iv) of this Item pursuant to Rule 83 (§ 200.83 of this chapter) while it is in the possession of the Commission staff. After completing its review of the supplemental information, the Commission staff will return or destroy it at the request of the registrant, if the registrant complies with the procedures outlined in Rules 418 or E:\FR\FM\02NOP2.SGM 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules 12b–4 (§ 230.418 or 240.12b–4 of this chapter). Instruction 1 to paragraph (b)(10) of Item 601: For purposes of paragraph (b)(10)(i) of this Item, a ‘‘newly reporting registrant’’ is (i) any registrant filing a registration statement that, at the time of such filing, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, whether or not such registrant has ever previously been subject to the reporting requirements of Section 13(a) or 15(d), (ii) any registrant that has not filed an annual report since the revival of a previously suspended reporting obligation, and (iii) any registrant that (a) was a shell company, other than a business combination related shell company, as defined in Rule 12b–2 under the Exchange Act (17 CFR 240.12b–2), immediately before completing a transaction that has the effect of causing it to cease being a shell company and (b) has not filed a registration statement or Form 8–K as required by Items 2.01 and 5.06 of that form, since the completion of such transaction. For example, newly reporting registrants would include (i) a registrant that is filing its first registration statement under the Securities Act or the Exchange Act, and (ii) a registrant that was a public shell company, other than a business combination related shell company, and completes a reverse merger transaction causing it to cease being a shell company. Instruction 2 to paragraph (b)(10): With the exception of management contracts, in order to comply with paragraph (iii) above, registrants need only file copies of the various compensatory plans and need not file each individual director’s or executive officer’s personal agreement under the plans unless there are particular provisions in such personal agreements whose disclosure in an exhibit is necessary to an investor’s understanding of that individual’s compensation under the plan. Instruction 3 to paragraph (b)(10): If a material contract is executed or becomes effective during the reporting period reflected by a Form 10–Q or Form 10–K, it must be filed as an exhibit to the Form 10–Q or Form 10– K filed for the corresponding period. See paragraph (a)(4) of this Item. With respect to quarterly reports on Form 10– Q, only those contracts executed or becoming effective during the most recent period reflected in the report must be filed. * * * * * VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 (13) Annual or quarterly report to security holders. (i) The registrant’s annual report to security holders for its last fiscal year or its quarterly report to security holders, if all or a portion thereof is incorporated by reference in the filing. Such report, except for those portions thereof that are expressly incorporated by reference in the filing, is to be furnished for the information of the Commission and is not to be deemed ‘‘filed’’ as part of the filing. If the financial statements in the report have been incorporated by reference in the filing, the accountant’s certificate must be manually signed in one copy. See Rule 439 (§ 230.439 of this chapter). (ii) Electronic filings. If all, or any portion, of the annual or quarterly report to security holders is incorporated by reference into any electronic filing, all, or such portion of the annual or quarterly report to security holders so incorporated, must be filed in electronic format as an exhibit to the filing. * * * * * (21) Subsidiaries of the registrant and entity identifiers. (i) List the following information for the registrant and each of its subsidiaries: The name, the legal entity identifier (if a legal entity identifier has been obtained), the state or other jurisdiction of incorporation or organization, and the names under which the entity does business. This list may be incorporated by reference from another filed document which includes a complete and accurate list. ‘‘Legal entity identifier’’ means, with respect to any registrant or its subsidiaries, the legal entity identifier as assigned by a utility endorsed or otherwise governed by the Global LEI Regulatory Oversight Committee or accredited by the Global LEI Foundation. * * * * * (99) Additional exhibits. (i) Any additional exhibits that the registrant may wish to file must be so marked as to indicate clearly the subject matters to which they refer. (ii) If pursuant to Section 11(a) of the Securities Act (15 U.S.C. 77k(a)) an issuer makes generally available to its security holders an earnings statement covering a period of at least 12 months beginning after the effective date of the registration statement, and if such earnings statement is made available by ‘‘other methods’’ than those specified in paragraphs (a) or (b) of § 230.158 of this chapter, it must be filed as an exhibit to the Form 10–Q or the Form 10–K, as appropriate, covering the period in which the earnings statement was released. * * * * * PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 51035 (104) Cover Page Interactive Data File. A Cover Page Interactive Data File (as defined in § 232.11 of this chapter) as required by Rule 406 of Regulation S– T (17 CFR 232.406), and in the manner provided by the EDGAR Filer Manual. * * * * * ■ 14. Amend § 229.1100 by: ■ a. Revising Instruction 1 to paragraph (c)(1) of Item 1100; and ■ b. Redesignating instructions 2 through 5 to paragraph (c)(1) as ‘‘Instruction 2 to paragraph (c)(1) of Item 1100.’’, ‘‘Instruction 3 to paragraph (c)(1) of Item 1100’’, ‘‘Instruction 4 to paragraph (c)(1) of Item 1100.’’, and ‘‘Instruction 5 to paragraph (c)(1) of Item 1100’’ to read as follows: § 229.1100 (Item 1100) General. * * * * * Instruction 1 to paragraph (c)(1) of Item 1100. In addition to the conditions in paragraph (c)(1) of this section, any information incorporated by reference must comply with all applicable Commission rules pertaining to incorporation by reference, such as Rule 303 of Regulation S–T (§ 232.303 of this chapter), Rule 411 of Regulation C (§ 230.411 of this chapter), and Rule 12b–23 of Regulation 12B (§ 240.12b–23 of this chapter), except that for purposes of paragraph (c)(1), an asset-backed issuer may incorporate by reference to a second document that incorporates pertinent information by reference to a third document. * * * * * PART 230—GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 15. The authority citation for part 230 continues to read in part as follows: ■ Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o,78o–7 note, 78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 28, 80a–29, 80a–30, and 80a–37, and Pub. L. 112–106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), unless otherwise noted. * * * * * 16. Amend § 230.405 by adding in alphabetical order the definition of Subunderwriter to read as follows: ■ § 230.405 Definition of terms. * * * * * Sub-underwriter. The term subunderwriter means a dealer that is participating as an underwriter in an offering by committing to purchase securities from a principal underwriter for the securities but is not itself in privity of contract with the issuer of the securities. * * * * * E:\FR\FM\02NOP2.SGM 02NOP2 51036 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules 17. Revise § 230.411 to read as follows: ■ asabaliauskas on DSKBBXCHB2PROD with PROPOSALS § 230.411 Incorporation by reference. (a) Prospectus. Except as provided by this section, Item 1100(c) of Regulation AB (§ 229.1100(c) of this chapter) for registered offerings of asset-backed securities, or unless otherwise provided in the appropriate form, information must not be incorporated by reference into the prospectus. Where a summary or outline of the provisions of any document is required in the prospectus, the summary or outline may incorporate by reference particular items, sections or paragraphs of any exhibit and may be qualified in its entirety by such reference. In any financial statements, incorporating by reference, or crossreferencing to, information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. (b) Information not required in a prospectus. Information may be incorporated by reference in answer, or partial answer, to any item of a registration statement that calls for information not required to be included in a prospectus. Except as provided in the Commission’s rules, financial information required to be given in comparative form for two or more fiscal years or periods must not be incorporated by reference unless the information incorporated by reference includes the entire period for which the comparative data is given. In any financial statements, incorporating by reference, or cross-referencing to, information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. (c) Exhibits. Any document or part thereof filed with the Commission pursuant to any Act administered by the Commission may be incorporated by reference as an exhibit to any registration statement filed with the Commission by the same or any other person. If any modification has occurred in the text of any document incorporated by reference since the filing thereof, the registrant must file with the reference a statement containing the text of such modification and the date thereof. (d) Hyperlinks. Include an active hyperlink to information incorporated into a registration statement or prospectus by reference if such information is publicly available on the Commission’s Electronic Data Gathering, Analysis and Retrieval System (‘‘EDGAR’’) at the time the registration statement or prospectus is filed. For hyperlinking to exhibits, VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 please refer to Item 601 of Regulation S– K (§ 229.601 of this chapter) or the appropriate form. (e) General. Include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. For example, unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. ■ 18. Revise § 230.491 to read as follows: § 230.491 Information to be furnished under paragraph (6) of Schedule B. Any foreign government filing a registration statement pursuant to Schedule B of the act need state, in furnishing the information required by paragraph (6), the names and addresses only of principal underwriters, namely, underwriters in privity of contract with the registrant, provided they are designated as principal underwriters and a brief statement is made as to the discounts and commissions to be received by sub-underwriters or dealers. PART 232—REGULATION S–T— GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 19. The authority citation for part 232 continues to read in part as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 80a–30, 80a–37, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * 20. In § 232.11 in alphabetical order add the definition of Cover Page Interactive Data File in to read as follows: ■ § 232.11 232. Definitions of terms used in Part * * * * * Cover Page Interactive Data File. The term Cover Page Interactive Data File means the machine-readable computer code that presents in Inline XBRL electronic format the cover page information for specified forms as required by Rule 406 (§ 232.406 of this chapter). PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 Note to definition of Cover Page Interactive Data File: When a filing is submitted using Inline XBRL, if permitted or required and as provided by the EDGAR Filer Manual, a portion of the Cover Page Interactive Data File must be embedded into a form with the remainder submitted as an exhibit to the form. * * * * * 21. Revise the second sentence of paragraph (a) and the third sentence of paragraph (d) of § 232.102 to read as follows: ■ § 232.102 Exhibits. (a) * * * Previously filed exhibits, whether in paper or electronic format, may be incorporated by reference into an electronic filing to the extent permitted by Rule 411 under the Securities Act (§ 230.411 of this chapter), Rule 12b–23 under the Exchange Act (§ 240.12b–23 of this chapter), Rule 0–4 under the Investment Company Act (§ 270.0–4 of this chapter) or Rule 303 of Regulation S–T (§ 232.303). * * * * * * * * (d) * * * For electronic filings on Form S–6 (§ 239.16 of this chapter), Form N–14 (§ 239.23 of this chapter), Form F–10 (§ 239.40 of this chapter), Form 20–F (§ 249.220f of this chapter), Form N–5 (§ 274.5 of this chapter), Form N–1A (§ 274.11A of this chapter), Form N–2 (§ 274.11a–1 of this chapter), Form N–3 (§ 274.11b of this chapter), Form N– 4 (§ 274.11c of this chapter), Form N–6 (§ 274.11d of this chapter), Form N–CSR (§ 274.128 of this chapter), or filings subject to Item 601 of Regulation S–K (§ 229.601 of this chapter), each exhibit identified in the exhibit index (other than an exhibit filed in eXtensible Business Reporting Language or an exhibit that is filed with Form ABS–EE (§ 249.1401 of this chapter)) must include an active link to an exhibit that is filed with the document or, if the exhibit is incorporated by reference, an active hyperlink to the exhibit separately filed on EDGAR. * * * * * * * * ■ 22. Amend § 232.105 by revising paragraph (d) and adding paragraph (e) as follows: § 232.105 Use of HTML and hyperlinks. * * * * * (d) Electronic filers submitting Form S–6 (§ 239.16 of this chapter), Form N– 14 (§ 239.23 of this chapter), Form F–10 (§ 239.40 of this chapter), Form 20–F (§ 249.220f of this chapter), Form N–5 (§ 274.5 of this chapter), Form N–1A (§ 274.11A of this chapter), Form N–2 (§ 274.11a–1 of this chapter), Form N–3 (§ 274.11b of this chapter), Form N–4 (§ 274.11c of this chapter), Form N–6 E:\FR\FM\02NOP2.SGM 02NOP2 asabaliauskas on DSKBBXCHB2PROD with PROPOSALS Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules (§ 274.11d of this chapter), Form N–CSR (§ 274.128 of this chapter), or a registration statement or report subject to Item 601 of Regulation S–K (§ 229.601 of this chapter), must submit such registration statement or report in HTML and each exhibit identified in the exhibit index (other than an exhibit filed in eXtensible Business Reporting Language or an exhibit filed with Form ABS–EE (§ 249.1401 of this chapter)) must include an active link to an exhibit that is filed with the registration statement or report or, if the exhibit is incorporated by reference, an active hyperlink to the exhibit separately filed on EDGAR, unless such exhibit is filed in paper pursuant to a temporary or continuing hardship exemption under Rules 201 or 202 of Regulation S–T (§ 232.201 or § 232.202) or pursuant to Rule 311 of Regulation S–T (§ 232.311). Instructions to paragraph (d): (1) No hyperlink is required for any exhibit incorporated by reference that has not been filed with the Commission in electronic format. (2) An electronic filer must correct an inaccurate or nonfunctioning link or hyperlink to an exhibit, in the case of a registration statement that is not yet effective, by filing an amendment to the registration statement containing the inaccurate or nonfunctioning link or hyperlink; or, in the case of a registration statement that has become effective or an Exchange Act report, an electronic filer must correct the inaccurate or nonfunctioning link or hyperlink in the next Exchange Act periodic report that requires, or includes, an exhibit pursuant to Item 601 of Regulation S–K (§ 229.601 of this chapter), Form N–CSR (§ 274.128 of this chapter), or, in the case of a foreign private issuer (as defined in § 229.405 of this chapter), Form 20–F (§ 249.220f of this chapter) or Form F–10 (§ 239.40 of this chapter). In the case of a registration statement on Form S–6 (§ 239.16 of this chapter), Form N–14 (§ 239.23 of this chapter), Form N–5 (§ 274.5 of this chapter), Form N–1A (§ 274.11A of this chapter), Form N–2 (§ 274.11a–1 of this chapter), Form N–3 (§ 274.11b of this chapter), Form N–4 (§ 274.11c of this chapter), or Form N–6 (§ 274.11d of this chapter) that has become effective, an electronic filer must correct an inaccurate or nonfunctioning link or hyperlink in the next post-effective amendment, if any, to the registration statement. Alternatively, an electronic filer may correct an inaccurate or nonfunctioning link or hyperlink in a registration statement that has become effective by filing a post-effective amendment to the registration statement. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 (e) Except for exhibits, which are covered by paragraph (d) of this section, electronic filers that are incorporating information by reference pursuant to Rule 411 under the Securities Act (§ 230.411 of this chapter), Rule 12b–23 under the Exchange Act (§ 240.12b–23 of this chapter), or Rule 0–4 under the Investment Company Act (§ 270.0–4 of this chapter) must submit such registration statement or report in HTML and must include an active hyperlink to such incorporated information when required by those rules. A hyperlink is not required if the incorporated information is filed in paper pursuant to a temporary or continuing hardship exemption under Rules 201 or 202 of Regulation S–T (§ 232.201 or § 232.202) or pursuant to Rule 311 of Regulation S–T (§ 232.311). Instruction 1 to paragraph (e) of Rule 105. No hyperlink is required for any information incorporated by reference that has not been filed with the Commission in electronic format. Instruction 2 to paragraph (e) of Rule 105. In the case of a registration statement that is not yet effective, an electronic filer must correct an inaccurate or nonfunctioning hyperlink by filing an amendment to such registration statement. * * * * * ■ 23. Revise the first sentence of paragraph (b) of § 232.303 to read as follows: § 232.303 Incorporation by reference. * * * * * (b) If a filer incorporates by reference into an electronic filing any portion of an annual or quarterly report to security holders, it must also file the portion of the annual or quarterly report to security holders in electronic format as an exhibit to the filing, as required by Regulation S–K Item 601(b)(13) (§ 229.601(b)(13) of this chapter). * * * ■ 24. Add § 232.406 to read as follows: * * * * * § 232.406 Cover Page XBRL Data Tagging. Electronic filers submitting Forms 10–K (§ 249.310 of this chapter), 10–Q (§ 249.308a of this chapter), 8–K (§ 249.308 of this chapter), 20–F (§ 249.220f of this chapter) and 40–F (§ 249.240f of this chapter) must tag in Inline XBRL electronic format, in the manner provided by the EDGAR Filer Manual, all of the information provided by the electronic filer on the cover page of these forms. * * * * * PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 51037 PART 239—FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933 25. The authority citation for part 239 continues to read in part as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n, 78o(d),78o–7 note, 78u–5, 78w(a), 78ll, 78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a– 10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, and 80a–37; and sec. 107, Pub. L. 112–106, 126 Stat. 312, unless otherwise noted. * * * * * 26. Amend Form S–1 (referenced in § 239.11) by revising the last sentence of Instruction V. under ‘‘General Instructions’’, the first paragraph of Instruction VII. under ‘‘General Instructions’’ and Item 3 to read as follows: ■ Note: The text of Form S–1 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S–1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * * * V. Registration of Additional Securities * * * See Rule 439(b) under the Securities Act (17 CFR 230.439(b)). * * * * * VII. Eligibility To Use Incorporation by Reference If a registrant meets the following requirements in paragraphs A–F immediately prior to the time of filing a registration statement on this Form, it may elect to provide information required by Items 3 through 11 of this Form in accordance with Item 11A and Item 12 of this Form. Notwithstanding the foregoing, in the financial statements, incorporating by reference or cross-referencing to information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. * * * * * * * * Item 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges. Furnish the information required by Items 105 and 503 of Regulation S–K E:\FR\FM\02NOP2.SGM 02NOP2 51038 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules (§ 229.105 and § 229.503 of this chapter). * * * * * ■ 27. Amend Form S–3 (referenced in § 239.13) by revising the last sentence of Instruction IV.A. under ‘‘General Instructions’’, Item 3, and paragraph (d) of Item 12 to read as follows: Note: The text of Form S–3 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S–3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * * * IV. Registration of Additional Securities and Additional Classes of Securities Note: The text of Form S–6 does not, and this amendment will not, appear in the Code of Federal Regulations. Form S–6 * * * * * INSTRUCTIONS AS TO EXHIBITS * * * * * Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * ■ 29. Amend Form S–11 (referenced in § 239.18) by revising the last sentence of Instruction G. under ‘‘General Instructions’’, the first paragraph of instruction H. under ‘‘General Instructions’’ and Item 3(a) to read as follows: the foregoing, in the financial statements, incorporating by reference or cross-referencing to information outside of the financial statement is not permitted unless otherwise specifically permitted or required by the Commission’s rules. * * * * * * * * Item 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges. (a) Furnish the information required by Items 105 and 503 of Regulation S– K (§ 229.105 and § 229.503 of this chapter). * * * * * ■ 30. Amend Form N–14 (referenced in § 239.23) by: ■ a. Revising the third paragraph of General Instruction G; and ■ b. Revising the Instruction to Item 16 to add a paragraph to read as follows: Note: The text of Form N–14 does not, and this amendment will not, appear in the Code of Federal Regulations. Note: The text of Form S–11 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES * SECURITIES AND EXCHANGE COMMISSION A. Registration of Additional Securities Pursuant to Rule 462(b). * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * Form N–14 * * * * * GENERAL INSTRUCTIONS * * * * Item 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges. Washington, DC 20549 G. Incorporation by Reference and Delivery of Prospectuses or Reports Filed with the Commission FORM S–11 * Furnish the information required by Items 105 and 503 of Regulation S–K (§ 229.105 and § 229.503 of this chapter). * * * * * FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES Item 12. Incorporation of Certain Information by Reference. * asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * (d) Any information required in the prospectus in response to Item 3 through Item 11 of this Form may be included in the prospectus through documents filed pursuant to Section 13(a), 14, or 15(d) of the Exchange Act that are incorporated or deemed incorporated by reference into the prospectus that is part of the registration statement. Notwithstanding the foregoing, in the financial statements, incorporating by reference or crossreferencing to information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. * * * * * ■ 28. Amend Form S–6 (referenced in § 239.16) by revising ‘‘Instructions as to Exhibits’’ to add a paragraph to read as follows: VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 GENERAL INSTRUCTIONS * * * * G. Registration of Additional Securities * * * Any opinion or consent required in the Rule 462(b) registration statement may be incorporated by reference from the earlier registration statement with respect to the offering, if: (i) Such opinion or consent expressly provides for such incorporation; and (ii) such opinion relates to the securities registered pursuant to Rule 462(b). See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. H. Eligibility to Use Incorporation by Reference If a registrant meets the following requirements in paragraphs 1–6 immediately prior to the time of filing a registration statement on this Form, it may elect to provide information required by Items 3 through 28 of this Form in accordance with Item 28A and Item 29 of this Form. Notwithstanding PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 * * * * All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus) and rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents). * * * * * Item 16. Exhibits * * * * * Instruction: * * * * * Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * ■ 31. Amend Form S–4 (referenced in § 239.25) by revising the last sentence of Instruction K. under ‘‘General E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Instructions’’ and the first sentence of Item 3 to read as follows: V. Registration of Additional Securities Note: The text of Form S–4 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S–4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * * * K. Registration of Additional Securities. * * * Any opinion or consent required in the Rule 462(b) registration statement may be incorporated by reference from the earlier registration statement with respect to the offering, if: (i) such opinion or consent expressly provides for such incorporation; and (ii) such opinion relates to the securities registered pursuant to Rule 462(b). See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information. * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. VI. Eligibility to Use Incorporation by Reference If a registrant meets the following requirements immediately prior to the time of filing a registration statement on this Form, it may elect to provide information required by Item 3 and Item 4 of this Form in accordance with Item 4A and Item 5 of this Form. Notwithstanding the foregoing, in the financial statements, incorporating by reference or cross-referencing to information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. * * * * * Item 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges. Furnish the information required by Items 105 and 503 of Regulation S–K (§ 229.105 and § 229.503 of this chapter). * * * * * ■ 33. Amend Form F–3 (referenced in § 239.33) by revising the last sentence of Instruction IV.A. under ‘‘General Instructions’’ and Item 3 to read as follows: Provide in the forepart of the prospectus a summary containing the information required by Items 105 and 503 of Regulation S–K (§ 229.105 and § 229.503 of this chapter) and the following: * * * * * ■ 32. Amend Form F–1 (referenced in § 239.31) by revising the last sentence of Instruction V. under ‘‘General Instructions’’, the first paragraph of instruction VI. under ‘‘General Instructions’’ and Item 3 to read as follows: Note: The text of Form F–3 does not, and this amendment will not, appear in the Code of Federal Regulations. Note: The text of Form F–1 does not, and this amendment will not, appear in the Code of Federal Regulations. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM F–1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * VerDate Sep<11>2014 * SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Jkt 244001 (§ 229.105 and § 229.503 of this chapter). * * * * * ■ 34. Amend Form F–4 (referenced in 239.34) by revising the last sentence of Instruction H. under ‘‘General Instructions’’ and Item 3 to read as follows: Note: The text of Form F–4 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM F–4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * H. * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information. Provide in the forepart of the prospectus a summary containing the information required by Items 105 and 503 of Regulation S–K (§ 229.105 and § 229.503 of this chapter) and the following: * * * * * ■ 35. Revise Item 3 of Form F–7 (referenced in § 239.37) to read as follows: Note: The text of Form F–7 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM F–3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Washington, DC 20549 * GENERAL INSTRUCTIONS REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * * * * * * IV. Registration of Additional Securities and Additional Classes of Securities A. Registration of Additional Securities Pursuant to Rule 462(b). * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * Item 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges. Furnish the information required by Items 105 and 503 of Regulation S–K * 20:05 Nov 01, 2017 UNITED STATES 51039 PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 FORM F–7 * * * * PART I—INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS * * * * * Item 3. Incorporation of Certain Information by Reference Information called for by this Form, including exhibits, may be incorporated by reference at the Registrant’s option from documents that the Registrant has filed previously with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or submitted to the Commission pursuant to Rule 12g3–2(b) E:\FR\FM\02NOP2.SGM 02NOP2 51040 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules under the Exchange Act. For information that you are incorporating by reference, identify the document where the information was originally filed or submitted and the specific location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. If any information is incorporated by reference into the prospectus, the prospectus must provide the name, address and telephone number of an officer of the Registrant from whom copies of such information may be obtained upon request without charge. * * * * * ■ 36. Revise Item 3 of Form F–8 (referenced in § 239.38) to read as follows: Note: The text of Form F–8 does not, and this amendment will not, appear in the Code of Federal Regulations. SECURITIES AND EXCHANGE COMMISSION REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * PART I—INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * Item 3. Incorporation of Certain Information by Reference Information called for by this Form, including exhibits, may be incorporated by reference at the Registrant’s option from documents that the Registrant has filed previously with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or submitted to the Commission pursuant to Rule 12g3–2(b) under the Exchange Act. For information that you are incorporating by reference, identify the document where the information was originally filed or submitted and the specific location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates VerDate Sep<11>2014 20:05 Nov 01, 2017 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 UNITED STATES Jkt 244001 38. Revise Item 3 of Form F–80 (referenced in § 239.41) to read as follows: Note: The text of Form F–80 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM F–80 * * * * * SECURITIES AND EXCHANGE COMMISSION PART I—INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS Washington, DC 20549 * FORM F–10 Item 3 Incorporation of Certain Information by Reference REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * * * * * Item 4. Incorporation of Certain Information by Reference FORM F–8 * Note: The text of Form F–10 does not, and this amendment will not, appear in the Code of Federal Regulations. * Washington, DC 20549 * ■ PART I—INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS UNITED STATES * information pertinent to such disclosure by reference to a third document. If any information is incorporated by reference into the prospectus, the prospectus must provide the name, address, and telephone number of an officer of the Registrant from whom copies of such information may be obtained upon request without charge. * * * * * ■ 37. Revise Item 4 of Form F–10 (referenced in § 239.40) to read as follows: Information called for by this Form, including exhibits, may be incorporated by reference at the Registrant’s option from documents that the Registrant has filed previously with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or submitted to the Commission pursuant to Rule 12g3–2(b) under the Exchange Act. For information that you are incorporating by reference, identify the document where the information was originally filed or submitted and the specific location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. If any information is incorporated by reference into the prospectus, the prospectus must provide the name, address, and telephone number of an officer of the Registrant from whom copies of such information may be obtained upon request without charge. * * * * * PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 * * * * Information called for by this Form, including exhibits, may be incorporated by reference at the Registrant’s option from documents that the Registrant has filed previously with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or submitted to the Commission pursuant to Rule 12g3–2(b) under the Exchange Act. For information that you are incorporating by reference, identify the document where the information was originally filed or submitted and the specific location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. If any information is incorporated by reference into the prospectus, the prospectus must provide the name, address, and telephone number of an officer of the Registrant from whom copies of such information may be obtained upon request without charge. * * * * * ■ 39. Amend Form SF–1 (referenced in § 239.44) by revising the last sentence of Instruction III. under ‘‘General Instructions’’ and the last sentence of Item 2 to read as follows: Note: The text of Form SF–1 does not, and this amendment will not, appear in the Code of Federal Regulations. E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules UNITED STATES PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 SECURITIES AND EXCHANGE COMMISSION 41. The authority citation for part 240 continues to read in part as follows: ■ Washington, DC 20549 FORM SF–1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * * * III. Registration of Additional Securities * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * * Furnish the information required by Items 105 and 503 of Regulation S–K (17 CFR 229.105 and 17 CFR 229.503) and Item 1103 of Regulation AB (17 CFR 229.1103). * * * * * ■ 40. Amend Form SF–3 (referenced in § 239.45) by revising the last sentence of Instruction III. under ‘‘General Instructions’’ and the last sentence of Item 2 to read as follows: Note: The text of Form SF–3 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM SF–3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * GENERAL INSTRUCTIONS * * * * * asabaliauskas on DSKBBXCHB2PROD with PROPOSALS III. Registration of Additional Securities Pursuant to Rule 462(b). * * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)]. * * * * * Item 2. Inside Front and Outside Back Cover Pages of Prospectus. Furnish the information required by Items 105 and 503 of Regulation S–K (17 CFR 229.105 and 17 CFR 229.503) and Item 1103 of Regulation AB (17 CFR 229.1103). * * * * * VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 * * * * 42. Revise § 240.12b–13 to read as follows: ■ Item 2. Inside Front and Outside Back Cover Pages of Prospectus. * Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o-4, 78o–10, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 4, 80b–11, and 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111–203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112–106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. § 240.12b–13 report. Preparation of statement or Except as provided by the appropriate form, the statement or report must contain the numbers and captions of all items of such form. The text of the items may be omitted if the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of referring to the text of the items or instructions thereto. Where any item requires information to be given in tabular form, it must be given in substantially the tabular form specified in the item. All instructions, whether appearing under the items of the form or elsewhere therein, must be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect must be made. ■ 43. Revise § 240.12b–23 to read as follows: § 240.12b–23 Incorporation by reference. (a) Registration statement or report. Except as provided by this section or in the appropriate form, information may be incorporated by reference in answer, or partial answer, to any item of a registration statement or report. (b) Financial information. Except as provided in the Commission’s rules, financial information required to be given in comparative form for two or more fiscal years or periods must not be incorporated by reference unless the information incorporated by reference includes the entire period for which the comparative data is given. In the financial statements, incorporating by reference, or cross-referencing to, information outside of the financial statements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 51041 (c) Exhibits. Any document or part thereof filed with the Commission pursuant to any Act administered by the Commission may be incorporated by reference as an exhibit to any statement or report filed with the Commission by the same or any other person. Any document or part thereof filed with an exchange pursuant to the Act may be incorporated by reference as an exhibit to any statement or report filed with the exchange by the same or any other person. If any modification has occurred in the text of any document incorporated by reference since the filing thereof, the registrant must file with the reference a statement containing the text of any such modification and the date thereof. (d) Hyperlinks. You must include an active hyperlink to information incorporated into a registration statement or report by reference if such information is publicly available on the Commission’s Electronic Data Gathering, Analysis and Retrieval System (‘‘EDGAR’’) at the time the registration statement or form is filed. For hyperlinking to exhibits, please refer to Item 601 of Regulation S–K (§ 229.601 of this chapter) or the appropriate form. (e) General. Include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. For example, unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. § 240.12b–32 [Removed and reserved]. 44. Remove and reserve § 240.12b–32. ■ 45. Revise the first sentence of Note D.1 of § 240.14a–101 to read as follows: ■ § 240.14a–101 Schedule 14A. Information required in proxy statement. * * * * * D. * * * 1. Disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to E:\FR\FM\02NOP2.SGM 02NOP2 51042 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules such disclosure by reference to a third document. * * * * * * * * ■ 46. Remove and reserve paragraph (e) of § 240.16a–3. PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 47. The authority citation for part 249 continues to read in part 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. * * * * * 48. Remove and reserve paragraph (c) of General Instruction 3 to Form 3 (referenced in § 249.103). ■ 49. Remove and reserve paragraph (c) of General Instruction 2 to Form 4 (referenced in § 249.104). ■ 50. Remove and reserve paragraph (c) of General Instruction 2 to Form 5 (referenced in § 249.105). ■ 51. Amend Form 8–A (referenced in § 249.208a) by revising the Instructions as to Exhibits to read as follows: ■ Note: The text of Form 8–A does not, and this amendment will not, appear in the Code of Federal Regulations. FORM 8–A FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 * SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 * Washington, DC 20549 * UNITED STATES * INSTRUCTIONS FOR EXHIBITS asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * * * * C. How to Prepare Registration Statements and Reports on This Form. (a) Do not use this Form as a blank form to be filled in; use it only as a guide in the preparation of the VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 * * * * * * * * * Trading symbol(s) GENERAL INSTRUCTIONS * * Item 1A. Risk Factors. Set forth, under the caption ‘‘Risk Factors,’’ where appropriate, the risk factors described in Item 105 of Regulation S–K (§ 229.105 of this chapter) applicable to the registrant. * * * * * * * * Title of each class * * GENERAL INSTRUCTIONS If the securities to be registered on this form are to be registered on an * * INFORMATION REQUIRED IN REGISTRATION STATEMENT SECURITIES AND EXCHANGE COMMISSION * Note: The text of Form 10 does not, and this amendment will not, appear in the Code of Federal Regulations. * UNITED STATES * exchange on which other securities of the registrant are registered, or are to be registered pursuant to Section 12(g) of the Act, copies of all constituent instruments defining the rights of the holders of each class of such securities, including any contracts or other documents which limit or qualify the rights of such holders, must be filed as exhibits with each copy of the registration statement filed with the Commission or with an exchange, subject to Rule 12b–23(c) regarding incorporation of exhibits by reference. ■ 52. Amend Form 10 (referenced in 249.210) by revising the first sentence in Item 1A and Instruction C(a) under ‘‘General Instructions’’ to read as follows: Frm 00056 Fmt 4701 (a) This form is not to be used as a blank form to be filled in, but only as a guide in the preparation of the registration statement on paper meeting the requirements of Rule 12b–12 [17 CFR 240.12b–12]. The numbers or captions of items are not required unless expressly required by this form or the referenced disclosure requirements. The text of the items may be omitted. Otherwise, the answers to the items must be prepared in the manner specified in Rule 12b–13 [17 CFR 240.12b–13]. * * * * * ■ 53. Amend Form 20–F (referenced in § 249.220f) by: ■ a. Adding a field to the cover page to include trading symbol(s); ■ b. Revising Instruction C(a) under ‘‘General Instructions’’; ■ c. Adding Instruction 6 under ‘‘Instructions to Item 5’’; ■ d. Revising Instruction 1(b) under ‘‘Instructions to Item 10’’; ■ e. Revising Instructions 1 and 2 under ‘‘Instructions to Item 12’’; ■ f. Revising the introductory text, Instruction 4(a) and Instruction 8 and adding Instructions 2(d) and 104 under ‘‘Instructions As To Exhibits’’ to read as follows: Note: The text of Form 20–F does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 20–F * * * * * Securities registered or to be registered pursuant to Section 12(b) of the Act. Name of each exchange on which registered registration statement or annual report. General Instruction E states which items must be responded to in a registration statement and which items must be responded to in an annual report. The number or captions of items are not required unless expressly required by this form. You may also omit the text following each caption in this Form, which describes what must be disclosed PO 00000 C. Preparation of Registration Statement. Sfmt 4702 under each item. Omit the text of all instructions in this Form. If an item is inapplicable or the answer to the item is in the negative, respond to the item by making a statement to that effect. * * * * * Item 5. Operating and Financial Review and Prospects * E:\FR\FM\02NOP2.SGM * * 02NOP2 * * Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Instructions to Item 5: * * * * 6. Generally, the discussion shall cover the periods covered by the financial statements and the registrant may use any format that in the registrant’s judgment enhances a reader’s understanding. For registrants providing financial statements covering three years in a filing, disclosure about the earliest year would not be required if (i) that disclosure is not material to an understanding of the registrant’s financial condition, changes in financial condition and results of operations and (ii) the registrant has filed its prior year Form 20–F on EDGAR containing an Operating and Financial Review and Prospects discussion of the earliest of the three years included in the financial statements of the current filing. * * * * * * Item 10. Additional Information * * * * * Instructions to Item 10: * * * * * 1* * * (b) If the information called for by Item 10.B has been reported previously in a registration statement on Form 20-F or a registration statement filed under the Securities Act and has not changed, you may incorporate that information by a specific reference in the annual report to the previous registration statement or, to the extent that this information has been provided in the exhibit required by instruction 2(d) of the Instructions as to Exhibits, you may refer to the exhibit for this information. * * * * * Item 12. Description of Securities Other than Equity Securities asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * Instructions to Item 12: * * * * * 1. If you are using the form as an annual report, provide the information required by Item 12.D.3 and Item 12.D.4 under this Item of your annual report and provide the remainder of the information required by this Item in an exhibit to such report pursuant to paragraph 2(d) of Instructions as to Exhibits. 2. You do not need to include any information in a registration statement, prospectus, or annual report on Form 20–F in response to Item 305(a)(2) of the Trust Indenture Act of 1939, 15 U.S.C. 77aaa et seq., as amended, if the information is not otherwise required by this Item or Instruction 2(d) under Instructions as to Exhibits of this Form. VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 INSTRUCTIONS AS TO EXHIBITS File the exhibits listed below as part of an Exchange Act registration statement or report. Exchange Act Rule 12b–23(c) explains the circumstances in which you may incorporate exhibits by reference. Exchange Act Rule 24b–2 explains the procedure to be followed in requesting confidential treatment of information required to be filed. Previously filed exhibits may be incorporated by reference. If any previously filed exhibits have been amended or modified, file copies of the amendment or modification or copies of the entire exhibit as amended or modified. If the Form 20–F registration statement or annual report requires the inclusion, as an exhibit or attachment, of a document that is in a foreign language, you must provide instead either an English translation or an English summary of the foreign language document in accordance with Exchange Act Rule 12b–12(d) (17 CFR 240.12b–12(d)) for both electronic and paper filings. You may submit a copy of the unabridged foreign language document along with the English translation or summary as permitted by Regulation S–T Rule 306(b) (17 CFR 232.306(b)) for electronic filings or by Exchange Act Rule 12b–12(d)(4) (17 CFR 240.12b–12(d) (4)) for paper filings. Include an exhibit index in each registration statement or report you file, immediately preceding the exhibits you are filing. The exhibit index must list each exhibit according to the number assigned to it below. If an exhibit is incorporated by reference, note that fact in the exhibit index. For paper filings, the pages of the manually signed original registration statement should be numbered in sequence, and the exhibit index should give the page number in the sequential numbering system where each exhibit can be found. Schedules (or similar attachments) to the exhibits required by this Form 20– F are not required to be filed unless such schedules contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. Each exhibit filed must contain a list briefly identifying the contents of all omitted schedules. In addition, the registrant must provide a copy of any omitted schedule to the Commission staff upon request. The registrant may redact information from exhibits required to be filed by this Form 20–F if disclosure of that that information would constitute a clearly unwarranted invasion of personal privacy (e.g., disclosure of bank account PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 51043 numbers, social security numbers, home addresses and similar information). The registrant is not required to undertake or provide to the Commission upon request a materiality or competitive harm analysis of this redacted information. * * * * * 2* * * (d) If a registrant is filing an annual report under Exchange Act Section 13(a) or 15(d), the registrant must provide as an exhibit a description of the rights of each class of securities that is registered under Section 12 of the Exchange Act as of the end of the period covered by the report with which the exhibit is filed. The description must include information for the securities comparable to that required by Item 9.A.3, A.5, A.6, and A.7, Item 10.B.3, B.4, B.6, B.7, B.8, B.9, and B.10, and Item 12.A, 12.B, 12.C, and 12.D.1 and 12.D.2 of Form 20–F (collectively, the ‘‘Description of Securities’’). However, for purposes of this paragraph 2(d), all references in those Items to securities to be or being registered, offered or sold will mean securities that are registered as of the end of the period covered by the report with which the exhibit is filed. In addition, for purposes of this Item, the disclosure will be required for classes of securities that have not been retired by the end of the period covered by the report. A registrant may incorporate by reference and provide an active hyperlink to a prior periodic filing containing the disclosure required by this paragraph 2(d) so long as there has not been any change to the information called for by the Description of Securities since the filing date of the linked filing. Such hyperlink will be deemed to satisfy the requirements of this paragraph 2(d) for the current filing. * * * * * 4.(a) Every contract not made in the ordinary course of business that is material to the registrant and is to be performed in whole or in part at or after the filing of the registration statement or report. In addition, for newly reporting registrants, every contract not made in the ordinary course of business that is material to the registrant and that was entered into not more than two years before the date on which such registrant: (i) first files a registration statement or report; or (ii) completes a transaction that had the effect of causing it to cease being a public shell company. The only contracts that must be filed are those to which the registrant or a subsidiary of the registrant is a party or E:\FR\FM\02NOP2.SGM 02NOP2 51044 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules has succeeded to a party by assumption or assignment or in which the registrant or such subsidiary has a beneficial interest. The registrant may redact provisions or terms of exhibits required to be filed by this Form 20–F if those provisions or terms are both (i) not material and (ii) competitively harmful to the registrant if publicly disclosed. If it does so, the registrant should mark the exhibit or exhibits to indicate that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of the redacted exhibit that certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) competitively harmful to the registrant if publicly disclosed. The registrant also must indicate by brackets where the information is omitted from the filed version of the exhibit. If requested by the Commission staff, the registrant must provide an unredacted paper copy of the exhibit on a supplemental basis. The Commission staff also may request the registrant to provide its materiality and competitive harm analyses on a supplemental basis. Upon evaluation of the registrant’s supplemental materials, the Commission staff may request the registrant to amend its filing to include in the exhibit any previously redacted information that is not adequately supported by the registrant’s materiality and competitive harm analyses. The registrant may request confidential treatment of the supplemental material submitted to the Commission or the staff pursuant to Rule 83 (17 CFR 200.83) while it is in the possession of the Commission staff. After reviewing the supplemental information, the Commission staff will return or destroy it at the request of the registrant, if the registrant complies with the procedures outlined in Rules 418 or 12b–4 (17 CFR 230.418 or 17 CFR 240.12b–4). Note: A ‘‘newly reporting registrant’’ is (i) any registrant filing a registration statement that, at the time of such filing, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, whether or not such registrant has ever previously been subject to the reporting requirements of Section 13(a) or 15(d), (ii) any registrant that has not filed an annual report since the revival of a previously suspended reporting obligation, and (iii) any registrant that (a) was a shell company, other than a business combination related shell company, as defined in Rule 12b–2 under the Exchange Act (17 CFR 240.12b–2), immediately before completing a transaction that has the effect of causing it to cease being a shell company and (b) has not filed a Form 20–F since the completion of such transaction. For example, newly reporting registrants would include (i) a registrant that is filing its first registration statement under the Securities Act or the Exchange Act, and (ii) a registrant that was a public shell company, other than a business combination related shell company, and completes a reverse merger transaction causing it to cease being a shell company. * * * * * 8. List the following information for the registrant and each of its subsidiaries: the name, the legal entity identifier (if any), the state or other jurisdiction of incorporation or organization, and the names under which the entity does business. This list may be incorporated by reference from another filed document which includes a complete and accurate list. ‘‘Legal entity identifier’’ means, with respect to any registrant or its subsidiaries, the legal entity identifier as assigned by a utility endorsed by the Global LEI Regulatory Oversight Committee or accredited by Trading symbol(s) Title of each class * * * * * asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * (17) Cover Page Interactive Data File. If the Form 40–F is being used as an annual report, a Cover Page Interactive Data File (as defined in 17 CFR 232.11) as required by Rule 406 of Regulation S– T [17 CFR 232.406], in the manner provided by the EDGAR Filer Manual and listed as exhibit 104. * * * * * VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 55. Amend Form 8–K (referenced in § 249.308) by adding a field to the cover page for securities registered pursuant to Section 12(b) of the Exchange Act, the title of each class of such securities, trading symbol(s) and name of each exchange on which registered: Note: The text of Form 8–K does not, and this amendment will not, appear in the Code of Federal Regulations. PO 00000 Frm 00058 Fmt 4701 102 and 103 [Reserved] 104. Cover Page Interactive Data File. If the Form 20–F is being used as an annual report, a Cover Page Interactive Data File (as defined in 17 CFR 232.11) as required by Rule 406 of Regulation S– T [17 CFR 232.406], and in the manner provided by the EDGAR Filer Manual. ■ 54. Amend Form 40–F (referenced in § 249.240f) by: ■ a. Adding a field to the cover page to include trading symbol(s); and ■ b. Adding paragraph B.17 under ‘‘General Instructions’’ to read as follows: Note: The text of Form 40–F does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 40–F * * * * * Securities registered or to be registered pursuant to Section 12(b) of the Act. Name of each exchange on which registered ■ B. Information To Be Filed on this Form the Global LEI Foundation. You may omit the names of subsidiaries that, in the aggregate, would not be a ‘‘significant subsidiary’’ as defined in rule 1–02(w) of Regulation S–X as of the end of the year covered by the report. You may omit the names of multiple wholly owned subsidiaries carrying on the same line of business, such as chain stores or service stations, if you give the name of the immediate parent company, the line of business and the number of omitted subsidiaries broken down by U.S. and foreign operations. * * * * * Sfmt 4702 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8–K * * * * * Securities registered pursuant to Section 12(b) of the Act: E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Trading symbol(s) Title of each class * * * * * ■ 56. Amend Form 10–Q (referenced in § 249.308a) by adding a field to the cover page for securities registered pursuant to Section 12(b) of the Exchange Act, the title of each class of such securities, trading symbol(s) and name of each exchange on which registered: * * * * 57. Amend Form 10–K (referenced in § 249.310) by: ■ a. Revising Instruction (C)(1) and the last sentence of Instruction (G)(3) under ‘‘General Instructions’’, the first sentence in Item 1A, and paragraph (a) under ‘‘Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act’’; ■ b. Removing the second sentence of Instruction (G)(4) under ‘‘General Instructions’’, the checkbox that relates to disclosure under Item 405, and the instruction to Item 10; and ■ c. Adding a field to the cover page to include trading symbol(s) 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. asabaliauskas on DSKBBXCHB2PROD with PROPOSALS VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 SECURITIES AND EXCHANGE COMMISSION FORM 10–Q * * * * * Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which registered UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10–K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 GENERAL INSTRUCTIONS * * * * * C. Preparation of Report. (1) This form is not to be used as a blank form to be filled in, but only as a guide in the preparation of the report on paper meeting the requirements of Rule 12b–12. Except as provided in this instruction and General Instruction G, the answers to the items must be prepared in the manner specified in Rule 12b–13. The numbers or captions Trading symbol(s) Title of each class * * * * Item 1A. Risk Factors. Set forth, under the caption ‘‘Risk Factors,’’ where appropriate, the risk factors described in Item 105 of Regulation S–K (§ 229.105 of this chapter) applicable to the registrant. * * * * * * * * UNITED STATES Washington, DC 20549 Trading symbol(s) ■ * Name of each exchange on which registered Note: The text of Form 10–Q does not, and this amendment will not, appear in the Code of Federal Regulations. Title of each class * 51045 (a) Except to the extent that the materials enumerated in (1) and/or (2) below are specifically incorporated into this Form by reference, every registrant which files an annual report on this Form pursuant to Section 15(d) of the Act must furnish to the Commission for its information, at the time of filing its Frm 00059 Fmt 4701 G. Information to be Incorporated by Reference. * * * * * (3) * * * See the Instruction to Item 401 of Regulation S–K (§ 229.401 of this chapter). * * * * * UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10–K Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which registered Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act PO 00000 of items are not required unless expressly required by this form or the referenced disclosure requirements. * * * * * Sfmt 4702 report on this Form, four copies of the following: * * * * * * * * ■ 58. Amend Form 10–D (referenced in § 249.312 of this chapter) by: ■ a. Removing and reserving General Instruction D(2)(a); and ■ b. Revising General Instruction D(2)(d) to read as follows: Note: The text of Form 10–D does not, and this amendment will not, appear in the Code of Federal Regulations. E:\FR\FM\02NOP2.SGM 02NOP2 51046 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10–D ASSET–BACKED ISSUER DISTRIBUTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 GENERAL INSTRUCTIONS * * * * * (d) Exchange Act Rules 12b–23 (17 CFR 240.12b–23) (additional rules on incorporation by reference for reports filed pursuant to Sections 13 and 15(d) of the Act). * * * * * PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1934 59. The authority citation for part 270 continues to read in part as follows: ■ Authority: 15 U.S.C. 80a–1 et seq., 80a– 34(d), 80a–37, 80a–39, and Pub. L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. * * * * * ■ 60. Revise § 270.0–4 to read as follows: asabaliauskas on DSKBBXCHB2PROD with PROPOSALS § 270.0–4 Incorporation by reference. (a) Registration statements and reports. Except as provided by this section or in the appropriate form, information may be incorporated by reference in answer, or partial answer, to any item of a registration statement or report. Where an item requires a summary or outline of the provisions of any document, the summary or outline may incorporate by reference particular items, sections, or paragraphs of any exhibit and may be qualified in its entirety by such reference. (b) Financial information. Except as provided in the Commission’s rules, financial information required to be given in comparative form for two or more fiscal years or periods must not be incorporated by reference unless the information incorporated by reference includes the entire period for which the comparative data is given. In the financial statements, incorporating by reference, or cross-referencing to, information provided pursuant to the non-financial information disclosure requirements is not permitted unless otherwise specifically permitted or required by the Commission’s rules. (c) Exhibits. Any document or part thereof, including any financial statement or part thereof, filed with the Commission pursuant to any Act administered by the Commission may VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 be incorporated by reference as an exhibit to any registration statement, application, or report filed with the Commission by the same or any other person. If any modification has occurred in the text of any document incorporated by reference since the filing thereof, the registrant must file with the reference a statement containing the text of any such modification and the date thereof. (d) Hyperlinks. Include an active hyperlink to information incorporated into a registration statement, application, or report by reference if such information is publicly available on the Commission’s Electronic Data Gathering, Analysis and Retrieval System (‘‘EDGAR’’) at the time the registration statement, application, or report is filed. For hyperlinking to exhibits, please refer to the appropriate form. (e) General. Include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. For example, unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. § 270.8b–23 ■ § 270.8b–24 ■ [Removed and reserved]. 61. Remove and reserve § 270.8b–23. [Removed and reserved]. 62. Remove and reserve § 270.8b–24. § 270.8b–32 [Removed and reserved]. 63. Remove and reserve § 270.8b–32. * * * * * ■ PART 274—FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1934 64. The authority citation for part 274 continues to read in part as follows: ■ Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 78(o)(d), 80a–8, 80a– 26, 80a–29, and Pub. L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. * * * * * 65. Amend Form N–5 (referenced in § 274.5 of this chapter) by revising ■ PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 ‘‘Instructions as to Exhibits’’ to add a paragraph to read as follows: Note: The text of Form N–5 does not, and this amendment will not, appear in the Code of Federal Regulations. Form N–5 * * * * * INSTRUCTIONS AS TO EXHIBITS * * * * * Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * ■ 66. Amend Form N–1A (referenced in § 274.11A of this chapter) by: ■ a. Revising General Instruction D.2; and ■ b. Revising the Instruction to Item 28 to read as follows: Note: The text of Form N–1A does not, and this amendment will not, appear in the Code of Federal Regulations. Form N–1A * * * * * GENERAL INSTRUCTIONS * * * * * D. Incorporation by Reference * * * * * 2. General Requirements All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents); and rule 0–4 [17 CFR 270.0–4] (additional rules on incorporation by reference for Funds). * * * * * Item 28. Exhibits * * * * * Instruction Each exhibit identified in the exhibit index (other than an exhibit filed in eXtensible Business Reporting Language) must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. A Fund that is a Feeder Fund also must file a copy of all codes of ethics applicable to the Master Fund. * * * * * ■ 67. Amend Form N–2 (referenced in § 274.11a–1 of this chapter) by: ■ a. Revising General Instruction F; and ■ b. Revising the Instructions to Item 25.2 to add Instruction 4 to read as follows: Note: The text of Form N–2 does not, and this amendment will not, appear in the Code of Federal Regulations. Form N–2 * * * * * GENERAL INSTRUCTIONS asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * F. Incorporation by Reference Incorporation by reference permits a Registrant to include documents and exhibits filed previously with the Commission as part of the registration statement by making reference to where, and under what designation, these documents can be found in previous filings. A Registrant may incorporate all or part of the Statement of Additional Information (the ‘‘SAI’’) into the prospectus delivered to investors without physically delivering the SAI with the prospectus, so long as the SAI is available to investors upon request at no charge and any information or documents incorporated by reference into the SAI are provided along with the SAI, except to the extent provided by paragraph F.3 below. In general, a Registrant may incorporate by reference, in response to any item of Form N–2 not required to be included in the prospectus, any information contained elsewhere in the registration statement or in other statements, applications, or reports filed with the Commission. A Registrant may incorporate by reference into the prospectus or the SAI in response to Item 4.1 or 24 of this form the information contained in Form N– CSR [17 CFR 249.331 and 274.128] or any report to shareholders meeting the requirements of Section 30(e) of the 1940 Act [15 U.S.C. 80a–29(e)] and Rule 30e–1 [17 CFR 270.30e–1] thereunder (and a Registrant that has elected to be regulated as a business development company may so incorporate into Items 4.2, 8.6.c, or 24 of this form the information contained in its annual report under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.] (the ‘‘Exchange Act’’)), provided: VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 1. The material incorporated by reference is prepared in accordance with, and covers the periods specified by, this form. 2. The Registrant states in the prospectus or the SAI, at the place where the information required by Items 4.1, 4.2, 8.6.c, or 24 of this form would normally appear, that the information is incorporated by reference from a report to shareholders or a report on Form N– CSR. (The Registrant also may describe briefly, in either the prospectus, the SAI, or Part C of the registration statement (in response to Item 25.1) those portions of the report to shareholders or report on Form N–CSR that are not incorporated by reference and are not a part of the registration statement.) 3. The material incorporated by reference is provided with the prospectus and/or the SAI to each person to whom the prospectus and/or the SAI is sent or given, unless the person holds securities of the Registrant and otherwise has received a copy of the material. (The Registrant must state in the prospectus and/or the SAI that it will furnish, without charge, a copy of such material on request and provide the name, address, and telephone number of the person to contact.) All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents); and rule 0–4 [17 CFR 270.0–4] (additional rules on incorporation by reference for investment companies). * * * * * Item 25. Financial Statements and Exhibits * * * * * * * 2. Exhibits: * * * Instructions * * * * * 4. Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 51047 68. Amend Form N–3 (referenced in § 274.11b of this chapter) by: ■ a. Revising General Instruction G; and ■ b. Revising the Instructions to Item 29(b) to add Instruction 3 to read as follows: ■ Note: The text of Form N–3 does not, and this amendment will not, appear in the Code of Federal Regulations. Form N–3 * * * * * GENERAL INSTRUCTIONS * * * * * G. Incorporation by Reference A Registrant may, at its discretion, incorporate all or part of the Statement of Additional Information into the prospectus, without physically delivering the Statement of Additional Information to investors with the prospectus. But the Statement of Additional Information must be available to the investor upon request at no charge and any information or documents incorporated by reference into the Statement of Additional Information must be provided along with the Statement of Additional Information. In general, a Registrant may incorporate by reference, in the answer to any item of Form N–3 not required to be in the prospectus, any information elsewhere in the registration statement or in other statements, applications, or reports led with the Commission. Subject to these rules, a Registrant may incorporate by reference into the prospectus or the Statement of Additional Information in response to Items 4(a) or 28 of Form N–3 the information in Form N–CSR [17 CFR 249.331 and 274.128] or any report to contract owners meeting the requirements of Section 30(e) of the 1940 Act [15 U.S.C. 80a–29(e)] and Rule 30e–1 [17 CFR 270.30e–1] provided: 1. The material incorporated by reference is prepared in accordance with, and covers the periods specified by, this Form. 2. The Registrant states in the prospectus or the Statement of Additional Information, at the place where the information would normally appear, that the information is incorporated by reference from a report to security holders or a report on Form N–CSR. The Registrant may also describe, in either the prospectus, the Statement of Additional Information, or Part C of the Registration Statement (in response to Item 29(a)), any parts of the report to security holders or the report on Form N–CSR that are not E:\FR\FM\02NOP2.SGM 02NOP2 51048 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules incorporated by reference and are not a part of the Registration Statement. 3. The material incorporated by reference is provided with the prospectus or the Statement of Additional Information to each person to whom the prospectus or the Statement of Additional Information is given, unless the person holds securities of the Registrant and otherwise has received a copy of the material. However, Registrant must state in the prospectus or the Statement of Additional Information that it will furnish, without charge, another copy of such report on request and the name, address, and telephone number of the person to contact. All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents); and rule 0–4 [17 CFR 270.0–4] (additional rules on incorporation by reference for investment companies). * * * * * Item 29. Financial Statements and Exhibits * * * * * * * Form N–6 A Registrant may, at its discretion, incorporate all or part of the Statement of Additional Information into the prospectus, without physically delivering the Statement of Additional Information to investors with the prospectus. But the Statement of Additional Information must be available to the investor upon request at no charge and any information or documents incorporated by reference into the Statement of Additional Information must be provided along with the Statement of Additional Information. All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents); and rule 0–4 [17 CFR 270.0–4] (additional rules on incorporation by reference for investment companies). In general, a Registrant may incorporate by reference, in the answer to any item of Form N–4 not required to be in the prospectus, any information elsewhere in the registration statement or in other statements, applications, or reports led with the Commission. * * * * * * * asabaliauskas on DSKBBXCHB2PROD with PROPOSALS * * * * * 3. Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference, an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * ■ 69. Amend Form N–4 (referenced in § 274.11c of this chapter) by: ■ a. Revising General Instruction G; and ■ b. Revising the Instructions to Item 24(b) to add Instruction 3 to read as follows: Note: The text of Form N–4 does not, and this amendment will not, appear in the Code of Federal Regulations. Form N–4 * * GENERAL INSTRUCTIONS * * * VerDate Sep<11>2014 * * 20:05 Nov 01, 2017 * GENERAL INSTRUCTIONS * * * * * B. Filing and Use of Form N–6 * * * * * 4. What rules apply to the filing of a registration statement on Form N–6? * * * * * D. Incorporation by Reference * * * * * 2. General Requirements: All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); rule 303 of Regulation S–T [17 CFR 232.303] (specific requirements for electronically filed documents); and rule 0–4, [17 CFR 270.0–4] (additional rules on incorporation by reference for investment companies). * * * * * Item 26. Exhibits Note: The text of Form N–CSR does not, and this amendment will not, appear in the Code of Federal Regulations. * * * * * * * 3. Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * ■ 70. Amend Form N–6 (referenced in § 274.11d of this chapter) by: ■ a. Revising General Instruction D.2; and ■ b. Revising Item 26 to read as follows: Item 24. Financial Statements and Exhibits * * Subject to General Instruction D regarding incorporation by reference and rule 483 under the Securities Act [17 CFR 230.483], file the exhibits listed below as part of the registration statement. Letter or number the exhibits in the sequence indicated and file copies rather than originals, unless otherwise required by rule 483. Reflect any exhibit incorporated by reference in the list below and identify the previously filed document containing the incorporated material. Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. (a) * * * * * * * * ■ 71. Amend Form N–CSR (referenced in § 274.128 of this chapter) by: ■ a. Revising General Instruction D; and ■ b. Revising the Instruction to Item 12 to read as follows: Instructions * * Note: The text of Form N–6 does not, and this amendment will not, appear in the Code of Federal Regulations. * (b) Exhibits: * G. Incorporation by Reference Jkt 244001 * * * * * * (b) Exhibits: * * * Instructions: * PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 E:\FR\FM\02NOP2.SGM 02NOP2 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules Item 12. Exhibits. Form N–CSR * * * * * * * * * * GENERAL INSTRUCTIONS Instruction to Item 12. * Letter or number the exhibits in the sequence that they appear in this item. Each exhibit identified in the exhibit index must include an active link to an exhibit that is filed with the report or, if the exhibit is incorporated by reference an active hyperlink to the exhibit separately filed on EDGAR. If the report is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. * * * * * * * * * asabaliauskas on DSKBBXCHB2PROD with PROPOSALS D. Incorporation by Reference A registrant may incorporate by reference information required by Items 4, 5, and 12(a)(1). No other Items of the Form shall be answered by incorporating any information by reference. The information required by Items 4 and 5 may be incorporated by reference from the registrant’s definitive proxy statement (filed or required to be filed pursuant to Regulation 14A (17 CFR 240.14a–1 et seq.)) or definitive information statement (filed or to be filed pursuant to Regulation 14C (17 CFR 240.14c–1 et seq.)) involving the election of directors, if such definitive proxy statement or information statement is filed with the Commission not later than 120 days after the end of the fiscal year covered by an annual report on this Form. All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: Rule 303 of Regulation S–T (17 CFR 232.303) (specific requirements for electronically filed documents); Rule 12b–23 under the Exchange Act (17 CFR 240.12b–23) (additional rules on incorporation by reference for reports filed pursuant to Sections 13 and 15(d) of the Exchange Act); and Rule 0–4 (17 CFR 270.0–4) (additional rules on incorporation by reference for investment companies). * * * * * VerDate Sep<11>2014 20:05 Nov 01, 2017 Jkt 244001 PART 275—RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940 72. The authority citation for Part 275 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 80b–2(a)(11)(G), 80b– 2(a)(11)(H), 80b–2(a)(17), 80b–3, 80b–4, 80b– 4a, 80b–6(4), 80b–6a, and 80b–11, unless otherwise noted. * * * * * 73. Revise § 275.0–6 to read as follows: § 275.0–6 Incorporation by reference in applications. (a) Exhibits. Any document or part thereof, including any financial statement or part thereof, filed with the Commission pursuant to any Act administered by the Commission may be incorporated by reference as an exhibit to any application filed with the Commission by the same or any other person. If any modification has occurred PO 00000 Frm 00063 Fmt 4701 Sfmt 9990 51049 in the text of any document incorporated by reference since the filing thereof, the registrant must file with the reference a statement containing the text of any such modification and the date thereof. (b) General. Include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. For example, unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document. (c) Definition of Application. For purposes of this rule, an ‘‘application’’ means any application for an order of the Commission under the Act other than an application for registration as an investment adviser. By the Commission. Dated: October 11, 2017. Brent J. Fields, Secretary. [FR Doc. 2017–22374 Filed 11–1–17; 8:45 am] BILLING CODE 8011–01–P E:\FR\FM\02NOP2.SGM 02NOP2

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 211 (Thursday, November 2, 2017)]
[Proposed Rules]
[Pages 50988-51049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22374]

[[Page 50987]]

Vol. 82

Thursday,

No. 211

November 2, 2017

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 230, 232, et al.

FAST Act Modernization and Simplification of Regulation S-K; Proposed
Rule

Federal Register / Vol. 82 , No. 211 / Thursday, November 2, 2017 /
Proposed Rules

[[Page 50988]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 232, 239, 240, 249, 270, 274 and 275

[Release No. 33-10425; 34-81851; IA-4791; IC-32858; File No. S7-08-17]
RIN 3235-AM02

FAST Act Modernization and Simplification of Regulation S-K

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing amendments based on the recommendations made
in the staff's Report on Modernization and Simplification of Regulation
S-K, as required by Section 72003 of the Fixing America's Surface
Transportation Act. The proposed amendments are intended to modernize
and simplify certain disclosure requirements in Regulation S-K, and
related rules and forms, in a manner that reduces the costs and burdens
on registrants while continuing to provide all material information to
investors. The amendments are also intended to improve the readability
and navigability of disclosure documents and discourage repetition and
disclosure of immaterial information. To provide for a consistent set
of rules to govern incorporation by reference and hyperlinking, we are
also proposing parallel amendments to several rules and forms
applicable to investment companies and investment advisers, including
proposed amendments that would require certain investment company
filings to be submitted in HyperText Markup Language (``HTML'') format.

DATES: Comments should be received by January 2, 2018.

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

Electronic Comments

Use the Commission's Internet comment forms (http://www.sec.gov/rules/proposed.shtml);
Send an email to rule-comments@sec.gov. Please include
File Number S7-08-17 on the subject line; or
Use the Federal Rulemaking Portal (http://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 S7-08-17. This file number
should be included in 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 Web
site (http://www.sec.gov/rules/proposed.shtml). Comments also are
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Room 1580, 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. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's Web site. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Shehzad Niazi, Daniel Morris, or Angie
Kim, Office of Rulemaking, Division of Corporation Finance, at (202)
551-3430; Michael C. Pawluk or J. Matthew DeLesDernier, Investment
Company Rulemaking Office, Division of Investment Management, at (202)
551-6792; U.S. Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing to amend Items
10, 102, 202, 303, 401, 405, 407, 501, 503, 512, 601, and 1100 of
Regulation S-K under the Securities Act of 1933 (the ``Securities
Act'') and the Securities Exchange Act of 1934 (the ``Exchange Act'');
Rules 405, 411, and 491 of Regulation C under the Securities Act; Rules
11, 102, 105, 303, and 406 of Regulation S-T under the Securities Act
and Exchange Act; Forms S-1, S-3, S-6, S-11, N-14, S-4, F-1, F-3, F-4,
F-7, F-8, F-10, F-80, SF-1, and SF-3 under the Securities Act; Rules
12b-13, 12b-23, 14a-101 (Schedule 14A), and 16a-3 under the Exchange
Act; Forms 3, 4, 5, 8-A, 10, 20-F, 40-F, 8-K, 10-Q, 10-K, and 10-D
under the Exchange Act; Rule 0-4 under the Investment Company Act of
1940 (the ``Investment Company Act''); Forms N-1A, N-2, N-3, N-4, N-5,
and N-6 under the Investment Company Act and Securities Act; Form N-CSR
under the Investment Company Act and Exchange Act; and Rule 0-6 under
the Investment Advisers Act of 1940 (``Investment Advisers Act''). The
Commission is also proposing to add new Item 105 to Regulation S-K and
to remove Rule 12b-32 under the Exchange Act and Rules 8b-23, 8b-24,
and 8b-32 under the Investment Company Act.

Table of Contents

I. Introduction
A. Background
B. Overview of the Proposed Amendments
II. Proposed Amendments
A. Description of Property (Item 102)
B. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 303)
1. Year-to-Year Comparisons (Instruction 1 to Item 303(a))
2. Application to Foreign Private Issuers
C. Management, Security Holders and Corporate Governance
1. Directors, Executive Officers, Promoters, and Control Persons
(Item 401)
2. Compliance With Section 16(a) of the Exchange Act (Item 405)
3. Corporate Governance (Item 407)
D. Registration Statement and Prospectus Provisions
1. Outside Front Cover Page of the Prospectus (Item 501(b))
2. Risk Factors (Item 503(c))
3. Plan of Distribution (Item 508)
4. Undertakings (Item 512)
E. Exhibits
1. Description of Registrant's Securities (Item 601(b)(4))
2. Information Omitted From Exhibits (Item 601)
3. Material Contracts (Item 601(b)(10)(i))
4. Subsidiaries of the Registrant and Entity Identifiers (Item
601(b)(21)(i))
5. Application to Foreign Private Issuers
F. Incorporation by Reference
1. Item 10(d)
2. Securities Act Rule 411, Exchange Act Rule 12b-23 and Rule
12b-32 and Related Rules Under the Investment Company Act and
Investment Advisers Act
3. Forms
G. Manner of Delivery
1. Tagging Cover Page Data
2. Exhibit Hyperlinks and HTML Format for Investment Companies
H. General Request for Comment
III. Economic Analysis
A. Background
1. The Benefits of Information Disclosure
2. The Costs of Disclosure
B. Baseline
C. Economic Analysis of the Proposed Amendments: General
Assessment, Including Impact on Efficiency, Competition, and Capital
Formation
D. Economic Analysis of the Specific Amendments: Proposals That
Clarify and Update Existing Rules
1. Proposals That Clarify or Streamline a Rule's Requirements

[[Page 50989]]

2. Proposals To Update Rules To Account for Subsequent
Developments
E. Economic Analysis of the Specific Amendments: Proposals That
Simplify the Disclosure Process or Eliminate Disclosures
1. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 303)
2. Information Omitted From Exhibits (Item 601): Item 601(a)(5),
Item 601(a)(6), and Item 601(b)(10)(iv)
F. Economic Analysis of the Specific Amendments: Proposals That
Require More Disclosure or the Incorporation of New Technology
1. Description of Registrant's Securities (Item 601(b)(4))
2. Subsidiaries of the Registrant and Entity Identifiers (Item
601(b)(21))
3. Tagging Cover Page Data
4. Proposals for Additional Disclosure With Minimal Additional
Costs to Registrants
G. Economic Analysis of HTML and Hyperlinking Requirements of
Forms Under the Investment Company Act
IV. Paperwork Reduction Act
A. Background
B. Summary of the Proposed Amendments' Impact on Collection of
Information
1. Proposed Amendments Expected To Decrease Burdens
2. Proposed Amendments Expected To Increase Burdens
3. Proposed Amendments Not Expected to Meaningfully Affect
Burdens
C. Burden and Cost Estimates to the Proposed Amendments
1. Form 10-K and Form 10-Q; Schedule 14A and Schedule 14C
2. Form S-1, Form S-3, Form S-4, Form F-3, Form F-4, Form SF-1,
Form SF-3, Form 10, and Form 20-F
3. Form 8-A, Form 10-D, Form 40-F, Form F-7, Form F-8, Form F-
10, and Form F-80
4. Form S-6, Form N-1A, Form N-2, Form N-3, Form N-4, Form N-5,
Form N-6, Form N-14, and Form N-CSR
D. Request for Comment
V. Small Business Regulatory Enforcement Fairness Act
VI. Initial Regulatory Flexibility Act Analysis
A. Reasons for, and Objectives of, the Proposed Action
B. Legal Basis
C. Small Entities Subject to the Proposed Rules
D. Reporting, Recordkeeping, and Other Compliance Requirements
E. Duplicative, Overlapping, or Conflicting Federal Rules
F. Significant Alternatives
G. Request for Comment
VII. Statutory Authority and Text of Proposed Rule and Form
Amendments

I. Introduction

A. Background

We are proposing amendments to modernize and simplify certain
disclosure requirements in Regulation S-K and related rules and forms
to implement Section 72003 of the Fixing America's Surface
Transportation Act (the ``FAST Act'').\1\ As required by Section
72003(c) of the FAST Act, the staff published its Report on
Modernization and Simplification of Regulation S-K (the ``FAST Act
Report'') on November 23, 2016.\2\ Consistent with Section 72003, the
FAST Act Report provided ``specific and detailed recommendations on
modernizing and simplifying the requirements in Regulation S-K in a
manner that reduces the costs and burdens on companies while still
providing all material information'' and ``[recommendations] on ways to
improve the readability and navigability of disclosure and to
discourage repetition and the disclosure of immaterial information.''
\3\ Also consistent with Section 72003, the FAST Act Report reflected
consultations with the Investor Advisory Committee (``IAC'') and the
Advisory Committee on Small and Emerging Companies.
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\1\ Public Law No. 114-94, Sec. 72003, 129 Stat. 1312 (2015).
\2\ Report on Modernization and Simplification of Regulation S-K
(Nov. 23, 2016), available at https://www.sec.gov/reportspubs/sec-fast-act-report-2016.pdf.
\3\ See FAST Act Sec. 72003(c).
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This release proposes amendments based on the recommendations in
the FAST Act Report. The proposed amendments largely implement these
recommendations, as required by Section 72003(d) of the FAST Act.
However, in some cases, and as discussed in more detail below, we have
chosen to alter or supplement the staff's previously recommended
approach based on our consideration of the issues and the statutory
mandate.\4\ This release reflects perspectives developed during the
staff's broader review of the Commission's disclosure regime. As part
of that effort, the staff requested public input on how the disclosure
system could be improved,\5\ and the Commission issued a concept
release on the business and financial disclosure requirements in
Regulation S[dash]K (the ``Concept Release'').\6\
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\4\ The FAST Act Report presented recommendations for the
Commission's consideration. The FAST Act Report also noted that many
of the recommendations in the report were necessarily preliminary in
nature and that ongoing outreach and study would be necessary in
connection with any rulemaking to implement the recommendations. See
FAST Act Report, supra note 2, at n.15.
\5\ Comment letters related to this request are available at
https://www.sec.gov/spotlight/disclosure-effectiveness.shtml. We
refer to these letters throughout as ``Disclosure Effectiveness''
letters.
\6\ See Business and Financial Disclosure Required by Regulation
S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23916 (Apr. 22,
2016)].
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In developing the proposed amendments, we considered the comment
letters we received on the Concept Release; \7\ the prior staff study
of Regulation S-K (the ``S-K Study'') mandated by the Jumpstart Our
Business Startups Act (the ``JOBS Act''); \8\ the Commission's request
for comment on the requirements relating to management, security
holders, and corporate governance matters in Subpart 400 of Regulation
S[dash]K (the ``Regulation S[dash]K Subpart 400 Release''); \9\ and the
FAST Act Report.\10\ Throughout this release, we discuss these comments
as further context for the proposed amendments.\11\ The proposed
amendments also reflect the Commission's experience with Regulation
S[dash]K arising from the Division of Corporation Finance's disclosure
review program.
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\7\ Comment letters related to this request are available at
https://www.sec.gov/comments/s7-06-16/s70616.htm.
\8\ Public Law No. 112-106, Sec. 108, 126 Stat. 306 (2012). See
also Rule 12b-2 under the Exchange Act [17 CFR 240.12b-2] and Rule
405 under the Securities Act [17 CFR 230.405]. Section 108 of the
JOBS Act required the Commission to comprehensively evaluate its
disclosure requirements to determine how they could be updated to
modernize and simplify the registration process and reduce the costs
and other burdens associated with these requirements for emerging
growth companies (``EGCs''). The resulting recommendations are in
the staff's Report on Review of Disclosure Requirements in
Regulation S-K, available at https://www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf.
In connection with the S-K Study, we received public comments on
regulatory initiatives to be undertaken in response to the JOBS Act.
See Comments on SEC Regulatory Initiatives Under the JOBS Act: Title
I--Review of Regulation S-K, available at http://www.sec.gov/comments/jobs-title-i/reviewreg-sk/reviewreg-sk.shtml.
\9\ Request for Comment on Subpart 400 of Regulation S-K
Disclosure Requirements Relating to Management, Certain Security
Holders and Corporate Governance Matters, Release No. 33-10198 (Aug.
25, 2016) [81 FR 59927 (Aug. 31, 2016)]. Comment letters related to
this request are available at https://www.sec.gov/comments/s7-18-16/s71816.htm. We refer to these letters throughout as ``Subpart 400''
letters.
\10\ Comment letters related to the FAST Act Report are
available at https://www.sec.gov/comments/fast/fast.htm.
After the FAST Act Report was published, the staff updated the
IAC on the recommendations included in the report at its December 8,
2016 meeting. See Minutes of the IAC Meeting on December 8, 2016
available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac120816-minutes.htm. The staff did not discuss with
the IAC or the ACSEC potential modifications to those
recommendations as reflected in this release.
\11\ Unless otherwise indicated, comment letters cited in this
release are to the Concept Release.
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In this release, we focus on amendments to implement Section
72003(d) of the FAST Act. Accordingly, we are not at this time
proposing amendments that extend substantially

[[Page 50990]]

beyond the staff's recommendations in the FAST Act Report.\12\ We are
continuing to consider potential additional changes to our disclosure
regime in connection with recent proposing releases and requests for
comment.\13\ In addition, we are proposing parallel amendments to
several rules and forms applicable to investment companies and
investment advisers to provide for a consistent set of rules governing
incorporation by reference and hyperlinking, including proposed
amendments that would require certain investment company filings to be
submitted in HTML format.\14\
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\12\ As discussed in relevant sections below, some of the
proposed amendments in this release would apply to Form 20-F or Form
40-F. Form 20-F is the combined registration statement and annual
report form for foreign private issuers under the Exchange Act. It
also sets forth disclosure requirements for registration statements
filed by foreign private issuers under the Securities Act. Form 40-F
is the registration statement and annual report used by eligible
Canadian issuers under the Multijurisdictional Disclosure System.
While Section 72003 of the FAST Act is focused on Regulation S-K, we
are proposing to make corresponding changes to the disclosure
requirements applicable to foreign private issuers where Forms 20-F
and 40-F include provisions that are substantially similar to those
found in Regulation S-K.
\13\ See Request for Comment on Possible Changes to Industry
Guide 3 (Statistical Disclosure by Bank Holding Companies), Release
No. 33-10321 (Mar. 1, 2017) [82 FR 12757 (Mar. 7, 2017)]; Concept
Release, supra note 6; Regulation S-K Subpart 400 Release, supra
note 9; Disclosure Update and Simplification, Release No. 33-10110
(Jul. 13, 2016) [81 FR 51607 (Aug. 4, 2016)] (the ``Disclosure
Update and Simplification Proposing Release''); Amendments to
Smaller Reporting Company Definition, Release No. 33-10107 (Jun. 27,
2016) [81 FR 43130 (Jul. 1, 2016)]; and Modernization of Property
Disclosures for Mining Registrants, Release No. 33-10098 (Jun. 16,
2016) [81 FR 41651 (Jun. 27, 2016)] (the ``Modernization for Mining
Registrants Proposing Release'').
\14\ The Commission has adopted requirements for exhibit
hyperlinks and HTML format for operating companies. See Exhibit
Hyperlinks and HTML Format, Release No. 33-10322 (Mar. 1, 2017) [82
FR 14130 (Mar. 17, 2017)] (``Exhibit Hyperlinks Adopting Release'')
(adopting amendments to require registrants to hyperlink to each
exhibit listed in the exhibit index and, to enable the inclusion of
hyperlinks, requiring registrants to submit all such filings in HTML
format). Non-accelerated filers and smaller reporting companies
(``SRCs'') may continue to file in American Standard Code for
Information Interchange (``ASCII'') until September 1, 2018 and are
therefore not required to include exhibit hyperlinks until that
date.
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B. Overview of the Proposed Amendments

We are proposing amendments to several individual rules that would
update, streamline, or otherwise improve our well-established and
robust disclosure framework. These include proposed changes to:
Description of Property (Item 102);
Management's Discussion and Analysis (Item 303);
Directors, Executive Officers, Promoters, and Control
Persons (Item 401);
Compliance with Section 16(a) of the Exchange Act \15\
(Item 405);
---------------------------------------------------------------------------

\15\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

Outside Front Cover Page of the Prospectus (Item 501(b));
\16\
---------------------------------------------------------------------------

\16\ See proposed amendments to Item 501(b)(1), (b)(3) and
(b)(4).
---------------------------------------------------------------------------

Risk Factors (Item 503(c));
Plan of Distribution (Item 508); \17\
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\17\ Our proposals would amend Rule 405 and Rule 491.
---------------------------------------------------------------------------

Material Contracts (Item 601(b)(10)); and
Various rules related to incorporation by reference.
Other proposed amendments would update some of our rules to account
for developments since their adoption or last amendment. These include
proposed changes to Corporate Governance (Item 407), Outside Front
Cover Page of the Prospectus (Item 501(b)(10)), and Undertakings (Item
512). Some of the proposed amendments would simplify disclosure or the
disclosure process. These include proposed changes to Management's
Discussion and Analysis (Item 303(a)) that would allow for flexibility
in discussing historical periods and the addition of new subparagraphs
to Exhibits (Item 601) to permit omission of portions of exhibits that
do not contain material information.
Some of our proposed amendments would require additional disclosure
or incorporation of new technology. These include proposed changes to:
Outside Front Cover Page of the Prospectus (Item
501(b)(4));
Description of Registrant's Securities (Item 601(b)(4));
Subsidiaries of the Registrant (Item 601(b)(21)(i)); and
Various regulations and forms to require all of the
information on the cover pages of some Exchange Act forms to be tagged
in Inline XBRL format.
We discuss the proposed amendments generally in the order that each
Item appears in Regulation S-K; however, we have consolidated the
discussion of the rules and item requirements related to incorporation
by reference. We have also consolidated our discussion of rules
requiring the incorporation of new technology.

II. Proposed Amendments

A. Description of Property (Item 102)

Item 102 requires disclosure of the location and general character
of the principal plants, mines, and other materially important physical
properties of the registrant and its subsidiaries.\18\ Instruction 1 to
Item 102 states that registrants must disclose such information as
reasonably will inform investors as to the suitability, adequacy,
productive capacity, and extent of utilization of the facilities by the
registrant.\19\ Instruction 2 provides that, in determining whether
properties are material to an understanding of the registrant's
business taken as a whole, registrants should take into account both
quantitative and qualitative factors.\20\
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\18\ Item 102 of Regulation S-K [17 CFR 229.102].
\19\ Detailed descriptions of the physical characteristics of
individual properties or legal descriptions by metes and bounds are
not required. See Instruction 1 to Item 102 of Regulation S-K.
\20\ Disclosure specific to the mining, oil and gas, and real
estate industries is outside the scope of this release. Instructions
3, 5, and 7 apply to the mining industry. The Commission has
separately proposed revisions to the property disclosure
requirements for mining registrants. See Modernization for Mining
Registrants Proposing Release, supra note 13. Instructions 4, 6, and
8 apply to the oil and gas industry. The Commission considered
disclosure specific to the oil and gas industry in 2008. See
Modernization of Oil and Gas Reporting, Release No. 33-8995 (Dec.
31, 2008) [74 FR 2158 (Jan. 14, 2009)]. Instruction 9 applies to the
real estate industry.
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Currently, Item 102 specifies disclosure of ``principal'' plants,
mines, and other ``materially important'' physical properties. The
staff has observed, however, that the item may elicit disclosure that
is not material.\21\ For example, some registrants--such as those in
the services or information technology industry--may not have material
physical properties, and accordingly, these registrants tend to
disclose information about their corporate headquarters, office space,
and other facilities in response to this item. To address this concern,
in the FAST Act Report, the staff recommended that the Commission
consider revising Item 102 to require a description of property only to
the extent that physical properties are material to the registrant's
business.\22\
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\21\ See FAST Act Report, supra note 2, at Recommendation B.1.
See also Concept Release, supra note 6, at Section IV.A.6.b and SEC
Staff's Report of the Task Force on Disclosure Simplification (Mar.
5, 1996) available at https://www.sec.gov/news/studies/smpl.htm.
\22\ FAST Act Report, supra note 2, at Recommendation B.1.
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Similarly, several commenters stated that Item 102 is not relevant
to all registrants or can result in immaterial disclosure.\23\ Two of
these commenters

[[Page 50991]]

noted that, if material to a registrant's business, Item 303,
Management's Discussion and Analysis of Financial Condition and Results
of Operations (``MD&A''),\24\ would require a discussion of the
importance of a property or facility and, in these instances, Item 102
may result in duplicative disclosure.\25\
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\23\ See, e.g., Letters from Ernst & Young (Sept. 11, 2012) [S-K
Study letter] (``Ernst & Young 1''); U.S. Chamber of Commerce (July
29, 2014) [Disclosure Effectiveness letter] (``Chamber 1''); Society
of Corporate Secretaries and Governance Professionals (Sept.10,
2014) [Disclosure Effectiveness letter] (``Society of Corporate
Secretaries''); Shearman & Sterling LLP (Nov. 26, 2014) [Disclosure
Effectiveness letter] (``Shearman 1'') (stating that disclosure of
physical properties does not, in most cases, provide investors
meaningful information, particularly for registrants not engaged in
manufacturing); Allstate Insurance Company (July 1, 2016)
(``Allstate''); Fenwick West LLP (Aug. 1, 2016) (``Fenwick''); U.S.
Chamber of Commerce (July 20, 2016) (``Chamber 2''); Corporate
Governance Coalition for Investor Value (July 20, 2016) (``CGCIV'');
Securities Industry and Financial Markets Association (July 21,
2016) (``SIFMA''); Ernst & Young (July 21, 2016) (``Ernst &Young
3''); and Davis Polk & Wardwell LLP (July 22, 2016) (``Davis Polk
1'').
\24\ 17 CFR 229.303.
\25\ See Letters from Chamber 1 and Society of Corporate
Secretaries.
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A number of commenters also supported revising Item 102 to be more
principles-based or require disclosure only when property is
material.\26\ One of these commenters asserted that the lack of a
materiality overlay in Instruction 2 to Item 102 results in immaterial
disclosure.\27\ Another commenter noted different triggers for
disclosure in Item 102, such as the item's reference to ``materially
important'' physical properties and ``major'' encumbrance.\28\ This
commenter suggested harmonizing these and similarly varied formulations
to lessen ambiguity in their application.\29\
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\26\ See, e.g., Letters from Allstate; National Association of
Real Estate Investment Trusts (July 21, 2016); Fenwick; Davis Polk
1; FedEx Corporation (July 21, 2016) (``FedEx''); Chamber 2; and
CGCIV (both the Chamber 2 and CGCIV letters recommended eliminating
this disclosure requirement except to the extent property disclosure
is material or is necessary to make other disclosures not misleading
and stated that, if this disclosure requirement is retained, it
should not be expanded and the Commission should clarify that for
registrants who do not have material physical properties, disclosure
about their corporate headquarters, office space, and other
facilities is optional, not required).
\27\ See Letter from Fenwick.
\28\ See Letter from American Bar Association (Mar. 6, 2015)
[Disclosure Effectiveness letter] (``ABA'').
\29\ Id.
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A few commenters, however, suggested retaining this item in its
current form,\30\ with one commenter noting the importance of this
disclosure for mining companies.\31\ Additionally, two commenters
recommended expanding the item to include additional disclosure.\32\
One of these commenters recommended disclosure of risks resulting from
the potential lack of availability and rising cost of properties.\33\
The other commenter recommended property disclosure specific to the
manufacturing industry, including manufacturing locations that promote
and retain jobs within the United States. This commenter stated that
enhanced disclosures would inform investors about the benefits of
manufacturing in the United States.\34\
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\30\ See, e.g., Letters from US SIF: The Forum for Sustainable
and Responsible Investment (Sept., 18, 2014) [Disclosure
Effectiveness letter] (``US SIF 1''); US SIF: The Forum for
Sustainable and Responsible Investment (July 14, 2016) (``US SIF
2''); Elise J. Bean (July 6, 2016) (``E. Bean''); and CFA Institute
(Oct. 6, 2016) (``CFA Institute'').
\31\ See Letter from US SIF 2.
\32\ See Letters from Stephen P. Percoco (July 24, 2016) (``S.
Percoco'') and Sen. Feinstein, et al. (Feb. 27, 2017) (``Sen.
Feinstein, et al.'').
\33\ See Letter from S. Percoco.
\34\ See Letter from Sen. Feinstein, et al.
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Consistent with several commenters' suggestions and the staff's
recommendation in the FAST Act report, we are proposing to revise Item
102 to emphasize materiality. While the FAST Act Report recommended
amending Item 102 to require disclosure only to the extent physical
properties are material to the registrant's business, our proposals
would require this disclosure to the extent material to the registrant.
Our proposal is intended to encompass properties that are material to
the registrant, which would include those properties that are material
to the registrant's business.\35\ We are also proposing to clarify that
the disclosure required under Item 102 should focus on physical
properties that are material to the registrant and may be provided on a
collective basis, if appropriate.
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\35\ We believe this approach is clearer and does not
inadvertently omit disclosures that would be material to the
registrant, but not its ongoing business, for example properties
that had value that was material to the registrant but that were no
longer important to its operations.
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As suggested by one commenter, we are also proposing to harmonize
the various non-industry-specific triggers for disclosure in Item
102.\36\ For example, we are proposing to replace the references to
``major'' encumbrances and ``materially important'' physical properties
in Item 102 with references to a materiality threshold. By using a
consistent materiality threshold, we intend to facilitate application
of the proposed amendments. In light of the particular significance of
this disclosure for registrants in the mining, real estate, and oil and
gas industries, we are not proposing to modify any of the instructions
of Item 102 specific to those industries in this release.\37\
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\36\ See Letter from ABA.
\37\ For example, Instruction 3 of Item 102 refers to ``major
significance'' and is specific to the mining industry. The
Modernization for Mining Registrants Proposing Release proposes to
eliminate this instruction. See supra note 13.
---------------------------------------------------------------------------

In the FAST Act Report, the staff also recommended that the
Commission consider combining the description of material physical
properties with the description of business in Item 101(c) of
Regulation S-K.\38\ A number of commenters on the Concept Release also
recommended incorporating Item 102 into the broader description of
business disclosure requirements in Item 101.\39\ Several of these
commenters recommended revising Item 101 to require broad disclosure of
a registrant's resources or assets, whether physical or otherwise, that
are critical to a registrant's business.\40\ One of these commenters
stated that the specific requirements of Item 102 are obsolete, but
that a description of physical properties in Item 101 would remain
relevant to certain types of registrants.\41\
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\38\ Item 101(c) of Regulation S-K [17 CFR 229.101(c)]. See FAST
Act Report, supra note 2, at Recommendation B.1.
\39\ See, e.g., Letters from Ernst & Young 3; SIFMA; New York
State Society of Certified Public Accountants (July 19, 2016)
(``NYSSCPA''); Davis Polk 1; General Motors Company (Sept. 30, 2016)
(``General Motors''); and Financial Executives International (Oct.
3, 2016) (``Financial Executives International'').
\40\ See Letters from Ernst & Young 3; Davis Polk 1; General
Motors; and Financial Executives International.
\41\ See Letter from Davis Polk 1.
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We have considered the recommendations of the staff and commenters
but are not proposing to combine Item 102 and Item 101. We believe that
any effort to combine these items should follow a broader evaluation of
how the disclosure should address material core assets, whether
physical or otherwise, including material resources such as human
capital or intellectual property. Such a broader inquiry was not
included in the FAST Act Report and is therefore outside the scope of
this release.
Request for Comment
1. Should we revise Item 102 to clarify that a description of
property is required only to the extent that physical properties are
material to the registrant and may be provided on a collective basis,
if appropriate, as proposed? Under what circumstances is the
flexibility to provide property disclosure on a collective basis useful
(e.g., information about the percentage of material properties within
and outside the United States)?
2. Should we harmonize non-industry-specific disclosure thresholds
by replacing them with a materiality threshold as proposed?
3. The S-K Study recommended that, for businesses that have
material properties, disclosure requirements

[[Page 50992]]

could be refocused on material facts about those properties that would
inform investors about the significance of the property to the
business, including uncertainties in connection with these
properties.\42\ Should Item 102 require additional disclosure about
material properties, including uncertainties such as information about
properties that are located near designated areas where natural
disasters are more likely to occur? If so, what should be required and
why? Would this elicit more meaningful disclosure or would this
duplicate disclosure in MD&A?
---------------------------------------------------------------------------

\42\ See S-K Study at pp. 99-100 (recommending that ``[f]or
businesses that do have properties that are material, disclosure
requirements could be refocused on material facts about those
properties that would inform investors about the significance of the
property to the business and any trends or uncertainties in
connection with that property, rather than requiring a list of
locations, capacity and ownership. Changes in the way that
businesses operate may also make other disclosures relevant that are
not expressly addressed under current requirements. For example,
requirements could be more specific as to additional disclosure that
would be necessary where a business relies heavily on intellectual
property owned by a third party or relies on service agreements with
third parties to perform necessary business functions.'').
---------------------------------------------------------------------------

B. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Item 303) 43
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\43\ After consideration of the staff's recommendation C.2. in
the FAST Act Report, we are not, proposing to eliminate or revise
the table of contractual obligations. See FAST Act Report, supra
note 2, at n.15. See also letter from Jack Ciesielski (Dec. 12,
2016) [FAST Act Letter] (opposing the staff's recommendation to
delete or revise the table of contractual obligations).
---------------------------------------------------------------------------

1. Year-to-Year Comparisons (Instruction 1 to Item 303(a))
Item 303(a) requires registrants to discuss their financial
condition, changes in financial condition, and results of
operations.\44\ Instruction 1 to Item 303(a) states that the discussion
and analysis shall be of the financial statements and other statistical
data that the registrant believes will enhance a reader's understanding
of its financial condition, changes in financial condition, and results
of operations. This instruction also provides that, generally, the
discussion shall cover the three-year period covered by the financial
statements and either use year-to-year comparisons or any other formats
that in the registrant's judgment would enhance a reader's
understanding. The instruction states that reference to the five-year
selected financial data may be necessary where trend information is
relevant.
---------------------------------------------------------------------------

\44\ Item 303(a) of Regulation S-K [17 CFR 229.303(a)].
---------------------------------------------------------------------------

In the FAST Act Report, the staff recommended that we consider
revising Item 303(a) to clarify that a registrant need only provide a
period-to-period comparison for the two most recent fiscal years
covered by the financial statements and may hyperlink to the prior
year's annual report for the earlier of the year-to-year
comparisons.\45\ Many commenters on the Concept Release recommended
modifying Item 303 to reduce duplicative disclosure, although these
commenters recommended simply eliminating the earlier of the year-to-
year comparisons.\46\ A number of these commenters stated that this
discussion is readily available in a registrant's prior year annual
report on EDGAR.\47\ Two of these commenters stated that repetition of
the earlier of the year-to-year comparisons could distract investors
from new, material information and result in confusion.\48\ A few of
these commenters recommended requiring the earlier of the year-to-year
comparisons only if there is a significant trend that is discernible
through a multiple year-to-year comparison \49\ or if prior results
have been restated.\50\
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\45\ See FAST Act Report, supra note 2, at Recommendation C.1.
\46\ See, e.g., Letters from Ernst & Young 1 (stating that the
existing requirements in Item 303 should be sufficient to result in
a comprehensive discussion of a three-year trend without a year-to-
year comparison); Chamber 1; Society of Corporate Secretaries (also
stating that the existing requirements in Item 303 are sufficient to
elicit a discussion of trends over the relevant three-year period,
if such a trend exists and is material); IBM Corporation (Aug. 7,
2014) [Disclosure Effectiveness letter]; Arthur J. Radin (May 29,
2015) [Disclosure Effectiveness letter] (``A. Radin 1''); Arthur J.
Radin (July 5, 2016) (``A. Radin 2''); UnitedHealth Group Inc. (July
21, 2016) (``United Health''); SIFMA; Ernst & Young (Nov. 20, 2015)
[Disclosure Effectiveness letter] (``Ernst &Young 2''); Ernst &
Young 3; PNC Financial Services Group (July 21, 2016) (``PNC'');
Investment Program Association (July 21, 2016) (``Investment Program
Association''); Prologis Inc. (July 21, 2016) (``Prologis'');
Allstate; Davis Polk 1; S. Percoco; Fenwick; NYSSCPA; Institute of
Management Accountants; Chamber 2; FedEx; CGCIV; Northrop Grumman
Corporation (Sept. 27, 2016); General Motors; and Financial
Executives International.
\47\ See, e.g., Letters from A. Radin 1 and A. Radin 2; Ernst
&Young 3; PNC; Prologis; Allstate; Fenwick; NYSSCPA; Chamber 2;
FedEx; CGCIV; Investment Program Association; General Motors; and
Financial Executives International.
\48\ See Letters from Chamber 1; Chamber 2; and CGCIV.
\49\ See Letters from SIFMA and PNC.
\50\ See Letter from S. Percoco.
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Some of the commenters who suggested eliminating the earlier of the
year-to-year comparisons recommended allowing registrants to hyperlink
to the filing with the earlier of the year-to-year comparisons.\51\ One
commenter opposed a requirement to hyperlink to the prior filing,
stating that EDGAR is sufficiently user-friendly for investors to
readily obtain the relevant report.\52\ Another commenter, however,
disagreed with eliminating the requirement to include the earlier of
the year-to-year comparisons stating that this would require investors
to look for the information elsewhere.\53\
---------------------------------------------------------------------------

\51\ See, e.g., Letters from United Health; Investment Program
Association; Allstate; and General Motors.
\52\ See Letter from Fenwick.
\53\ See Letters from CFA Institute (Nov. 12, 2014 [Disclosure
Effectiveness letter] and Oct. 6, 2016).
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We are proposing to amend Item 303 to eliminate discussion of the
earliest year in some situations.\54\ Under the amendments we propose
today, when financial statements included in a filing cover three
years, discussion about the earliest year would not be required if (i)
that discussion is not material to an understanding of the registrant's
financial condition, changes in financial condition, and results of
operations, and (ii) the registrant has filed its prior year Form 10-K
\55\ on EDGAR containing MD&A of the earliest of the three years
included in the financial statements of the current filing. By allowing
registrants to eliminate MD&A disclosure about the earliest year in
these situations, our proposals are intended to discourage repetition
of disclosure that is no longer material, which we believe would
further our mandate under the FAST Act to modernize and simplify
Regulation S-K in a manner that reduces costs and burdens on companies
while still providing all material information.
---------------------------------------------------------------------------

\54\ Our proposed amendments to Item 303(a)(3) would not affect
SRCs, as SRCs may limit their disclosure to the two-year period
covered by their financial statements. See Instruction 1 to Item
303(a) of Regulation S-K. See also Rule 12b-2 under the Exchange Act
and Rule 405 under the Securities Act.
Similarly, our proposed amendments would not affect EGCs that
provide two years of audited financial statements. EGCs are only
required to provide two years of audited financial statements in an
initial public offering of common equity securities and may limit
their MD&A to only those audited periods presented in the financial
statements. Public Law 112-106, Sec. 102(b)-(c), 126 Stat. 306
(2012). See also Instruction 1 to Item 303(a) of Regulation S-K.
\55\ 17 CFR 249.310.
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Our proposed amendments to Item 303(a) are consistent with our
existing interpretive guidance on MD&A. In the 2003 MD&A Interpretive
Release, the Commission stated that, in preparing MD&A, companies
should evaluate issues presented in previous periods and consider
reducing or omitting discussion of those that may no longer be material
or helpful, or revise discussions where a revision would make the
continuing relevance of an issue more apparent.\56\ The Commission

[[Page 50993]]

also encouraged companies and management to take a ``fresh look'' at
MD&A with a view to enhancing its quality.\57\ The Commission observed
that the effectiveness of MD&A decreases with the accumulation of
unnecessary detail or duplicative or uninformative disclosure that
obscures material information.\58\ In furtherance of this prior
interpretive guidance, our proposals are intended to encourage
companies to re-evaluate disclosures in their prior year MD&A and take
a ``fresh look'' to determine whether such disclosure remains material.
---------------------------------------------------------------------------

\56\ See Commission Guidance Regarding Management's Discussion
and Analysis of Financial Condition and Results of Operation,
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)]
(``2003 MD&A Interpretive Release'').
\57\ Id.
\58\ Id. See also Basic, Inc., v. Levinson, 485 U.S. 224 (1998)
at 231 quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438
(1976) at 448-449.
---------------------------------------------------------------------------

To this end, we are not proposing the staff's recommendation in the
FAST Act Report to hyperlink to the prior year's annual report for the
earlier of the year-to-year comparison. We believe that encouraging
companies to take a ``fresh look'' at their prior year MD&A to
determine whether it remains material and eliminating disclosure of the
earliest of the three years when specified conditions are met, rather
than hyperlinking to disclosure that may no longer be material, would
more effectively achieve our FAST Act mandate to reduce the costs and
burdens on companies while continuing to provide all material
information.\59\
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\59\ We also are mindful that a number of registrants with
segments or different lines of business may present their MD&A by
segment or line of business. In these instances, numerous hyperlinks
in MD&A may fragment readability.
---------------------------------------------------------------------------

Our proposals would also eliminate the reference to five-year
selected financial data in Instruction 1 to Item 303(a). Instruction 1
provides that, where trend information is relevant, reference to the
five-year selected financial data in Item 301 may be necessary. Because
disclosure requirements for liquidity, capital resources, and results
of operations already require trend disclosure,\60\ we are proposing to
simplify Instruction 1 by eliminating the reference to trend
information. This proposed amendment is intended to eliminate
duplication and is not intended to discourage registrants from
providing trend disclosure in MD&A.
---------------------------------------------------------------------------

\60\ See Item 303(a)(1), 303(a)(2)(ii) and 303(a)(3)(ii) of
Regulation S-K [17 CFR 229.303(a)(1), (a)(2)(ii), (a)(3)(ii)].
---------------------------------------------------------------------------

We are also proposing to simplify Instruction 1 to Item 303(a) to
emphasize that registrants may use any presentation that, in the
registrant's judgment, would enhance a reader's understanding.
Instruction 1 currently specifies that the discussion cover the three-
year period covered by the financial statements and use year-to-year
comparisons or any other format that, in the registrant's judgment,
would enhance a reader's understanding. Although the staff has observed
that almost all registrants provide year-to-year comparisons,\61\ we
believe that registrants may, in some cases, determine that a narrative
discussion for some or all of the years in the three-year period is a
more appropriate format. For instance, in a situation where some
information about the earliest year in a three-year period is needed
because it remains material to an understanding of the registrant's
financial condition, a registrant may decide that narrative disclosure
about the earliest year and a year-to-year comparison for the two most
recent years in the three-year period is appropriate. The proposed
amendments underscore our intent to allow registrants to tailor the
presentation of their disclosure to reflect their varying
circumstances, provided that registrants continue to disclose the
information required by Item 303.\62\
---------------------------------------------------------------------------

\61\ See Concept Release, supra note 6, at n.350 and
accompanying text.
\62\ See 2003 MD&A Interpretive Release, supra note 53.
---------------------------------------------------------------------------

Request for Comment
4. Should we revise Item 303 as proposed?
5. Should we expand the proposal, with similar conditions, to other
forms such as Form S[dash]1 \63\ or Form 8-K? \64\
---------------------------------------------------------------------------

\63\ 17 CFR 239.11.
\64\ 17 CFR 249.308.
---------------------------------------------------------------------------

6. Instead of allowing registrants to eliminate the earliest of the
three years of MD&A in some situations, should we retain the earliest
year requirement and instead amend Item 303 to allow registrants to
hyperlink to the prior year's annual report for that disclosure in lieu
of repeating the disclosure in the current year's report?
7. Should we include additional conditions on allowing registrants
to exclude the earliest of the three years or provide guidance on when
a discussion of the earliest of the three years would be material to an
understanding of the registrant's financial condition, changes in
financial condition, and results of operations? For example, should we
not allow registrants to exclude discussion of the earliest year if
there has been a material change to either of the two earlier years due
to a restatement or a retrospective adoption of a new accounting
principle?
8. Should we revise Instruction 1 to Item 303(a) as proposed to
eliminate the reference to year-to-year comparisons? Would eliminating
that reference encourage registrants to use a different presentation?
Alternatively, should we retain the references to year-to-year
comparisons and revise the instruction to identify specific
alternatives to year-to-year comparisons? If so, what alternatives
should we include?
9. Should we eliminate the reference to five-year selected
financial data in Instruction 1 to Item 303(a) as proposed? Would there
be a significant impact on the total mix of information available?
Would eliminating this reference discourage registrants from providing
trend disclosure in their MD&A?
2. Application to Foreign Private Issuers
The disclosure requirements for Item 5 of Form 20-F \65\ (Operating
and Financial Review and Prospects) are substantively comparable to the
MD&A requirements under Item 303 of Regulation S-K.\66\ To maintain a
consistent approach to MD&A for domestic registrants and foreign
private issuers, we are proposing changes to Form 20-F that conform to
our proposed amendments to Instruction 1 to Item 303(a). Accordingly,
our proposals would amend the instructions to Item 5 of Form 20-F to
provide that, when financial statements included in a filing cover
three years, discussion about the earliest year would not be required
if (i) that discussion is not material to an understanding of the
registrant's financial condition, changes in financial condition, and
results of operations and (ii) the registrant has filed its prior year
Form 20-F on EDGAR containing Item 5 disclosure of the earliest of the
three years included in the financial statements of the current filing.
Similar to our proposals for Item 303, we are proposing to amend the
instructions to Item 5 of Form 20-F to emphasize that registrants may
use any presentation that, in the registrant's judgment, would enhance
a reader's understanding.
---------------------------------------------------------------------------

\65\ 17 CFR 249.220f.
\66\ When the Commission revised the wording of Item 5 of Form
20-F in 1999, the adopting release noted that the requirements
correspond with Item 303 of Regulation S-K. See International
Disclosure Standards, Release No. 33-7745 (Sept. 28, 1999) [64 FR
53900 (Oct. 5, 1999)], at 53904.
---------------------------------------------------------------------------

We are not proposing similar changes to Form 40-F.\67\ Form 40-F
generally permits Canadian issuers to use Canadian disclosure documents
to satisfy the Commission's registration and disclosure requirements.
As a result, the MD&A contained in Form

[[Page 50994]]

40-F is largely prepared in accordance with Canadian disclosure
standards.
---------------------------------------------------------------------------

\67\ 17 CFR 249.240f.
---------------------------------------------------------------------------

Request for Comment
10. Should we make corresponding changes to the instructions to
Item 5 in Form 20-F as proposed? Why or why not? Are there any unique
considerations with respect to foreign private issuers in this context?
11. Should we include additional conditions on allowing registrants
to exclude the earliest of the three years or provide guidance on when
a discussion of the earliest of the three years would be material to an
understanding of the registrant's financial condition, changes in
financial condition, and results of operations when providing Item 5
disclosure on Form 20-F? For example, should we not allow registrants
to exclude discussion of the earliest year if there has been a material
change to either of the two earlier years due to a restatement or a
retrospective adoption of a new accounting principle?
12. Should we make corresponding changes to Form 40-F? Why or why
not?
13. Would the proposed amendments conflict with home-country
requirements in some jurisdictions? If so, please explain.

C. Management, Security Holders and Corporate Governance

1. Directors, Executive Officers, Promoters, and Control Persons (Item
401)
Item 401 \68\ requires disclosure of identifying and background
information about a registrant's directors, executive officers, and
significant employees.\69\ The information required by Item 401 must be
included in several of the Commission's disclosure forms, including
Part III of an annual report on Form 10-K. General Instruction G of
Form 10-K allows Part III disclosure to be incorporated into the Form
10-K by reference to the registrant's definitive proxy or information
statement.\70\
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\68\ 17 CFR 229.401.
\69\ Item 401 of Regulation S-K [17 CFR 229.401] was adopted in
1982 as part of the Commission's integrated disclosure initiative,
although similar requirements can be traced back to Schedule A of
the Securities Act. See Adoption of Integrated Disclosure System,
Release No. 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)]
(the ``Integrated Disclosure System Adopting Release''). See also
Securities Act, Schedule A, Paragraph 4 [15 U.S.C. 77aa(4)].
\70\ General Instruction G.3 allows the information required by
Item 401, along with other items required by Part III of Form 10-K,
to be incorporated by reference from the registrant's proxy
statement if it is filed with the Commission within 120 days after
the end of the fiscal year covered by the Form 10-K.
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As an alternative to incorporating all of the Part III disclosure
by reference to a definitive proxy or information statement,
Instruction 3 to Item 401(b) allows disclosure of information about
executive officers required under Item 401 to be included in Part I of
Form 10-K. If a registrant elects to follow this instruction, it is not
required to repeat that information in its definitive proxy or
information statement.
This instruction was introduced in 1978, when the executive officer
and director disclosure requirements were moved from separate parts of
Form 10-K into what was then Item 3 of Regulation S-K.\71\ The
instruction was intended to allow registrants to continue the practice
of disclosing information about their executives in Form 10-K while
incorporating disclosure about directors and other matters by reference
to their definitive proxy or information statement.\72\
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\71\ See Uniform and Integrated Reporting Requirements, Release
No. 33-5949 (July 28, 1978) [43 FR 34402 (Aug. 3, 1978)].
\72\ Id. At the time, Part I of Form 10-K required disclosure
regarding executive officers of the registrant and Part II required
disclosure about directors. Registrants could exclude the Part II
information if it would be included in the registrant's proxy
statement.
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As the staff observed in the FAST Act Report, the instruction's
location may cause confusion because it is included under paragraph
(b), despite the fact that other paragraphs of Item 401 also require
disclosure about executive officers.\73\ Although Instruction 3 refers
to ``this Item'' (rather than to paragraph (b) narrowly), the staff
issued interpretive guidance stating that disclosure of the business
experience of executive officers pursuant to Item 401(e) need not be
duplicated in proxy statements if it is already presented in Part I of
Form 10[dash]K.\74\
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\73\ FAST Act Report, supra note 2, at Recommendation D.1.
\74\ See Regulation S-K Compliance and Disclosure Interpretation
116.02, available at https://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm (last updated July 26, 2016). General Instruction G
to Form 10-K also refers generally to the ``information regarding
executive officers required by Item 401'' when discussing the
accommodation provided in Instruction 3 to Item 401(b).
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To eliminate any confusion arising from the current location of the
instruction, we are proposing to clarify the instruction by moving it
from Item 401(b) and making it a general instruction to Item 401. The
amended instruction is intended to clarify its application to any
disclosure about executive officers required by Item 401. We are also
proposing to revise the required caption for the disclosure if it is
included in Part I of Form 10-K to reflect a ``plain English''
approach. The required caption would be ``Information about our
Executive Officers'' instead of ``Executive officers of the
registrant.''
Request for Comment
14. Should we amend Instruction 3 to Item 401(b) as proposed?
15. The proposed instruction would apply to all of the disclosure
about executive officers required by Item 401. Should we limit this
instruction to only certain paragraphs of Item 401, such as paragraphs
(b) and (e) but exclude paragraph (f)? \75\
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\75\ Item 401(b) (Identification of executive officers); Item
401(e) (Business experience) and Item 401(f) (Involvement in certain
legal proceedings).
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16. Where a registrant relies on General Instruction G to forward
incorporate by reference to its definitive proxy or information
statement, is there other Part III disclosure about executive officers
that we should specify need not be duplicated in the proxy or
information statement if it is already presented in Part I of Form 10-
K? For example, should we specify that disclosure about transactions
with executive officers pursuant to Item 404 does not need to be
duplicated in the proxy or information statement if it is already
disclosed in Part I of Form 10-K?
17. Instead of clarifying how Instruction 3 to Item 401(b) applies,
should we require disclosure about executive officers to be included in
a registrant's Form 10-K filing, so that it is easier to locate? \76\
Alternatively, should we require all Item 401 disclosure to be included
in a registrant's proxy or information statement instead of its Form
10-K if the registrant is required to file a proxy or information
statement? \77\
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\76\ See Letter from Davis Polk (Oct. 31, 2016) [Subpart 400
letter] (``Davis Polk 2'') (stating that requiring disclosure about
executive officers in Form 10-K would make it easier to find and
would be more appropriate because shareholders ``are not generally
asked to vote on matters related to a registrant's executive
officers other than with respect to executive compensation, and that
information is provided in the proxy statement'').
\77\ See Letter from Ernst & Young LLP (Nov. 30, 2016) [Subpart
400 letter] (recommending that all Item 401 disclosure be required
in a registrant's proxy or information statement because splitting
that disclosure is ``not conducive to investors assessing the
diversity and complementary mix of experience of the board in
conjunction with that of executive officers'').
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2. Compliance With Section 16(a) of the Exchange Act (Item 405)
Section 16(a) of the Exchange Act requires officers, directors, and
specified types of security holders to report their beneficial
ownership of a registrant's equity securities using forms

[[Page 50995]]

prescribed by the Commission.\78\ Item 405 \79\ requires registrants to
disclose each reporting person \80\ who failed to file on a timely
basis Section 16 reports during the most recent fiscal year or prior
fiscal years.\81\ The disclosure is required under the caption
``Section 16(a) Beneficial Ownership Reporting Compliance.'' Rule 16a-
3(e) requires reporting persons to furnish a duplicate of those Section
16 reports to the registrant.\82\ Item 405(a) states that registrants
shall provide the required disclosure based solely on a review of such
furnished reports and any written representation provided by such
persons that no Form 5 is required.\83\
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\78\ See Form 3, Form 4, and Form 5.
\79\ 17 CFR 229.405.
\80\ Item 405(a)(1) of Regulation S-K [17 CFR 229.405(a)(1)]
defines a ``reporting person'' as ``each person who, at any time
during the fiscal year, was a director, officer, beneficial owner of
more than ten percent of any class of equity securities of the
registrant registered pursuant to Section 12 of the Exchange Act, or
any other person subject to Section 16 of the Exchange Act with
respect to the registrant because of the requirements of Section 30
of the Investment Company Act.''
\81\ Item 405 was initially proposed in 1988 in an attempt to
reduce the high delinquency rate for Section 16 reports. See
Ownership Reports and Trading by Officers, Directors and Principal
Stockholders, Release No. 34-26333 (Dec. 2, 1988) [53 FR 49997 (Dec.
13, 1988)] and Ownership Reports and Trading by Officers, Directors
and Principal Security Holders, Release No. 34-27148 (Aug. 18, 1989)
[54 FR 35667 (Aug. 29, 1989)] (re-proposing Item 405 in response to
comments on the 1988 proposing release).
\82\ See 17 CFR 240.16a-3(e).
\83\ See 17 CFR 229.405(a) and (b)(1).
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In the FAST Act Report, the staff recommended that we consider
eliminating the delivery requirement in Rule 16a-3(e) and revising Item
405 to permit registrants to rely only on (i) a review of Section 16
reports submitted on EDGAR and (ii) any written representation that no
Form 5 is required, when determining whether there are any Section 16
delinquencies that must be disclosed pursuant to Item 405.\84\
Reporting persons have been required to file their Section 16 reports
electronically on EDGAR since 2003.\85\ The Commission has stated that
``[b]y reviewing Section 16 reports posted on EDGAR, an issuer is
readily able to evaluate their timeliness'' \86\ and ``issuers also may
consult EDGAR to obtain notice of new filings.'' \87\
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\84\ FAST Act Report, supra note 2, at Recommendation D.2.
\85\ See Mandated Electronic Filing and Web Site Posting for
Forms 3, 4 and 5, Release No. 33-8230 (May 7, 2003) [68 FR 25788
(May 13, 2003)] (the ``Section 16 Mandatory Electronic Filing
Release''). In addition, all registrants who maintain a corporate
website are required to post any Section 16 reports relating to the
equity securities of the registrant on such website pursuant to Rule
16a-3(k) of the Exchange Act [17 CFR 240.16a-3(k)], and many
registrants satisfy this requirement by providing hyperlinks
directly to the electronic filings once they are made on EDGAR. The
Commission has noted that any concerns a registrant may have about
obtaining an electronic copy of the filing from a Section 16
reporting person in order to satisfy the web posting requirement
``would not arise for issuers that rely on a hyperlink (for example,
to EDGAR) instead of, or in addition to, direct website posting.''
Id. at 25790.
\86\ See Ownership Reports and Trading by Officers, Directors
and Principal Security Holders, Release 33-8600 (Aug. 3, 2005) [70
FR 46080 (Aug. 9, 2005)], at 46086.
\87\ Section 16 Mandatory Electronic Filing Release, supra note
85, at 25790.
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Consistent with the staff's recommendations, we are proposing to
amend Item 405 to focus on a review of Section 16 reports available on
EDGAR rather than reports furnished to the registrant. We are also
proposing to eliminate the requirement in Rule 16a-3(e) that reporting
persons furnish Section 16 reports to the registrant. We believe that a
shift to reliance on electronically filed Section 16 reports, while
retaining the written representation in Item 405(b)(1), would modernize
and simplify compliance with Item 405 while still providing all
material information.
In the FAST Act Report, the staff recommended that the Commission
consider adding an instruction that permits a registrant to rely on the
information in the Section 16 reports submitted on EDGAR unless it
knows, or has reason to believe, that the information is not complete
or accurate or that a report or an amendment should have been filed but
was not.\88\ While there is a similar instruction in Item 403 of
Regulation S-K with respect to the contents of Section 13(d) and 13(g)
statements filed with the Commission,\89\ we have concerns that, if
implemented, this recommendation could lead to uncertainty about when a
registrant has a reporting obligation because of the difficulty
ascertaining when a registrant may have knowledge of delinquencies or a
reason to believe that delinquencies have occurred. Therefore, at this
time, we are not proposing to expand reporting under Item 405 in this
manner.
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\88\ FAST Act Report, supra note 2, at n.55.
\89\ See Instruction 3 to Item 403 [17 CFR 229.403].
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We are, however, proposing to change the language of Item 405 to
clarify that registrants may rely on Section 16 reports filed on EDGAR
but are not required to limit their inquiry to those filings. Item 405
currently states that the registrant ``shall'' make its disclosure
``based solely upon'' the Section 16 reports that are furnished to it
pursuant to Rule 16a-3(e) and any written representation from a
reporting person that no Form 5 is required. This language could be
read to suggest that registrants may not rely on information outside of
the Section 16 reports furnished to the registrant pursuant to Rule
16a-3(e). As proposed, Item 405(b) would state that registrants ``may''
rely only on the Section 16 reports and the written representation.
Therefore, if a registrant was aware that information in a Section 16
report submitted on EDGAR was not complete or accurate, or that a
reporting person failed to file a required report, it could provide
appropriate disclosure pursuant to Item 405. We are also soliciting
comment on the benefits and challenges of the proposed approach and how
it may affect compliance with Section 16(a) reporting obligations.
The staff's final recommendation for revising Item 405 was to
eliminate the use of the ``Section 16(a) Beneficial Ownership Reporting
Compliance'' heading when the registrant does not have Section 16(a)
delinquencies to report.\90\ The staff has observed that some
registrants have included this heading to disclose that they have
nothing to report pursuant to Item 405.\91\ To reduce unnecessary
disclosure and improve the ability to search a registrant's filings for
disclosure of Section 16(a) reporting delinquencies, we are proposing
to add an instruction to Item 405 that encourages registrants to
exclude the heading if they have no delinquencies to report. We are
also proposing to change the heading to ``Delinquent Section 16(a)
Reports'' to more precisely describe the required disclosure and to
further encourage registrants to exclude the heading if they do not
have delinquencies to report.
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\90\ See FAST Act Report, supra note 2, at Recommendation D.3.
\91\ Rule 12b-13 [17 CFR 240.12b-13] states that, unless
expressly provided otherwise, if any item is inapplicable or the
answer thereto is negative, an appropriate statement to that effect
shall be made. Item 405, however, only requires the use of this
heading when responsive disclosure is included. See Item 405(a)(1).
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We are also proposing to eliminate the checkbox on the cover page
of Form 10-K relating to Item 405 disclosures and the related
instruction in Item 10 of Form 10-K.\92\ Currently, registrants are
required to check a box on the cover page of Form 10-K to indicate that
disclosure pursuant to Item 405 is not contained in the Form 10-K and
will not be contained, to the best of the registrant's knowledge, in
any definitive proxy or information statement that is incorporated by
reference.\93\ This checkbox was included in Form 10-K to

[[Page 50996]]

assist the Commission and security holders in identifying registrants
that were disclosing delinquent filings by insiders.\94\ The related
instruction in Item 10 of Form 10-K is also intended to facilitate the
Form's processing and review.\95\ We believe that the proposed
amendments would lessen the need for this checkbox by reducing the
unnecessary use of the heading and thereby facilitating document
searches. Moreover, the checkbox may have limited use, because most
registrants defer their Item 405 disclosure to their definitive proxy
or information statement pursuant to General Instruction G of Form
10[dash]K.\96\
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\92\ 17 CFR 229.10.
\93\ See 17 CFR 249.310.
\94\ See Ownership Reports and Trading by Officers, Directors
and Principal Security Holders, Release No. 34-28869 [56 FR 7242
(Feb. 21, 1991)] (``Ownership Reports and Trading Release''), at
Section VI.B.
\95\ The Instruction to Item 10 specifies that checking the box
on the cover page to indicate that Item 405 disclosure of delinquent
Form 3, 4, or 5 filers is not contained is intended to facilitate
Form processing and review. The instruction also states that failure
to provide such indication will not create liability for violation
of the federal securities laws and that the space should be checked
only if there is no disclosure in the Form of reporting person
delinquencies in response to Item 405 and if the registrant, at the
time of filing the Form 10-K, has reviewed the information necessary
to ascertain, and has determined that, Item 405 disclosure is not
expected to be contained in Part III of the Form 10-K or
incorporated by reference.
\96\ See Ownership Reports and Trading Release at 7260 (``If at
the time of filing the Form 10-K the registrant does not yet know
whether such disclosure will be contained in the proxy or
information statement or the Form 10-K amendment containing the Part
III information, the box should not be checked. If the box is not
checked, this will not be taken as a statement that there will be
Item 405 disclosure of delinquent filers, but rather that the
registrant may not have the requisite knowledge at the time the Form
10-K is filed.''). The proposed approach would also have the
advantage of allowing for this disclosure to be located with a
simple text search whether it is included in the registrant's annual
report or its definitive proxy or information statement.
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Request for Comment
18. Would allowing registrants to rely on Section 16 reports filed
on EDGAR instead of reports furnished to them reduce the burden of
complying with Item 405 while preserving their ability to disclose
delinquencies? What effect, if any, would the proposed approach have on
compliance with the Section 16(a) reporting requirements? Should we
continue to require Section 16 reporting persons to furnish reports to
registrants, or should we require them to provide notice to the
registrant when the reporting person files a report on EDGAR?
19. Should we, instead of permitting, require a registrant to
disclose delinquencies under Item 405 if it knows, or has reason to
believe, that there is a delinquency that is not reflected on EDGAR?
Why or why not?
20. Should we revise the ``Section 16(a) Beneficial Ownership
Reporting Compliance'' heading as proposed? Is there an alternative
heading that would be more appropriate?
21. Should we continue to include a checkbox on Form 10-K, or
include a checkbox on Schedule 14A \97\ or Schedule 14C, to indicate
when the disclosure required by Item 405 is included in a filing? If
so, what benefits would it provide compared to our proposed approach of
encouraging registrants to exclude the proposed ``Delinquent Section
16(a) Reports'' heading if they do not have delinquencies to report?
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\97\ 17 CFR 240.14a-101.
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3. Corporate Governance (Item 407)
Several disclosure requirements related to corporate governance are
consolidated in Item 407.\98\ In the FAST Act Report, the staff
recommended updating a reference to an outdated auditing standard in
Item 407(d)(3)(i)(B) and revising Item 407(e)(5) to clarify that EGCs
are not required to provide a compensation committee report.\99\ We are
proposing amendments to implement both of these recommendations.
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\98\ 17 CFR 229.407. Item 407 was adopted in 2006 to consolidate
various corporate governance requirements under a single disclosure
item. See Executive Compensation and Related Person Disclosure,
Release No. 33-8732A (Aug. 29, 2006) [71 FR 53158 (Sept. 8, 2006)].
\99\ See FAST Act Report, supra note 2, at Recommendations D.4
and D.5.
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a. Audit Committee Discussions With Independent Auditor (Item
407(d)(3)(i)(B))
Under existing Item 407(d)(3)(i)(B), when a registrant files a
proxy or information statement relating to an annual or special meeting
of security holders at which directors are elected or written consents
are provided in lieu of a meeting, a registrant's audit committee must
state whether it has discussed with the independent auditor the matters
required by AU section 380, Communication with Audit Committees (``AU
sec. 380'').\100\ AU sec. 380 was part of the interim standards
previously adopted by the Public Company Accounting Oversight Board
(``PCAOB'') on April 16, 2003.\101\ As noted in the Commission's
concept release on audit committee disclosures (the ``Audit Committee
Concept Release''), the reference to AU sec. 380 is outdated, because
it was superseded by PCAOB Auditing Standard No. 16, Communications
with Audit Committees (``AS 16'').\102\ Furthermore, on March 31, 2015,
the PCAOB formally reorganized its auditing standards resulting in the
codification of AS 16 as Auditing Standard No. 1301, Communications
with Audit Committees (``AS 1301'').\103\
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\100\ See Instruction 3 to Item 407(d) of Regulation S-K.
\101\ See PCAOB Release No. 2003-006 (Apr. 16, 2003). AU sec.
380 required an auditor to discuss various matters related to the
conduct of an audit with those who have responsibility for oversight
of the financial reporting process.
\102\ See Possible Revisions to Audit Committee Disclosures,
Release No. 33-9862 (July 1, 2015) [80 FR 38995 (July 8, 2015)], at
39003.
\103\ See PCAOB Release No. 2015-02 (Mar. 31, 2015). The PCAOB
completed a reorganization of its auditing standards into a topical
structure and a single, integrated numbering system (the
``Reorganization''). The Commission approved the Reorganization on
September 17, 2015. See Order Granting Approval of Proposed Rules to
Implement the Reorganization of PCAOB Auditing Standards and Related
Changes to PCAOB Rules and Attestation, Quality Control, and Ethics
and Independence Standards, Release No. 34-75935 (Sept. 17, 2015)
[80 FR 57263 (Sept. 22, 2015)].
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Commenters on the Audit Committee Concept Release that addressed
this issue generally supported updating the AU sec. 380 reference.\104\
Commenters differed on how best to update this reference, as AS 1301 is
not the only requirement addressing communications between an auditor
and the audit committee. Specifically, both the Commission and PCAOB
have other rules and standards that require matters to be communicated
to a company's audit committee.\105\ Accordingly, several commenters
suggested aligning the disclosure requirements with the communication
requirements specific to the standards and rules of the PCAOB,\106\
while others suggested a more encompassing requirement that would refer
to all audit committee communications with the independent auditors
required by not only the PCAOB but also the Commission.\107\
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\104\ Comments on the Audit Committee Concept Release are
available at https://www.sec.gov/comments/s7-13-15/s71315.shtml. We
refer to these letters throughout as ``Audit Committee'' letters.
\105\ See, e.g., Appendix B to AS 1301; Section 10A(k) of the
Exchange Act [15 U.S.C. Sec. 78j-1(k)]; Rule 2-07 of Regulation S-X
[17 CFR 210.2-07]; and Rule 10A-3 [17 CFR 240.10A-3].
\106\ See, e.g., Letters from AngloGold Ashanti Limited (Sept.
7, 2015) [Audit Committee letter]; Deloitte & Touche LLP (Sept. 2,
2015) [Audit Committee letter]; National Association of State Boards
of Accountancy (Sept. 3, 2015) [Audit Committee letter]; and James
H. Edwards (Sept. 8, 2015) [Audit Committee letter].
\107\ See, e.g., Letters from AT&T Inc. (Sept. 8, 2015) [Audit
Committee letter]; Federal Regulation of Securities, Law and
Accounting, and Corporate Governance Committees of the American Bar
Association (Feb. 9, 2016) [Audit Committee letter]; and The Home
Depot, Inc. (Sept. 17, 2015) [Audit Committee letter]. One commenter
on the Regulation S-K Subpart 400 Release also recommended updating
Item 407(d) to refer to AS 16. See Letter from Davis Polk 2.

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[[Page 50997]]

After consideration of the comments we have received and the
recommendation of the staff in the FAST Act Report, we are proposing to
update the reference to AU sec. 380 by referring more broadly to the
applicable requirements of the PCAOB and the Commission. We believe
such an approach would accommodate future changes to audit committee
communication requirements.
Request for Comment
22. Should we amend Item 407(d)(3)(i)(B) to refer to the
``applicable requirements of the PCAOB and the Commission rules'' as
proposed? Is there a better reference or additional guidance that we
should provide to facilitate audit committee compliance and investor
understanding of this requirement?
b. Compensation Committee Report (Item 407(e)(5))
Item 407(e)(5) requires a registrant's compensation committee to
state whether it has reviewed and discussed the Compensation Discussion
and Analysis (``CD&A'') required by Item 402(b).\108\ Based on this
review and discussion, Item 407(e)(5) requires that the compensation
committee state whether it recommended to the board of directors that
the CD&A be included in the registrant's annual report, proxy statement
or information statement. As recommended by the staff, we are proposing
to amend Item 407 to explicitly exclude EGCs from the Item 407(e)(5)
requirement, because they are not subject to a requirement to include a
CD&A in their public disclosures.\109\ Specifically, we are proposing
to add a reference to EGCs in Item 407(g) instead of amending Item
407(e)(5). Item 407(g) currently excludes SRCs from Item 407(e)(5),
among other provisions of Item 407.
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\108\ 17 CFR 229.402(b).
\109\ See Item 402(l) of Regulation S-K.
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Request for Comment
23. Instead of amending Item 407(g) as proposed, should we amend
Item 407(e)(5)?

D. Registration Statement and Prospectus Provisions

1. Outside Front Cover Page of the Prospectus (Item 501(b))
Item 501 \110\ includes disclosure requirements related to the
forepart of the registration statement and the outside front cover page
of the prospectus. In the FAST Act Report, the staff made several
recommendations to streamline the requirements and to provide
registrants with greater flexibility in designing a cover page tailored
to their business and the particular offering.\111\ The proposed
amendments discussed below would implement these recommendations.
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\110\ 17 CFR 229.501.
\111\ FAST Act Report, supra note 2, at Recommendations E.1-5.
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a. Name (Item 501(b)(1))
Item 501(b)(1) requires disclosure of a registrant's name,
including an English translation of the name of foreign registrants.
The instruction to Item 501(b)(1) states that if a registrant's name is
the same as that of a ``well known'' company, or if the name leads to a
misleading inference about the registrant's line of business, the
registrant must include information to eliminate any possible confusion
with the other company. If disclosure is insufficient to eliminate the
confusion, the registrant may be required to change its name. An
exception, however, is available when the registrant is an
``established company,'' the character of the registrant's business has
changed, and the ``investing public is generally aware of the change
and the character of [the registrant's] current business.''
The policy reflected in Item 501(b)(1) with regards to misleading
company names was first articulated in 1969 in response to an increase
in the number of registrants using names that the staff considered to
be misleading.\112\ Although we continue to believe that a registrant's
name could mislead investors, the staff's experience administering this
provision suggests that these situations can typically be addressed
with clarifying disclosure. The Commission and the staff may be able to
address situations in which the registrant's name is either confusingly
similar or misleading in connection with any public interest finding
necessary to declare the filing effective.\113\ Accordingly, we are
proposing to streamline the instruction to Item 501(b)(1) by
eliminating the portion that discusses when a name change may be
required and the exception to that requirement.
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\112\ At the time, the Commission noted that registrants were
using words such as ``nuclear,'' ``missile,'' ``space,''
``nucleonics,'' and ``electronics'' in their names when they were
not engaged in activity normally associated with those words, or
were engaged to a limited extent. See Guide for Preparation and
Filing of Registration Statements; Misleading Names of Registrants,
Release No. 33-4959 (Apr. 16, 1969) [34 FR 6575 (Apr. 17, 1969)].
This policy was contained in Guide 53 of the Commission's Guides for
Preparation and Filing of Registration Statements before being moved
into Item 501 in 1982. See Integrated Disclosure System Adopting
Release, supra note 69; Rescission of Guides and Redesignation of
Industry Guides, Release No. 33-6384 (Mar. 3, 1982) [47 FR 11476
(Mar. 16, 1982)].
\113\ 15 U.S.C. 77h.
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Request for Comment
24. Should we eliminate the language about a registrant's being
required to change its name in the instruction to Item 501(b)(1) as
proposed, or should we retain the current version of the instruction?
Are there situations where disclosure would not be sufficient to
eliminate misleading inferences about the company or its line of
business?
b. Offering Price of the Securities (Item 501(b)(3))
Item 501(b)(3) requires disclosure of the price of the securities
being offered, the underwriter's discounts and commissions, and the net
proceeds that the registrant and any selling security holders will
receive.\114\ The disclosure must be provided on an aggregate and per
share basis, but registrants may present the required information in
any format that fits the design of the cover page and is clear, easily
read, and not misleading.
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\114\ 17 CFR 229.501(b)(3). Item 501(b)(3) also includes
specific disclosure requirements for offerings being made on a
minimum/maximum basis.
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Although in many cases the disclosure required by Item 501(b)(3)
will be straightforward, Instruction 2 states that ``[i]f it is
impracticable to state the price to the public, explain the method by
which the price is to be determined.'' \115\ In the FAST Act Report,
the staff recommended providing registrants with greater flexibility in
explaining the method by which the price is to be determined when it is
impracticable to state the price on the cover page.\116\
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\115\ The instruction also provides that if the securities are
to be offered at the market price, or if the offering price is to be
determined by a formula relating to the market price, indicate the
market and market price of the securities as of the latest
practicable date. We are not proposing any change to this portion of
the instruction.
\116\ See FAST Act Report, supra note 2, at Recommendation E.2.
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We are proposing to amend Instruction 2 to explicitly allow
registrants to include a clear statement that the offering price will
be determined by a particular method or formula that is more fully
explained in the prospectus. Under the proposed instruction,
registrants would be required to accompany that statement with a cross-
reference to the offering price method or formula disclosure, including
a page number that is

[[Page 50998]]

highlighted by prominent type or in another manner.\117\
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\117\ This cross-reference would be similar to the cross-
reference that is required for risk factor disclosure pursuant to
Item 501(b)(5) of Regulation S-K [17 CFR 229.501(b)(5)]. In the FAST
Act Report, the staff recommended the Commission consider amending
Instruction 2 to Item 501(b)(3) to require the cross-reference to
the offering price method or formula to be accompanied by a
hyperlink. Because the cross-reference to risk factors required
under Item 501(b)(5) does not currently require a hyperlink, we are
not proposing to require a hyperlink for the disclosure called for
by Item 501(b)(3).
---------------------------------------------------------------------------

Request for Comment
25. As proposed, Item 501(b)(3) would allow registrants to choose
to include a cross-reference to the explanation of the method in which
the offering price will be determined when it is impracticable to state
the price method or formula to the public on the cover page. Should we
instead retain the requirement to present the explanation on the
prospectus cover page? Why or why not?
26. Should we amend Instruction 2 to Item 501(b)(3) to require the
cross-reference to be accompanied by a hyperlink? Item 501(b)(5)
currently requires on the prospectus cover page a cross-reference to
the risk factors section. Should we similarly amend Item 501(b)(5) to
also require a hyperlink?
c. Market for the Securities (Item 501(b)(4))
Item 501(b)(4) requires a registrant to name the national
securities exchanges that list the securities being offered and to
disclose the trading symbols for those securities. A ``national
securities exchange'' is a securities exchange that has registered with
the Commission under Section 6 of the Exchange Act.\118\ Under Item
501(b)(4), registrants are not required to name markets that are not a
``national securities exchange.''
---------------------------------------------------------------------------

\118\ See Section 6 of the Securities Exchange Act of 1934 [15
U.S.C. 78f].
---------------------------------------------------------------------------

Consistent with the staff's recommendation in the FAST Act
Report,\119\ we believe that information about markets that are not a
``national securities exchange'' could be important to investors and
should be disclosed on the prospectus cover page. Accordingly, we are
proposing to amend Item 501(b)(4) to require disclosure of the
principal United States market or markets for the securities being
offered and the corresponding trading symbols.\120\
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\119\ See FAST Act Report, supra note 2, at Recommendation E.3.
\120\ Our proposed changes to Item 501(b)(4) align with our
proposals to amend Item 201(a) [17 CFR 229.201(a)] in the Disclosure
Update and Simplification Proposing Release. See Disclosure Update
and Simplification Proposing Release supra note 13, at 51688.
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Also consistent with the staff's recommendation,\121\ we are
limiting disclosure of markets that are not national securities
exchanges to those principal United States markets where the
registrant, through the engagement of a registered broker-dealer, has
actively sought and achieved quotation. We agree with the staff that a
registrant cannot always control whether its securities are quoted on
an over-the-counter market and should not be burdened with making that
determination.
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\121\ See FAST Act Report, supra note 2, at Recommendation E.3.
---------------------------------------------------------------------------

Request for Comment
27. Should we expand the disclosure required by Item 501(b)(4) to
include markets other than national securities exchanges as proposed?
Would expanding the disclosure requirement make it difficult for
registrants to determine which United States markets to disclose?
28. Should we limit the disclosure requirement to those principal
United States markets where the registrant has actively sought and
achieved quotation through the engagement of a registered broker-dealer
as proposed? Should there be any other limitations on the markets the
registrant would be required to disclose?
29. Should a domestic or foreign registrant be required to identify
principal foreign markets where the registrant, through the engagement
of a registered broker-dealer, has actively sought and achieved
quotation for the class of security being offered?
30. If a registrant discloses another trading market elsewhere in
its registration statement, should Item 501(b)(4) require disclosure of
that market on the cover page, even if it is not a national securities
exchange and even if the registrant did not actively seek quotation
through the engagement of a registered broker-dealer? For example, Item
201(a) of Regulation S-K \122\ requires disclosure of the principal
United States market or markets in which each class of the registrant's
common equity is traded.
---------------------------------------------------------------------------

\122\ Item 201(a) of Regulation S-K.
---------------------------------------------------------------------------

31. Should we provide additional guidance on when a market other
than a national securities exchange must be disclosed or when a
registrant would be considered to have actively sought quotation
through the engagement of a registered broker-dealer?
d. Prospectus ``Subject to Completion'' Legend (Item 501(b)(10))
Item 501(b)(10) requires a registrant that is using a preliminary
prospectus to include a legend advising readers that the information
will be amended or completed. The legend also must include a statement
that the prospectus is not an offer to sell or a solicitation of an
offer to buy securities in any state where the offer or sale is not
permitted. The latter statement was introduced in 1958 to harmonize the
legend with what was required by state securities administrators at the
time.\123\
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\123\ See Amendment of Rules 134 and 433, Release No. 33-3885
(Jan. 7, 1958) [23 FR 184 (Jan. 10, 1958)]. This requirement was
originally in Rule 433, a predecessor to the current requirement.
---------------------------------------------------------------------------

The legend requirement has remained mostly unchanged since 1958,
even after the National Securities Markets Improvement Act (``NSMIA'')
allowed for preemption of state blue sky laws in many offerings.\124\
Consistent with the staff's recommendations in the FAST Act
Report,\125\ we are proposing to amend Item 501(b)(10) to permit
registrants to exclude from the prospectus the portion of the legend
relating to state law for offerings that are not prohibited by state
blue sky law. This change would allow for a more tailored prospectus
cover page in recognition of the changes to securities law brought by
NSMIA.
---------------------------------------------------------------------------

\124\ Public Law No. 104-290, 110 Stat. 3416 (1996).
\125\ See FAST Act Report, supra note 2, at Recommendation E.4.
---------------------------------------------------------------------------

Also consistent with the staff's recommendations,\126\ we are
proposing to streamline Item 501(b) by combining paragraphs (b)(10) and
(11) without substantive change. Thus, our proposed amendments to
paragraph (b)(10) would also require the ``subject to completion''
legend to be included if a registrant relies on Rule 430A \127\ to omit
pricing information and the prospectus is used after the effectiveness
of the registration statement but before the public offering price is
determined. Correspondingly, we are proposing to delete paragraph
(b)(11).
---------------------------------------------------------------------------

\126\ See id., at Recommendation E.5.
\127\ 17 CFR 230.430A.
---------------------------------------------------------------------------

Request for Comment
32. Should we allow registrants the discretion to exclude the
portion of the legend required by Item 501(b)(10) that relates to state
law prohibitions on offers or sales when it would not apply, as
proposed?
2. Risk Factors (Item 503(c))
Item 503(c) requires disclosure of the most significant factors
that make the

[[Page 50999]]

offering speculative or risky.\128\ The item specifies that the
discussion should be concise and organized logically. Although the
requirement is principles-based, it includes the following specific
examples as factors that may make an offering speculative or risky:
---------------------------------------------------------------------------

\128\ 17 CFR 229.503(c).
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A registrant's lack of an operating history,
a registrant's lack of profitable operations in recent
periods,
a registrant's financial position,
a registrant's business or proposed business, or
the lack of a market for a registrant's common equity
securities or securities convertible into or exercisable for common
equity securities.\129\
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\129\ These factors were derived from previous stop order
proceedings under Section 8(d) of the Securities Act where the
Commission suspended the effectiveness of previously filed
registration statements due, in part, to inadequate disclosure about
speculative aspects of the registrant's business. See Guides for
Preparation and Filing of Registration Statements, Release No. 33-
4936 (Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)] (citing In the
Matter of Doman Helicopters, Inc., 41 S.E.C. 431 (Mar. 27, 1963); In
the Matter of Universal Camera Corp., 19 S.E.C. 648 (June 28,
1945)).
---------------------------------------------------------------------------

The item directs registrants to explain how each risk affects the
issuer or the securities being offered. Additionally, the item
discourages disclosure of risks that could apply to any issuer or
offering.
Risk factor disclosure was initially called for only in the
offering context.\130\ Accordingly, when Item 503(c) was adopted in
1982 as part of the integrated disclosure system, it was included with
other offering-related disclosure requirements in Subpart 500 of
Regulation S[dash]K.\131\ In 2005, risk factor disclosure requirements
were extended to periodic reports and registration statements on Form
10.\132\
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\130\ See Guides for Preparation and Filing of Registration
Statements, Release No. 33-4666 (Feb. 7, 1964) [29 FR 2490 (Feb. 15,
1964)] and Guides for Preparation and Filing of Registration
Statements, Release No. 33-4936 (Dec. 9, 1968) [33 FR 18617 (Dec.
17, 1968)].
\131\ See Integrated Disclosure System Adopting Release, supra
note 69.
\132\ See Securities Offering Reform, Release No. 33-8591 (July
19, 2005) [70 FR 44722 (Aug. 3, 2005)] (``Securities Offering Reform
Adopting Release'').
---------------------------------------------------------------------------

As recommended by the staff in the FAST Act Report, we are
proposing to relocate Item 503(c) from Subpart 500 to Subpart 100 to
reflect the application of risk factor disclosure requirements to
registration statements on Form 10 \133\ and periodic reports.\134\
Subpart 100 covers a broad category of business information and is not
limited to offering-related disclosure. Accordingly, our proposed
amendments would move Item 503(c)'s requirement for risk factor
disclosure to new Item 105.\135\
---------------------------------------------------------------------------

\133\ 17 CFR 249.210.
\134\ See FAST Act Report, supra note 2, at Recommendation E.6.
Additionally, the proposed amendments would use the term
``registrant'' instead of ``issuer.'' Use of and reference to
``registrant'' instead of ``issuer'' is intended to better reflect
the application of risk factor disclosure outside of the offering
context. The term ``registrant'' is defined under both the Exchange
Act and Securities Act. See Rule 12b-2 [17 CFR 240.12b-2] and Rule
405 [17 CFR 230.405].
\135\ See proposed Item 105. Consistent with this change, we are
also proposing amendments to several Commission forms that require
risk factor disclosure and reference Item 503(c). These proposed
amendments would revise references to Item 503 to specify new Item
105. A number of forms that require risk factor disclosure do not
reference Item 503(c). Our proposed amendments do not include
revisions to these forms. For example, Forms 10-Q and 20-F require
risk factor disclosure but do not reference Item 503(c).
---------------------------------------------------------------------------

Additionally, our proposed amendments would eliminate the risk
factor examples that are currently enumerated in Item 503(c). Although
not addressed in the FAST Act Report, we solicited comment in the
Concept Release on whether we should retain or eliminate the examples
and whether we should revise our requirements to include additional or
different examples.
A number of commenters recommended retaining and revising the
examples in Item 503(c).\136\ Several of these commenters supported a
revision to specify examples of risk factors that are generic and
therefore should not be disclosed.\137\ For example, one of these
commenters recommended that the Commission prohibit disclosure of
generalized risks that affect all registrants or all registrants in a
particular industry, the risk of stock volatility, organizational
structure risks, and summaries of applicable regulation.\138\ Two
commenters recommended revising the examples to include risk factors
applicable to well-established Exchange Act registrants,\139\ while
another two supported expanding the list of examples.\140\ One of the
commenters that recommended expanding the list of examples pointed to
guidelines produced by the investor community as a source of additional
examples.\141\
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\136\ See, e.g., Letters from Center for Audit Quality (July 21,
2016) (``CAQ''); California Public Employees' Retirement System
(July 21, 2016) (``CalPERS''); PricewaterhouseCoopers LLP (July 21,
2016) (``PWC''); Edison Electric Institute and American Gas
Association (July 21, 2016) (``Edison Electric and AGA'');
Investment Program Association; Davis Polk 1; National Investor
Relations Institute (Aug. 4, 2016) (``NIRI''); Shearman & Sterling
(Aug. 31, 2016) (``Shearman 2''); NYSSCPA.
\137\ See, e.g., Letters from Edison Electric and AGA;
Investment Program Association; Davis Polk 1; NIRI; and Shearman 2.
\138\ See Letter from Investment Program Association.
\139\ See Letters from CAQ and PWC.
\140\ See Letters from CalPERS and NYSSCPA.
\141\ See Letter from CalPERS (referring to several sets of
guidelines such as the Principles for Responsible Investment and
those issued by the International Corporate Governance Network,
among others).
---------------------------------------------------------------------------

A few commenters recommended eliminating the examples in Item
503(c).\142\ One of these commenters supported eliminating the examples
so as to emphasize the principles-based nature of the disclosure
requirement and to focus registrants on their own risk identification
process.\143\ Another of these commenters expressed a view that the
examples were outdated and only helpful when the requirement to
disclose risk factors was first introduced.\144\
---------------------------------------------------------------------------

\142\ See Letters from Chris Barnard (June 23, 2016)
(``Barnard''); Fenwick; and SIFMA (stating that the five examples
are not ``cutting edge'' and ``could be eliminated,'' but that most
registrants recognize that Item 503(c) is focused on principles-
based disclosure of the most significant factors that make the
offering speculative or risky).
\143\ See Letter from Barnard.
\144\ See Letter from Fenwick.
---------------------------------------------------------------------------

As part of our mandate under the FAST Act to modernize and simplify
our disclosure requirements while still providing all material
information, we are proposing to eliminate these examples. These
examples may not apply to all registrants and may not correspond to the
material risks of any particular registrant. In addition, the inclusion
of these examples could suggest that a registrant must address each one
in its risk factor disclosures, regardless of the significance to its
business. Finally, several commenters suggested expanding the list of
examples or revising them to specify examples of generic risks that
should not be disclosed. We are concerned that inclusion of examples
could anchor or skew the registrant's risk analysis in the direction of
the examples.\145\ We believe that eliminating the examples would
encourage registrants to focus on their own risk identification
processes.
---------------------------------------------------------------------------

\145\ See infra note 349 and accompanying text.
---------------------------------------------------------------------------

Request for Comment
33. Should we move the requirement to provide risk factor
disclosure in Item 503(c) to a new Item 105 as proposed? Why or why
not?
34. Should we relocate Item 503(c)'s requirements to another
subsection of Regulation S-K? If so, which subsection and why?
35. Should we eliminate the risk factor examples as proposed, or do
they provide useful guidance to registrants? Instead of eliminating the
examples, should we provide different or

[[Page 51000]]

additional examples that would be more helpful to registrants? If so,
what examples would be most helpful?
3. Plan of Distribution (Item 508)
Item 508 requires disclosure about the plan of distribution for
securities in an offering, including information about
underwriters.\146\ Paragraph (a) requires disclosure about the
principal underwriters and underwriters that have a material
relationship with the registrant, while paragraph (h) requires
disclosure of the discounts and commissions to be allowed or paid to
dealers. If a dealer is paid any additional discounts or commissions
for acting as a ``sub-underwriter,'' paragraph (h) allows the
registrant to include a general statement to that effect without giving
the additional amounts to be sold.
---------------------------------------------------------------------------

\146\ 17 CFR 229.508.
---------------------------------------------------------------------------

``Sub-underwriter'' is not a defined term, and its application may
be unclear. ``Principal underwriter,'' however, is defined in
Regulation C as ``an underwriter in privity of contract with the issuer
of the securities as to which he is an underwriter.'' \147\ Consistent
with the staff's recommendation in the FAST Act Report,\148\ and in
light of the definition of ``principal underwriter'' and the disclosure
required by Item 508(a), we are proposing to amend Rule 405 \149\ to
define the term ``sub-underwriter'' as a dealer that is participating
as an underwriter in an offering by committing to purchase securities
from a principal underwriter for the securities but is not itself in
privity of contract with the issuer of the securities.\150\
---------------------------------------------------------------------------

\147\ 17 CFR 230.405.
\148\ See FAST Act Report, supra note 2, at Recommendation E.7.
\149\ 17 CFR 230.405.
\150\ The only other use of the term ``sub-underwriter'' or
``subunderwriter'' in Regulation S-K, the Securities Act rules, or
the Exchange Act rules is in Rule 491 [17 CFR 230.491]. We are
proposing to amend Rule 491 to reference ``sub-underwriter,''
consistent with our proposed amendments here. The proposed
definition of sub-underwriter would not change the meaning of that
term in Rule 491 and appears to be consistent with its use in that
context.
---------------------------------------------------------------------------

Request for Comment
36. Should we amend Rule 405 to define ``sub-underwriter'' as
proposed? Should we define the term differently? For example, is the
concept of ``privity of contract'' sufficiently clear?
4. Undertakings (Item 512)
Item 512 \151\ provides undertakings that a registrant must include
in Part II of its registration statement, depending on the type of
offering. In the FAST Act Report, the staff recommended that the
Commission consider eliminating undertakings that are duplicative of
other rules or that have become unnecessary due to developments since
their adoption. We are proposing the following amendments to implement
the staff's recommendations.
---------------------------------------------------------------------------

\151\ 17 CFR 229.512.
---------------------------------------------------------------------------

Item 512(c) sets forth undertakings that a registrant must include
if it registers a warrant or rights offering to existing security
holders and the securities not purchased by those security holders will
be reoffered to the public.\152\ The undertaking requires a registrant,
after the expiration of the subscription period, to supplement the
prospectus to disclose the results of the subscription offer and the
terms of any subsequent reoffer to the public. If any public reoffer is
made on terms different from the offer to existing security holders,
then the registrant must undertake to file a post-effective amendment
to disclose the terms of that offering. We are proposing to eliminate
this undertaking because it is no longer necessary. A registrant
conducting the type of offering described in Item 512(c) would already
have been required to register and disclose the offering to existing
security holders as well as the reoffering to the public. Furthermore,
Item 512(a)(1) requires registrants to undertake to file a post-
effective amendment to disclose fundamental changes in the information
set forth in the registration statement and material information with
respect to the plan of distribution or changes in the plan of
distribution.\153\ Thus, disclosure of material changes in the terms of
the reoffering would also be required as part of the Item 512(a)(1)
undertaking, thus obviating the need for the Item 512(c) undertaking.
---------------------------------------------------------------------------

\152\ 17 CFR 229.512(c). The Item 512(c) undertaking was
included in the Securities Act forms and guides, prior to the
enactment of the integrated disclosure system in 1982. See, e.g.,
Notice of Proposed Revision of Form S[dash]4, Release No. 33-3667
(July 31, 1956) [21 FR 6025 (Aug. 11, 1956)] and Notice of Proposed
Form S-11 for Registration of Securities of Certain Real Estate
Companies, Release No. 33-4347 (Apr. 10, 1961) [26 FR 3280 (Apr. 18,
1961)].
\153\ 17 CFR 229.512(a)(1).
---------------------------------------------------------------------------

Consistent with the recommendations made in the FAST Act Report, we
are also proposing to eliminate the Item 512(d), Item 512(e), and Item
512(f) undertakings, because they are obsolete.\154\ Item 512(d)
requires a registrant to include undertakings if the securities it
registers are to be offered at competitive bidding.\155\ The
undertaking requires a registrant to use its best efforts to distribute
a Section 10(a) prospectus to prospective bidders, underwriters, and
dealers and to file a post-effective amendment reflecting the results
of the bidding and any related terms. This undertaking arises from
former Rule 50 under the Public Utility Holding Company Act of 1935
(``PUHCA''), which formerly required public utility company securities
to be sold through competitive bids.\156\ We propose eliminating this
undertaking because the Commission rescinded Rule 50 in 1994,\157\ and
because Congress repealed PUHCA in 2005.\158\ Furthermore, this
undertaking was put into place prior to the adoption of Rule 430A,
which permits the omission of pricing and underwriter related terms
from the effective registration statement if the issuer includes that
information in a prospectus or post-effective amendment after the
effective date.\159\ To the extent that competitive bidding is still
used, registrants may file prospectuses that contain the pricing and
underwriter disclosure pursuant to Rule 430A and those documents will
be subject to the liability imposed by that rule.\160\
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\154\ See FAST Act Report, supra note 2, at Recommendation E.9.
\155\ 17 CFR 229.512(d).
\156\ See Notice of Proposal to Adopt Rule 415 Relating to
Competitive Bidding Registration Statements, to Amend Rules 424,
455, 471 and 472 and to Rescind Rule 460, Release No. 33-3491-Z
(Nov. 10, 1953) [18 FR 7300 (Nov. 18, 1953)]; Adoption of Rule 415
Relating to Competitive Bidding Registration Statements, Amendment
of Rules 424, 427, 455, 471 and 472 and Rescission of Rule 460,
Release No. 33-3494 (Jan. 13, 1954) [19 FR 399 (Jan. 22, 1954)]; and
Phase One Recommendations of Task Force on Disclosure
Simplification, Release No. 33-7300 (May 31, 1996) [61 FR 30397
(June 14, 1996)] (``1996 Disclosure Simplification
Recommendations'').
\157\ See 1996 Disclosure Simplification Recommendations (citing
Public Utility Holding Company Act Rules, Release No. 35-26031 (Apr.
20, 1994) [59 FR 21922 (Apr. 28, 1994)]).
\158\ See Energy Policy Act of 2005, Public Law No. 109-58, 119
Stat. 594 (2005).
\159\ 17 CFR 230.430A.
\160\ We understand that registration statements filed in
connection with securities to be offered through competitive bidding
are rarely used. See Louis Loss, Joel Seligman, & Troy Paredes,
Securities Regulation (5th ed. 2016) (``Loss et al.'') Sec. 2.A.4.
Competitive Bidding. According to Loss et al., competitive bidding
is now used by ``municipalities and public instrumentalities.'' Rule
430A provides that information omitted in reliance on that rule is
deemed part of the registration statement as of the time it was
declared effective, thus subjecting those disclosures to liability
under Section 11 of the Securities Act.
---------------------------------------------------------------------------

Item 512(e) provides that, if a registrant's prospectus directly
incorporates by reference the registrant's annual report to security
holders meeting the requirements of Rule 14a-4 \161\ or Rule 14c-
3,\162\ the registrant must undertake to deliver the latest

[[Page 51001]]

annual report with the prospectus.\163\ If interim information is
required but is not included in the prospectus, the registrant must
undertake to deliver the latest quarterly report that is incorporated
by reference in the prospectus. The purpose of this undertaking is to
ensure that the registrant delivers incorporated annual and quarterly
reports with the prospectus, as required by former Form S[dash]2.\164\
The disclosure and delivery requirements of former Form S-2 were
intended to minimize duplicative reporting while still requiring
delivery of incorporated information.\165\ The Commission rescinded
Form S-2 as part of Securities Offering Reform, since its underlying
purpose was outdated because of EDGAR, other technological
developments, and the rapid dissemination of information in the
market.\166\ Similarly, we are now proposing to eliminate the related
undertaking, since any material information in a registrant's annual or
quarterly reports to security holders should be publicly available.
---------------------------------------------------------------------------

\161\ 17 CFR 240.14a-4.
\162\ 17 CFR 240.14c-3.
\163\ 17 CFR 229.512(e).
\164\ See Proposed Comprehensive Revision to System for
Registration of Securities Offerings, Release No. 33-6235 (Sept. 2,
1980) [45 FR 63693 (Sept. 25, 1980)].
\165\ See Securities Offering Reform Adopting Release, supra
note 132.
\166\ See id.
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Finally, the undertaking in Item 512(f) applies to registrants that
prior to the offering had no obligation to file reports with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act.\167\
If such a registrant conducts an underwritten equity offering, it must
undertake to provide the securities certificates required by the
underwriter at closing to permit prompt delivery to each purchaser. The
purpose of this undertaking is to ensure that the registrant delivers
sufficient certificates to the underwriter at closing to permit
aftermarket trading in new issues.\168\ We are proposing to eliminate
this undertaking because the need to deliver certificates to
underwriters has decreased dramatically since this undertaking was
adopted in the early 1970s. Today, equity securities trades in the
United States are typically cleared and settled using the depository
and book-entry services of the Depository Trust and Clearing
Corporation's clearing agency subsidiaries.\169\
---------------------------------------------------------------------------

\167\ 17 CFR 229.512(f).
\168\ See Hot Issues, Release No. 33-5274 (July 26, 1972) [37 FR
16005 (Aug. 9, 1972)] (``Hot Issues Release''); Notice of Adoption
of Amendments to Registration Forms S-1 and S-2 under the Securities
Act of 1933 and to Forms 10, 10-K and 10-Q and Rules 13a-13 and 15d-
13 under the Securities Exchange Act of 1934, Release No. 33-5395
(June 1, 1973) [38 FR 17202 (June 29, 1973)]. In 1972, the
Commission conducted public hearings on the matter of hot issues
securities markets, which revealed that ``one of the imperfections
affecting aftermarket trading in new issues is the occasional
failure of issuers to furnish securities in such denominations and
registered in such manner as to permit adequate and prompt delivery
to each purchaser. Accordingly, one of the proposals is that non-
reporting registrants formally undertake in registration statements
filed on Forms S-1 and S-2 that they will deliver the certificates
to the underwriter at the closing for prompt delivery to
customers.'' See Hot Issues Release, supra at 16007.
\169\ See Loss et al. Sec. 7.E.2. Current Law (``Virtually all
equities securities trades in the United States are cleared and
settled through the National Securities Clearing Corporation (NSCC)
and the Depository Trust Company (DTC), clearing agency subsidiaries
of the Depository Trust and Clearing Corporation (DTCC).'');
Depository Trust & Clearing Corporation, FAQs: How Issuers Work With
DTC available at http://www.dtcc.com/matching-settlement-and-asset-services/issuer-services/how-issuers-work-with-dtc (last visited
Feb. 22, 2017) (``DTC provides (i) settlement services for virtually
all equity, corporate and municipal debt trades and Money Market
Instruments in the U.S.'').
---------------------------------------------------------------------------

Request for Comment
37. Should we retain or modify any of the undertakings that we have
proposed eliminating? If so, please explain why.
38. In what instances are physical securities certificates still
delivered today? Should we retain the undertaking for those situations?
39. Are there other undertakings that we have not addressed in this
release that are duplicative, no longer necessary or that should be
eliminated for other reasons?
40. Are there undertakings we should consider requiring to
modernize and address developments for novel securities offerings?

E. Exhibits

\170\ Items 202(a)-(d) and (f) [17 CFR 229.202(a)-(d) and (f)].
Item 202(e), ``Market information for securities other than common
equity,'' is outside the scope of this release; it requires that if
securities other than common stock are to be registered and there is
an established trading market for such securities, registrants are
required to provide market information for such securities
comparable to that required by Item 201(a) of Regulation S-K.
\171\ Item 202 disclosure is often incorporated by reference
into a registration statement on Form 8-A from a prior registration
statement on Form S-1. See Concept Release, supra note 6, at Section
IV.D.2. Registrants are not currently required to include Item 202
disclosure as an exhibit to any filings with the Commission.
\172\ 17 CFR 249.308a.
Registrants are required to file complete copies of their
articles and bylaws as exhibits to Form 10-K, but they are not
required to provide the descriptions called for by Item 202. See
Item 601(b)(3) [17 CFR 229.601(b)(3)]. Also, under Accounting
Standards Codification (``ASC'') Topic 505-10-50-3, registrants are
required to summarize the ``pertinent rights and privileges of the
various securities outstanding'' in the notes to their financial
statements. ASC Topic 470-10-50-5 requires the same information for
debt securities. While the date of sale is not required, registrants
usually include it in their discussions of the rights and privileges
of securities sold.
---------------------------------------------------------------------------

Consistent with the staff's recommendation in the FAST Act
Report,\173\ we are proposing to amend Item 601(b)(4) \174\ to require
registrants to provide the information required by Item 202(a)-(d) and
(f) as an exhibit to Form 10-K, rather than limiting this disclosure to
registration statements.\175\ Proposed Item 601(b)(4)(vi) would require
Item 202 disclosure only for securities that are registered under
Section 12 of the Exchange Act.\176\ Because Item 202(e) requires Item
201(a) market information for securities other than common equity where
there is an established trading market for those securities, proposed
Item 601(b)(4)(vi) does not include Item 202(e). The proposed
requirement is intended to increase investors' ease of access to
information about the rights and obligations of each class of
securities registered.
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\173\ See FAST Act Report, supra note 2, at Recommendation F.1.
\174\ 17 CFR 229.601(b)(4).
\175\ To the extent that a registrant has previously filed an
exhibit containing Item 202 disclosure, it could incorporate that
exhibit by reference and hyperlink to the previously-filed exhibit
in future Form 10-K filings, assuming that the information contained
therein remains unchanged. See Exhibit Hyperlinks Adopting Release
supra note 15.
\176\ The proposed amendment includes an instruction requiring
disclosure for those classes of a registrant's securities that have
not been retired by the end of the period covered by the report. We
are also proposing to amend Item 202 to specify that Section
305(a)(2) of the Trust Indenture Act of 1939, 15 U.S.C. 77aa et
seq., as amended, would not affect a registrant's disclosure
obligations under proposed Item 601(b)(4)(vi).
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The proposed amendments would not change existing disclosure
obligations under Form 8-K and Schedule 14A, which currently require
registrants to disclose certain modifications to the rights of their
security holders and amendments to their articles of incorporation or
bylaws.\177\ As

[[Page 51002]]

proposed, any modifications and amendments during a fiscal year would
now also be reflected in the Item 202 disclosure provided in an exhibit
to the registrant's next annual report.\178\ The proposed amendments
would be in addition to the current requirement to file a complete copy
of the amended articles of incorporation or bylaws under Item
601(b)(3).\179\
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\177\ Item 3.03 of Form 8-K requires disclosure of material
modifications to rights of security holders while Item 5.03 requires
disclosure of amendments to the articles of incorporation or bylaws
for amendments not disclosed in a proxy or information statement.
Item 5.03 of Form 8-K also requires disclosure of changes in fiscal
year other than by means of a submission to a vote of security
holders through the solicitation of proxies (or otherwise) or an
amendment to the articles of incorporation or bylaws [17 CFR
249.308].
Item 12 of Schedule 14A requires disclosure if action is to be
taken regarding the modification of any class of securities of the
registrant, or the issuance or authorization for issuance of
securities of the registrant in exchange for outstanding securities.
Section (b) of Item 12 requires disclosure of any material
differences between the outstanding securities and the modified or
new securities in respect of any of the matters concerning which
information would be required in the description of the securities
in Item 202 of Regulation S-K. Item 19 of Schedule 14A requires
disclosure of amendments to the registrant's charter, bylaws, or
other documents.
\178\ Over the course of a given fiscal year, it is possible
that a registrant may make various non-material changes to the
rights and privileges of its securities that do not require separate
disclosure on Form 8-K. However, if any changes are made, whether
material or non-material, the proposed amendments would require a
registrant to update the description of securities in the exhibit
filed with its Form 10-K.
\179\ See Item 601(b)(3) of Regulation S-K [17 CFR
229.601(b)(3)]. The proposal would amend Item 601(b)(4) instead of
Item 601(b)(3) because (b)(4) is consistent with Item 202's
requirement to provide a description of capital stock that is
registered while (b)(3) is specific to the articles of incorporation
and bylaws.
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We recognize that some commenters opposed requiring Item 202
disclosure in periodic reports, stating that this information can
easily be found in registration statements,\180\ while other commenters
noted that the information overlaps with disclosure required under U.S.
GAAP.\181\ Requiring Item 202 disclosure as an exhibit to annual
reports could improve the ability of investors to gain access to
information about their rights as security holders. The proposed Item
601(b)(4)(vi) would allow investors to easily locate an updated
description of their rights as security holders in the most recent
annual report rather than require investors to search through prior
filings to find this disclosure. Where a registrant has previously
filed the Item 202 information as an exhibit, and so long as there has
not been any change to the information called for by Item 202, the
registrant may incorporate the information by reference and provide a
hyperlink to the previously filed exhibit. Therefore, we believe that
any additional compliance cost associated with the proposed amendment
should not be unduly burdensome.
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\180\ See, e.g., Letters from Fenwick; CGCIV; Chamber 2; and
FedEx. See also Davis Polk 1.
\181\ See Letters from CAQ and KPMG LLP (July 21, 2016)
(``KPMG''). Both commenters referenced Item 202 in the context of
broader recommendations to the Commission to work with the FASB and
the PCAOB to eliminate redundancies.
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Request for Comment
41. Should the proposed amendments include a requirement to file
Item 202 disclosure for each class of securities registered under
Section 12 of the Exchange Act as an exhibit to the annual report? Why
or why not? Should registrants also be required to include descriptions
of securities that are not registered under Section 12 of the Exchange
Act? For example, should issuers reporting only under Section 15(d) of
the Exchange Act (e.g., asset-backed issuers) be required to file Item
202 disclosure as a Form 10-K exhibit?
42. Do the requirements for Item 202, and our proposal to require
that the Item 202 information be provided as an exhibit to the annual
report, provide sufficient disclosure about debt securities or other
classes of stock with different or preferential voting rights?
43. Would the new requirements result in significantly higher
compliance costs? Would the new requirements provide benefits to
investors and facilitate informed investment decisions? Would the
proposed amendments require disclosure that is adequately provided
elsewhere in the annual report or on EDGAR? \182\
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\182\ See supra notes 172 and 181 and accompanying text.
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44. Would compliance with the proposed amendment be problematic for
issuers with multiples classes of registered securities (e.g., well-
known seasoned issuers or asset-backed issuers)? If so, how should we
revise the proposed amendments to avoid unnecessary burdens that may be
imposed on these issuers?
2. Information Omitted From Exhibits (Item 601)
Item 601 of Regulation S-K generally requires registrants to file
complete copies of exhibits.\183\ Securities Act Rule 406 \184\ and
Exchange Act Rule 24b-2 \185\ permit registrants to request
confidential treatment of information included in an exhibit to a
filing or any other document required to be filed under either the
Securities Act or the Exchange Act. Item 601(b)(2) states that
registrants shall not file schedules or similar attachments to material
plans of acquisition, reorganization, arrangement, liquidation, or
succession unless they contain information material to an investment
decision and unless that information is not otherwise disclosed in the
agreement or the disclosure document.\186\ The Commission staff
generally has not objected where a registrant omits personally
identifiable information from exhibits without submitting a
confidential treatment request.
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\183\ Item 601 of Regulation S-K [17 CFR 229.601].
\184\ 17 CFR 230.406.
\185\ 17 CFR 240.24b-2.
\186\ 17 CFR 229.601(b)(2).
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To modernize and simplify the disclosure requirements under Item
601, we are proposing to add new paragraphs (a)(5) and (a)(6) to expand
the existing accommodation in Item 601(b)(2) to include all exhibits
filed under Item 601 and permit the omission of personally identifiable
information. We also propose to add paragraph (b)(10)(iv) to Item 601
to reduce significantly the need for registrants to submit applications
for confidential treatment of information in material contract exhibits
required by that item.\187\ The proposals to add paragraphs (a)(6) and
(b)(10)(iv) are broader than the staff's recommendations in the FAST
Act Report. As explained more fully below, we believe that they are
consistent with our mandate under the FAST Act to modernize and
simplify our disclosure requirements while still providing all material
information.\188\
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\187\ Certain domestic forms include their exhibits requirements
in the form and/or do not separately reference Item 601 of
Regulation S-K (e.g., Schedule 13E-3 and Schedule 13D). As such, we
are considering whether the rationale for the proposed amendments to
Item 601 of Regulation S-K is also applicable to the exhibit
requirements in these forms. For example, Schedule 13E-3 and
Schedule 13D require registrants to file as exhibits certain
material agreements that may be deemed analogous to the exhibits
required under Item 601 of Regulation S-K. We are requesting further
comment to assist in our evaluation of this issue.
\188\ See FAST Act Report, supra note 2, at Recommendation F.2
(recommending only that the Commission permit registrants to omit
attachments and schedules filed with exhibits unless they contain
information that is material to an investment decision that has not
been otherwise disclosed).
---------------------------------------------------------------------------

a. Schedules and Attachments to Exhibits
Proposed Item 601(a)(5) would permit registrants to omit entire
schedules and similar attachments to exhibits unless they contain
material information and unless that information is not otherwise
disclosed in the exhibit or the disclosure document. This exception,
which is similar to the existing accommodation in Item 601(b)(2) for
plans of acquisition, reorganization, arrangement, liquidation, or
succession, would be expanded to all exhibits under the proposed
amendments. Similar to the current provisions in Item 601(b)(2),
proposed Item 601(a)(5) would require registrants to provide with each
exhibit a list briefly identifying the contents of any omitted
schedules and attachments.

[[Page 51003]]

In addition, registrants would be required to provide, on a
supplemental basis, a copy of any omitted schedules or attachments to
the Commission staff upon request.\189\
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\189\ See proposed Item 601(a)(5) of Regulation S-K. Securities
Act Rule 418 [17 CFR 230.418] states that the Commission or its
staff may, where it is deemed appropriate, request supplemental
information concerning the registrant or a registration statement,
among other things. Exchange Act Rule 12b-4 [17 CFR 240.12b-4]
similarly indicates that the Commission or its staff may, where it
is deemed appropriate, request supplemental information concerning
the registrant, a registration statement, and a periodic or other
report filed under the Exchange Act. Unlike the current version of
Item 601(b)(2), registrants would not be required to include with
its list identifying the contents of all omitted schedules an
agreement to furnish a supplemental copy of any omitted schedule to
the Commission upon request. Instead, proposed Item 601(a)(5) would
require registrants to provide a copy of any omitted schedule to the
Commission staff upon request.
---------------------------------------------------------------------------

The Commission requested comment in the Concept Release on whether
to allow registrants to omit schedules and attachments to all exhibits,
provided that the omitted schedules and attachments do not include
material information that is not otherwise included in the exhibit or
the disclosure document. Commenters uniformly supported expanding the
exception under Item 601(b)(2).\190\ Some noted that the current
requirement to file complete exhibits is unnecessarily cumbersome and
expensive where the schedules do not contain material information.\191\
Commenters also stated that these burdens are exacerbated where those
schedules contain, as is frequently the case, confidential information
that would require registrants to file confidential treatment
requests.\192\ A few commenters that supported allowing registrants to
omit schedules opposed requiring registrants to provide a list of their
omitted schedules.\193\ Another commenter supported a requirement to
include a list, but stated that requiring registrants to provide a
materiality analysis supporting the decision to omit the schedules was
unnecessary.\194\ We believe that a list of omitted schedules, similar
to current Item 601(b)(2), would be informative for investors.
---------------------------------------------------------------------------

\190\ See, e.g., Letters from Committee on Securities Law of the
Business Law Section of the Maryland State Bar Association
(``Maryland Bar Securities Committee'') (July 21, 2016); ABA;
NYSSCPA; FedEx; Fenwick; and Davis Polk 1. See also Letter from
CGCIV (supporting exemption from filing immaterial attachments to
material agreements for smaller reporting companies).
\191\ See, e.g., Letters from Fenwick and Davis Polk 1.
\192\ See, e.g., Letters from Fenwick; Fenwick and West LLP,
Cooley LLP and Wilson Sonsini Goodrich & Rosati, PC (June 19, 2012)
[S-K Study Letter] (``Silicon Valley''); and Mike Liles (Apr. 10,
2013) [S-K Study Letter] (endorsing the comments expressed in the
Silicon Valley Letter).
\193\ See Letter from Fenwick (stating that it does not believe
``the burden of completing such a list of omitted schedules is
offset by any meaningful advantage to investors''); see also letters
from NYSSCPA and FEI.
\194\ See Letter from Maryland Bar Securities Committee.
---------------------------------------------------------------------------

Request for Comment
45. Should the proposed amendments permit registrants to omit
entire schedules and attachments to exhibits unless the schedules or
attachments contain material information and unless that information is
not otherwise disclosed in the exhibit or the disclosure document?
Similarly, should we amend our investment company rules or forms to
permit investment companies to omit entire schedules and attachments?
46. Should Item 601(a)(5) require registrants to provide a list of
the contents of the omitted schedules and attachments as proposed?
Would a list of the titles of the schedules and attachments be
sufficient to identify the contents of the omitted schedules and
attachments? Should we provide guidance on the registrant's description
of any omitted schedule or attachment?
47. As proposed, Item 601(a)(5) would expand the existing Item
601(b)(2) accommodation to all exhibits. Should we require exhibits
filed pursuant to certain subsections of Item 601(b) to include all
schedules and attachments even if they are not material? If so, which
exhibits and subsections?
b. Personally Identifiable Information
The Commission generally does not publish or make available
information that ``would constitute a clearly unwarranted invasion of
personal privacy.'' \195\ This information includes personally
identifiable information (``PII''). Exhibits filed pursuant to Item 601
may include PII such as bank account numbers, social security numbers,
home addresses and similar information. The staff generally does not
object where a registrant omits PII from exhibits without submitting a
confidential treatment request.
---------------------------------------------------------------------------

\195\ 17 CFR 200.80(b)(6) (exempting personnel and medical files
and similar files the disclosure of which would constitute a clearly
unwarranted invasion of personal privacy).
---------------------------------------------------------------------------

In the Concept Release, the Commission requested comment about
whether to continue or modify the current accommodation on PII.
Numerous commenters recommended codifying the current staff practice of
permitting registrants to omit PII from exhibits without making a
formal confidential treatment request.\196\
---------------------------------------------------------------------------

\196\ See, e.g., Letters from NYSSCPA; Chamber 2; FedEx; CGCIV;
Maryland Bar Securities Committee; General Motors; and Financial
Executives International.
---------------------------------------------------------------------------

Consistent with our mandate under the FAST Act to modernize and
simplify our disclosure requirements while still providing all material
information, Item 601(a)(6), as proposed, would permit registrants to
omit PII without submitting a confidential treatment request under Rule
406 or Rule 24b-2. Allowing registrants to omit PII without submitting
a confidential treatment request is also intended to better safeguard
PII by limiting its dissemination. Under the proposed amendment,
registrants also would not be required to provide an analysis to redact
PII from exhibits.
Request for Comment
48. Should we codify the current staff practice of permitting
registrants to omit PII without making a formal confidential treatment
request as proposed? Similarly, should we amend our investment company
rules or forms to similarly permit investment companies to omit PII?
c. Redaction of Confidential Information in Material Contract Exhibits
The proposed revisions to Item 601(b)(10) would permit registrants
to omit confidential information from material contracts filed pursuant
to that item where such information is both (i) not material and (ii)
competitively harmful if publicly disclosed, even where the registrant
has not submitted a confidential treatment request to the Commission.
Instead, registrants would be required to mark the exhibit index to
indicate that portions of the exhibit or exhibits have been omitted and
include a prominent statement on the first page of each redacted
exhibit that information in the marked sections of the exhibit has been
omitted from the filed version of the exhibit. Registrants would also
be required to indicate with brackets where the information has been
omitted from the filed version of the exhibit.\197\
---------------------------------------------------------------------------

\197\ These proposals are consistent with the marking
requirements for confidential treatment requests under Rule 406 and
Rule 24b-2.
---------------------------------------------------------------------------

Although registrants would not be required to file a confidential
treatment request in accordance with Rule 406 or Rule 24b-2 in
connection with the redacted exhibit, the responsibility of a
registrant to determine whether all material information has been
disclosed and whether they may redact the

[[Page 51004]]

information under the proposed rules would remain unchanged.\198\ The
Commission staff would continue its selective review of registrant
filings and would selectively assess whether redactions from exhibits
appear to be limited to information that is not material and that would
subject the registrant to competitive harm if publicly disclosed. As is
currently the case, the redacted information should include no more
text than necessary to prevent competitive harm to the registrant. Upon
request, registrants would be expected to promptly provide supplemental
materials to the staff similar to those currently required in a
confidential treatment request, including an unredacted paper copy of
the exhibit and an analysis of why the redacted information is both (i)
not material and (ii) would cause competitive harm if publicly
disclosed.\199\ The timing of any staff review would not alleviate a
registrant's obligation to disclose all material information and its
obligation to limit redactions to those provisions and terms that are
both (i) not material and (ii) would cause competitive harm if publicly
disclosed. Registrants could request confidential treatment of this
supplemental information pursuant to Rule 83 while it is in the staff's
possession. If the registrant's supplemental materials do not support
its redactions, similar to the process the staff currently follows for
confidential treatment requests under Rule 406 and Rule 24b-2, the
staff may request that the registrant file an amendment that includes
some, or all, of the previously redacted information.\200\
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\198\ See Rule 12b-20 [17 CFR 240.12b-20], Rule 408(a) [17 CFR
230.408(a)] and proposed Item 601(b)(10)(iv).
\199\ This analysis would be substantially the same as is
currently required in confidential treatment requests submitted in
reliance on Rule 80(b)(4) [17 CFR 200.80(b)(4)] pursuant to Rule 406
or Rule 24b-2.
\200\ Upon completion of the staff's review, the materials would
be returned or destroyed if the registrant complies with the
procedures outlined in Rule 418 or 12b-4.
---------------------------------------------------------------------------

The Concept Release did not request comment on the confidential
treatment process, other than its request for comment about omitting
schedules and attachments to exhibits; however, two commenters noted
that the requirement to file material agreements causes registrants to
expend significant resources in preparing confidential treatment
requests.\201\ We believe that simplifying and streamlining this
process would be consistent with the FAST Act mandate to revise
Regulation S-K in a manner that reduces the costs and burdens on
registrants while providing investors all material information. In
addition, we believe the proposal would result in limiting the
dissemination of sensitive information because registrants would not be
required to provide an un-redacted copy of each exhibit at the time of
filing in order to request confidential treatment. Instead, this
information would only be required on request in connection with a
staff filing review.
---------------------------------------------------------------------------

\201\ See Letter from Fenwick and letter from Davis Polk 1
(requesting that the Commission reconsider the utility of the
(b)(10) exhibit filing requirement).
---------------------------------------------------------------------------

Request for Comment
49. Should registrants be permitted to omit confidential
information from exhibits filed pursuant to Item 601(b)(10) that is
both (i) not material and (ii) competitively harmful if publicly
disclosed without submitting a confidential treatment request as
proposed? Similarly, should we amend our investment company forms to
permit investment companies to omit confidential information from
exhibits?
50. Would the disclosure provided in exhibits change under the
proposed amendments? Why or why not?
51. Under the proposed amendments, if the registrant's supplemental
materials do not support its redactions, the staff may request that the
registrant file an amendment that includes some, or all, of the
previously redacted information. In these situations, should we require
registrants to include an explanatory note describing why the amendment
is being provided? Should we also require that any amendment highlight
the previously redacted information?
52. Should we allow registrants to omit confidential information
from exhibits other than those filed pursuant to Item 601(b)(10) that
is both (i) not material and (ii) competitively harmful if publicly
disclosed? For instance, should registrants be allowed to omit similar
information from exhibits filed pursuant to Item 601(b)(2)? Should they
be allowed to omit similar information from exhibits filed pursuant to
other subsections of Item 601? If so, which subsections and why?
53. Should we apply the proposed amendments discussed in Section
II.E.2. (Information Omitted from Exhibits) to forms that include their
exhibits requirements in the form or do not separately reference Item
601 of Regulation S-K (e.g., Schedule 13E-3 and Schedule 13-D)? If so,
what forms should be amended and to what extent? If not, why? Are there
special considerations associated with change of control transactions,
going private transactions, or beneficial ownership reporting that
render the provision of information in exhibits material to an
investment or voting decision? What are the costs and benefits of
applying the proposed amendments to these forms? How do they differ
from the costs and benefits of applying the proposed amendments to
Regulation S-K? \202\
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\202\ We are proposing to apply the proposed amendments to Form
20-F to maintain a consistent approach to the exhibit filing
requirements for domestic registrants and foreign private issuers.
See infra Section II.E.5 (Exhibits--Application to Foreign Private
Issuers).
---------------------------------------------------------------------------

3. Material Contracts (Item 601(b)(10)(i))
Item 601(b)(10)(i) requires registrants to file every material
contract not made in the ordinary course of business, provided that one
of two tests is met: (i) The contract must be performed in whole or in
part at or after the filing of the registration statement or report, or
(ii) the contract was entered into not more than two years before that
filing.\203\
---------------------------------------------------------------------------

\203\ Item 601(b)(10)(i) of Regulation S-K [17 CFR
229.601(b)(10)(i)].
---------------------------------------------------------------------------

The first test captures contracts that have not been fully
performed prior to the filing date. The second test--the two-year look
back--captures material contracts that were fully performed before the
filing date.\204\ Currently, all registrants subject to Item 601 must
consider both tests when deciding whether a material, non-ordinary
course contract must be filed as an exhibit.
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\204\ The two-year look back is included in Schedule A of the
Securities Act [15 U.S.C. 77aa(24)] and serves as a ``cutoff
period'' so registrants would not have to file material contracts
that may have been fully performed many years prior to registration.
When Section 12(g) was added to the Exchange Act in 1964, the
Commission was authorized to issue rules requiring such material
contracts to be filed with Exchange Act reports. See Section
12(b)(1)(I) of the Exchange Act; H.R. Rep. No. 88-1418, 83rd Cong.,
2nd Sess., 1964. Prior to the enactment of Section 12(g), the
Exchange Act reporting requirements were applicable only to listed
companies.
---------------------------------------------------------------------------

Consistent with the recommendations in the FAST Act Report,\205\ we
are proposing amendments to Item 601(b)(10)(i) that would limit the
two-year look back test to newly reporting registrants. Proposed
Instruction 1 to Item 601(b)(10)(i) defines a ``newly reporting
registrant'' as any registrant filing a registration statement that, at
the time of such filing, is not subject to the reporting requirements
of Section 13(a) or 15(d) of the Exchange Act, whether or not such
registrant has ever previously been subject to the reporting
requirements of Section 13(a) or 15(d), and any registrant that has not
filed an annual report since the revival of a previously suspended
reporting

[[Page 51005]]

obligation.\206\ As an example, a registrant that is filing its first
registration statement under the Securities Act or the Exchange Act, or
filing its first Form 10-K since the revival of its reporting
obligation,\207\ would be required to file material agreements under
Item 601(b)(10)(i) for the two-year look back period.\208\ The
definition of ``newly reporting registrant'' under the proposed
instruction also would include any registrant that (a) was a shell
company, other than a business combination related shell company, as
defined in Rule 12b-2 under the Exchange Act, immediately before
completing a transaction that has the effect of causing it to cease
being a shell company, and (b) has not filed a registration statement
or Form 8-K, as required by Item 2.01 and Item 5.06 of that form, since
the completion of the transaction (or, in the case of foreign private
issuers, has not filed a Form 20-F since the completion of the
transaction).\209\ Under the proposed amendments, a registrant meeting
this definition would be required to file material agreements for the
two-year look back period. The proposed amendments would help ensure
that investors receive access to agreements containing material
information, including agreements entered into by newly reporting
registrants up to two years prior to the commencement of their
reporting obligations. Registrants with established reporting histories
would not be required to comply with the two-year look back requirement
because investors would continue to have access to any material
agreements previously filed on EDGAR.\210\ As such, the proposed
amendments would streamline reporting obligations while maintaining
investor protections.
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\205\ See FAST Act Report, supra note 2, at Recommendation F.3.
\206\ See proposed Instruction 1 to paragraph (b)(10) of Item
601.
\207\ See Exchange Act Rules Compliance and Disclosure
Interpretation 153.02 (stating that a Form 10-K for the previous
fiscal year is the first report due after a reporting obligation is
revived), available at https://www.sec.gov/divisions/corpfin/guidance/exchangeactrules-interps.htm (last updated December 8,
2016).
\208\ In the case of a registrant with a suspended reporting
obligation that, less than two years later, is revived, the proposed
requirement to file material agreements for the two-year look back
period may be satisfied by incorporating by reference and
hyperlinking to agreements previously filed on EDGAR and filing any
material agreements entered into while the registrant was not
reporting. See Exhibit Hyperlinks Adopting Release, supra note 14,
at 14135.
\209\ Under the proposed amendment, the definition of ``newly
reporting registrant'' would not include reporting companies
completing merger transactions with business combination-related
shell companies.
\210\ Schedule A of the Securities Act requires that registrants
file ``every material contract made, not in the ordinary course of
business, which contract is to be executed in whole or in part at or
after the filing of the registration statement or which contract has
been made not more than two years before such filing.'' See Schedule
A, paragraph 24 [15 U.S.C. 77aa(24)]. Due to the availability of
filings on EDGAR, as noted above, we believe the two-year look back
requirement does not provide additional investor protection when
applied to registrants with a reporting history.
---------------------------------------------------------------------------

Request for Comment
54. Should we revise Item 601(b)(10)(i) to limit the two-year look
back test to newly reporting registrants as proposed?
55. Should the two-year look back requirement apply to a registrant
completing a reverse merger involving any public shell company that is
not a business combination-related shell company as proposed? Why or
why not?
56. Should the proposed amendment be broadened to require that a
public company acquiring or merging with a non-public company must
apply the two-year look back test to agreements entered into by the
non-public company prior to the transaction date?
57. Should registrants that have revived reporting obligations be
required as proposed, to file material contracts for the full two-year
look back period, regardless of how long their prior reporting
obligation was suspended? Alternatively, if the registrant's reporting
obligation was suspended for less than two years prior to revival,
should the registrant only be required to file agreements entered into
while the obligation was suspended?
4. Subsidiaries of the Registrant and Entity Identifiers (Item
601(b)(21)(i))
Item 601(b)(21) requires a registrant to list as an exhibit all of
its subsidiaries, the state, or other jurisdiction of incorporation or
organization of each, and the names under which those subsidiaries do
business.\211\ The name of particular subsidiaries may be omitted if
the unnamed subsidiaries, considered in the aggregate as a single
subsidiary, would not constitute a ``significant subsidiary'' under
Rule 1-02(w) of Regulation S-X.\212\
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\211\ Item 601(b)(21)(i) of Regulation S-K [17 CFR
229.601(b)(21)(i)].
\212\ Item 601(b)(21)(ii) of Regulation S-K [17 CFR
229.601(b)(21)(ii)].
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Consistent with the staff's recommendation in the FAST Act
Report,\213\ we are proposing amendments to Item 601(b)(21)(i) that
would require registrants to include in the exhibit the legal entity
identifier (``LEI''), if one has been obtained, of the registrant and
each subsidiary listed. An LEI is a 20-character, alpha-numeric code
that allows for unique identification of entities engaged in financial
transactions. LEIs are intended to improve market transparency by
providing clear identification of participants.\214\ Fees are not
imposed on investors for use of, or access to, LEIs. All of the
associated reference data needed to understand, process, and use LEIs
is widely and freely available. These associated reference data also
are not subject to any usage restrictions. There is a cost of obtaining
an LEI for registrants: A one-time fee of $75-$119 and $50-$99 in
annual maintenance fees.\215\
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\213\ See FAST Act Report, supra note 2, at Recommendation F.4.
\214\ See Arthur B. Kennickell, Bd. of Governors of the Fed.
Reserve Sys., Identity, Identification and Identifiers: The Global
Legal Entity Identifier System (Nov. 8, 2016), available at https://www.federalreserve.gov/econresdata/feds/2016/files/2016103pap.pdf.
\215\ See Glob. Legal Entity Identifier Found., Frequently Asked
Questions--Fees, Payment and Taxes, available at https://lei.bloomberg.com/docs/faq; and Glob. Mkt. Entity Identifier Util.,
GMEI Utility Pricing, available at https://www.gmeiutility.org/gmeiUtilityPricing.jsp. See also, Letter from SIFMA.
---------------------------------------------------------------------------

In the Concept Release, we solicited comment on whether we should
require registrants to disclose their LEI and the LEIs of their
subsidiaries (if available) in Exhibit 21 and how this information
would benefit investors. Many commenters supported requiring disclosure
of LEIs,\216\ with most of them

[[Page 51006]]

recommending that we require both the registrant and its subsidiaries
to obtain and disclose LEIs.\217\ These commenters generally stated
that the use of LEIs would improve investors' ability to understand
registrants' risk profiles. In this regard, commenters observed that
LEIs would allow investors to link third-party data with structured
data from the Commission to produce more meaningful analysis.\218\
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\216\ See, e.g., Letters from Data Coalition (July 21, 2016)
(``Data Coalition'') (recommending that the Commission adopt the
``if available'' disclosure standard as an interim step prior to
requiring registrants to obtain and disclose LEIs); Bloomberg
(recommending that filers should be required to obtain an LEI);
SIFMA (noting that regulators have driven the expansion of the LEI
system and expressing support for recent regulations that impose
requirements upon certain investment companies to obtain an LEI);
and XBRL US (recommending that the Commission require registrants to
obtain an LEI for every company in their corporate structure;
stating that use of LEIs would improve the functionality of filings
by identifying participants in financial transactions and bringing
clarity to interrelationships between entities). See also Letters
from E. Bean; SEC Investor Advisory Committee (June 15, 2016) (``IAC
1'') (stating that LEIs could facilitate the work of the Commission
and other prudential regulators related to systemic risk, firm
interconnectivity, and leverage at broker-dealers, asset managers,
and other market participants and benefit investors trying to
understand complex structures); Owner Subcommittee of the SEC's
Investor Advisory Committee (Nov. 22, 2016) (``IAC 2''); Main Street
Alliance (July 5, 2016); The Financial Accountability and Corporate
Transparency Coalition (July 6, 2016); Citizens for Tax Justice; GRI
(July 21, 2016); American Sustainable Business Council, Citizens for
Tax Justice, FACT Coalition, Fair Share, Global Financial Integrity
and Main Street Alliance (July 21, 2016); Americans for Tax Fairness
(July 21, 2016); AFL-CIO (July 21, 2016); Oxfam America (July 21,
2016); S. Percoco; Americans for Financial Reform (Aug. 10, 2016);
NYSCRF; Global Legal Identity Identifier Foundation (July 21, 2016);
and CFA Institute. See also letter from TagniFi, LLC (Jan. 27, 2016)
[Disclosure Effectiveness letter] (``TagniFi'').
\217\ See id. Two commenters opposed an LEI requirement, stating
that ``there is no global standard for LEI.'' See Letters from
Financial Executives International and General Motors.
\218\ See, e.g., Letters from SIFMA, Bloomberg, and Data
Coalition. See also Nationally Recognized Statistical Rating
Organizations, Release No. 34-72936 (Aug. 27, 2014) [79 FR 55077
(Sept. 15, 2014)] (the ``2014 NRSRO Amendments Release'') and Credit
Risk Retention, Release No. 34-73407 (Oct. 22, 2014) [79 FR 77601
(Dec. 24, 2014)] (the ``Credit Risk Retention Release'').
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The proposed amendment is intended to modernize the disclosure
requirements under Regulation S-K by requiring registrants to provide
any LEIs obtained for themselves or their listed subsidiaries to
investors. This proposal would allow investors to use the LEI to more
quickly and precisely identify registrants and their subsidiaries. Our
proposal is consistent with prior regulatory efforts. For example, as
part of our recent investment company reporting modernization efforts,
we adopted rules requiring certain registrants and funds to obtain LEIs
to provide a consistent means of identification.\219\ Due in part to
these and other similar global regulatory efforts, the usage of LEIs
has increased over the last few years.\220\
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\219\ See Investment Company Reporting Modernization, Release
No. 33-10231 (Nov. 18, 2016) [81 FR 81870]) (the ``IM Modernization
Adopting Release''). See also id. at n. 61 (discussing additional
contexts in which the Commission has required LEIs, including Form
PF--Reporting Form for Investment Advisers to Private Funds and
Certain Commodity Pool Operators and Commodity Trading Advisors,
available at http://www.sec.gov/rules/final/2011/ia-3308-formpf.pdf); Regulation SBSR-Reporting and Dissemination of
Security-Based Swap Information, Release No. 34-74244 (Feb. 11,
2015) [80 FR 14564 (Mar. 19, 2015)]. See also 2014 NRSRO Amendments
Release, supra note 218; Credit Risk Retention Release, supra note
218.
\220\ See, e.g., Legal Entity Identifier Regulatory Oversight
Comm., The Global LEI System and regulatory uses of the LEI (Nov. 5,
2015), available at http://www.leiroc.org/publications/gls/lou_20151105-1.pdf (progress report by the Legal Identifier
Regulatory Oversight Committee, including an annex listing
regulatory actions in the United States, the EU countries, and eight
other countries which require, request, or allow the use of LEIs).
The global LEI system currently has over 580,000 registrations and
is growing. See Global LEI Foundation daily updated ``concatenated
file,'' which includes all LEIs issued globally and related LEI
reference data, available at https://www.gleif.org/en/lei-data/gleif-concatenated-file/lei-download#or http://openleis.com. See
also Glob. Legal Entity Identifier Found., Regulatory Use of the LEI
(providing an overview of current and proposed global regulatory
activities involving LEI), available at https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei; Global LEI Data Quality Reports
Archive, available at https://www.gleif.org/en/lei-data/gleif-data-quality-management/about-the-data-quality-reports/archive# (showing
total number of LEIs issued, renewed, reactivated and lapsed from
January 2016 through April 2017).
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We recognize that many registrants and their subsidiaries may not
have LEIs. Accordingly, our proposals would require disclosure of LEIs
only for those registrants and subsidiaries that choose to obtain this
identifier. Below, we solicit comment as to whether to require
registrants and their subsidiaries to obtain LEIs.
Request for Comment
58. Should we require registrants to include in Exhibit 21 the LEI
(if one has been obtained) of the registrant and each subsidiary
required to be listed in the exhibit? Would requiring registrants to
disclose LEIs in Exhibit 21 as proposed, provide investors with
sufficient access to that information? Is there another location in
registrant filings, other than Exhibit 21, where LEI information would
be more accessible to investors? For example, should a registrant be
required to disclose its LEI, if it has one, on the cover page of each
registration statement, periodic filing, or current report and provide
the LEIs for its significant subsidiaries in an exhibit?
59. If we require registrants to include LEIs in Exhibit 21 as
proposed, should we also require them to provide that information as
machine-readable data? If so, what structured data format would be the
most useful to investors? For example, the Commission recently adopted
amendments requiring investment companies to provide LEIs in XML
format.\221\ Should we require registrants that have already obtained
LEIs to disclose their LEIs in XML format? Or, for consistency with the
proposal to tag information on the cover page of certain forms using
Inline XBRL format,\222\ should we require disclosure of LEIs in Inline
XBRL format? What would be the additional cost to registrants to
provide LEIs in XML, Inline XBRL, or another machine-readable format?
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\221\ See IM Modernization Adopting Release, supra note 219.
\222\ See infra Section II.G.1 (Tagging Cover Page Data).
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60. In light of the many comments received on the costs and
benefits of LEIs,\223\ should our rules encourage or require
registrants and each subsidiary thereof required to be listed in
Exhibit 21 to obtain an LEI? If so, how should we structure our rules
to achieve this purpose?
---------------------------------------------------------------------------

\223\ See supra notes 216 to 218 and accompanying text.
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61. Some registrants have numerous subsidiaries or affiliates
operating globally, while other registrants have simple corporate
structures. Should we require certain types of registrants, such as
larger registrants or subsidiaries, to obtain LEIs? For example, should
we limit the requirement to large accelerated filers, well-known
seasoned issuers, or foreign private issuers?
5. Application to Foreign Private Issuers
The Commission previously adopted amendments to conform the exhibit
requirements in Form 20-F to the requirements in Item 601.\224\ To
maintain a consistent approach to the exhibit requirements for domestic
registrants and foreign private issuers, the proposed amendments would
require foreign private issuers to provide information in exhibit
filings comparable to the information provided by domestic registrants
under Item 601(a)(5), Item 601(a)(6), Item 601(b)(4)(vi), Item
601(b)(10)(i), Item 601(b)(10)(iv), and Item 601(b)(21), as proposed.
In each case, we believe that the justifications for the proposed
amendments to Item 601 are equally applicable to Form 20-F.
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\224\ See International Disclosure Standards Release, Release
No. 33-7637 (Feb. 2, 1999) [64 FR 6261 (Feb. 9, 1999)] (expressing
the Commission's intention ``to conform the exhibit requirements for
Form 20-F with the exhibit requirements for registration statements
filed by U.S. issuers under the Exchange Act'' and stating that all
of the Form 20-F exhibit requirements ``are required for domestic
issuers filing a registration statement on Form 10 or an annual
report on Form 10-K'').
---------------------------------------------------------------------------

We are not proposing similar changes to Form 40-F. Form 40-F
generally permits Canadian issuers to use Canadian disclosure documents
to satisfy the Commission's registration and disclosure requirements.
As a result, the exhibit requirements in Form 40-F are largely in
accordance with Canadian disclosure standards.
Request for Comment
62. Should we amend the exhibit requirements of Form 20-F so that
they are consistent with the requirements under Item 601 as proposed?
Why or why not? Are there any unique considerations with respect to
foreign private issuers in this context?
63. Should we make corresponding changes to the exhibit
requirements in Form 40-F? Why or why not?
64. Would the proposed amendments conflict with home-country
requirements in some jurisdictions? If so, please explain.

[[Page 51007]]

F. Incorporation by Reference

To reduce duplicative disclosure, registrants have been permitted
to incorporate previously filed information into their filings since
the enactment of the Securities Act and the Exchange Act.\225\
Initially, incorporation by reference was limited to exhibits, but over
time we have increasingly permitted incorporation by reference in other
contexts. The rules and instructions governing incorporation by
reference are now found in a variety of regulations, including
Regulation S-K, Regulation C, Regulation 12B and many of the
Commission's forms.
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\225\ See Federal Trade Commission Release No. 33-47 (Sept. 22,
1933) (allowing for incorporation by reference of exhibits filed
with registration statements); Release No. 34-51 (Nov. 27, 1934)
(allowing for incorporation by reference of exhibits filed with the
Commission under the Exchange Act or filed with an exchange).
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In the FAST Act Report, the staff recommended that the Commission
consider consolidating, clarifying, and updating Item 10(d) of
Regulation S-K and the other rules governing incorporation by
reference.\226\ Consistent with our mandate under the FAST Act, our
proposed amendments would revise Item 10(d), Rule 411,\227\ Rule 12b-
23,\228\ and a number of our forms to simplify and modernize these
rules while still providing all material information. Our proposed
amendments would also rescind Rule 12b-32.\229\ In addition, to provide
for a consistent set of incorporation by reference rules for investment
companies and investment advisers, we are proposing parallel amendments
to Rule 0-4 \230\ and a number of forms under the Investment Company
Act,\231\ certain conforming amendments to Rule 0-6 \232\ under the
Investment Advisers Act,\233\ and the rescission of Rule 8b-23,\234\
Rule 8b-24,\235\ and Rule 8b-32 \236\ under the Investment Company Act
(certain provisions of which would be consolidated into proposed new
Rule 0-4). The proposed amendments would streamline the requirements
associated with incorporation by reference and facilitate investor
access to incorporated documents through the use of hyperlinks. The
proposed amendments are also consistent with the Commission's
longstanding acceptance of incorporation by reference in the interests
of encouraging registrants to eliminate duplicative disclosures.
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\226\ See FAST Act Report, supra note 2, at Recommendations A.1
and A.2.
\227\ 17 CFR 230.411.
\228\ 17 CFR 240.12b-23.
\229\ 17 CFR 240.12b-32.
\230\ 17 CFR 270.0-4.
\231\ 15 U.S.C. 80a-1 et seq.
\232\ 17 CFR 275.0-6.
\233\ 15 U.S.C. 80b-1 et seq.
\234\ 17 CFR 270.8b-23.
\235\ 17 CFR 270.8b-24.
\236\ 17 CFR 270.8b-32.
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Our proposed amendments respond to some of the recommendations from
commenters on the Concept Release. Commenters generally supported the
use of incorporation by reference.\237\ A number of commenters
recommended expanding the ability to incorporate by reference.\238\
Some commenters, while supporting the use of incorporation by
reference, cautioned that it should not excessively fragment disclosure
or make disclosure more difficult to access.\239\
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\237\ See Letters from Wachtell, Lipton, Rosen & Katz (May 16,
2016) (``Wachtell''); Ball Corporation (July 19, 2016) (``Ball'');
Chamber 2; FedEx; CGCIV; International Integrated Reporting Council
(July 20, 2016) (``IIRC''); California State Teachers' Retirement
System (July 21, 2016) (``CalSTRS''); Edison Electric and AGA;
American Federation of State, County and Municipal Employees (July
21, 2016) (``AFSCME''); Fenwick; and NIRI.
\238\ See Letters from Wachtell; Chamber 2; FedEx; CGCIV; IIRC;
Edison Electric and AGA; Fenwick; IAC 1; and NIRI.
\239\ See Letters from IIRC and CalSTRS. The IIRC recommended
emphasizing the use of incorporation by reference for
``supplementary'' information so as to focus the disclosure in a
document on ``core'' information.
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1. Item 10(d)
Item 10 of Regulation S-K \240\ contains general requirements on
the application of Regulation S-K. Item 10(d) focuses on incorporation
by reference.\241\ Item 10(d) states that, where rules, regulations, or
instructions to the forms permit incorporation by reference, a document
may be incorporated by reference to the specific document and to the
prior filing or submission in which that document was physically filed
or submitted. Item 10(d) generally prevents registrants from
incorporating by reference a portion of a document that itself also
incorporates pertinent information by reference.\242\ It also prohibits
incorporating documents by reference if they have been on file with the
Commission for more than five years and do not fall within one of the
exceptions provided in the rule.\243\
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\240\ 17 CFR 229.10.
\241\ 17 CFR 229.10(d).
\242\ Indirect incorporation by reference is permitted when the
registrant is expressly required to incorporate a document by
reference and, in the case of asset-backed issuers, under Item
1100(c) of Regulation AB [17 CFR 229.1100(c)]. See Item 10(d).
\243\ See infra note 247 and accompanying text (discussing the
exceptions).
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Consistent with the staff's recommendation in the FAST Act Report,
we are proposing to eliminate the five-year limit in Item 10(d). This
requirement originated from the Commission's policy on retention of
hard copy records of filings, as set forth in the Commission's Rules of
Practice.\244\ This requirement previously imposed a 10-year limit but
was reduced to five years in 1977 to allow for the Commission's
``orderly destruction of unneeded filings.'' \245\ At the time, the
Commission noted that the ``cost of storage outweighs the usefulness to
the Commission and to the public of many if not most of these
records.'' \246\ Nevertheless, exceptions were added for documents
contained in registration statements of reporting registrants and for
documents that a registrant identifies by file number that have not
been disposed of pursuant to the Commission's Records Control
Schedule.\247\ Given these broad exceptions and the current practice of
retaining documents electronically, the five-year limit now serves
little purpose and may lead to confusion about which documents may be
incorporated by reference.\248\
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\244\ See Rules of Practice, Release No. 34-35833 (June 9, 1995)
[60 FR 32738 (June 23, 1995)] (moving the requirements from Rule 24
of the Commission's Rules of Practice to Item 10(d)). We are also
proposing to eliminate remaining references to Rule 24 in Regulation
S-K and other rules and forms. See, e.g., Rule 411(d) and Form N-2.
\245\ See 25 FR 6719 (July 15, 1960) (adopting Rule 24);
Incorporation by Reference, Release No. 33-5818 (Mar. 18, 1977) [42
FR 16922 (Mar. 30, 1977)] (adopting an amendment to Rule 24 reducing
the 10-year limit to five years).
\246\ Notice of (1) Proposed Amendments to Rule 24 of the Rules
of Practice and All Other Commission Rules Relating to Incorporation
By Reference and Basic Documents and (2) Proposed Revocation of
Securities Exchange Act Rule 12b-34, Release No. 33-5711 (May 21,
1976) [41 FR 105 (May 28, 1976)] (proposing a three-year limit with
certain ``basic documents'' being retained for a longer period).
\247\ See Item 10(d)(1)-(2) and the Commission's Records Control
Schedule [17 CFR 200.80f].
\248\ We believe that it is very unlikely that a registrant
would attempt to incorporate by reference to a document that was
filed with the Commission but is no longer available because it was
not submitted on EDGAR and has been destroyed pursuant to the
Records Control Schedule. For example, the Commission retains
Securities Act and Exchange Act registration statements, reports and
proxy materials that have not been filed on EDGAR for 30 years. See
Records Control Schedule [17 CFR 200.80f]. Under the proposed
amendments, a registrant would not be permitted to incorporate by
reference to a destroyed document because it would render its
disclosure incomplete, unclear, or confusing. See, e.g., proposed
Rule 411(e) and Rule 12b-23(e).
---------------------------------------------------------------------------

Without the provisions relating to the five-year limit, little
substance remains in Item 10(d). Therefore, to simplify the
requirements, we are proposing to move the remaining provision in Item
10(d) prohibiting indirect incorporation by reference into the other
rules governing incorporation by reference.\249\ In the

[[Page 51008]]

FAST Act Report, the staff recommended consolidating the incorporation
by reference rules in Item 10(d). After considering this
recommendation, we believe that consolidating these procedural rules in
Regulation C and Regulation 12B (and, for investment companies and
investment advisers, in Rule 0-4 under the Investment Company Act and
Rule 0-6 under the Investment Advisers Act, respectively \250\) would
better align with the Commission's original intent of focusing
Regulation S-K on substantive disclosure requirements.\251\
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\249\ See the proposed amendments to Rule 411, Rule 12b-23, Rule
0-4, and Rule 0-6. Paragraph (d) of Item 10 also states that, when
incorporation by reference is permitted, a document may be
incorporated by reference to the specific document and to the prior
filing or submission in which such document was physically filed or
submitted. We are proposing to eliminate this provision because
similar provisions exist in Rule 411(d), Rule 12b-23(b), Rule 0-
4(c), and Rule 0-6(c).
\250\ As part of these amendments, we are proposing amendments
to various Investment Company Act forms to eliminate references to
Item 10(d), along with outdated references in our forms and Rule 0-4
and Rule 0-6 to 17 CFR 228.10(f), a former rule under Regulation S-B
which was rescinded in 2007. See Smaller Reporting Company
Regulatory Relief and Simplification, Release No. 33-8876 (Dec. 19,
2007) [73 FR 934 (Jan. 4, 2008)].
\251\ See FAST Act Report, supra note 2, at Recommendation A.2
(``These rules could be consolidated in Item 10(d) for submissions
that are required to comply with Regulation S-K.''). When the
Commission adopted the integrated disclosure system, it indicated
that it intended to bifurcate the regulations into procedural
requirements and substantive disclosure requirements. See Proposed
Revision of Regulation C, Registration and Regulation 12B,
Registration and Reporting, Release No. 33-6333 (Aug. 6, 1981) [46
FR 41971 (Aug. 18, 1981)] (``In its development of an integrated
disclosure system, the Commission has sought to consolidate
requirements relating to substantive disclosure and document content
in Regulation S-K. The proposals in this release reflect the
continuation of that process and also the effort to simplify and
consolidate procedural requirements in Regulations C and 12B.'');
Integrated Disclosure System Adopting Release, supra note 69 (``The
third aspect of the integrated disclosure system consists of
Regulation C and Regulation 12B, which contain the procedures to be
used in preparing and filing registration statements and reports
under the Securities Act and the Exchange Act, respectively.'').
Nevertheless, the rules governing incorporation by reference could
be consolidated in Regulation S-K. We are soliciting comment on
whether such an approach would be preferable.
---------------------------------------------------------------------------

Request for Comment
65. Should we consolidate the requirements governing incorporation
by reference as proposed? Would the proposed structure of the
incorporation by reference rules be simpler for registrants,
particularly smaller registrants, to follow? Instead of preserving the
different rules for incorporation by reference under Regulation C and
Regulation 12B, should we combine Rule 411, Rule 12b-23, and Rule 12b-
32 in a single item of Regulation S-K? Would that facilitate or
streamline compliance with the rules?
66. Should we eliminate Item 10(d)'s five-year limit on
incorporation by reference as proposed? Given the exceptions that exist
and the Commission's electronic filing requirements, is the five-year
limit obsolete? Would eliminating the five-year limit make it difficult
for investors to locate information that a registrant incorporates by
reference?
67. For investment companies and investment advisers, should we
consolidate the different rules for incorporation by reference into
Rule 0-4 and Rule 0-6, respectively as proposed? Would this structure
be simpler for investment companies and investment advisers to follow,
or are there special considerations regarding investment companies and
investment advisers that make the current or another structure more
appropriate?
2. Securities Act Rule 411, Exchange Act Rule 12b-23 and Rule 12b-32
and Related Rules Under the Investment Company Act and Investment
Advisers Act
Rule 12b-23 governs incorporation by reference for registration
statements filed pursuant to Sections 12(b) and 12(g) of the Exchange
Act and reports filed pursuant to Sections 13 and 15(d) of the Exchange
Act.\252\ Rule 12b-23 broadly allows for incorporation by reference in
answer, or partial answer, to any item of an Exchange Act registration
statement or report. Rule 12b-32 governs incorporation by reference for
exhibits filed with registration statements and reports. Rule 411
governs incorporation by reference for registration statements filed
under the Securities Act, including exhibits thereto.\253\ Rule 411
restricts incorporation by reference in a prospectus unless otherwise
provided in the appropriate form but allows for incorporation by
reference similar to Rule 12b-23 for the non-prospectus portions of a
registration statement.\254\
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\252\ See Rule 12b-1 [17 CFR 240.12b-1] (setting forth the scope
of Regulation 12B).
\253\ See Rule 400 [17 CFR 230.400] (setting forth the scope of
Regulation C).
\254\ See Integrated Disclosure System Adopting Release, supra
note 69; Proposed Revision of Regulation C, Registration and
Regulation 12B, Registration and Reporting, Release No. 33-6333
(Aug. 6, 1981) [46 FR 41971 (Aug. 18, 1981)] (``While it is
generally proper to prevent prospectuses from incorporating exhibits
which are not delivered, the Commission does not believe it is
necessary to impose such limits in connection with Exchange Act
reports which are not actually delivered in registered public
offerings of securities.'').
---------------------------------------------------------------------------

Under the Investment Company Act, Rule 0-4 provides general
incorporation by reference rules for investment company registration
statements, applications, and reports filed with the Commission. Rule
8b-23 (additional incorporation by reference rules for registration
statements and reports), Rule 8b-24 (rules regarding summaries or
outlines of documents), and Rule 8b-32 (incorporation of exhibits by
reference) provide additional incorporation by reference rules for
investment company registration statements and reports. Under the
Investment Advisers Act, Rule 0-6 governs incorporation by reference
for investment adviser applications for Commission orders under the
Investment Advisers Act other than applications for registration as an
investment adviser.
a. Exhibit and Other Filing Requirements
Rule 12b-23(a)(3) under the Exchange Act requires that copies of
any information incorporated by reference must be filed as an exhibit,
with limited exceptions.\255\ This provision was introduced in 1971 so
that then-existing microfiche technology for the public dissemination
of reports and documents filed with the Commission could function
properly.\256\ Rule 411(b)(4) under the Securities Act has a more
limited exhibit filing provision for non-prospectus information that is
incorporated by reference into a document that does not comply with the
five-year limit in Item 10(d). Rule 8b-23 under the Investment Company
Act generally requires investment company registrants to file with a
registration statement or report a copy of any registration statement,
report, or prospectus from which information is incorporated by
reference, except in cases where the registration statement, report, or
prospectus was filed electronically.\257\ We are proposing to

[[Page 51009]]

eliminate these requirements, consistent with commenters' suggestions
and the staff's recommendation in the FAST Act Report to make the rules
for incorporation by reference more consistent, and to apply consistent
rules for incorporation by reference under the Investment Company Act
and Investment Advisers Act.\258\ We no longer believe that these
requirements are necessary as most Exchange Act filings are made
publicly available on EDGAR, and as we generally do not have similar
exhibit filing requirements for Securities Act registration
statements.\259\
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\255\ See Rule 12b-23(a)(3) [17 CFR 240.12b-23(a)(3)](providing
exceptions for a proxy or information statement incorporated by
reference in response to Part III of Form 10-K, a form of prospectus
filed pursuant to Rule 424(b) [17 CFR 230.424(b)] incorporated by
reference in response to Item 1 of Form 8-A, and information filed
on Form 8-K).
\256\ See Registration and Reporting and Form for Annual Reports
of Employee Stock Purchase Plans, Release No. 34-9048 (Jan. 4, 1971)
[36 FR 4483 (Mar. 6, 1971)] (``In order that the microfiche system
for the public dissemination of reports and documents filed with
[the] Commission may work, the amended rule requires that copies of
information or financial statements incorporated by reference, or
copies of the pertinent pages of any document containing such
information or statement, be filed with the registration statement
or report in which it is so incorporated.'').
\257\ See Rule 8b-23(a) [17 CFR 270.8b-23(a)]. In addition, Rule
0-4 under the Investment Company Act and Rule 0-6 under the
Investment Advisers Act permit the incorporation by reference as an
exhibit in any registration statement, application or report (in the
case of Rule 0-4) or in any application (in the case of Rule 0-6)
any document or part thereof previously or concurrently filed with
the Commission. Both rules also permit the incorporation by
reference of financial statements (or parts thereof), although Rule
0-6 specifies that the financial statements (or parts thereof) that
are incorporated are to be filed as exhibits. For consistent rules
under both Acts, we are proposing amendments to Rule 0-4 to specify
that financial statements may be filed as exhibits to investment
company applications, as Rule 0-6 currently specifies with respect
to applications filed under the Investment Advisers Act.
Furthermore, if the number of copies of any document from which
information is incorporated by reference is less than the number of
copies required to be filed with a registration statement,
application, or report, Rule 0-4 and Rule 0-6 require an investment
company or applicant, respectively, to file as many additional
copies of the document incorporated by reference as may be necessary
to meet the requirements of the registration statement, application,
or report. See Rule 0-4(a), Rule 0-6(a). We are proposing to
eliminate the requirement to file additional copies from Rule 0-4
because most investment company filings are available on EDGAR.
Although investment adviser applications are filed in paper format,
in the staff's experience, those applications rarely incorporate by
reference information as permitted by Rule 0-6. For our regulatory
purposes, we do not believe that the number of copies specified in
current Rule 0-6 is needed. Thus, for the foregoing reasons and for
consistency purposes, we are similarly proposing to eliminate the
requirement to file additional copies from Rule 0-6.
\258\ See Letters from ABA and Fenwick. See also FAST Act
Report, supra note 2, at Recommendation A.2.
\259\ We note that investment advisers register and submit some
filings to the Commission electronically through the Investment
Adviser Registration Depository (``IARD'').
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In connection with these proposed amendments, we are also proposing
to eliminate the corresponding exhibit requirement in Item
601(b)(99)(ii) of Regulation S-K, which was adopted in connection with
Rule 12b-23(a) and Rule 411(b)(4).\260\ In addition to Item 601(b)(99),
other provisions in Item 601 require documents to be filed as exhibits
only when they are incorporated by reference into a filing. For
example, Item 601(b)(13) requires a registrant to file an annual report
to security holders, Form 10-Q or quarterly report to security holders
as an exhibit when the registrant incorporates all or a portion of such
reports by reference. Although annual reports to security holders are
readily available to investors and the staff outside of EDGAR, we
believe it is appropriate to retain the exhibit requirement in these
circumstances because some registrants satisfy their disclosure
requirements by incorporating a significant amount of disclosure from
these reports. We are not proposing to eliminate these other exhibit
filing requirements in Item 601. Nonetheless, we are proposing to
eliminate the requirement in Item 601(b)(13) to file a Form 10[dash]Q
as an exhibit when it is specifically incorporated by reference into a
prospectus. This provision would no longer be necessary because, under
the proposed rules, a registrant would be required to include a
hyperlink to any information that is incorporated by reference to a
document available on EDGAR.\261\
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\260\ See Integrated Disclosure System Adopting Release, supra
note 69 (adopting Item 601(b)(28)(ii), which is now found in Item
601(b)(99)(ii)) and Proposed Revision of Regulation S-K and Proposed
Rescission of Guides for the Preparation and Filing of Registration
Statements and Reports, Release No. 33-6332 (Aug. 6, 1981) [46 FR
41925 (Aug. 18, 1981)].
\261\ See infra Section II.F.2.b. (Incorporation by Reference--
Hyperlinks).
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Request for Comment
68. Should we eliminate the requirement in Rule 12b-23(a)(3) and
Rule 411(b)(4) that copies of information incorporated by reference be
filed as exhibits to registration statements or reports? Would
eliminating these requirements encourage incorporation by reference as
suggested by some commenters? \262\ Would eliminating the requirement
make it difficult for investors to locate the incorporated information
on EDGAR?
---------------------------------------------------------------------------

\262\ See Letters from ABA and Fenwick.
---------------------------------------------------------------------------

69. Should we modify, as proposed, the exhibit filing provisions in
Rule 0-4, Rule 8b-23, and Rule 0-6 regarding materials incorporated by
reference? Are there special considerations regarding investment
companies and applications under the Investment Advisers Act that merit
maintaining or modifying the current provisions we are proposing to
eliminate? Should we specify in Rule 0-4, as proposed, that financial
statements may be filed as exhibits to investment company applications,
as Rule 0-6 currently specifies with respect to applications filed
under the Investment Advisers Act? Given that applications under the
Investment Advisers Act are filed with the Commission in paper, should
our final rules continue to require the filing of additional copies of
materials incorporated by reference?
70. Some documents are required to be filed as exhibits only when
they are incorporated by reference into a filing. For example, Item
601(b)(13) requires an annual report to security holders to be filed as
an exhibit to a Form 10-K when all or part of the annual report is
incorporated by reference into the text of Form 10-K. Should we amend
Item 601(b)(13) or other provisions in Item 601 to eliminate these
requirements (or is the proposed elimination of Rule 12b-23(a)(3)
sufficient to encourage incorporation by reference)? Please address the
availability of the information called for by Item 601 to investors and
the Commission in your response.\263\
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\263\ For example, annual reports are required to be delivered
to security holders. See Rule 14a-3(b) and Rule 14c-3(a) [17 CFR
240.14a-3(b) and 14c-3]. Such reports must also be provided to the
Commission. See Rule 14a-3(c) [17 CFR 240.14a-3] and Rule 14c-3(b)
(requiring hard copies of these reports to be delivered to the
Commission).
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b. Hyperlinks
Consistent with the recommendation of commenters and the staff, we
are proposing to facilitate greater investor access to disclosure by
amending Rule 411, Rule 12b-23, and Rule 0-4 to require hyperlinks to
information that is incorporated by reference if that information is
available on EDGAR.\264\ The Commission recently adopted rules
requiring hyperlinks to most exhibits filed pursuant to Item 601, Form
F-10 \265\ or Form 20-F.\266\ To accommodate hyperlinks, those filings
must be made in HTML format.\267\ The requirement to file documents in
HTML format would be expanded under the proposed rules to include
filings that are subject to the proposed hyperlinking requirements in
Rule 411, Rule 12b-23, and Rule 0-4.\268\ We believe that

[[Page 51010]]

expanding the hyperlinking requirement to other information that is
incorporated by reference would improve the readability and
navigability of disclosure documents and discourage repetition,
consistent with our FAST Act mandate.
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\264\ See Letters from Chamber; FedEx; Fenwick; and CGCIV. See
also FAST Act Report, supra note 2, at n.34. We are not proposing
similar amendments to Rule 0-6 because applications under the
Investment Advisers Act filed pursuant to that rule are not required
to be filed electronically. In addition, applications filed pursuant
to Rule 0-6 may incorporate information that may not be filed on
EDGAR.
\265\ 17 CFR 239.40.
\266\ See Exhibit Hyperlinks Adopting Release, supra note 14, at
14130.
\267\ See id. at 14130. Larger registrants were required to
comply with the rules requiring exhibit hyperlinks for filings
submitted on or after September 1, 2017. Id. The rules we adopted at
that time did not generally apply to investment companies. However,
as discussed below, we are proposing to apply similar requirements
to certain filings by investment companies in this release. See
infra Section II.G.2.
\268\ See proposed Rule 105(e) of Regulation S-T. We do not
believe that the proposed amendments would significantly increase
the number of filings that must be in HTML format. Filings that are
not subject to Rule 411 or Rule 12b--23, such as proxy statements on
Schedule 14A, would not be affected by this proposal.
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The proposed requirements for hyperlinking are similar to the
requirements for exhibit hyperlinking. Specifically, under the proposed
amendments, registrants would not be required to file an amendment to a
document solely to correct an inaccurate hyperlink unless, that
hyperlink was included in a pre-effective registration statement. An
inaccurate hyperlink alone would neither render the filing materially
deficient nor affect a registrant's eligibility to use Form S-3 \269\
or Form F-3.\270\ Lastly, we are not proposing to require refiling of
information that is incorporated by reference from a document that was
previously filed with the Commission in paper. Similar to our reasoning
in the Exhibit Hyperlinks Adopting Release, we believe that requirement
would have limited utility given that electronic filing has been
required for over two decades and paper filings are currently made in
very limited circumstances.\271\
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\269\ 17 CFR 239.13.
\270\ 17 CFR 239.33.
\271\ See Exhibit Hyperlinks Adopting Release, supra note 14, at
14131. See also FAST Act Report, supra note 2, at n.31 and
accompanying text.
---------------------------------------------------------------------------

Unlike the requirements for exhibit hyperlinking, however, a
registrant would not be required to correct inaccurate hyperlinks in an
effective registration statement by including a corrected hyperlink in
a subsequent periodic report or a post-effective amendment. We
preliminarily believe that it would result in more confusion than
clarity if we were to require registrants to re-file disclosure to
correct a hyperlink or to include a section solely devoted to corrected
hyperlinks in the body of a periodic report or post-effective
amendment. This differs from exhibit hyperlinks where the corrected
hyperlink would be unobtrusively located in the exhibit index with
other exhibits. The requirement in proposed Rule 411, Rule 12b-23, and
Rule 0-4 to describe the location of the information incorporated by
reference should mitigate the impact of any inaccurate hyperlinks.
Request for Comment
71. As proposed, in most cases a registrant would be required to
include a hyperlink to information that it incorporates by reference.
Would the proposed hyperlinking requirements significantly increase the
compliance burden on registrants? Should we provide a delayed
compliance date for smaller reporting companies and ASCII filers? \272\
If so, what compliance date would be appropriate? Should we provide any
exceptions to the proposed hyperlinking requirement? For example,
should we exclude references to entire forms that are readily
accessible on EDGAR, such as Form 10-K, or for particular types of
disclosure? If so, which forms or types of disclosure would be
appropriate and why?
---------------------------------------------------------------------------

\272\ See Exhibit Hyperlinks Adopting Release, at 14130.
---------------------------------------------------------------------------

72. Should investment companies be required to include a hyperlink
to information incorporated by reference as proposed? Are there special
considerations regarding filings by investment companies that merit
modifying the requirement in any way? For example, should investment
company applications be required to include a hyperlink to information
that is incorporated by reference?
73. When should registrants be required to update inaccurate
hyperlinks? Should these updating requirements differ from the
requirements to update inaccurate exhibit hyperlinks as proposed? \273\
Should we instead require registrants to update hyperlinks in a post-
effective amendment or subsequent periodic report?
---------------------------------------------------------------------------

\273\ See Exhibit Hyperlinks Adopting Release, supra note 14, at
n.73.
---------------------------------------------------------------------------

74. Should we amend our forms to clarify that information
incorporated by reference must include a hyperlink to where that
information may be found on EDGAR? Would the requirements be
sufficiently clear if we include them only in the rules as proposed?
c. Financial Statements
In addition to addressing incorporation by reference, the FAST Act
Report recommended that we consider revising our rules and forms to
allow for consistent cross-referencing to disclosure found elsewhere in
a filing.\274\ To address the concern that cross-referencing to non-
financial information from within the financial statements may raise
questions about the scope of an audit or review, the staff recommended
that we consider prohibiting the use of such cross-referencing. Several
commenters on the Concept Release also supported using cross-references
to reduce repetitive disclosure while recommending that the Commission
clarify or delineate what information constitutes the set of audited or
reviewed financial statements.\275\
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\274\ See FAST Act Report, supra note 2, at Recommendation A.2.
\275\ See Letters from Deloitte & Touche LLP (July 15, 2016);
CAQ; Ernst & Young 3; PNC; Grant Thornton LLP (July 21, 2016); KPMG;
PWC; Crowe Horwath LLP (July 21, 2016) (``Crowe Horwath''); and CFA
Institute.
---------------------------------------------------------------------------

In most cases, there is no prohibition on cross-referencing to or
incorporating information from the financial statements to satisfy the
narrative disclosure requirements of Regulation S-K.\276\ In some cases
cross-referencing is specifically permitted.\277\ Therefore, although
we encourage registrants to make use of the disclosure in their
financial statements to satisfy other disclosure requirements,\278\ we
are not proposing clarifying amendments to our rules or forms to
address incorporation by reference from the financial statements at
this time.
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\276\ Although Rule 411 restricts incorporation by reference in
a prospectus, it does not prohibit cross-references within a
prospectus. Also, Securities Act forms, such as Forms S-1 and S-3,
permit incorporation by reference in the prospectus if specified
conditions are met.
\277\ See, e.g., Item 101(b) and Item 101(d)(2) of Regulation S-
K [17 CFR 229.101(b) and (d)(2)].
\278\ For example, disclosure about legal proceedings,
transactions with related persons and matters relevant to MD&A might
be disclosed in the financial statements.
---------------------------------------------------------------------------

By contrast, where financial statements cross-reference or
incorporate information from outside the financial statements, it can
raise questions as to the scope of an auditor's responsibilities.\279\
To address this concern, we are proposing amendments to our rules and
forms that would prohibit that type of incorporation by reference or
cross-referencing.\280\ These amendments would not prohibit cross-
references to other parts of a filing when otherwise specifically
permitted by our rules.\281\ These amendments would also not prohibit
incorporating financial information from other filings to satisfy

[[Page 51011]]

financial reporting requirements when otherwise permitted or
required.\282\
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\279\ See supra note 275 and accompanying text.
\280\ See our proposed amendments to Rule 411, Rule 12b-23, and
Rule 0-4 and Securities Act Forms S-1, S-3, S-11, and F-1. This
approach would also avoid the concern raised by one commenter that
registrants may lose their Securities Act Section 27A [15 U.S.C.
77z-2] safe harbor by cross-referencing to the body of a periodic
report within their financial statements. See Letter from General
Motors. Because Rule 0-6 governs incorporation by reference only for
applications filed under the Investment Advisers Act, we are not
proposing to make similar amendments to that rule, but request
comment on whether the final rule should include such provision.
\281\ For example, registrants would continue to be permitted to
include cross-references in the financial statements to information
outside of the financial statements about segments when that
information conforms with generally accepted accounting principles.
See Item 101(b) of Regulation S-K.
\282\ For example, registrants using Form S-3 would continue to
be permitted to incorporate financial statements filed with a Form
8-K that reports the acquisition of a significant business. Also,
registrants using Form S-4 to report a merger with another
registrant would continue to be able to incorporate the financial
statements of the registrant filed on Form 10-K and Form 10-Q.
---------------------------------------------------------------------------

We are also proposing an amendment to Rule 0-4 that, except as
provided in the Commission's rules, would restrict the incorporation of
financial information required to be given in comparative form for two
or more fiscal years or periods unless the information incorporated by
reference includes the entire period for which the comparative data is
given.\283\ We are proposing this amendment to provide for consistency
with similar restrictions under both current and proposed Rule 411 and
Rule 12b-23 and request comment on whether this amendment is
appropriate.
---------------------------------------------------------------------------

\283\ See proposed Rule 0-4(b).
---------------------------------------------------------------------------

Request for Comment
75. Should we amend our rules or forms to clarify or expand when
financial statement disclosure may be used to satisfy other disclosure
requirements? If so, are there particular areas of disclosure that we
should address?
76. To clarify the scope of the financial statements and an
auditor's responsibilities, we have proposed prohibiting registrants
from incorporating or cross-referencing information outside of the
financial statements into their financial statements unless otherwise
specifically permitted or required by the Commission's rules. Is the
proposed approach appropriate or would an alternative approach better
achieve this goal? Should we provide other exceptions to the proposed
rule?
77. Are the proposed amendments appropriate for investment
companies? Do investment companies raise special considerations that
our rules and forms should address? Should we amend Rule 0-6 to provide
for similar rules regarding the incorporation by reference of financial
statements into applications under the Investment Advisers Act? Why or
why not?
d. Other Amendments
We are also proposing several non-substantive changes to Rule 411,
Rule 12b-23 and Rule 0-4 to streamline, clarify, and conform these
rules. One of these proposed changes relates to the current provisions
governing how financial information from another filing may be
incorporated by reference.\284\ Rule 12b-23 states that financial
information incorporated by reference must comply with the requirements
of the form or report into which it is incorporated. Rule 411 and Rule
0-4 contain similar language.\285\ These provisions could be read to
imply that the financial statements must comply with the form on which
they were originally filed, rather than the form into which they are
being incorporated. We are proposing to eliminate these provisions
because all information, not just information incorporated by reference
or financial information, must comply with the requirements of the form
in which it is used unless otherwise permitted by rule or statute.
---------------------------------------------------------------------------

\284\ See Rule 411(b)(2) (discussing the incorporation by
reference of financial information in the non-prospectus portion of
a registration statement) and Rule 12b-23(a)(1).
\285\ Similar language also exists in Rule 8b-23, which we are
proposing to rescind.
---------------------------------------------------------------------------

The proposed amendments would also eliminate several redundant
provisions in Rule 411 and Rule 12b-23. Rule 411(b) provides that
information may be incorporated by reference in answer, or partial
answer, to any item that calls for information not required to be
included in a prospectus ``subject to the following provisions.''
Although presented as conditions to using incorporation by reference,
the provisions that follow mostly discuss situations where
incorporation by reference is permitted by other parts of these rules.
For example, Rule 411(b)(1) states that non-financial information may
be incorporated by reference to any document in response to the non-
prospectus disclosure requirements in filings under the Securities Act.
Rule 12b-23(a) contains a similar structure for any item of a
registration statement or report. Further, Rule 411(b)(3) (for non-
prospectus disclosure requirements) and Rule 12b-23(a)(2) both state
that incorporating information by reference to other parts of the same
filing is generally permitted. Incorporation by reference in all of
these contexts is permitted by the broader provisions of Rule 411(b)
and Rule 12b-23(a). Accordingly, we are proposing to eliminate
paragraphs (b)(1) and (b)(3) of Rule 411 and paragraph (a)(2) of Rule
12b[dash]23, as these provisions are unnecessary.
We are also proposing to move the provisions relating to
incorporating exhibits by reference from Rule 12b-32 into Rule 12b-23.
Previously, Regulation C had a bifurcated structure, similar to Rule
12b-32 and Rule 12b-23, with both Rule 411 and Rule 447 governing the
incorporation of exhibits by reference for Securities Act filings. Rule
447 was consolidated into Rule 411 in 1982.\286\ Although Rule 12b-32
is currently found under the exhibits subheading of Regulation 12B, we
believe that reducing the number of separate rules governing
incorporation by reference would simplify compliance. We are not
proposing any substantive changes to Rule 12b-32.\287\
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\286\ See Integrated Disclosure System Adopting Release, supra
note 69.
\287\ The proposed amendments would conform the language of Rule
12b-32 (as incorporated into Rule 12b-23) with similar language
currently found in Rule 411(c). References to 17 CFR 228.10(f),
which no longer exists, would be eliminated.
---------------------------------------------------------------------------

For similar reasons, we are proposing to move the provisions
relating to incorporating exhibits by reference from Rule 8b-32 into
Rule 0-4, with one exception.\288\ Under Rule 8b-32(c), an investment
company may only incorporate by reference into a registration statement
or report required to be filed electronically an exhibit that was filed
in electronic format, unless the exhibit was filed in paper under a
hardship exemption and any required confirming copy has been
submitted.\289\ Given that EDGAR is now the primary method for the
filing of investment company registration statements, applications, and
reports with the Commission and our rules require the filing of
electronic format copies of paper format documents filed under a
hardship exemption,\290\ this provision is obsolete, and therefore, we
are proposing to eliminate it.\291\
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\288\ As with the proposed amendments to Rule 12b-23, we are
proposing to conform the language of paragraphs (a) and (b) of Rule
8b-32 (as incorporated into Rule 0-4) with similar language
currently found in Rule 411(c). References to 17 CFR 228.10(f),
which no longer exists, would similarly be eliminated.
\289\ See Rule 8b-32(c).
\290\ See, e.g., Rule 201(b) of Regulation S-T [17 CFR
232.201(b)], Notes 2 and 3 to Rule 202 of Regulation S-T [17 CFR
232.202].
\291\ See paragraph (a)(iv) of Rule 101 of Regulation S-T [17
CFR 232.101] (specifying the investment company filings required to
be submitted electronically).
---------------------------------------------------------------------------

We are also proposing additional modifications to Rule 0-4 and Rule
0-6 to modernize and simplify these rules. First, we are proposing to
eliminate the requirement that if a certificate of an independent
public accountant previously or concurrently filed is incorporated by
reference by an investment company (with respect to the filing of a
registration statement, application, or report) or an investment
adviser (with respect to the filing of an application) a written
consent of the accountant must be filed with the filing.\292\ We note
that Rule 439 under

[[Page 51012]]

the Securities Act \293\ provides a similar requirement for these types
of consents for registration statements under the Securities Act. We
further note that our investment company registration forms do not
require the filing of these consents where a registration statement or
amendment is filed only under the Investment Company Act.\294\ We are
unaware of circumstances under which a consent would be required in
connection with an investment company report or an application filed by
an investment company or investment adviser. Therefore, we are
proposing to eliminate this requirement from Rule 0-4 and Rule 0-6 but
request comment on whether the final rules should retain it.
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\292\ See Rule 0-4(b), Rule 0-6(b).
\293\ 17 CFR 239.439.
\294\ See, e.g., General Instruction B.2(b) of Form N-1A.
---------------------------------------------------------------------------

Second, we are proposing to eliminate the restrictions currently
contained in Rule 0-4(d) and Rule 0-6(d) on incorporating by reference
exhibits or financial statements made in certain filings.\295\ Given
that EDGAR is now the primary method for the filing of registration
statements and reports with the Commission, and that documents filed on
EDGAR remain available regardless of whether a filing is withdrawn,
whether a registration statement ceases to be effective, and whether
the other circumstances outlined in Rule 0-4(d) and Rule 0-6(d) apply
to a particular filing, these provisions are no longer necessary.\296\
For our regulatory purposes, we do not believe that the restrictions
are needed. Thus, for the foregoing reasons and for consistency
purposes, we are proposing to eliminate this provision from Rule 0-4
and Rule 0-6 but request comment on whether the final rules should
retain it.
---------------------------------------------------------------------------

\295\ Specifically, the rules restrict the incorporation by
reference of exhibits or financial statements which (1) have been
withdrawn, (2) were filed in connection with certain registration
statements that have ceased to be effective, (3) are contained in
filings subject to pending proceedings under (i) Section 8(b) or
8(d) of the Securities Act, (ii) Section 8(e) of the Investment
Company Act, (iii) in the case of applications under Rule 0-6,
Section 203(e)(1) of the Investment Advisers Act, or (iv) orders
under any of the foregoing, and (4) in the case of investment
companies, were documents filed in paper and with respect to an
electronic filer under a temporary hardship exemption under Rule 201
of Regulation S-T and an electronic copy has not been submitted.
\296\ As noted earlier, investment advisers register and submit
some filings to the Commission electronically through IARD.
---------------------------------------------------------------------------

Finally, we are proposing to eliminate the provisions currently
contained in Rule 0-4(e) and Rule 0-6(e). These provisions provide that
the Commission may refuse to permit incorporation by reference in any
case in which, in the Commission's judgment, such incorporation would
render a registration statement or report of an investment company or
an application filed by an investment adviser incomplete, unclear, or
confusing. Instead, for consistency with proposed Rule 411(e) and
proposed Rule 12b-23(e), we are proposing to amend Rule 0-4 and Rule 0-
6 to contain a general requirement that information must not be
incorporated by reference in any case where such information would
render the disclosure incomplete, unclear, or confusing.\297\
---------------------------------------------------------------------------

\297\ See proposed Rule 0-4(e), proposed Rule 0-6(b). A
substantially similar provision exists in current Rule 8b-23(c)
(which we are proposing to rescind) pertaining to information
incorporated by reference into an investment company registration
statement or report.
---------------------------------------------------------------------------

Request for Comment
78. We are proposing to eliminate several redundant parts of the
rules that address incorporation by reference. Are those provisions
helpful to understanding whether and when incorporation by reference is
permitted? Should we include those provisions in instructions to the
rules or in other guidance?
79. Are the proposed amendments appropriate with respect to
investment companies, or do investment companies raise special
considerations that our rules should address? For example, should our
rules maintain the current restriction contained in Rule 8b-32(c)
regarding exhibits filed as part of registration statements and reports
required to be filed electronically? Should our rules retain the
current requirement that a consent be filed where an independent public
accountant certificate is incorporated by reference? Should our rules
retain the current prohibitions on incorporating by reference
information filed as part of certain filings specified in Rule 0-4(d)
and Rule 0-6(d)? In these cases, should our rules retain the current
provisions of our rules, or should they be modified in any way? If so,
how?
80. Are the proposed amendments to Rule 0-4 and Rule 0-6 sufficient
to help ensure that information incorporated by reference into a
registration statement, report, or application does not render the
disclosure in these documents incomplete, unclear, or confusing? If so,
should we, as proposed to provide regulatory consistency between
operating companies on the one hand and investment companies and
investment advisers on the other, eliminate the current provisions in
Rule 0-4(e) and Rule 0-6(e) that the Commission may refuse to permit
incorporation by reference in any case in which in its judgment the
incorporation would render a registration statement, report, or
application incomplete, unclear, or confusing? Why or why not? If
retained, should the provisions be modified in any way, and if so, how?
81. Are the proposed rules governing incorporation by reference
under the Investment Company Act or Investment Advisers Act
sufficiently clear? Should we modify them in any other respect? For
example, should our rules expressly permit or prohibit information to
be incorporated into the body of an application?
3. Forms
Incorporation by reference is also addressed in our forms.\298\
Accordingly, we are proposing revisions to several of the Commission's
forms to implement the proposed amendments discussed above. In addition
to conforming changes, we are proposing amendments to Form 10, Form 10-
K and Form 20-F to allow registrants to exclude item numbers and
captions or to create their own captions tailored to their
disclosure.\299\ The proposed amendments would not affect captions that
are expressly required by the forms or Regulation S[dash]K. For
example, Form 10-K and Form 20-F require captions for ``audit fees,''
``audit-related fees,'' ``tax fees,'' and ``all other fees.''
Regulation S-K requires a caption for ``risk factors.'' \300\ These
proposed amendments are intended to reduce the use of unnecessary
cross-references

[[Page 51013]]

when information may be responsive to more than one disclosure item in
the Exchange Act forms.\301\
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\298\ Although, as stated above, Rule 411, Rule 12b-23 and Rule
12b-32 generally govern incorporation by reference for filings
subject to Regulation C or Regulation 12B, provisions in the forms
that cover the same subject matter are controlling. See Rule 400 [17
CFR 230.400] (stating that the provisions in a form, or an item of
Regulation S-K referred to in such form, will control when they
cover the same subject matter as a rule in Regulation C, unless
otherwise specifically provided in Regulation C) and Rule 12b-1
(stating that provisions in a form will control when they cover the
same subject matter as a rule in Regulation 12B).
\299\ Rule 12b-13 requires registrants to include the numbers
and captions of all items in these forms. Although provisions in a
form control when they cover the same subject matter as a rule in
Regulation 12B, these forms do not contradict Rule 12b-13.
\300\ The proposed amendments are not intended to change
instances where the staff has interpreted a requirement to allow for
a caption to be excluded. See, e.g., Regulation S-K Compliance and
Disclosure Interpretation 233.02 (discussing the caption called for
by Item 407(e)(4)). The proposed amendments would also not eliminate
General Instruction G.4 of Form 10-K, which requires captions when
the registrant incorporates all of the information in its Form 10-K
by reference to its annual report to security holders and its
definitive proxy or information statement. In connection with this
proposal, we are also proposing to amend Rule 12b-13 to make it
clearer that the provisions of a form control over the requirements
of that rule.
\301\ A commenter recommended amending our rules to include a
``policy'' on avoidance of duplication that would clarify that a
registrant is not required to repeat or include cross-references to
disclosure found elsewhere in a document when responding to specific
line item requirements; however, we believe amending our forms in
the manner proposed would provide clearer guidance for registrants.
See Letter from ABA.
---------------------------------------------------------------------------

While item numbers and captions are generally not required in the
prospectus portion of most Securities Act filings, they are required in
many Exchange Act forms.\302\ Although clear disclosure will often call
for appropriate headings or captions, the proposed amendments would
provide registrants with more flexibility in how they present their
disclosure. Increasing flexibility in this manner may reduce repetitive
disclosure or unnecessary cross-references when information may be
responsive to more than one item and thereby enhance the overall
readability of required disclosures.
---------------------------------------------------------------------------

\302\ See Securities Act Rule 404 [17 CFR 230.404] and Exchange
Act Rule 12b-13 [17 CFR 240.12b-13]. Rule 404 does not require the
numbers or captions of items to be included in a prospectus, but
does require them for the non-prospectus portion of a registration
statement. See Rule 404(d).
---------------------------------------------------------------------------

Request for Comment
82. Should we amend Form 10, Form 10-K, and Form 20-F to eliminate
the requirements to include most item numbers and captions as proposed?
Would the proposed amendments to these forms lead to disclosure that is
less clear or less comparable across registrants? Under the proposed
amendments, a few required captions would remain, such as the caption
for ``risk factors'' and the captions required by General Instructions
G.4 of Form 10-K.\303\ Should we retain these requirements, or should
they also be eliminated?
---------------------------------------------------------------------------

\303\ See supra note 300 and accompanying text.
---------------------------------------------------------------------------

83. Would increasing flexibility in how the disclosure in Form 10,
Form 10-K, and Form 20-F is presented lead to less repetitive
disclosure? Should we eliminate the requirements to include item
numbers and captions in other forms, such as in Part II of Form 10-Q or
in Form 8-K?
84. In addition to or in lieu of eliminating the requirements for
most item numbers and captions, should we amend our rules to provide
guidance on the use of cross-references, as suggested by one commenter?
\304\ If so, how should the guidance discourage excessive cross-
referencing while acknowledging that some cross-references may be
necessary to provide clear disclosure? Should the cross-referencing
guidance differ based on the nature of the document or the disclosure?
For example, should the guidance treat a prospectus differently from a
Form 10-K filing, or treat information in the financial statements
differently from narrative disclosure?
---------------------------------------------------------------------------

\304\ See Letter from ABA.
---------------------------------------------------------------------------

85. The proposed amendments would not alter the general rule that a
prospectus may not incorporate information by reference unless
permitted by the appropriate form. Our forms, however, typically
provide registrants with significant latitude to incorporate
information by reference when specified conditions are met.\305\ Should
we change the information that may be incorporated by reference into a
prospectus under any of our forms? If so, which information, and why?
---------------------------------------------------------------------------

\305\ For example, subject to certain conditions, Form S-1
allows registrants to incorporate information by reference in most
of the items of Part I--Information Required in Prospectus. See
General Instruction VII and Item 12 of Form S-1.
---------------------------------------------------------------------------

G. Manner of Delivery ³⁰⁶
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\306\ After consideration of the staff's recommendation G.2. in
the FAST Act Report, we are not, at this time, proposing to require
the use of external hyperlinks whenever our rules call for the
inclusion of an internet address. In the FAST Act Report, the staff
recommended requiring external hyperlinks provided that the
appropriate technology is available to prevent these hyperlinks from
jeopardizing the security and integrity of the EDGAR system. See
FAST Act Report, supra note 2, at n.15.
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1. Tagging Cover Page Data
Currently, operating company registrants are required to file their
financial statements as an exhibit in a machine-readable format using
eXtensible Business Reporting Language (``XBRL'').\307\ This disclosure
is required as an exhibit to periodic reports and Securities Act
registration statements, including reports on Form 8-K or Form 6-K that
contain revised or updated financial statements.
---------------------------------------------------------------------------

\307\ For domestic disclosure forms, the XBRL data-tagging
requirements are imposed through Item 601(b)(101) of Regulation S-K
and Rule 405(b) of Regulation S-T. See Item 601(b)(101) of
Regulation S-K and Rule 405(b) of Regulation S-T [17 CFR
232.405(b)]. For foreign disclosure forms, analogous XBRL tagging
requirements are included in the instructions to the relevant forms.
See, e.g., paragraphs 100 and 101 of the Instructions to Exhibits to
Form 20-F.
---------------------------------------------------------------------------

Registrants must also tag in XBRL a specific group of data points
that appears on the cover page of the filing. These specific data
points, which are tagged according to Regulation S-T and the EDGAR
Filer Manual, are known as document and entity identifier elements
(``DEIs'') and include, among others, form type, company name, filer
size, and public float.\308\ This information corresponds to some, but
not all, of the information that registrants are required to include on
the filing cover page. For example, the Form 10[dash]K cover page
contains approximately 25 data points. Less than half of those data
points are currently required to be tagged in XBRL. The non-tagged data
points include, among others, the exchange on which securities are
registered and the state (or jurisdiction) of incorporation.
---------------------------------------------------------------------------

\308\ See Rule 405 of Regulation S-T [17 CFR 232.405]; See also
Interactive Data to Improve Financial Reporting, Release No. 33-9002
(Jan. 30, 2009) [74 FR 15666] (discussing the requirement to tag
document and entity identifier elements, such as form type, company
name, and public float, according to Regulation S-T and the EDGAR
Filer Manual).
---------------------------------------------------------------------------

In the FAST Act Report, the staff recommended that the Commission
consider requiring operating company registrants to tag in XBRL all the
data points on the cover pages of Form 10-K, Form 10-Q, Form 8-K, Form
20-F, and Form 40-F. The staff also recommended that the Commission
consider revising the cover page of these forms to include the trading
symbol for each class of securities registered under the Exchange Act
and require registrants to format this additional data point in
XBRL.\309\
---------------------------------------------------------------------------

\309\ See FAST Act Report, supra note 2, at Recommendations G.1.
---------------------------------------------------------------------------

We are proposing amendments to require all of the information on
the cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F, and Form
40-F to be tagged in Inline XBRL in accordance with the EDGAR Filer
Manual. Under the proposed amendments, the cover page data would appear
in HTML format with embedded XBRL data. We recently proposed to require
the use of the Inline XBRL format, where XBRL data is embedded into an
HTML document, instead of the traditional XBRL format \310\ for the
submission of operating company financial statements.\311\ We intend
for

[[Page 51014]]

the cover page data to be tagged in the same format as this other
information. Therefore, if the Inline XBRL proposal is not adopted, we
are proposing, as an alternative, to require operating company filers
to tag each cover page data point in an XBRL exhibit to the relevant
filing.
---------------------------------------------------------------------------

\310\ In the traditional XBRL format currently required for
financial statements, none of the registrant's XBRL data is embedded
into an HTML document. Instead, an exhibit containing all XBRL data
is filed with the relevant form. Inline XBRL allows filers to embed
XBRL data directly into an HTML document, eliminating the need to
tag a copy of the information in a separate document.
\311\ See Inline XBRL Filing of Tagged Data, Release No. 33-
10323 (Mar. 1, 2017) [82 FR 14282 (Mar. 17, 2017)] (``Inline XBRL
Proposing Release''). As part of the proposal, we also proposed to
require the use of Inline XBRL format for the submission of mutual
fund risk/return summary information. See also Order Granting
Limited and Conditional Exemption Under Section 36(a) of the
Securities Exchange Act of 1934 from Compliance with Interactive
Data File Exhibit Requirement in Forms 6-K, 8-K, 10-Q, 10-K, 20-F
and 40-F to Facilitate Inline Filing of Tagged Financial Data,
Release No. 34-78041 (Jun. 13, 2016) [81 FR 39741 (June 17, 2016)]
(exercising exemptive authority ``to permit, but not require,
operating companies to use Inline XBRL in their periodic and current
reports under the Exchange Act through March 2020'').
---------------------------------------------------------------------------

To implement the cover page tagging requirements, we propose to add
new Rule 406 to Regulation S-T, new Item 601(b)(104) to Regulation S-K,
new paragraph 104 to the ``Instructions as to Exhibits'' of Form 20-F
and new paragraph B.17 to the ``General Instructions'' of Form 40-F to
require registrants to file with each of the specified forms a ``Cover
Page Interactive Data File.'' Under the proposed amendments,
registrants filing Form 20-F and Form 40-F would be required to tag
cover page data only when those forms are used as annual reports. The
proposed amendments would not apply to Form 20-F and Form 40-F when
used as registration statements. We are also proposing to revise Rule
11 of Regulation S-T to add the term ``Cover Page Interactive Data
File.'' The term would be defined as the machine readable computer code
that presents the information required by Rule 406 of Regulation S-T in
Inline XBRL format.
We believe that the proposal to require mandatory tagging of all
data points on the cover pages of the specified forms would allow
investors to automate their use of this information. This would enhance
their ability to identify, count, sort, and analyze registrants and
disclosures to the extent these data points otherwise would be
formatted solely in ASCII or HTML. At the same time, we do not expect
the incremental compliance burden associated with tagging the
additional cover page information to be significant, given that
registrants already are required to tag some of this information as
well as information in their financial statements. We therefore believe
that the enhanced comparability and usability of these proposed
disclosures would justify the burden of requiring registrants to tag
the additional data and would help to modernize our disclosure system
in a manner consistent with the FAST Act mandate.
We are also proposing amendments to the cover pages of these forms
to include the trading symbol for each class of registered
securities.\312\ Because the cover pages of Form 10-K, Form 20-F, and
Form 40-F already require disclosure of the title of each class of
securities registered pursuant to Section 12(b) of the Exchange Act and
each exchange on which they are registered, our proposed amendments to
these forms would revise the cover page to include a corresponding
field for the trading symbol. Unlike Form 10-K, Form 20-F, and Form 40-
F, however, the cover pages of Form 10-Q and Form 8-K do not currently
require disclosure of the title of each class of securities and each
exchange on which they are registered. Accordingly, to ensure that
registrants and their registered securities are identified in a
consistent manner across forms, we are proposing to revise the cover
pages of Form 10-Q and Form 8-K to include this disclosure in addition
to the trading symbol.
---------------------------------------------------------------------------

\312\ In the Disclosure Update and Simplification Proposing
Release, we have proposed to amend Item 201(a) to also require
disclosure of the trading symbol(s) for each class of a registrant's
common equity. See Disclosure Update and Simplification Proposing
Release, supra note 13, at 51637.
---------------------------------------------------------------------------

Requiring the disclosure of trading symbols on the cover pages of
periodic reports would facilitate investors' efforts to search news
websites and stock market databases for information about registrants
and distinguish among similarly named companies. Further, we believe
that requiring the tagging of trading symbols would allow investors to
sort and compare filings and disclosures more easily and accurately.
Request for Comment
86. Should we require as proposed, all of the information on the
cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F, and Form 40-F
to be tagged in Inline XBRL? Should the proposed cover page tagging
requirement apply to any other forms (e.g., Form 6-K)?
87. Should we amend the cover pages of Form 10-K, Form 20-F, and
Form 40-F to include the trading symbol for each class of registered
securities as proposed? Should we also revise the cover pages of Form
10-Q and Form 8-K as proposed, to include the title, trading symbol and
exchange of each class of registered securities?
88. Under the proposed amendments, Form 10-K, Form 10-Q, Form 8-K,
Form 20-F, and Form 40-F would require each registrant to identify on
the cover page of those forms the exchange on which each class of
securities is registered. The proposed amendments to Item 501(b)(4)
would require each registrant to identify on the cover page of the
prospectus its principal U.S. market or markets for the securities
being offered. Should we reconcile these differing cover page
disclosures? If so, how?
89. If we do not adopt Inline XBRL for the submission of operating
company financial statements, should we instead require the cover page
data to be tagged using traditional XBRL format?
90. Instead of requiring the cover page data to be tagged using
Inline XBRL or traditional XBRL format, should we require the cover
page data to be submitted using an XML format? Why or why not?
91. Are there any changes we should make to the proposed amendments
to better ensure accurate and consistent tagging? If so, which changes
should we make and why?
92. Are there any disclosures discussed in this release that we
should require to be provided in a structured format? For example,
should we require the use of structured data within Item 303(a) to
facilitate readability and navigability of this disclosure for
investors? Are there specific elements of Item 303(a) disclosure, such
as the table of contractual obligations, which should be provided in a
machine-readable structured data format? Would it be useful to
investors to require registrants to provide any of the property
disclosures under Item 102 in a machine-readable format, such as
geospatial coordinates? To the extent that we consider additional
structured data requirements in periodic reports, what level and type
of structured data requirements would be appropriate? For example,
should we require registrants to identify sections, subsections or
topics with ``block text'' labels, or should we require registrants to
structure numeric elements and tables individually? What would be the
challenges and costs of such an approach? What would be the benefits?
2. Exhibit Hyperlinks and HTML Format for Investment Companies
As discussed above, the Commission recently adopted rules requiring
hyperlinks to most exhibits filed pursuant to Item 601, Form F-10, and
Form 20-F, and, to accommodate hyperlinks, those filings will be
required to be made in HTML.\313\ In this release, we are proposing
parallel amendments to certain of our forms that are used by investment
companies and amendments to Rule 102 \314\ of Regulation S-T to apply
similar hyperlinking and HTML requirements to those registrants to
facilitate access to these exhibits for investors and other users of
the information.
---------------------------------------------------------------------------

\313\ See Exhibit Hyperlinks Adopting Release, supra note 14 at
14130.
\314\ 17 CFR 232.102.

---------------------------------------------------------------------------

[[Page 51015]]

Under the proposed amendments, affected registrants would be
required to include a hyperlink to each exhibit identified in a
filing's exhibit index, unless the exhibit is filed in paper pursuant
to a temporary or continuing hardship exemption under Rule 201 or Rule
202 of Regulation S[dash]T, or pursuant to Rule 311 of Regulation S-
T.\315\ This requirement would apply to registration statements on Form
S-6, Form N-1A, Form N-2, Form N-3, Form N-4, Form N-5, Form N-6, and
Form N-14 and to reports on Form N-CSR.\316\ Consistent with our rules
for operating companies, we are not proposing to require registrants to
refile electronically any exhibits filed only in paper.\317\ Under the
proposed amendments, an electronic filer would also be required to
correct an inaccurate or nonfunctioning link or hyperlink to an
exhibit.\318\
---------------------------------------------------------------------------

\315\ As with the rules for operating companies, the proposed
rules for investment companies would exclude any XBRL exhibits. See
id. at 14133.
\316\ See proposed Instructions as to Exhibits of Form S-6;
proposed Instruction to Item 28 of Form N-1A; proposed Instruction 4
to Item 25.2 of Form N-2; proposed Instruction 3 to Item 29(b) of
Form N-3; proposed Instruction 3 to Item 24(b) of Form N-4; proposed
Instructions as to Exhibits of Form N-5; proposed Item 26 of Form N-
6; proposed Instruction to Item 16 of Form N-14; proposed
Instruction to Item 12 of Form N-CSR. We are also proposing to amend
Forms N-3 and N-14 to clarify that Rule 303 of Regulation S-T
applies to registration statements on Forms N-3 and N-14 that are
electronically filed. See proposed General Instruction G to Form N-
3; proposed Instruction to Item 16 of Form N-14.
\317\ See Exhibit Hyperlinks Adopting Release, supra note 14, at
14133.
\318\ 17 CFR 232.105(d)(2). In the case of a registration
statement that is not yet effective, the filer would be required to
file an amendment to the registration statement containing the
inaccurate or nonfunctioning link or hyperlink. In the case of a
report on Form N-CSR, the filer would be required to correct the
inaccurate or nonfunctioning link or hyperlink in its next report on
Form N-CSR. In the case of a registration statement on Form S-6,
Form N-14, Form N-5, Form N-1A, Form N-2, Form N-3, Form N-4, or
Form N-6 that has become effective, the filer would be required to
correct an inaccurate or nonfunctioning link or hyperlink in the
next post-effective amendment, if any, to the registration
statement. Alternatively, an electronic filer may correct an
inaccurate or nonfunctioning link or hyperlink in a registration
statement that has become effective by filing a post-effective
amendment to the registration statement. Id.
---------------------------------------------------------------------------

In connection with the proposed exhibit hyperlinking requirements,
we are also proposing amendments to Rule 105 of Regulation S[dash]T to
require investment company registrants to file registration statements
and reports that include exhibits in HTML format. Currently, investment
company registrants must submit electronic filings to the Commission
using the EDGAR system in either ASCII format or HTML format. Because
the ASCII format does not support hyperlink functionality, the exhibit
hyperlinking requirement would be feasible only if registrants are
required to file in HTML. Under the proposed requirement, registrants
would be required to file registration statements and reports on Form
S-6,\319\ Form N-1A,\320\ Form N-2,\321\ Form N-3,\322\ Form N-4,\323\
Form N-5,\324\ Form N-6,\325\ Form N-14, and Form N-CSR \326\ in HTML
format. While the affected registration statements and reports would be
required to be filed in HTML pursuant to the proposed amendments to
Rule 105, registrants would continue to be permitted to file in ASCII
any schedules or forms that are not subject to the exhibit filing
requirements, such as proxy statements, or other documents included
with a filing, such as an exhibit.
---------------------------------------------------------------------------

\319\ 17 CFR 239.16.
\320\ 17 CFR 239.15A and 17 CFR 274.11A.
\321\ 17 CFR 239.14 and 17 CFR 274.11a-1.
\322\ 17 CFR 239.17a and 17 CFR 274.11b.
\323\ 17 CFR 239.17b and 17 CFR 274.11c.
\324\ 17 CFR 239.24 and 17 CFR 274.5.
\325\ 17 CFR 239.17c and 17 CFR 274.11d.
\326\ 17 CFR 249.331 and 17 CFR 274.128.
---------------------------------------------------------------------------

Request for Comment
93. Should we require investment company registrants to include
hyperlinks in the exhibit index for registration statements and reports
as proposed? Should we amend Rule 105 of Regulation S[dash]T to require
investment company registrants to file registration statements and
reports that include exhibits in HTML format as proposed?
94. Should we revise any additional forms to require exhibit
hyperlinks? For example, should we revise a form to require exhibit
hyperlinks even though all exhibits filed with this form will be
attached to it?
95. Should we require, as proposed, that electronic filers correct
an inaccurate or nonfunctioning link or hyperlink? If so, when should
the correction be required to be filed?
96. Should we require registrants to refile electronically any
exhibit previously filed in paper so that they can include a hyperlink
in the exhibit index?
97. What compliance date would be appropriate for investment
companies to begin filing in HTML format? Should the compliance date be
the same for all affected investment companies, or should we
distinguish between larger and smaller investment companies, for
example, by providing an extended compliance date for smaller entities?
If we provide an extended compliance date for smaller entities, what
additional compliance period would be necessary and how should we
define those smaller entities? For example, should we define smaller
investment companies for these purposes as investment companies that,
together with other investment companies in the same group of related
investment companies have net assets of less than $1 billion as of the
end of the most recent fiscal year of the investment company?

H. General Request for Comment

We request and encourage any interested person to submit comments
regarding the proposed amendments, specific issues discussed in this
release and other matters that may have an effect on the proposals. We
note that comments that are accompanied by supporting data and analysis
are of particular assistance to us.

III. Economic Analysis

We are mindful of the costs and benefits of our rules. Section 2(b)
of the Securities Act, Section 3(f) of the Exchange Act, Section 2(c)
of the Investment Company Act, and Section 202(c) of the Investment
Advisers Act require us, when engaging in rulemaking that requires us
to consider or determine whether an action is necessary or appropriate
in (or, with respect to the Investment Company Act, consistent with)
the public interest, to consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.\327\ Additionally, Exchange Act Section 23(a)(2)
requires us, when adopting rules under the Exchange Act, to consider,
among other things, the impact that any new rule would have on
competition and not to adopt any rule that would impose a burden on
competition that is not necessary or appropriate in furtherance of the
Exchange Act.\328\
---------------------------------------------------------------------------

\327\ 15 U.S.C. 77b(b), 15 U.S.C. 78c(f), 15 U.S.C. 80a-2(c),
and 15 U.S.C. 80b-2(c).
\328\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

In this release, we are proposing amendments to simplify and
modernize disclosure requirements in Regulation S-K and related rules
and forms as required by Section 72003 of the FAST Act.\329\ The
proposed amendments are based on the staff's recommendations in the
FAST Act Report. The FAST Act Report was tailored to the statutory
mandate of providing specific and detailed recommendations on
modernizing and simplifying Regulation S-K in a manner that reduces
costs and burdens on registrants while still providing all material
information. As discussed above, the proposed amendments reflect the
input of public commenters as well as the Commission's experience with

[[Page 51016]]

Regulation S-K arising from the Division of Corporation Finance's
disclosure review program. To promote consistency, we are also
proposing parallel amendments to certain rules and forms applicable to
investment companies and investment advisers, including proposed
amendments that would require certain investment company filings to be
submitted in HTML format.
---------------------------------------------------------------------------

\329\ Public Law 114-94, Sec. 72003, 129 Stat. 1312 (2015).
---------------------------------------------------------------------------

A. Background

1. The Benefits of Information Disclosure
The primary purpose of disclosure under the federal securities laws
is to provide investors with the information they need to make informed
investment and voting decisions. The separation of ownership and
management typically prevents investors from directly observing many
managerial decisions and requires them to rely on financial and
qualitative disclosures for information. Absent regulation, managers
may lack incentives to voluntarily disclose or standardize relevant
information. As a result, in the absence of disclosure requirements, an
information asymmetry often exists between managers and investors that
limits the ability of investors to distinguish between well-run and
poorly-run companies and can lead to under-supply and inefficient
allocation of capital.\330\ A disclosure regime that facilitates the
disclosure of material, reliable information can reduce informational
asymmetries between managers of companies and investors, which can
enhance capital formation and the allocative efficiency of the capital
markets.
---------------------------------------------------------------------------

\330\ See, Akerlof, George A., The Market for ``Lemons'':
Quality Uncertainty and the Market Mechanism, 84 Q. J. ECON. 488-500
(1970).
---------------------------------------------------------------------------

Materiality is a key principle of public company reporting.\331\
Efforts to make disclosures more effective typically focus on
evaluating whether existing or proposed disclosures provide material
information to those using the disclosures. Material disclosures can
reduce information asymmetries between managers of companies and
investors, decrease the cost of capital, and lead to more efficient
share prices and heightened accountability of the managers of
companies.\332\
---------------------------------------------------------------------------

\331\ See Report of the Advisory Committee on Corporate
Disclosure to the Securities and Exchange Commission, Cmte. Print
95-29, House Cmte. On Interstate and Foreign Commerce, 95th Cong.,
1st. Sess. (Nov. 3, 1977), at 320. available at http://opc-ad-ils/
InmagicGenie/DocumentFolder/
report%20of%20the%20advisory%20committee%20on%20corporate%20disclosur
e%20to%20the%20sec%2011011977.pdf.
\332\ See Br[uuml]ggemann, Ulf and Kaul, Aditya and Leuz,
Christian and Werner, Ingrid M., The Twilight Zone: OTC Regulatory
Regimes and Market Quality (June 14, 2017). IGM Working Paper #95;
Fisher College of Business Working Paper No. 2013-03-09; European
Corporate Governance Institute (ECGI)--Law Working Paper No. 224/
2013; Charles A. Dice Center Working Paper No. 2013-09. Available at
SSRN: https://ssrn.com/abstract=2290492 or http://dx.doi.org/10.2139/ssrn.2290492.
See also C. Leuz and P. Wysocki, 2016, The Economics of
Disclosure and Financial Reporting Regulation: Evidence and
Suggestions for Future Research, Journal of Accounting Research Vol.
54, 525-622 and M. Lang, K. Lins, and M. Maffett. Transparency,
Liquidity, and Valuation: International Evidence on When
Transparency Matters Most, Journal of Accounting Research 50 (2012):
729-774.
---------------------------------------------------------------------------

2. The Costs of Disclosure
Although disclosure requirements benefit investors and financial
markets, there are potential drawbacks associated with these
requirements. For example, disclosure can be costly for registrants to
produce and disclosure of sensitive information can result in
competitive disadvantages.
Disclosure of information that is unnecessary or that may not be
material also entails costs to investors, if it affects their ability
to discern material information effectively. While material disclosures
provide important information to investors about their investments,
sorting through information that is unnecessary or not material can
obscure material information that investors find useful. Consistent
with this view, research has found that attention to one subject
generally leaves less attention available for others.\333\
---------------------------------------------------------------------------

\333\ See Pashler, H.E., The Psychology of Board: Attention
(Cambridge, MA: MIT Press 1998) and Hirshleifer, David & Siew Hong
Teoh, Limited attention, information disclosure, and financial
reporting, 36 J. Acct. & Econ. 337-386 (2003).
---------------------------------------------------------------------------

In the economic analysis that follows, we first examine the current
regulatory and economic landscape that forms the baseline for our
analysis. We then analyze the likely economic effects arising from the
proposed amendments relative to that baseline. These economic effects
include the costs and benefits and impact on efficiency, competition,
and capital formation.

B. Baseline

To assess the economic effect of the proposed amendments, we are
using as our baseline the current state of the Commission's filing and
disclosure regime. In characterizing the baseline, it is useful to
distinguish between operating companies and investment companies.
Although both types of registrants are subject to similar registration
and reporting requirements, there are differences in the specific rules
and forms applicable to each. In particular, on March 1, 2017, the
Commission adopted amendments requiring registrants that file
registration statements and reports subject to the exhibit requirements
under Item 601 of Regulation S-K, or that file Form F-10 or Form 20-F,
(i.e., operating companies) to submit these filings in HTML format and
to include a hyperlink to each exhibit listed in the exhibit index of
these filings.\334\ In contrast, there is currently no comparable
requirement for investment companies; however, this proposal includes
amendments to a set of forms under the Investment Company Act that
would apply HTML and hyperlinking requirements to filers of those
forms.
---------------------------------------------------------------------------

\334\ While compliance with these rules was required by
September 1, 2017, smaller reporting companies, as well as
registrants that are neither accelerated filers nor large
accelerated filers, are not required to comply until September 1,
2018. Although these registrants are not yet required to comply with
the exhibit hyperlinks and HTML rules, we are treating these rules
as part of the baseline for all filers subject to Regulation S-K.
---------------------------------------------------------------------------

For operating companies, the baseline includes the disclosure
requirements in Regulation S-K and related rules and forms as well as
Commission and staff guidance on the application of those requirements.
Table 1 below suggests that the proposed amendments to Regulation S-K
and related rules and forms would apply to a substantial number of
operating companies. On average, 7,800 different registrants per year
have filed periodic reports on Form 10-K and Form 10-Q in recent years.
As shown in the table below, approximately 800 foreign private issuers
provided periodic information to investors in the U.S. capital markets
using Form 20-F and Form 40-F. The number of registrants filing
definitive proxy statements on Schedule 14A has exceeded 5,000 each
year.\335\
---------------------------------------------------------------------------

\335\ We note that, in addition to operating companies,
registered investment companies file proxy statements as well.

[[Page 51017]]

Table 1--Number of Registrants Filing Various Disclosure Forms From 2012-2016
----------------------------------------------------------------------------------------------------------------
Year 10-K 10-Q 20-F 40-F DEF 14A
----------------------------------------------------------------------------------------------------------------
2012............................ 8240 8381 712 153 5371
2013............................ 7898 8031 690 145 5382
2014............................ 7857 7872 669 143 5259
2015............................ 7767 7676 687 131 5390
2016............................ 7373 7147 675 126 5126
----------------------------------------------------------------------------------------------------------------

As discussed above, investment companies that file certain forms
required by the Investment Company Act would also be affected by the
proposed amendments. Table 2 below lists the number of filings filed by
investment companies in fiscal year 2016 using EDGAR submission types
potentially affected by the proposed amendments, broken out by the
number of filings in HTML and ASCII format. From January 1, 2016 to
December 31, 2016, investment companies filed 64,522 filings using
EDGAR submission types potentially affected by the proposed amendments.
Of these filings, the vast majority (58,429) were filed in HTML, while
fewer than ten percent (6,093) were filed in ASCII format. As shown in
Table 2, most of the filers had substantially more HTML filings than
ASCII filings, while the Form S-6 filers had more ASCII filings than
HTML filings in 2016.
---------------------------------------------------------------------------

\336\ The figures in this table are presented on the basis of
filer type, not on the basis of the form on which the document was
filed. Therefore, not all of the filings presented in the table
would be subject to the proposed requirements.

Table 2--Number of Potentially Affected Filings From January 1, 2016 to
December 2016 \336\
------------------------------------------------------------------------
Number of Number of
HTML ASCII
Filings Filings
------------------------------------------------------------------------
N-1A Filers................................... 48,150 1,280
N-2 Filers.................................... 2,965 77
N-3 Filers.................................... 42 6
N-4 Filers.................................... 5,247 758
N-6 Filers.................................... 1,549 245
S-6 Filers.................................... 476 3,727
-------------------------
Total....................................... 58,429 6,093
------------------------------------------------------------------------

The proposed amendments would require registrants to include
hyperlinks in the case of exhibits included with the forms and exhibits
that are incorporated by reference from a previously filed document. To
draw a baseline indicative of current disclosure practices, we selected
a random sample of 400 filings (359 in HTML and 41 in ASCII) submitted
in 2016 that may be affected by the proposed amendments. Table 3 below
shows the average and median number of exhibits listed in the sampled
filings by the type of exhibit (i.e., filed with the form vs.
incorporated by reference).

Table 3--Number of Exhibits in Sampled Filings \337\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of exhibits listed in Number of exhibits filed with Number of exhibits
the index the filing incorporated by reference Number of
------------------------------------------------------------------------------------------------ sampled
Average Median Average Median Average Median filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
N-1A.................................... 5.8 0 0.6 0 5.2 0 267
N-2..................................... 7.4 2 2.1 2 5.0 0 21
N-3..................................... 0 0 0 0 0 0 1
N-4..................................... 13.6 0 0.7 0 12.9 0 31
N-6..................................... 11.1 0 0.8 0 10.3 0 11
N-14.................................... 38.0 38.5 1.5 1 36.5 37.0 6
N-CSR................................... 2.3 3 1.9 0 0.1 0 43
S-6..................................... 36 36 5.0 5.0 31.0 31.0 30
---------------------------------------------------------------------------------------------------------------
All Filings......................... 6.7 N/A 0.9 N/A 5.8 N/A 400
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 3 shows a significant variation in the number of exhibits
listed in the exhibit index across different types of filings.
Registration statements on Form N-4, Form N-14, and Form S-6 typically
contain a large number of exhibits and had significantly more exhibits
incorporated by reference than filings on other forms affected by the
proposed amendments. Of the 400 sampled filings, we found that none of
them included hyperlinked indexes.
---------------------------------------------------------------------------

\337\ In counting the number of exhibits, we did not include the
following exhibits: 101.INS XBRL Instance Taxonomy; 101.SCH XBRL
Taxonomy Extension Schema Document; 101.CAL XBRL Taxonomy Extension
Calculation Linkbase Document; 101.DEF XBRL Taxonomy Extension
Definition Linkbase Document; 101.LAB XBRL Taxonomy Extension Labels
Linkbase Document; and 101.PRE XBRL Taxonomy Extension Presentation
Linkbase Document because XBRL exhibits are not covered by the
proposal.
Average represents the sum of the number of exhibits divided by
the number of sampled forms for each form type. Median represents
the middle number of exhibits for each form type when the numbers of
exhibits are listed from the smallest to the largest. For instance,
for Form N-2, the number of exhibits listed in the index ranged from
0 to 55, with 2 as the middle number.
---------------------------------------------------------------------------

As discussed above, disclosure requirements involve trade-offs
between benefits to investors in terms of reducing information
asymmetries and costs to registrants associated with producing
disclosure. While the proposed amendments would apply to all
registrants subject to the regulation, the trade-offs between the costs
and benefits of disclosure requirements would vary across different
types of registrants. For example, smaller companies typically have
proportionately higher disclosure costs as well as proportionately
higher disclosure benefits.\338\ That is, the fixed costs of disclosure
requirements typically constitute a higher percentage of revenues for
smaller companies than

[[Page 51018]]

for larger companies. However, the benefits of disclosure may be
greater for smaller companies because information asymmetries between
investors and managers of smaller companies are typically higher than
for larger, more seasoned companies with a large following.\339\
Compliance costs could be also higher for foreign registrants to the
extent that the disclosure requirements in the United States are
different from the disclosure requirements in their home countries.
---------------------------------------------------------------------------

\338\ In its 2015 proposing release to amend the definition of
``smaller reporting company,'' the Commission observed that, based
on a review of filings, approximately 42% of registrants qualified
as smaller reporting companies. See Amendments to Smaller Reporting
Company Definition, Release No. 33-10107 (Jun. 27, 2017) [81 FR
43130 (Jul. 1, 2016)], available at https://www.sec.gov/rules/proposed/2016/33-10107.pdf.
\339\ See, e.g., R. Frankel and X. Li, Characteristics of a
firm's information environment and the information asymmetry between
insiders and outsiders, 37 J. Acct. Econ. 229, 229-259 (June 2004).
See also, L. Cheng, S. Liao, and H. Zhang, The Commitment Effect
versus Information Effect of Disclosure--Evidence from Smaller
Reporting Companies, 88 Acct. Rev. 1239, 1239-1263 (2013).
---------------------------------------------------------------------------

C. Economic Analysis of the Proposed Amendments: General Assessment,
Including Impact on Efficiency, Competition, and Capital Formation

In this subsection, we evaluate the broad economic effects of the
proposed amendments, including a discussion of their impact on
efficiency, competition, and capital formation. The proposals amend a
well-established and robust disclosure regime that has existed for many
years. As a result, we expect the aggregate impact of the proposed
amendments to be incremental to the effects that have already been
realized from the existing disclosure regime.
As discussed above, disclosure provides benefits to participants in
financial markets by reducing information asymmetries that exist
between investors in a company and managers tasked with operating the
company. Both registrants and investors alike would generally benefit
from the proposed amendments, because they would simplify the
requirements and resulting content of existing disclosures while still
providing all material information. The proposed changes to the
requirements and resulting improved presentation are expected to
increase the usefulness of the disclosures for investors and generally
lower the regulatory burden (and compliance costs) for registrants. In
addition, the improved information environment associated with
modernized and simplified disclosures is expected to incrementally
enhance capital formation and the allocative efficiency of the capital
markets through more accurate share prices, better accountability of
managers and increased capital market liquidity.
We expect some of the proposed amendments to entail modest initial
implementation costs. However, we believe that the initial costs would
be in manageable amounts. Furthermore, those costs would be offset by
future savings as a result of simplified and streamlined disclosure
requirements, after implementation. Some of the proposed amendments,
such as those that impose new data tagging, hyperlinking, or disclosure
requirements, would involve not only implementation costs but would
also increase compliance costs for registrants going forward, although
as discussed below, we do not expect these additional costs to be
significant.
While the purpose of the proposed amendments is to simplify and
modernize public company disclosure requirements without loss of
material information, we acknowledge that the proposed amendments could
result in a loss of some information in specific cases, as discussed
below. This loss of information could potentially increase information
asymmetry in those cases, which may have negative implications for
investor protection, market transparency, efficiency, and capital
formation. In turn, such loss of information could raise the firm's
cost of capital.\340\ However, we believe this potential adverse effect
would be mitigated by the fact that registrants will continue to be
required to provide further material information, if any, as may be
necessary to make the required statements, in the light of the
circumstances under which they are made, not misleading.\341\
---------------------------------------------------------------------------

\340\ See Easley, D., Hvidkjaer, S., & M. O'Hara, Is information
risk a determinant of asset returns? 57 J. Finance. 2185-2221
(2002).
\341\ See Rule 12b-20 [17 CFR 240.12b-20] and Rule 408(a) [17
CFR 230.408(a)].
---------------------------------------------------------------------------

D. Economic Analysis of the Specific Amendments: Proposals That Clarify
and Update Existing Rules

1. Proposals That Clarify or Streamline a Rule's Requirements
a. Description of Property (Item 102)
Item 102 requires disclosure of the location and general character
of the principal plants, mines, and other materially important physical
properties of the registrant and its subsidiaries. The staff has
observed, however, that the item may elicit disclosure that is not
material.\342\ The proposed amendments to Item 102 would clarify that a
description of property is required only to the extent physical
properties are material to the registrant and make other clarifying
amendments.\343\ The proposed amendments would not modify the Item 102
requirements for companies in the mining, real estate, and oil and gas
industries.
---------------------------------------------------------------------------

\342\ See FAST Act Report, supra note 2, at Recommendation B.1.
See also Concept Release, supra note 6, at Section IV.A.6.b and SEC
Staff's Report of the Task Force on Disclosure Simplification (Mar.
5, 1996) available at https://www.sec.gov/news/studies/smpl.htm.
\343\ See Section II.A (Description of Property).
---------------------------------------------------------------------------

The main benefit of the proposed amendments would be to reduce the
amount of duplicative disclosure that is not material by emphasizing
materiality and harmonizing the rule's thresholds for disclosure. The
proposed amendments also could facilitate compliance and avoid any
confusion associated with different disclosure standards. The aggregate
reduction in regulatory burden due to the proposed amendments to Item
102 may extend to approximately 6,500 registrants.\344\
---------------------------------------------------------------------------

\344\ We derive this number by taking the average number of
registrants filing annual reports as reported in Table 1 and
excluding all companies in the mining, oil and natural gas, and real
estate industries.
---------------------------------------------------------------------------

When Item 102 was originally adopted, registrants were more likely
to maintain large physical properties and other assets, such as mines
and manufacturing plants.\345\ However, the nature of enterprise has
changed dramatically over the last thirty years. Currently, many of the
largest and most profitable firms operate in the services and
technology industries that are often not characterized by large
physical assets. Nevertheless, many modern firms are highly
geographically dispersed. As a consequence, information about the
geographic operations of these companies--including information about
the location of physical properties--could be highly relevant for
investors by providing information about important firm customers and
employees. We expect that any risk of exclusion of relevant information
under the proposed amendment would be minimal, because Item 102
explicitly solicits the disclosure of material information. This risk
is further mitigated by the fact that registrants may disclose relevant
property information elsewhere in their filings, such as in response to
Item 101 (Description of Business).
---------------------------------------------------------------------------

\345\ Since 1935, we have required disclosure similar to that
required under Item 102. See Release No. 33-276 (January 14, 1935)
[not published in the Federal Register].
---------------------------------------------------------------------------

b. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Item 303)
We are proposing a series of amendments to Item 303. In this
subsection, we discuss all amendments to Item 303 that are intended to
clarify the rule's requirements, while in

[[Page 51019]]

Subsection E.1 below, we discuss proposals intended to amend the
content of MD&A. Instruction 1 to Item 303(a) provides that, generally,
MD&A shall cover the three-year period covered by the financial
statements and either use year-to-year comparisons or any other formats
that in the registrant's judgment would enhance a reader's
understanding. Additionally, the instruction states that reference to
the five-year selected financial data may be necessary where trend
information is relevant.
We are proposing to amend the instructions to Item 303(a) to
emphasize that a registrant may use any presentation that would enhance
a reader's understanding. As discussed above, our proposed amendments
to Item 303(a) are consistent with the Commission's existing
interpretive guidance on MD&A. We are also proposing to eliminate
mention of the five-year selected financial data in the instructions to
Item 303(a) because disclosure requirements for liquidity, capital
resources, and results of operations already require trend disclosure.
The proposed amendments emphasize the flexibility available to
registrants with respect to the form of MD&A presentation. The major
benefit of flexibility is that it allows registrants to frame the
information in a way that emphasizes material information. One
potential cost associated with this aspect of the rule is that, in
framing the discussion in a way that emphasizes material information,
registrants may inadvertently de-emphasize information that investors
nevertheless find useful or relevant. To the extent the proposed
amendment leads to more tailored disclosure, it also could make
disclosure less comparable across registrants and over time.
To maintain a consistent approach to MD&A for domestic registrants
and foreign private issuers, we are proposing changes to Form 20-F
similar to the proposed changes to Item 303(a).\346\ The disclosure
requirements for Item 5 of Form 20-F are substantively comparable to
the MD&A requirements under Item 303 of Regulation S-K. The economic
effects of the proposed amendments to Form 20-F are therefore similar
to those for the proposed amendments to Item 303(a) described above.
---------------------------------------------------------------------------

\346\ See supra Section II.C.B.2.
---------------------------------------------------------------------------

c. Risk Factors (Item 503(c))
Item 503(c) requires disclosure of the most significant factors
that make an offering speculative or risky. We are proposing to
relocate Item 503(c) from Subpart 500 to Subpart 100 of Regulation S-
K.\347\ We believe that Subpart 100 is a more appropriate location for
the risk factor disclosure requirements, because it covers a broad
category of business information and is not limited to offering-related
disclosure. Additionally, our proposed amendments would eliminate the
risk factor examples that are enumerated currently in Item 503(c).\348\
---------------------------------------------------------------------------

\347\ See supra Section II.D.2.
\348\ See id.
---------------------------------------------------------------------------

We do not expect that relocating the disclosure requirement within
Regulation S-K would pose any additional costs to registrants or
investors because we are only proposing to change the location of the
requirement. The content of the requirement would not change.
With respect to the proposed elimination of the examples in Item
503(c), we believe that this could prompt registrants to more carefully
evaluate and classify their risk exposures, which could ultimately
benefit investors through more specific and relevant risk factor
disclosures. Although examples could be useful to registrants in some
cases, they could also anchor or skew the registrant's risk analysis in
the direction of the examples. \349\
---------------------------------------------------------------------------

\349\ There is extensive evidence in psychology and economics
that individuals tend to rely too heavily on the first piece of
information offered (the ``anchor'') when making decisions. See
e.g., Tversky, A. & Kahneman, D., Judgment under Uncertainty:
Heuristics and Biases. 185 Science. 1124-1131 (1974).
---------------------------------------------------------------------------

An alternative to the proposed amendments, as suggested by some
commenters, would be to expand or update the list of examples or revise
them to specify generic risks that should not be disclosed. While such
an approach might lead to incremental improvements in existing
disclosures, it would not eliminate the anchoring effect discussed
above nor would it serve to discourage generic or ``boilerplate''
disclosures as effectively as the proposed amendments. It is also
possible that a list of generic risks could inadvertently be viewed as
exhaustive. In addition, specifying a list of generic risks that should
not be disclosed may create a rule that needs to be regularly updated.
d. Plan of Distribution (Item 508)
Item 508 requires disclosure about the plan of distribution for
securities in an offering, including information about underwriters. We
are proposing to amend Rule 405 to define the term ``sub-underwriter''
to clarify its application in Item 508 of Regulation S-K.\350\ We
believe that defining the term ``sub-underwriter'' would reduce
compliance costs by helping registrants to more easily determine what
disclosure is required under Item 508. We also believe that a defined
term could help investors better understand the role of ``sub-
underwriters'' in the offering process. We do not believe there would
be additional costs associated with the proposed amendment, since it
merely clarifies an existing disclosure requirement.
---------------------------------------------------------------------------

\350\ See supra Section II.D.3.
---------------------------------------------------------------------------

e. Material Contracts (Item 601(b)(10))
Item 601(b)(10)(i) currently requires registrants to file every
material contract not made in the ordinary course of business, provided
that the contract meets one of two tests: (i) The contract must be
performed in whole or in part at or after the filing of the
registration statement or report, or (ii) the contract was entered into
not more than two years before that filing.
The second test, the two-year look back, captures material
contracts that were fully performed before the filing date. We are
proposing amendments to Item 601(b)(10)(i) that would limit the two-
year look back test to newly reporting registrants.\351\ Proposed
Instruction 1 to Item 601(b)(10)(i) defines a ``newly reporting
registrant'' as any registrant filing a registration statement that, at
the time of such filing, is not subject to the reporting requirements
of Section 13(a) or 15(d) of the Exchange Act, whether or not such
registrant has ever previously been subject to the reporting
requirements of Section 13(a) or 15(d), and any registrant that has not
filed an annual report since the revival of a previously suspended
reporting obligation.\352\ As an example, a registrant that is filing
its first registration statement under the Securities Act or the
Exchange Act, or filing its first Form 10-K since the revival of its
reporting obligation, would be required to file material agreements
under Item 601(b)(10)(i) for the two-year look back period. The
definition of ``newly reporting registrant'' under the proposed
instruction also would include any registrant that (a) was a shell
company, other than a business combination related shell company, as
defined in Rule 12b-2 under the Exchange Act, immediately before
completing a transaction that has the effect of causing it to cease
being a shell company, and (b) has not filed a registration statement
or Form 8-K, as required by Item 2.01 and Item 5.06 of that form, since
the completion of the

[[Page 51020]]

transaction (or in the case of foreign private issuers, has not filed a
Form 20-F since the completion of the transaction).\353\ Under the
proposed amendments, a registrant meeting this definition would be
required to file material agreements for the two-year look back period.
---------------------------------------------------------------------------

\351\ See supra Section II.E.3.
\352\ See supra Section II.E.3.
\353\ See supra Section II.E.3
---------------------------------------------------------------------------

We expect that the proposed amendments would streamline reporting
obligations while maintaining investor protections. Although the two-
year look back test captures material contracts that were fully
performed before the filing date, this test does not provide any new
information to the market for registrants with established reporting
histories. Excluding these registrants from the two-year look back
requirement would marginally reduce their compliance burdens, because
they would not need to re-file (or incorporate by reference) agreements
that were previously filed and are no longer in effect. At the same
time, investors would continue to have access to any material
agreements that a registrant previously filed on EDGAR.
f. Proposals With a Minor Effect on Disclosure
The following proposed amendments are expected to have minor
impacts on the disclosure provided:
Item 401--proposal would clarify what disclosure about
executive officers does not need to be repeated in proxy or information
statements if it is already included in Form 10-K.
Item 405--proposal would simplify the Section 16 reporting
process by allowing registrants to rely on a review of Section 16
reports submitted on EDGAR instead of gathering reports furnished to
the registrant.\354\
---------------------------------------------------------------------------

\354\ The proposal would also eliminate the requirement for
reporting persons to furnish Section 16 reports to registrants,
which could ease the compliance burden on reporting persons.
---------------------------------------------------------------------------

Item 501(b)(1)--proposal would eliminate the portion of
the item that discusses when a name change may be required and the
exception to that requirement.
Item 501(b)(3)--proposal would allow registrants to move
details of an offering price method or formula from the prospectus
cover page to another location in the prospectus; the proposal also
would require registrants to state that the price will be more fully
explained in the prospectus and accompany that statement with a cross-
reference to the more detailed offering price disclosure.
Item 501(b)(10)--proposal would streamline the prospectus
legend requirements.
Incorporation by Reference--proposals would (i) provide
clearer guidance on cross-referencing; (ii) consolidate the
requirements for incorporation by reference in Securities Act Rule 411,
Exchange Act Rule 12b-23 and related rules under the Investment Company
Act and Investment Advisers Act to eliminate redundant or unnecessary
requirements; and (iii) allow registrants more flexibility in excluding
item numbers and captions or creating their own captions tailored to
their disclosure in Form 10, Form 10-K and Form 20-F.
Since the proposed amendments listed above would alter existing
disclosure practices only to a minor degree, their implementation would
have little economic effect. We believe that the proposed amendments
would allow registrants to improve the readability and navigability of
disclosure documents and reduce repetition. The proposed amendments
also would reduce compliance costs for registrants while preserving all
material information. We do not envision any significant incremental
costs associated with the proposed amendments because they do not
significantly change the required disclosures.
2. Proposals To Update Rules to Account for Subsequent Developments
The following proposed amendments would update existing rules to
account for subsequent developments and are expected to have minor
impacts on the disclosure provided:
Item 407(d)--proposal would update the outdated reference
to AU sec. 380 in Item 407(d)(3)(i)(B).
Item 407(e)--proposal would update requirements for
compensation committee disclosure to exclude EGCs because they are not
required to include a CD&A.
Item 512--proposal would eliminate certain undertakings
that are redundant and obsolete.
We believe that the proposed amendments listed above would reduce
potential confusion in applying our rules, result in more consistent
disclosure practices, and ease compliance burdens for registrants, with
a minimal impact on the information available to investors. We do not
envision any significant incremental costs associated with the proposed
amendments, because the substance of the rules would not change.

E. Economic Analysis of the Specific Amendments: Proposals That
Simplify the Disclosure Process or Eliminate Disclosures

1. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Item 303)
Under the proposed amendments to Item 303 of Regulation S-K, when
the financial statements included in a filing cover three years,
discussion about the earliest year would not be required if (i) this
discussion is not material to an understanding of the registrant's
financial condition, changes in financial condition, and results of
operations, and (ii) the registrant has filed its prior year Form 10-K
on EDGAR containing MD&A of the earliest of the three years included in
the financial statements of the current filing.
We believe that the main economic benefit of the proposed
amendments would be to simplify and modernize MD&A as well as increase
its readability while still providing all material information. This
may facilitate a better understanding of the firm's financial
prospects. Because MD&A is typically one of the most labor-intensive
pieces of disclosure to produce, eliminating the requirement to discuss
the earliest year financial statements in some circumstances could
meaningfully reduce compliance costs for registrants.
One potential cost of the proposed amendments is that investors may
receive less comparative discussion about earlier period financial
results within a filing. Although previously disclosed information
could provide helpful context for the new information being disclosed,
this information would have been incorporated into market prices when
it was originally presented. There may be certain situations in which
this context may be particularly useful in assessing a firm's financial
condition--for example, in the case of restatements of prior period
financials. Although we recognize these potential costs, we believe
their impact would be mitigated by the fact that discussion of earlier
year financial results could be excluded only under specified
conditions, including that the discussion was not material to an
understanding of the registrant's financial condition, changes in
financial condition, and results of operations.
An alternative to the proposed amendments would be to retain the
earliest year requirement but permit registrants to hyperlink to the
prior year's report in lieu of repeating this disclosure. This
alternative would likely reduce search costs for investors and allow
efficient access to previously

[[Page 51021]]

disclosed information about a firm's financial condition. However, we
believe that this alternative would not reduce compliance costs to
registrants as effectively as the proposed amendments. Furthermore,
this alternative may detract from investor understanding of material
information about a firm's financial condition to the extent that it
resulted in hyperlinking to information that is no longer material to
such an understanding.
2. Information Omitted From Exhibits (Item 601): Item 601(a)(5), Item
601(a)(6), and Item 601(b)(10)(iv)
Proposed Item 601(a)(5) would permit registrants to omit schedules
and attachments to exhibits unless they contain information material to
an investment or voting decision and that information is not otherwise
disclosed in the exhibit or the disclosure document.\355\ The proposed
amendments also would require registrants to provide with each exhibit
a list briefly identifying the contents of all omitted schedules and
attachments.\356\ In addition, registrants would be required to
provide, on a supplemental basis, a copy of any of the omitted
schedules or attachments to the Commission staff upon request.\357\
---------------------------------------------------------------------------

\355\ See supra Section II.E.2.a (Exhibits--Information Omitted
from Exhibits, Schedules and Attachments).
\356\ See id.
\357\ See id.
---------------------------------------------------------------------------

Allowing registrants to omit schedules and attachments that are not
material to all exhibits would lower their filing costs. As noted in
Section II.E.2.a above, some commenters have noted that these burdens
are exacerbated if the schedules contain commercially sensitive
information that would require registrants to file confidential
treatment requests. The omission of schedules that are not material
would also help investors more clearly focus on the material
disclosures.
Based on our review of confidential treatment requests submitted
under Rule 406 and Rule 24b-2 granted in fiscal year 2016, we estimate
that over 90% of confidential treatment requests are granted for
material contracts based on competitive harm to the registrant,
discussed below. For the subset of confidential treatment requests that
were granted for reasons other than competitive harm to the registrant,
we expect that many of those exhibits likely contain schedules or
attachments that could be omitted under proposed Item 601(a)(5),
although we are unable to reliably estimate how many, because this
would depend, in part, on whether the schedules contain material
information. Any reduction in burden would be incremental to that
attributable to the proposed amendments to Item 601(b)(10)(iv), which
would likely address over 90% of confidential treatment requests.
Item 601(a)(6), as proposed to be amended, would permit registrants
to omit PII without submitting a confidential treatment request under
Rule 406 or Rule 24b-2.\358\ Under the proposed amendment, registrants
also would not be required to provide an analysis in order to redact
PII from exhibits. Since the proposed amendment leaves the decision
about omission of PII entirely to the registrant, it could result in
more liberal redactions. Thus, there is a tradeoff between reduced
compliance costs and the potentially adverse effects of reduced
disclosure. However, our analysis indicates that the Commission granted
very few confidential treatment requests in reliance on the Freedom of
Information Act \359\ (``FOIA'') exemption concerning PII. As an
illustration, in fiscal year 2016 only nine confidential treatment
requests were granted pursuant to this FOIA exemption. Presumably, most
registrants are currently taking advantage of existing staff guidance
that PII may be omitted without filing a confidential treatment
request. As a result, we do not expect that codifying this
accommodation would significantly alter existing disclosure practices.
---------------------------------------------------------------------------

\358\ See supra Section II.E.2.b.
\359\ 5 U.S.C. 552.
---------------------------------------------------------------------------

We are also proposing to add paragraph (b)(10)(iv) to Item 601 to
permit registrants to omit confidential information in material
contract exhibits filed pursuant to that item that is both (i) not
material and (ii) competitively harmful if publicly disclosed, without
submitting a confidential treatment request.\360\ Instead, registrants
would be required to mark the exhibit index to indicate that portions
of the exhibit or exhibits have been omitted and include a prominent
statement on the first page of each redacted exhibit that certain
information is omitted from the filed version of the exhibit.\361\ The
registrant would also be required to indicate with brackets where the
information is omitted from the filed version of the exhibit.\362\
---------------------------------------------------------------------------

\360\ See supra Section II.E.2.c.
\361\ See id.
\362\ See id.
---------------------------------------------------------------------------

Registrants could be asked by the Commission staff to provide on a
supplemental basis an unredacted copy of the exhibit.\363\ The staff
also could request that the registrant provide an analysis of why the
redacted information is both (i) not material and (ii) competitively
harmful.\364\ Registrants could request confidential treatment of this
supplemental information pursuant to Rule 83 while it is in the
possession of the staff.
---------------------------------------------------------------------------

\363\ See id.
\364\ See id.
---------------------------------------------------------------------------

The proposed amendment would significantly reduce the costs
associated with preparing confidential treatment requests and expedite
the filing process. In this regard, one commenter on the Concept
Release reviewed seven different confidential treatment requests on
which it assisted clients since 2012 and found that legal fees alone
ranged from approximately $35,000 to over $200,000.\365\
---------------------------------------------------------------------------

\365\ See Letter from Fenwick.
---------------------------------------------------------------------------

Because more than 90% of the confidential treatment requests
granted by the Commission in fiscal year 2016 were made in reliance on
the FOIA exemption concerning competitive harm, the proposed amendments
to Item 601(b)(10) to allow registrants to omit competitively harmful
information that is not material without filing a confidential
treatment request could correspondingly reduce the number and cost of
confidential treatment requests pursuant to Rule 406 and Rule 24b-2 by
over 90%. However, this reduction in cost would be partially offset by
the proposed amendment's provision that the staff may request an
analysis similar to the current competitive harm analysis. Registrants
would incur costs to prepare and provide this analysis in response to
any request from the staff.
One potential cost of the proposed amendments is that information
may be redacted that would not otherwise be afforded confidential
treatment by the staff. However, based on previous experience and a
review of confidential treatment requests, we believe that such
instances would be rare. Over the past five fiscal years, very few
confidential treatment requests were denied by the staff. Specifically,
of the confidential treatment requests filed over the last five fiscal
years, on average, approximately 1.0% were withdrawn because the staff
determined that the information likely was material to investors.\366\
During this time, on

[[Page 51022]]

average, approximately 95% of confidential treatment requests filed
were granted, and requests were rarely denied.\367\ Also during the
past five fiscal years, on average, approximately 12% of confidential
treatment requests filed were revised prior to the request being
granted to limit the number of terms redacted based on likely
materiality or over broad redactions.\368\ Under the proposed
amendments, the Commission staff would continue its selective review of
registrant filings and would selectively assess whether redactions from
exhibits appear to be limited to information that is not material and
that would subject the registrant to competitive harm if publicly
disclosed.
---------------------------------------------------------------------------

\366\ The following confidential treatment requests were filed
and withdrawn for likely materiality during the last five fiscal
years: 2016: 1,271 filed and approximately 7 withdrawn; 2015: 1,369
filed and approximately 14 withdrawn; 2014: 1,413 filed and
approximately 19 withdrawn; 2013: 1,290 filed and approximately 16
withdrawn; and 2012: 1,466 filed and approximately 6 withdrawn.
\367\ In fiscal years 2016 and 2015, no confidential treatment
requests were denied. In fiscal years 2014, 2013, and 2012, one, two
and one CTR(s) were denied, respectively. On average, during the
last five fiscal years, approximately 95% of confidential treatment
requests were granted in full and approximately 5% were withdrawn.
In addition to withdrawals based on staff determinations that the
information was likely material, other reasons confidential
treatment requests are withdrawn include that the offering is no
longer going forward, the information is already public, or the
contract is no longer material.
\368\ Confidential treatment requests revised based on
materiality and/or overbroad redactions in fiscal years 2016, 2015,
2014, 2013, and 2012, were approximately 119, 139, 183, 184, and
182, respectively.
---------------------------------------------------------------------------

F. Economic Analysis of the Specific Amendments: Proposals That Require
More Disclosure or the Incorporation of New Technology

1. Description of Registrant's Securities (Item 601(b)(4))
Item 202 requires registrants to provide a brief description of
their registered capital stock, debt securities, warrants, rights,
American Depositary Receipts, and other securities. We are proposing to
amend Item 601(b)(4) to require registrants to provide Item 202
disclosure as an exhibit to Form 10-K for each class of securities that
is registered under the Exchange Act, rather than limiting this
disclosure to registration statements. The proposed amendments would
not change existing disclosure obligations under Form 8-K and Schedule
14A, which currently require registrants to disclose certain
modifications to the rights of their security holders and amendments to
their articles of incorporation or bylaws. Any modifications and
amendments during a fiscal year to the information called for by Item
202 would now also be reflected in an exhibit to the registrant's next
annual report.
Information about Exchange Act registered securities allows
investors to assess the existing capital structure of registrants,
which can help investors understand better their exposure to risks and
their control rights. Requiring Item 202 disclosure as an exhibit to
annual reports would improve investors' access to information about
their rights as security holders, thereby facilitating more informed
investment and voting decisions.
The proposed requirements would impose some incremental compliance
costs for registrants to include the proposed disclosure with their
annual reports. Table 1 above shows that on average 7,800 registrants
file Form 10-K each year and therefore would be subject to the new Item
601(b)(4) exhibit filing requirement. However, because registrants
already prepare very similar disclosure to satisfy existing disclosure
obligations under Form 8-K and Schedule 14A and would be able to
incorporate by reference and hyperlink to prior disclosure, so long as
there has not been any change to the information called for by Item
202, we expect these incremental costs to be minimal.
2. Subsidiaries of the Registrant and Entity Identifiers (Item
601(b)(21))
Item 601(b)(21) requires a registrant to list in an exhibit its
subsidiaries, the state or other jurisdiction of incorporation or
organization of each, and the names under which those subsidiaries do
business. We are proposing amendments to Item 601(b)(21)(i) that would
require registrants to include in the exhibit the LEI, if one has been
obtained, of the registrant and each subsidiary listed.\369\
---------------------------------------------------------------------------

\369\ See supra Section II.E.4.
---------------------------------------------------------------------------

A key benefit of LEIs is that they allow for unique identification
of entities engaged in commercial and financial transactions. For
various reasons, firm and subsidiary names can be spelled and recorded
differently across filings, corporate websites, and standard databases.
In addition, subsidiaries can share the same (or very similar) names.
These issues can make names poor identifiers of market participants,
which could be an obstacle in some forms of investment analysis
involving computerized data access.
In contrast, LEIs provide clear and unique identification of market
participants that facilitates the statistical analysis and aggregation
of firm financial data. In this regard, some commenters have observed
that improved identifiers would allow investors to link third-party
data with structured data from Commission filings to produce more
meaningful analysis.\370\ As a consequence, a standard identifier of
firms and firm subsidiaries has the potential to improve not only
individual investment decisions but also the efficiency of the overall
market.
---------------------------------------------------------------------------

\370\ See id.
---------------------------------------------------------------------------

Disclosure of LEIs would also facilitate the ability of investors
and the Commission to link the information disclosed in Commission
filings with data from other filings or sources as LEIs become more
widely used by regulators and the financial industry. This could aid in
the performance of market analysis studies, surveillance activities,
and systemic risk monitoring by the Commission and other regulators.
The proposed amendments would impose an incremental cost on
registrants to include LEIs in the Item 601(b)(21) exhibit. We do not
expect this incremental cost to be significant, however, given that
this information should be readily available to registrants. Our
proposals would require disclosure of LEIs only for those registrants
and subsidiaries that have obtained this identifier, thereby not
imposing additional costs.\371\ As a result, the benefits of LEI
disclosure outlined above may be limited to the extent that not all
reporting entities obtain an identifier.
---------------------------------------------------------------------------

\371\ The use of and access to LEIs is free for investors. All
of the associated reference data needed to understand, process and
use LEIs is also widely and freely available. However, the cost of
obtaining a LEI for registrants currently entails a one-time fee of
$75-$119, and $50-$99 per year in annual maintenance fees.
---------------------------------------------------------------------------

Moreover, standard identifiers, such as LEIs, are most beneficial
to registrants and investors when a broad array of firms in the market
adopt them. For example, a widely adopted identifier would facilitate
the electronic link and cross-referencing of various informational
items over a large group of registrants. Staff experience indicates
that LEI adoption rates are currently low, which limits its benefits to
investors and other users of financial information.\372\ If LEIs are
not widely used, firms may not have incentives to obtain an LEI. Since
coordination among firms with regard to adoption is difficult to
accomplish, LEIs could remain underutilized.
---------------------------------------------------------------------------

\372\ For example, in the context of Form ADV, which similarly
requires an LEI to be reported only if the entity already has one,
the Commission has noted that just 6.8% of registered investment
advisers report an LEI when filing the form. See Form ADV and
Investment Advisers Act Rules, Release No. IA-4509 (Aug. 25, 2016)
[81 FR 60417 (Sept. 1, 2016)], at 114.
However, see also the discussion in the text around note 220,
supra. Although overall adoption rates appear low, the use of LEIs
may be increasing as a result of global regulatory efforts. See
Glob. Legal Entity Identifier Found., Regulatory Use of the LEI,
available at https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei (last visited July 13, 2017).

---------------------------------------------------------------------------

[[Page 51023]]

3. Tagging Cover Page Data
We are proposing to require registrants to tag all of the
information on the cover page of Form 10-K, Form 10-Q, Form 8-K, Form
20-F, and Form 40-F using Inline XBRL (or, if the Commission's recent
proposal to require Inline XBRL for the submission of operating company
financial statements is not adopted, in an XBRL exhibit to the relevant
filing) in accordance with the EDGAR Filer Manual. To implement the
cover page tagging requirements, we propose to add new Rule 406 to
Regulation S-T, new Item 601(b)(104) to Regulation S-K, new paragraph
104 to the ``Instructions as to Exhibits'' of Form 20-F and new
paragraph B.17 to the ``General Instructions'' of Form 40-F to require
registrants to file with each of the specified forms a ``Cover Page
Interactive Data File'' containing cover page data. We are also
proposing to revise Rule 11 of Regulation S-T to add the term ``Cover
Page Interactive Data File.'' Our proposals also would amend the cover
pages of these forms to include the trading symbol for each class of
the registrant's registered securities.\373\
---------------------------------------------------------------------------

\373\ Because the cover pages of Form 10-K, Form 20-F, and Form
40-F already require disclosure of the title of each class of
securities registered pursuant to Section 12(b) of the Exchange Act
and each exchange on which they are registered, our proposed
amendments to these forms would revise the cover page to include a
corresponding field for the trading symbol. Unlike these forms,
however, the cover pages of Form 10-Q and Form 8-K do not currently
require disclosure of the title of each class of securities and each
exchange on which they are registered. Accordingly, to ensure that
registrants and their registered securities are identified in a
consistent manner across forms, we are proposing to revise the cover
pages of Form 10-Q and Form 8-K to include this disclosure in
addition to the trading symbol.
---------------------------------------------------------------------------

Investment analysis increasingly relies on quantitative statistical
methods. Machine-readable formats greatly facilitate quantitative
analysis because they allow for the corresponding items to be imported
directly into various platforms for data analysis. Thus, tagging all
the data points on the cover pages of Form 10-K, Form 10-Q, Form 8-K,
Form 20-F, and Form 40-F could decrease the costs to investors for
implementing quantitative data analysis. We acknowledge that the
amendment would impose additional costs on registrants but expect the
additional burden to be minimal, given that registrants already furnish
a substantial amount of information contained in these forms in a
structured format.
An alternative to the Inline XRBL or traditional XBRL format is to
specify an XML format for the cover pages of Form 8-K, Form 10-K, Form
10-Q, Form 20-F, and Form 40-F. An XML format could have a variety of
implementations ranging from filers submitting the data according to a
designated technical framework to inputting the cover page information
in a web-fillable format within EDGAR. We are not proposing this
approach, because the Inline XBRL and traditional XBRL format provide
more precise rules that facilitate consistent input and data validation
by filers and enhance the analytical capabilities of data users.
Moreover, the Inline XBRL and traditional XBRL format have more robust
data validation capabilities, which could help to ensure better data
quality for investors. Inline XBRL also would not suffer from possible
data quality discrepancies that may occur from filers rekeying the
information from their cover page for submission in XBRL or XML.
4. Proposals for Additional Disclosure With Minimal Additional Costs to
Registrants
The following proposed amendments are expected to impose only
limited compliance costs on registrants:
Incorporation by Reference--proposal would require
hyperlinks internal to EDGAR for documents incorporated by
reference.\374\
---------------------------------------------------------------------------

\374\ See supra Section II.F.2.
---------------------------------------------------------------------------

Item 501(b)(4)--proposal would require disclosure on the
prospectus cover page of any national securities exchange where the
securities being offered are listed or, if not listed, the principal
United States market or markets for the securities being offered and
the corresponding trading symbols, if any. \375\
---------------------------------------------------------------------------

\375\ See supra Section II.D.1.c.
---------------------------------------------------------------------------

Requiring registrants to include hyperlinks to information that is
incorporated by reference could improve the readability and
navigability of disclosure documents by allowing users to be taken
directly to the incorporated information by clicking on a link rather
than having to locate the information on EDGAR. Although requiring the
inclusion of hyperlinks for incorporated information would impose an
additional compliance burden on registrants, we do not expect this
burden to be significant given that hyperlinks are relatively easy to
implement and involve minimal cost.
In the case of Item 501(b)(4), expanding the existing requirements
for trading market disclosure to encompass information about markets
that are not ``national securities exchanges'' would benefit investors
by helping them to better assess their trading costs. The disclosure
would impose some additional disclosure costs on registrants. However,
we do not expect these costs to be significant given that registrants
should have ready access to this information. In this regard, we note
that the required disclosure would be limited to the principal United
States market or markets where the registrant, through the engagement
of a registered broker-dealer, has actively sought and achieved
quotation.

G. Economic Analysis of HTML and Hyperlinking Requirements of Forms
Under the Investment Company Act

As discussed above, we are proposing HTML and hyperlinks
requirements for filers of certain forms under the Investment Company
Act. Broadly speaking, we believe the proposed amendments would reduce
search costs for investors. In particular, we believe that exhibit
hyperlinks would help investors and other users to access a particular
exhibit more efficiently as they would not need to search within the
filing or through different filings made over time to locate the
exhibit. Requiring exhibit hyperlinks may make it easier for investors
and other users to find and access a particular exhibit that was
originally filed with a previous filing.
To the extent that hyperlinks ease the navigation process for
investors and other users, hyperlinks may also facilitate a more
thorough review of a registrant's registration statements,
applications, and reports and encourage more effective monitoring over
time. The potential reduction of search costs and the enhanced ability
of investors to review a registrant's disclosure may result in more
informed investment and voting decisions, potentially enhancing
allocative efficiency, and capital formation by registrants.
We expect that hyperlinks would be more beneficial in reducing
search costs in the case of exhibits incorporated by reference than in
the case of exhibits filed with the filing, and in particular, we
expect these benefits to be most pronounced in the case of
incorporation by reference from a filing that was not recently filed
because more recent filings are displayed first on the EDGAR search
results page. Further, we expect hyperlinks would have greater benefits
in the case of registrants that submit more filings.
As a result of the proposed amendments, we expect that both HTML
and ASCII registrants would incur compliance costs to include
hyperlinks in their exhibit indexes. The cost of inserting a hyperlink
to an exhibit incorporated by reference would likely be greater than
the cost of

[[Page 51024]]

inserting a hyperlink to an exhibit filed with the document. While the
average cost itself of inserting a hyperlink is minimal, the total
hyperlinking costs for registrants would be a function of two main
factors: (1) How many registration statements, applications and reports
a registrant files that require an exhibit index; and (2) how many
exhibits in the exhibit index of these registration statements,
applications, and reports are either filed with the filing or
incorporated by reference.
Filers reporting in ASCII would incur costs to switch to HTML, in
addition to the costs of including hyperlinks in their exhibit indexes.
We expect that the costs of switching to HTML would not be significant
because the cost of software with built-in HTML and hyperlink features
is minimal. Overall, given the modest costs involved, we do not expect
that the proposed amendments would have significant competitive effects
for registrants.
Request for Comment
We request comment on all aspects of our economic analysis,
including the potential costs and benefits of the proposed amendments
and whether the rules, if adopted, would promote efficiency,
competition, and capital formation or have an impact on investor
protection. Commenters are requested to provide empirical data,
estimation methodologies, and other factual support for their views, in
particular, on costs and benefits estimates.

IV. Paperwork Reduction Act

A. Background

Certain provisions of our rules and forms that would be affected by
the proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\376\ The Commission is submitting the proposal to the Office
of Management and Budget (``OMB'') for review in accordance with the
PRA.\377\ The hours and costs associated with preparing and filing the
forms and reports constitute reporting and cost burdens imposed by each
collection of information. 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 collections is mandatory. Responses to
the information collections are not kept confidential and there is no
mandatory retention period for the information disclosed. The titles
for the collections of information are:
---------------------------------------------------------------------------

\376\ 44 U.S.C. 3501 et seq.
\377\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

``Regulation S-K'' (OMB Control No. 3235-0071); \378\
---------------------------------------------------------------------------

\378\ The paperwork burdens for Regulation S-K, Regulation S-T,
Regulation C and Regulation 12B are imposed through the forms that
are subject to the requirements in these regulations and are
reflected in the analysis of those forms. To avoid a PRA inventory
reflecting duplicative burdens and for administrative convenience,
we assign a one-hour burden to each of these regulations.
---------------------------------------------------------------------------

``Regulation S-T'' (OMB Control No. 3235-0424);
``Regulation 12B'' (OMB Control No. 3235-0062);
``Regulation C'' (OMB Control No. 3235-0074);
``Family of rules under section 8(b) of the Investment Company Act
of 1940'' (OMB Control No. 3235-0176);
``Form S-1'' (OMB Control No. 3235-0065);
``Form S-3'' (OMB Control No. 3235-0073);
``Form S-4'' (OMB Control No. 3235-0324);
``Form S-6'' (OMB Control No. 3235-0184);
``Form S-11'' (OMB Control No. 3235-0067);
``Form N-14'' (OMB Control No. 3235-0336);
``Form F-1'' (OMB Control No. 3235-0258);
``Form F-3'' (OMB Control No. 3235-0256);
``Form F-4'' (OMB Control No. 3235-0325);
``Form F-7'' (OMB Control No. 3235-0325);
``Form F-8'' (OMB Control No. 3235-0378);
``Form F-80'' (OMB Control No. 3235-0404);
``Form F-10'' (OMB Control No. 3235-0380);
``Form SF-1'' (OMB Control No. 3235-0707);
``Form SF-3'' (OMB Control No. 3235-0690);
``Form 10'' (OMB Control No. 3235-0064);
``Form 20-F'' (OMB Control No. 3235-0288);
``Form 40-F'' (OMB Control No. 3235-0381);
``Form 10-K'' (OMB Control No. 3235-0063);
``Form 10-Q'' (OMB Control No. 3235-0070);
``Form 8-A'' (OMB Control No. 3235-0056);
``Form 8-K'' (OMB Control No. 3235-0060);
``Form 10-D'' (OMB Control No. 3235-0604);
``Schedule 14A'' (OMB Control No. 3235-0059);
``Schedule 14C'' (OMB Control No. 3235-0057); ``Form N-1A'' (OMB
Control No. 3235-0307); ``Form N-2'' (OMB Control No. 3235-0026);
``Form N-3'' (OMB Control No. 3235-0316); ``Form N-4'' (OMB Control No.
3235-0318); ``Form N-5'' (OMB Control. No. 3235-0169); ``Form N-6''
(OMB Control No. 3235-0503); and ``Form N-CSR'' (OMB Control No. 3235-
0570).
The forms, reports, and regulations listed above were adopted under
the Securities Act, the Exchange Act or the Investment Company Act. The
regulations, schedules, and forms set forth the disclosure requirements
for registration statements, periodic and current reports, distribution
reports and proxy, and information statements filed by registrants to
help investors make informed investment and voting decisions. Other
forms and reports are filed by entities regulated by the Investment
Company Act in connection with the Commission's oversight of these
entities.
We are proposing amendments, which are described in more detail in
Section II above, based on the recommendations made in the FAST Act
Report, as required by Section 72003 of the FAST Act. The proposed
amendments are intended to modernize and simplify certain disclosure
requirements in Regulation S-K and related rules and forms in a manner
that reduces the costs and burdens on registrants while continuing to
provide all material information to investors. The proposed amendments
are also intended to improve the readability and navigability of the
Commission's disclosure documents and discourage repetition and
disclosure of immaterial information. In addition, we are proposing
parallel amendments to several rules and forms applicable to investment
companies and investment advisers to provide for a consistent set of
incorporation by reference and hyperlinking rules for these entities,
including proposed amendments that would require certain investment
company filings to be submitted in HTML format.

B. Summary of the Proposed Amendments' Impact on Collection of
Information

In this section, we summarize the proposed amendments and their
general impact on the paperwork burden associated with the forms listed
in Section IV.A. In Section IV.C. below, we provide revised burden
estimates for each form.

[[Page 51025]]

1. Proposed Amendments Expected To Decrease Burdens
a. Description of Property (Item 102)
The proposed amendments to Item 102 of Regulation S-K would clarify
that a description of property is only required to the extent physical
properties are material to the registrant and make other clarifying
amendments.\379\ The staff has observed that the current disclosure
standard may lead registrants, in some instances, to devote resources
to providing disclosure on properties that are not material. Although
the proposed amendments to Item 102 are expected to help registrants
avoid unnecessary disclosure in some instances, the amendments are
clarifying in nature and therefore we do not believe they would
significantly affect the paperwork burden associated with affected
forms. Accordingly, we estimate that the paperwork burden would be
reduced by 0.5 hours for each form affected by the proposed amendments.
We expect that Form S-1,\380\ Form S-4,\381\ Form 10, and Form 10-K
would be affected by this proposed amendment.
---------------------------------------------------------------------------

\379\ See supra Section II.A.
\380\ 17 CFR 239.11.
\381\ 17 CFR 239.25.
---------------------------------------------------------------------------

b. Management's Discussion and Analysis (Item 303)
The proposed amendments to Item 303 would allow registrants, in
some circumstances, to eliminate the earliest year of the MD&A
discussion.\382\ The proposed amendments would also eliminate the
reference to five-year selected financial data in Instruction 1 to Item
303(a) and clarify that registrants may use their discretion in
selecting the best format for their MD&A presentation.\383\ The
combined effects of these amendments would be to eliminate the burden
on registrants to prepare and provide repetitive disclosure that is not
material. The proposed amendments are of particular significance,
because MD&A is typically one of the most labor-intensive sections of
any form in which it is required. We anticipate that the proposed
amendments to simplify and clarify the MD&A requirements would reduce
the paperwork burden associated with related forms.
---------------------------------------------------------------------------

\382\ See supra Section II.B.
\383\ See supra id.
---------------------------------------------------------------------------

We estimate that the aggregate impact of the proposed amendments
would be a four hour reduction in paperwork burden each time Item 303
information is required to be included in a form. We estimate that the
aggregate impact of the proposed corresponding amendments to Form 20-F
would result in a four hour reduction each time information under Item
5 of that form is required. We expect that Form S-1,\384\ Form S-
4,\385\ Form S-11,\386\ Form F-1,\387\ Form F-4,\388\ Form 10, Form 10-
K, Form 10-Q, and Form 20-F would be affected by this proposed
amendment.
---------------------------------------------------------------------------

\384\ 17 CFR 239.11.
\385\ 17 CFR 239.25.
\386\ 17 CFR 239.18.
\387\ 17 CFR 239.31.
\388\ 17 CFR 239.34.
---------------------------------------------------------------------------

c. Directors, Executive Officers, Promoters and Control Persons (Item
401, Item 405 and Item 407)
The proposed amendments to Item 401, Item 405, and Item 407 of
Regulation S-K would simplify and modernize executive officer, Section
16(a) compliance and corporate governance disclosure requirements. The
proposed amendments to Item 401 would simplify the rules for
determining what disclosure about executive officers may be included in
Form 10-K when other disclosure in Part III of Form 10-K will be
incorporated by reference to the registrant's definitive proxy or
information statement.\389\ The proposed amendments to Item 405 would
allow registrants to rely on a review of Section 16 reports submitted
on EDGAR rather than reports furnished to the registrant when providing
disclosure about Section 16(a) compliance.\390\ Finally, the proposed
amendments to Item 407 clarify the applicable auditing standard and the
disclosure requirements for the compensation committees of EGCs.\391\
---------------------------------------------------------------------------

\389\ See supra Section II.C.
\390\ See id.
\391\ See id.
---------------------------------------------------------------------------

The proposed amendments to Item 401, Item 405, and Item 407 would
clarify and streamline existing disclosure requirements, and in that
respect are expected to marginally reduce compliance costs for
registrants. We estimate that the proposed amendments would reduce the
paperwork burden for each affected form by 0.5 hours. We expect that
Form S-1, Form S-4, Form S-11, Form 8-K, Form 10, Form 10-K, and Form
10-Q would be affected by this proposed amendment.
d. Exhibits (Item 601)
i. Information Omitted From Exhibits (Item 601(a)(5), Item 601(a)(6),
and Item 601(b)(10)(iv))
We are proposing several amendments to Item 601 of Regulation S-K.
Many of these amendments affect provisions related to the Commission's
confidential treatment process. Specifically, the proposed amendments
to Item 601(a)(5), Item 601(a)(6), and Item 601(b)(10)(iv) would permit
registrants to omit, without submitting a confidential treatment
request, schedules and attachments that are not material, personally
identifiable information and confidential information in material
contract exhibits that is both (i) not material and (ii) competitively
harmful if publicly disclosed.
For purposes of the PRA, we consider the time and cost to prepare
and submit a confidential treatment request to be part of the paperwork
burden associated with preparing and filing the related disclosure
form. We estimate that elimination of the need to prepare and submit a
confidential treatment request to omit confidential information from
exhibits filed pursuant to Item 601(b)(10) that is both (i) not
material and (ii) competitively harmful if publicly disclosed would
reduce internal burden hours by ten hours per request for an estimated
20% of registrants that prepare the confidential treatment request
without relying on outside counsel, and reduce external costs by $4,000
per request for an estimated 80% of registrants that retain outside
counsel for this work.\392\
---------------------------------------------------------------------------

\392\ The $4,000 cost estimate is calculated as follows: 10
hours x $400 per hour of outside counsel work = $4,000. See infra
note 412.
---------------------------------------------------------------------------

Proposed Item 601(a)(5) would permit registrants to omit entire
schedules and attachments to exhibits unless the schedules contain
information material to an investment or voting decision and that
information is not otherwise disclosed in the exhibit or the disclosure
document. The threshold for omission under proposed Item 601(a)(5) is
lower than for omission under the proposed amendment to Item 601(b)(10)
because registrants would not be required to show that the information
would cause competitive harm if publicly disclosed.
Based on our review of confidential treatment requests granted in
fiscal year 2016, we estimate that over 90% of these requests were
granted for material contracts based on competitive harm to the
registrant. For the remainder, we expect that many of those exhibits
likely contain schedules that could be omitted under proposed Item
601(a)(5). However, we are unable to reliably estimate how many of
these requests would be unnecessary under the proposed amendments to
Item 601(a)(5) because this would depend, in part, on whether the
schedules contain material

[[Page 51026]]

information. Given that the proposed amendments to Item 601(b)(10)
would likely address over 90% of the confidential treatment requests
submitted to the Commission, and to avoid overestimating the decrease
in paperwork burden arising from the proposed amendments, we are not
making an additional adjustment to our burden estimates in respect of
the amendment to Item 601(a)(5) but are soliciting comment on ways to
reasonably estimate such an adjustment.\393\
---------------------------------------------------------------------------

\393\ For similar reasons, we are making no additional
adjustment to our burden estimates in respect of the amendments to
Item 601(a)(6). In fiscal year 2016, only nine confidential
treatment requests were granted by the Commission for documents
containing PII. This suggests that most registrants are currently
taking advantage of existing staff guidance that PII may be omitted
without filing a confidential treatment request.
---------------------------------------------------------------------------

Based on these assumptions, we expect the annual internal burden
hours and professional costs devoted to the confidential treatment
process to decrease each time exhibit information described in Item
601(a)(5), Item 601(a)(6), or Item 601(b)(10)(iv) is omitted or
redacted. In fiscal year 2016, 43% of confidential treatment requests
were filed for Form 10-Q, 18% for Form 10-K, 13% for Form 8-K, 8% for
Form S-1, 4% for Form 20-F, and 1% each for Form 10 and Form F-1. We
are therefore ascribing changes in paperwork burdens and costs to these
forms in these same proportions.
ii. Material Contracts Exhibits (Item 601(b)(10)(i))
The proposed amendment to Item 601(b)(10)(i) would limit the two-
year look back filing requirement for material contracts to newly
reporting registrants. Registrants that are not newly reporting
registrants would no longer be required to comply with this filing
requirement and thus would incur reduced compliance burdens. However,
we believe that the current burden associated with the two-year look
back requirement is minimal. Therefore, the proposed amendments are not
expected to result in a significant reduction of the paperwork burden
associated with the affected forms. We estimate that the paperwork
burden would be reduced by 0.5 hours for each form affected by the
proposed amendment. We expect that Form 10, Form 10-K, Form S-1, Form
S-4, Form F-1, Form F-3, Form F-4, Form S-11, and Form SF-1 would be
affected by this proposed amendment.
2. Proposed Amendments Expected To Increase Burdens
a. Registration Statement and Prospectus Provisions (Item 501(b))
We are proposing to amend Item 501(b) to require disclosure on the
cover page of the prospectus of any national securities exchange where
the securities being offered are listed or, if not listed, the
principal United States market or markets for the securities being
offered and the corresponding trading symbols, if any.\394\ The
proposed amendments would incrementally increase the compliance burden
on registrants by requiring them to provide disclosure about trading
markets other than national exchanges. Because we are proposing to
limit the incremental disclosure to those trading markets where the
registrants, through the engagement of a registered broker-dealer, has
actively sought and achieved quotation, we believe this information
should be readily available to registrants and impose only a minimal
paperwork burden.
---------------------------------------------------------------------------

\394\ See supra Section II.D.
---------------------------------------------------------------------------

Accordingly, we estimate that the proposed amendment would slightly
increase the paperwork burden associated with each affected form by
0.25 hours. We expect that Form S-1, Form S-3, Form S-4, Form S-11,
Form F-1, Form F-3, Form F-4, Form SF-1,\395\ and Form SF-3 \396\ would
be affected by this proposed amendment.
---------------------------------------------------------------------------

\395\ 17 CFR 239.44.
\396\ 17 CFR 239.45.
---------------------------------------------------------------------------

b. Exhibits (Item 601(b)(4)(vi) and (b)(21))
Proposed new Item 601(b)(4)(vi) would require registrants to file
an Item 202 description of their Exchange Act registered securities as
an exhibit to Form 10-K. The proposed amendments to Item 601(b)(21)
would require disclosure of an LEI (if one has been obtained) for each
registrant and any subsidiaries required to be disclosed in the
exhibit.
We expect that the new requirements under Item 601(b)(4)(vi) would
slightly increase the paperwork burden on registrants because
registrants would be required to provide a description of registered
securities annually. However, registrants would be able to incorporate
by reference and hyperlink to prior disclosure if the information
called for by Item 202 remains unchanged from prior years, thus
mitigating any increase in the anticipated burden. Accordingly, we
estimate the proposed amendments would increase the paperwork burden
associated with Form 10-K and Form 20-F by 0.5 hours.
We expect that the proposed amendments to Item 601(b)(21) would
also increase the burden on registrants; however, we expect this
increase to be slight because LEI information should be readily
available and would be only required if an identifier has already been
obtained. Those registrants that have not obtained LEIs would not incur
an additional burden. Accordingly, we estimate that the proposed
amendments to Item 601(b)(21) would increase the paperwork burden
associated with each affected form by 0.25 hours. We expect that Form
S-1, Form S-4, Form F-1, Form 10, Form 10-K, Form S-11, Form SF-1, and
Form SF-3 would be affected by the proposed amendment to Item
601(b)(21).
c. Manner of Delivery
Proposed new Rule 406, proposed new Item 601(b)(104), proposed new
paragraph 104 to ``Instructions as to Exhibits'' of Form 20-F and
proposed new Instruction 17 to ``Information To Be Filed on this Form''
of Form 40-F would require registrants to tag every data point on the
cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F, and Form 40-F
using Inline XBRL, including certain new data points added pursuant to
the proposed amendments.\397\ Although expanded data tagging would
result in an increase in the burden associated with related forms, we
note that registrants are already required to tag certain cover page
information as well as financial statement information. For this
reason, we believe most registrants already will have developed the
internal resources or engaged outside professionals to assist them in
complying with existing data tagging requirements.\398\ In this
respect, we do not believe the cover page tagging requirement would
result in significant additional burdens for registrants.
---------------------------------------------------------------------------

\397\ See supra Section II.G.1.
\398\ As discussed above, the Commission recently proposed to
require the use of the Inline XBRL format instead of the traditional
XBRL format for the submission of operating company financial
statements, and we intend for the cover page data to be tagged in
the same format as this other information. See id. In the Inline
XBRL Proposing Release, we provided estimates of the change in
paperwork burden associated with the transition to Inline XBRL. See
supra note 310. Because we expect to require the Inline XBRL format
for tagging cover page data only if the Inline XBRL proposal has
been adopted, we are not including PRA burden estimates related to
the transition to Inline XBRL in this release.
---------------------------------------------------------------------------

Accordingly, we estimate that the requirement to tag additional
cover page items would impose an increased paperwork burden of one hour
for each affected form. We expect that Form 10-

[[Page 51027]]

K, Form 10-Q, Form 8-K, Form 20-F, and Form 40-F would be affected by
the proposed new rules and form amendments.
As described in more detail above, we are proposing amendments to
certain of our forms that are used by investment companies and
amendments to Rule 102 of Regulation S-T to apply hyperlinking and HTML
requirements to those registrants to facilitate access to most exhibits
for investors and other users of the information.\399\ We anticipate
that the proposed amendments will increase the burdens and costs for
registrants to prepare and file registration statements and reports on
the affected forms. Because the software tools to prepare and file
documents in HTML are widely used and available at minimal cost, we do
not believe this requirement would appreciably change the existing
burden estimates for the affected registration statements or reports,
which already include the time and expense to prepare and file in
electronic format on EDGAR. We believe the burdens associated with
hyperlinking exhibits would be small as the registrant would already be
preparing the exhibits and exhibit index for the related filing and
would have readily available all the information necessary to create
the hyperlinks. We assume that the average burden hours of requiring
exhibit hyperlinks would vary based on the number of exhibits that are
included with a filing, as discussed in detail below.\400\
---------------------------------------------------------------------------

\399\ See supra Section II.G.2.
\400\ See infra Section IV.C.4.
---------------------------------------------------------------------------

3. Proposed Amendments Not Expected to Meaningfully Affect Burdens
a. Registration Statement and Prospectus Provisions (Item 501(b), Item
503(c), Item 508 and Item 512)
The proposed amendments to Item 501(b)(1), Item 501(b)(3), and Item
501(b)(10) would, respectively, eliminate misleading company name
disclosure requirements, explicitly allow registrants to include a
clear statement that the offering price will be determined by a
particular method or formula (and require a cross reference to the
offering price method or formula disclosure), and permit registrants to
exclude some portion of the legend relating to state law in the
prospectus for an offering that is not prohibited by state blue sky
law.\401\ The proposed amendments to Item 503(c) would relocate the
current risk factor disclosure requirements to Subpart 100 and
eliminate the risk factor examples without substantively changing the
underlying disclosure requirements.\402\ The proposed amendment to Item
508 would define the term ``sub-underwriter'' to clarify one aspect of
the required disclosure about the plan of distribution for a registered
securities offering.\403\ The proposed amendments to Item 512 would
eliminate certain undertakings that are redundant or obsolete.\404\
---------------------------------------------------------------------------

\401\ The proposed amendments would also streamline 501(b) by
combining paragraphs (b)(10) and (b)(11) without substantive change.
\402\ See supra Section II.D.2.
\403\ See supra Section II.D.3.
\404\ See supra Section II.D.4.
---------------------------------------------------------------------------

We believe these proposed amendments would not meaningfully affect
the paperwork burden associated with the related forms because these
amendments modernize and clarify certain requirements and do not
substantively change the required disclosure. Therefore, we are not
making any adjustments to the paperwork burden of affected forms due to
these proposed amendments.
b. Incorporation by Reference
We are proposing amendments to simplify and modernize the rules and
forms governing incorporation by reference. Under the proposed
amendments, certain existing requirements for incorporation by
reference would be consolidated into Rule 411, Rule 12b-23, Rule 0-4,
and Rule 0-6.\405\ The proposed amendments would also eliminate several
redundant or outdated requirements. In addition, the proposed
amendments would provide registrants with additional flexibility in
organizing the disclosure in Form 10, Form 10-K, and Form 20-F by
permitting them to exclude item numbers and captions or create their
own captions tailored to the disclosure in these forms \406\ These
proposals are expected to decrease reporting burdens associated with
incorporating information by reference in Commission filings, leading
to an estimated 0.5 hour reduction in paperwork burden per affected
form. However, this decrease would be offset by an estimated 0.5 hour
increase in paperwork burden per affected form due to the proposed
amendments requiring registrants to include hyperlinks to information
incorporated by reference when that information is available on
EDGAR.\407\ Accordingly, we are not making any adjustments to the
paperwork burden of affected forms due to these proposed amendments.
---------------------------------------------------------------------------

\405\ See supra Section II.F.
\406\ See id.
\407\ See id.
---------------------------------------------------------------------------

C. Burden and Cost Estimates to the Proposed Amendments

As discussed below, we expect that the proposed amendments would,
in the aggregate, reduce the paperwork burden on respondents. The
change in burden, however, would differ depending on the form because
not all of the proposed amendments would apply to each form.
These estimates represent 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 nature of their business.
The burden estimates were calculated by multiplying the estimated
number of responses by the estimated average amount of time it would
take a registrant to prepare and review disclosure required under the
proposed amendments. The portion of the burden carried by outside
professionals is reflected as a cost, while the portion of the burden
carried by the registrant internally is reflected in hours.
1. Form 10-K and Form 10-Q; Schedule 14A and Schedule 14C
The proposed amendments are estimated to significantly reduce the
paperwork burdens associated with Form 10-K \408\ and Form 10-Q as well
as Schedule 14A and Schedule 14C.\409\ For purposes of the PRA, we
estimate that 75% of the burden of preparation for these Exchange Act
reports is carried by the registrant internally and that 25% of the
burden of preparation is carried by outside professionals retained by
the company at an average cost of $400 per hour.\410\
---------------------------------------------------------------------------

\408\ Schedules 14A and 14C require disclosure under Subpart 400
of Regulation S-K. This disclosure is often incorporated, in
relevant part, into Part III of a registrant's Form 10-K. Therefore,
our burden estimates for Form 10-K contemplate that Part III
disclosure may be incorporated by reference to Schedules 14A or 14C.
\409\ Schedule 14A requires that registrants, under certain
circumstances, provide disclosure under Item 303. Our burden
estimate for Schedule 14A assumes that registrants would duplicate
the disclosure provided under this Item in the most recent Form 10-K
and/or Form 10-Q.
\410\ 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 would 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
reports with the Commission.
---------------------------------------------------------------------------

Table 4 below illustrates the total annual compliance burden, in
hours and in costs, \411\ of the affected

[[Page 51028]]

collections of information resulting from the proposed amendments.\412\
---------------------------------------------------------------------------

\411\ For convenience, the estimated hour and cost burdens in
the tables in this section have been rounded to the nearest whole
number.
\412\ The burdens associated with the proposed amendments to the
forms listed in Table 4, other than the confidential treatment
request proposal, have been estimated by assuming that 75% of the
burden is borne by the company and 25% is borne by outside counsel
at $400 per hour. The burdens associated with submitting
confidential treatment requests in connection with the forms listed
in Table 4 have been estimated by assuming that the average request
requires approximately ten hours of preparation and that 20% of the
burden is borne by the company and 80% of the burden is borne by
outside counsel at $400 per hour.

Table 4--Incremental Paperwork Burden Under the Proposed Amendments for Exchange Act Forms
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed
Current annual number of Current burden Change in Change in Change in Change in
responses affected hours burden hours company hours professional professional
responses hours costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
10-K.................................... 8,137 8,137 12,228,620 (32,703) (23,325) (9,378) ($3,715,600)
10-Q.................................... 22,907 22,907 3,220,037 (73,181) (63,884) (9,297) (3,718,800)
8-K..................................... 118,387 118,387 507,665 116,867 88,490 28,377 11,350,800
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Form S-1, Form S-3, Form S-4, Form F-3, Form F-4, Form SF-1, Form
SF-3, Form 10, and Form 20-F
The proposed amendments are estimated to significantly reduce the
paperwork burden associated with Form S-1, Form S-3, Form S-4, Form F-
3, Form F-4, and Form 20-F. For registration statements on Form 10,
Form S-1, Form S-3, Form S-4, Form F-1, Form F-3, Form F-4, Form SF-1,
and Form SF-3, and Exchange Act report Form 20-F, we estimate that 25%
of the burden of preparation is carried by the company internally and
that 75% of the burden of preparation is carried by outside
professionals retained by the company at an average cost of $400 per
hour.
Table 5 below illustrates the total annual compliance burden, in
hours and in costs, of the affected collections of information
resulting from the proposed amendments.\413\
---------------------------------------------------------------------------

\413\ The burdens associated with the proposed amendments to the
forms listed in Table 5, other than the confidential treatment
request proposal, have been estimated by assuming that 25% of the
burden is borne by the company and 75% is borne by outside counsel
at $400 per hour. The burdens associated with submitting
confidential treatment requests in connection with the forms listed
in Table 5 have been estimated by assuming that the average request
requires approximately ten hours of preparation and that 20% of the
burden is borne by the company and 80% of the burden is borne by
outside counsel at $400 per hour.

Table 5--Incremental Paperwork Burden Under the Proposed Amendments for Registration Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed
Current annual number of Current burden Change in Change in Change in Change in
reponses affected hours burden hours company hours professional professional
responses hours costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-1..................................... 901 901 150,242 (5,514) (1,325) (4,189) ($1,675,600)
S-3..................................... 1,082 1,082 127,806 (301) (78) (223) (89,200)
S-4..................................... 551 551 564,731 (2,803) (700) (2,103) (841,200)
S-11.................................... 100 100 19,476 (450) (112) (338) (135,200)
SF-3.................................... 71 71 24,495 36 9 27 10,800
F-1..................................... 63 63 26,917 (431) (98) (333) (133,200)
F-3..................................... 107 107 4,467 (10) (1) (9) (3,600)
F-4..................................... 68 68 24,769 (281) (70) (211) (84,400)
10...................................... 238 238 12,805 (1390) (342) (1,048) (419,200)
20-F.................................... 725 725 479,501 (2454) (588) (1,866) (746,400)
40-F.................................... 160 160 17,197 160 40 120 40,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 6--Current and Revised Burdens Under the Proposed Amendments for Securities Act
and Exchange Act Forms
----------------------------------------------------------------------------------------------------------------
Current burden Revised burden
-------------------------------------------------------------------
Burden hours Burden hours
(A) Cost (B) (C) Costs (D)
----------------------------------------------------------------------------------------------------------------
10-K........................................ 12,228,620 $1,631,470,000 12,205,295 $1,627,754,400
10-Q........................................ 3,220,037 429,368,808 3,156,153 425,650,008
8-K......................................... 507,665 67,688,700 596,155 79,039,500
S-1......................................... 150,242 180,290,100 148,917 178,614,900
S-3......................................... 127,806 153,367,008 127,728 153,277,808
S-4......................................... 564,731 677,677,104 564,031 676,835,904
S-11........................................ 19,476 23,371,200 19,364 23,236,000
SF-3........................................ 24,495 29,394,000 24,504 29,404,800
F-1......................................... 26,917 32,300,100 26,819 32,166,900
F-3......................................... 4,467 5,360,700 4,465 5,357,100
F-4......................................... 24,769 29,722,800 24,699 29,638,400
10.......................................... 12,805 15,366,042 12,463 14,946,842
20-F........................................ 479,501 575,400,600 478,913 574,654,200

[[Page 51029]]

40-F........................................ 17,197 20,636,800 17,237 20,684,800
----------------------------------------------------------------------------------------------------------------

3. Form 8-A, Form 10-D, Form 40-F, Form F-7, Form F-8, Form F-10, and
Form F-80
The proposed amendments to Form 8-A,\414\ Form 10-D, Form 40-F,
Form F-7,\415\ Form F-8,\416\ Form F-10, and Form F-80 \417\ are not
expected to meaningfully reduce the associated paperwork burden for
these forms. Accordingly, we have not included a tabular presentation
of the impact on the total annual compliance burden of these forms as a
result of these proposed amendments.
---------------------------------------------------------------------------

\414\ 17 CFR 249.208a.
\415\ 17 CFR 239.37.
\416\ 17 CFR 239.38.
\417\ 17 CFR 239.41.
---------------------------------------------------------------------------

4. Form S-6, Form N-1A, Form N-2, Form N-3, Form N-4, Form N-5, Form N-
6, Form N-14, and Form N-CSR
The proposed amendments to Form S-6,\418\ Form N-1A,\419\ Form N-
2,\420\ Form N-3,\421\ Form N-4,\422\ Form N-5,\423\ Form N-6,\424\
Form N-14, and Form N-CSR \425\ are expected to increase the burdens
and costs for registrants to prepare and file registration statements
and reports on the affected forms, but we believe the burdens
associated with hyperlinking exhibits would be small.\426\ We assume
that the average burden hours of requiring exhibit hyperlinks would
vary based on the number of exhibits that are included with a filing.
For purposes of the PRA, based on the average and median number of
exhibits shown in Table 3 above and the staff's experience, we estimate
that the average burden for a registrant to hyperlink to exhibits would
be one hour per response for each of the affected forms. As discussed
above, we are not making any adjustments to the paperwork burden of
affected forms due to the proposed amendments to simplify and modernize
the rules and forms governing incorporation by reference.\427\
---------------------------------------------------------------------------

\418\ 17 CFR 239.16.
\419\ 17 CFR 239.15A and 17 CFR 274.11A.
\420\ 17 CFR 239.14 and 17 CFR 274.11a-1.
\421\ 17 CFR 239.17a and 17 CFR 274.11b.
\422\ 17 CFR 239.17b and 17 CFR 274.11c.
\423\ 17 CFR 239.24 and 17 CFR 274.5.
\424\ 17 CFR 239.17c and 17 CFR 274.11d.
\425\ 17 CFR 249.331 and 17 CFR 274.128.
\426\ See supra Section IV.B.2.c.
\427\ See supra Section IV.B.3.b.
---------------------------------------------------------------------------

The table below shows the total annual compliance burden, in hours
and in costs, of the collections of information resulting from the
proposed amendments.\428\ 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 the
exhibit hyperlinks. 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 25% of the burden of preparation is carried
by the registrant internally and that 75% of the burden of preparation
is carried by outside professionals retained by the company at an
average cost of $400 per hour.\429\
---------------------------------------------------------------------------

\428\ For convenience, the estimated hour and cost burdens in
the table have been rounded to the nearest whole number.
\429\ 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 would be an average of $400 per hour. These estimates are
based on our estimates for the parallel requirement for operating
companies. Exhibit Hyperlinks Adopting Release, supra note 14 at
14139.

Table 6--Incremental Paperwork Burden Under the Proposed Amendments to Forms for Investment Companies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed number
Forms of affected Incremental Total incremental 25% internal 75% outside Professional
responses burden hours/form burden hours burden professional costs
(A) (B) (C) = (A) x (B) (D) = (C) x 0.25 (E) = (C) x 0.75 (F) = E x $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form S-6.............................. 2,498 1 2,498 625 1,874 $749,600
Form N-1A............................. 6,002 1 6,002 1,501 4,502 1,800,800
Form N-2.............................. 166 1 166 42 125 50,000
Form N-3.............................. 20 1 20 5 15 6,000
Form N-4.............................. 1,653 1 1,653 413 1,240 496,000
Form N-5.............................. 1 1 1 0 1 400
Form N-6.............................. 472 1 472 118 354 141,600
Form N-14............................. 192 1 192 48 144 57,600
Form N-CSR............................ 6,898 1 6,898 1,725 5,174 2,069,600
-----------------------------------------------------------------------------------------------------------------
Total............................. ................. ................. 17,902 ................. ................. 5,371,600
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Request for Comment

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order
to:
Evaluate whether the proposed collections of information
are necessary for the proper performance of the functions of the
Commission, including whether the information will have practical
utility;
Evaluate the accuracy of our assumptions and estimates of
the

[[Page 51030]]

burden of the proposed collection of information;
Determine whether there are ways to enhance the quality,
utility, and clarity of the information to be collected;
Evaluate whether there are ways to minimize the burden of
the collection of information on those who respond, including through
the use of automated collection techniques or other forms of
information technology; and
Evaluate whether the proposed amendments would have any
effects on any other collection of information not previously
identified in this section.
Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
these burdens. Persons submitting comments on the collection of
information requirements should direct their comments to the Office of
Management and Budget, Attention: Desk Officer for the U.S. Securities
and Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and send a copy to, Brent J. Fields, Secretary,
U.S. Securities and Exchange Commission, 100 F Street NE., Washington,
DC 20549, with reference to File No. S7-08-17. Requests for materials
submitted to OMB by the Commission with regard to the collection of
information should be in writing, refer to File No. S7-08-17 and be
submitted to the U.S. Securities and Exchange Commission, Office of
FOIA Services, 100 F Street NE., Washington DC 20549. OMB is required
to make a decision concerning the collection of information between 30
and 60 days after publication of this proposed rule. Consequently, a
comment to OMB is best assured of having its full effect if the OMB
receives it within 30 days of publication.

V. Small Business Regulatory Enforcement Fairness Act

For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996,\430\ a rule is ``major'' if it has resulted, or is likely
to result in:
---------------------------------------------------------------------------

\430\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

An annual effect on the U.S. economy of $100 million or
more;
a major increase in costs or prices for consumers or
individual industries; or
significant adverse effects on competition, investment, or
innovation.
We request comment on whether our proposal would be a ``major
rule'' for purposes of the Small Business Regulatory Enforcement
Fairness Act. We solicit comment and empirical data on:
The potential effect on the U.S. economy on an annual
basis;
any potential increase in costs or prices for consumers or
individual industries; and
any potential effect on competition, investment, or
innovation.

VI. Initial Regulatory Flexibility Act Analysis

This Initial Regulatory Flexibility Act Analysis has been prepared
in accordance with the Regulatory Flexibility Act.\431\ It relates to
proposed amendments to modernize and simplify certain disclosure
requirements in Regulation S-K and related rules and forms to implement
Section 72003 of the FAST Act and provide consistent incorporation by
reference and hyperlinking requirements in the rules and forms
applicable to investment companies and investment advisers.
---------------------------------------------------------------------------

\431\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, the Proposed Action

The purpose of the proposed amendments is to modernize and simplify
Commission disclosure requirements in a manner that reduces costs and
burdens on companies while still providing all material information.
Specifically, the proposed amendments would modernize and simplify
these disclosure requirements by clarifying, consolidating, relocating
and eliminating, or updating various Commission rules that govern
public company disclosure. The proposed amendments would also modernize
the rules by requiring cover page data to be tagged in a machine-
readable format, requiring disclosure of LEIs and requiring hyperlinks
to be included in some documents filed on EDGAR. The proposed
amendments would largely implement the staff's recommendations in the
FAST Act Report, as required by Section 72003(d) of the FAST Act. In
addition, the proposed amendments would apply parallel incorporation by
reference and hyperlinking requirements in the rules and forms used by
investment companies and investment advisers to provide a consistent
set of requirements for these registrants.

B. Legal Basis

We are proposing the rule and form amendments contained in this
document under the authority set forth in Sections 7, 10, 19(a), and 28
of the Securities Act of 1933, as amended, Sections 3(b), 12, 13, 14,
15, 16, 23(a), and 36 of the Securities Exchange Act of 1934, as
amended, Sections 6(c), 8, 24(a), 30, and 38 of the Investment Company
Act of 1940, as amended and Sections 204, 206A, 210, and 211 of the
Investment Advisers Act of 1940, as amended.

C. Small Entities Subject to the Proposed Rules

The proposed amendments would affect some registrants that are
small entities. The Regulatory Flexibility Act defines ``small entity''
to mean ``small business,'' ``small organization,'' or ``small
governmental jurisdiction.'' \432\ For purposes of the Regulatory
Flexibility Act, under our rules, an issuer, other than an investment
company or an investment adviser, is a ``small business'' or ``small
organization'' if it had total assets of $5 million or less on the last
day of its most recent fiscal year and is engaged or proposing to
engage in an offering of securities that does not exceed $5
million.\433\ An investment company, including a business development
company,\434\ is considered to be a ``small business'' if it, together
with other investment companies in the same group of related investment
companies, has net assets of $50 million or less as of the end of its
most recent fiscal year.\435\ An investment adviser generally is a
small entity if it: (1) Has assets under management having a total
value of less than $25 million; (2) did not have total assets of $5
million or more on the last day of the most recent fiscal year; and (3)
does not control, is not controlled by, and is not under common control
with another investment adviser that has assets under management of $25
million or more, or any person (other than a natural person) that had
total assets of $5 million or more on the last day of its most recent
fiscal year.\436\ We estimate that there are 837 issuers that file with
the Commission, other than investment companies and investment
advisers, that may be considered small entities.\437\ In addition, we
estimate that, as of

[[Page 51031]]

December 2016, there are 130 investment companies that would be subject
to the proposed amendments that may be considered small entities.
Finally, we estimate that, as of August 1, 2017, there are 557
investment advisers that may be subject to the proposed amendments that
may be considered small entities.\438\
---------------------------------------------------------------------------

\432\ 5 U.S.C. 601(6).
\433\ See Securities Act Rule 157 [17 CFR 230.157] and Exchange
Act Rule 0-10(a) [17 CFR 240.0-10(a)].
\434\ Business development companies are a category of closed-
end investment company that are not registered under the Investment
Company Act [15 U.S.C. 80a-2(a)(48) and 80a-53-64].
\435\ See Investment Company Act Rule 0-10(a) [17 CFR 270.0-
10(a)].
\436\ See Investment Advisers Act Rule 0-7(a) [17 CFR 275.0-
7(a)].
\437\ This estimate is based on a review of Form 10-K and 20-F
filings (from EDGAR XBRL) with fiscal periods ending between January
31, 2015 and January 31, 2016.
\438\ This estimate is based on Commission-registered investment
adviser responses to Form ADV, Item 5.F and Item 12.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

As noted above, the purpose of the proposed amendments is to
modernize and simplify the Commission's disclosure requirements and
provide consistent incorporation by reference and hyperlinking rules
for investment companies and investment advisers. If adopted, the
majority of the proposed amendments are expected to have an incremental
effect on existing reporting, recordkeeping and other compliance
burdens for all issuers, including small entities.\439\ Many of the
proposed amendments would simplify and streamline existing disclosure
requirements in ways that are expected to reduce compliance burdens.
Some of the proposed amendments, like those that impose new data
tagging,\440\ hyperlinking \441\ or disclosure requirements \442\ would
increase compliance costs for registrants, although we do not expect
these additional costs to be significant.
---------------------------------------------------------------------------

\439\ We recognize that the fixed costs of disclosure
requirements typically constitute a higher percentage of revenues
for smaller companies than for larger companies. However, the
benefits of disclosure may be greater for smaller companies because
information asymmetries between investors and managers of smaller
companies are typically higher than for larger, more seasoned
companies with a large following. See, e.g., R. Frankel and X. Li,
Characteristics of a firm's information environment and the
information asymmetry between insiders and outsiders, 37 J. Acct.
Econ. 229, 229-259 (June 2004). See also, L. Cheng, S. Liao, and H.
Zhang, The Commitment Effect versus Information Effect of
Disclosure--Evidence from Smaller Reporting Companies, 88 Acct. Rev.
1239, 1239-1263 (2013).
\440\ See, e.g., supra Section 0 (Tagging Cover Page Data).
\441\ See, e.g., supra Section 0 (Exhibit Hyperlinks and HTML
format for Investment Companies).
\442\ See e.g., supra Section II.D.1.c (Market for the
Securities (Item 501(b)(4)).
---------------------------------------------------------------------------

E. Duplicative, Overlapping, or Conflicting Federal Rules

We believe that the proposed amendments would not duplicate,
overlap, or conflict with other federal rules.

F. Significant Alternatives

The Regulatory Flexibility Act directs us to consider alternatives
that would accomplish our stated objectives, while minimizing any
significant adverse impact on small entities. In connection with the
proposed amendments, we considered the following alternatives:
Establishing different compliance or reporting
requirements that take into account the resources available to small
entities;
Clarifying, consolidating, or simplifying compliance and
reporting requirements under the rules for small entities;
Using performance rather than design standards; and
Exempting small entities from all or part of the
requirements.
We believe the proposed amendments would clarify, consolidate and
simplify compliance and reporting requirements for small entities and
other registrants. As discussed above, we believe the majority of the
proposed amendments would simplify and streamline disclosure
requirements in ways that are expected to reduce compliance
burdens.\443\ We do not believe that the proposed amendments would
impose any significant new compliance obligations. Accordingly, we
generally do not believe it is necessary to establish different
compliance and reporting requirements or timetables or to exempt small
entities from all or part of the proposed amendments. We note in this
regard that the Commission's existing disclosure requirements provide
for scaled disclosure requirements and other accommodations for small
entities, and the proposed amendments would not alter these existing
accommodations.
---------------------------------------------------------------------------

\443\ See supra Sections (Economic Analysis) and IV (Paperwork
Reduction Act).
---------------------------------------------------------------------------

Finally, with respect to using performance rather than design
standards, the proposed amendments generally use design rather than
performance standards in order to promote uniform filing requirements
for all registrants. In some instances, the proposed amendments would
modernize and simplify existing design standards. For example, the
proposed amendments to Item 303(a) would emphasize the flexibility
currently available to registrants with respect to the form of MD&A
presentation.\444\ In other instances, the proposed amendments may
result in additional flexibility when preparing disclosures. For
example, proposed Item 601(a)(5) would expand registrants' ability to
omit schedules and attachments that are not material to exhibits.\445\
As another example, the proposed amendments to Item 102 would clarify
that the threshold for disclosure about registrants' physical
properties is based on materiality.\446\
---------------------------------------------------------------------------

\444\ See supra Section (Year-to-Year Comparisons (Instruction 1
to Item 303(a)).
\445\ See supra Section (Schedules and Attachments to Exhibits).
\446\ See supra Section (Description of Property).
---------------------------------------------------------------------------

G. Request for Comment

We encourage the submission of comments with respect to any aspect
of this Initial Regulatory Flexibility Analysis. In particular, we
request comments regarding:
how the proposed rule and form amendments can achieve
their objective while lowering the burden on small entities;
the number of small entity companies that may be affected
by the proposed rule and form amendments;
the existence or nature of the potential effects of the
proposed amendments on small entity companies discussed in the
analysis; and
how to quantify the effects of the proposed amendments.
Commenters are asked to describe the nature of any effect and
provide empirical data supporting the extent of that effect. Comments
will be considered in the preparation of the Final Regulatory
Flexibility Analysis, if the proposed rules are adopted, and will be
placed in the same public file as comments on the proposed rules
themselves.

VII. Statutory Authority and Text of Proposed Rule and Form Amendments

We are proposing the rule and form amendments contained in this
document under the authority set forth in Sections 7, 10, 19(a), and 28
of the Securities Act of 1933, as amended, Sections 3(b), 12, 13, 14,
15, 16, 23(a), and 36 of the Securities Exchange Act of 1934, as
amended, Sections 6(c), 8, 24(a), 30, and 38 of the Investment Company
Act of 1940, as amended, and Sections 204, 206A, 210, and 211 of the
Investment Advisers Act of 1940, as amended.

List of Subjects in 17 CFR Parts 229, 230, 232, 239, 240, 249, 270,
274, and 275

Administrative practice and procedure, Reporting and recordkeeping
requirements, Securities.

In accordance with the foregoing, we are proposing to amend Title
17, Chapter II of the Code of Federal Regulations as follows:

[[Page 51032]]

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C.
1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec.
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

Sec. 229.10 [Amended].

0
2. Remove and reserve paragraph (d) of Sec. 229.10.
0
3. Amend Sec. 229.102 by revising the introductory text, Instruction 1
and Instruction 2 to read as follows:

Sec. 229.102 (Item 102) Description of property.

To the extent material, disclose the location and general character
of the registrant's principal physical properties. In addition,
identify the segment(s), as reported in the financial statements, that
use the properties described. If any such property is not held in fee
or is held subject to an encumbrance that is material to the
registrant, so state and describe briefly how held.
Instructions to Item 102: 1. What is required is information that
will reasonably inform investors as to the suitability, adequacy,
productive capacity, and extent of utilization of the principal
physical properties of the registrant and its subsidiaries, to the
extent the described properties are material. A registrant should
engage in a comprehensive consideration of the materiality of its
properties. If appropriate, descriptions may be provided on a
collective basis; detailed descriptions of the physical characteristics
of individual properties or legal descriptions by metes and bounds are
not required and shall not be given.
2. Disclosures with respect to this item need only be provided to
the extent the properties are material to the registrant. In
determining materiality under this Item, the registrant should take
into account both quantitative and qualitative factors. See Instruction
1 to Item 101 of Regulation S-K (Sec. 229.101).
* * * * *
0
4. Add Sec. 229.105 to read as follows:

Sec. 229.105 (Item 105) Risk factors.

Where appropriate, provide under the caption ``Risk Factors'' a
discussion of the most significant factors that make an investment in
the registrant or offering speculative or risky. This discussion must
be concise and organized logically. Do not present risks that could
apply generically to any registrant or any offering. Explain how the
risk affects the registrant or the securities being offered. Set forth
each risk factor under a subcaption that adequately describes the risk.
If the risk factor discussion is included in a registration statement,
it must immediately follow the summary section. If you do not include a
summary section, the risk factor section must immediately follow the
cover page of the prospectus or the pricing information section that
immediately follows the cover page. Pricing information means price and
price-related information that you may omit from the prospectus in an
effective registration statement based on Rule 430A (Sec. 230.430A(a)
of this chapter). The registrant must furnish this information in plain
English. See Sec. 230.421(d) of Regulation C of this chapter.
0
5. Amend Sec. 229.202 by revising Instruction 3 under ``Instructions
to Item 202'' to read as follows:

Sec. 229.202 (Item 202) Description of registrant's securities.

* * * * *
3. Section 305(a)(2) of the Trust Indenture Act of 1939, U.S.C.
77aaa et seq., as amended (``Trust Indenture Act''), shall not be
deemed to require the inclusion in a registration statement,
prospectus, or annual report on Form 10-K of any information not
required by this Item or Item 601(b)(4)(vi) of this chapter.
* * * * *
0
6. Amend Sec. 229.303 by revising Instruction 1 under ``Instructions
to paragraph 303(a)'' to read as follows:

Sec. 229.303 (Item 303) Management's discussion and analysis of
financial condition and results of operations.

* * * * *
Instructions to paragraph 303(a): 1. The registrant's discussion
and analysis shall be of the financial statements and other statistical
data that the registrant believes will enhance a reader's understanding
of its financial condition, changes in financial condition and results
of operations. Generally, the discussion shall cover the periods
covered by the financial statements included in the filing and the
registrant may use any presentation that in the registrant's judgment
enhances a reader's understanding. A smaller reporting company's
discussion shall cover the two-year period required in Article 8 of
Regulation S-X and may use any presentation that in the registrant's
judgment enhances a reader's understanding. For registrants providing
financial statements covering three years in a filing, discussion about
the earliest year would not be required if (i) that discussion is not
material to an understanding of the registrant's financial condition,
changes in financial condition and results of operations and (ii) the
registrant has filed its prior year Form 10-K on EDGAR containing
management's discussion and analysis of the earliest of the three years
included in the financial statements of the current filing. An emerging
growth company, as defined in Rule 405 of the Securities Act (Sec.
230.405 of this chapter) or Rule 12b-2 of the Exchange Act (Sec.
240.12b-2 of this chapter), may provide the discussion required in
paragraph (a) of this Item for its two most recent fiscal years if,
pursuant to Section 7(a) of the Securities Act of 1933 (15 U.S.C
77g(a)), it provides audited financial statements for two years in a
Securities Act registration statement for the initial public offering
of the emerging growth company's common equity securities.
* * * * *
0
7. Amend Sec. 229.401 by removing Instruction 3 to paragraph (b) of
Item 401and adding an Instruction to Item 401 to read as follows:

Sec. 229.401 (Item 401) Directors, executive officers, promoters and
control persons.

* * * * *
Instruction to Item 401. The information regarding executive
officers called for by this Item need not be furnished in proxy or
information statements prepared in accordance with Schedule 14A or
Schedule 14C under the Exchange Act (Sec. 240.14a-101 and Sec.
240.14c-101 of this chapter) if you are relying on General Instruction
G of Form 10-K under the Exchange Act (Sec. 249.310 of this chapter),
such information is furnished in a separate section captioned
``Information about our Executive Officers,'' and is included in Part I
of your annual report on Form 10-K.
0
8. Revise Sec. 229.405 to read as follows:

Sec. 229.405 (Item 405) Compliance with Section 16(a) of the
Exchange Act.

(a) Reporting obligation. Every registrant having a class of equity
securities registered pursuant to Section 12 of the Exchange Act (15
U.S.C. 78l) and every closed-end investment company registered under
the

[[Page 51033]]

Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) must:
(1) Under the caption ``Delinquent Section 16(a) Reports,''
identify each person who, at any time during the fiscal year, was a
director, officer, beneficial owner of more than ten percent of any
class of equity securities of the registrant registered pursuant to
Section 12 of the Exchange Act, or any other person subject to Section
16 of the Exchange Act with respect to the registrant because of the
requirements of Section 30 of the Investment Company Act (``reporting
person'') that failed to file on a timely basis reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year or
prior fiscal years.
(2) For each such person, set forth the number of late reports, the
number of transactions that were not reported on a timely basis, and
any known failure to file a required form. A known failure to file
would include, but not be limited to, a failure to file a Form 3, which
is required of all reporting persons, and a failure to file a Form 5 in
the absence of the written representation referred to in paragraph
(b)(3) of this section, unless the registrant otherwise knows that no
Form 5 is required.
Instruction 1 to paragraph (a) of Item 405. If no disclosure is
required, registrants are encouraged to exclude the caption
``Delinquent Section 16(a) Reports.''
Instruction 2 to paragraph (a) of Item 405. The registrant is only
required to disclose a failure to file timely once. For example, if in
the most recently concluded fiscal year a reporting person filed a Form
4 disclosing a transaction that took place in the prior fiscal year,
and should have been reported in that year, the registrant should
disclose that late filing and transaction pursuant to this Item 405
with respect to the most recently concluded fiscal year, but not in
material filed with respect to subsequent years.
(b) Scope of the Inquiry. In determining whether disclosure is
required pursuant to paragraph (a), the registrant may rely only on the
following:
(1) A review of Forms 3 and 4 (17 CFR 249.103 and 249.104) and
amendments thereto filed electronically with the Commission during the
registrant's most recent fiscal year;
(2) A review of Forms 5 (17 CFR 249.105) and amendments thereto
filed electronically with the Commission with respect to the
registrant's most recent fiscal year; and
(3) Any written representation from the reporting person that no
Form 5 is required. The registrant must maintain the representation in
its records for two years, making a copy available to the Commission or
its staff upon request.
0
9. Amend Sec. 229.407 by revising paragraphs (d)(3)(i)(B) and (g) to
read as follows:

Sec. 229.407 (Item 407) Corporate governance.

* * * * *
(d) * * *
(3)(i) * * *
(B) The audit committee has discussed with the independent auditors
the matters required to be discussed by the applicable requirements of
the Public Company Accounting Oversight Board (``PCAOB'') and the
Commission;
* * * * *
(g) Smaller reporting companies and emerging growth companies. (1)
A registrant that qualifies as a ``smaller reporting company,'' as
defined by Sec. 229.10(f)(1), is not required to provide:
(A) The disclosure required in paragraph (d)(5) of this Item in its
first annual report filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (15 U.S.C. 78m(a) or 78o(d)) following the effective date
of its first registration statement filed under the Securities Act (15
U.S.C. 77a et seq.) or Exchange Act (15 U.S.C. 78a et seq.); and
(B) The disclosure required by paragraphs (e)(4) and (e)(5) of this
Item.
(2) A registrant that qualifies as an ``emerging growth company,''
as defined in Rule 405 of the Securities Act (Sec. 230.405 of this
chapter) or Rule 12b-2 of the Exchange Act (Sec. 240.12b-2 of this
chapter) , is not required to provide the disclosure required by
paragraph (e)(5) of this Item.
* * * * *
0
10. Amend Sec. 229.501 by:
0
a. Revising the instruction under ``Instruction to paragraph
501(b)(1)'', Instruction 2 under ``Instructions to paragraph
501(b)(3)'', paragraph (b)(4) and paragraph (b)(10); and
0
b. Removing paragraph (b)(11) to read as follows:

Sec. 229.501 (Item 501) Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.

* * * * *
(b) * * *
(1) * * *
Instruction to paragraph 501(b)(1): If your name is the same as
that of a company that is well known, include information to eliminate
any possible confusion with the other company. If your name indicates a
line of business in which you are not engaged or in which you are
engaged only to a limited extent, include information to eliminate any
misleading inference as to your business.
* * * * *
Instructions to paragraph 501(b)(3): * * *
2. If it is impracticable to state the price to the public, explain
the method by which the price is to be determined. Instead of
explaining the method on the outside front cover page of the
prospectus, you may state that the offering price will be determined by
a particular method or formula that is described in the prospectus and
include a cross-reference to the location of such disclosure in the
prospectus, including the page number. Highlight the cross-reference by
prominent type or in another manner. If the securities are to be
offered at the market price, or if the offering price is to be
determined by a formula related to the market price, indicate the
market and market price of the securities as of the latest practicable
date.
* * * * *
(4) Market for the securities. The national securities exchange(s)
where the securities being offered are listed. If the securities being
offered are not listed on a national securities exchange, the principal
United States market(s) where the registrant, through the engagement of
a registered broker-dealer, has actively sought and achieved quotation.
In each case, also disclose the corresponding trading symbol(s) for the
securities on such market(s).
* * * * *
(10) Prospectus ``Subject to Completion'' legend.
(i) If you use the prospectus before the effective date of the
registration statement or if you use Rule 430A [Sec. 230.430A of this
chapter] to omit pricing information and the prospectus is used before
you determine the public offering price, include a prominent statement
that:
(A) The information in the prospectus will be amended or completed;
(B) A registration statement relating to these securities has been
filed with the Securities and Exchange Commission;
(C) The securities may not be sold until the registration statement
becomes effective; and
(D) The prospectus is not an offer to sell the securities, and it
is not soliciting an offer to buy the securities, in any state where
offers or sales are not permitted.
(ii) The legend called for by paragraph (b)(10)(i) of this Item may
be in the following or other clear, plain language:
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the

[[Page 51034]]

registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
(iii) Registrants may exclude the statement in paragraph (b)(i)(D)
of this Item if the offering is not prohibited by state law.
* * * * *

Sec. 229.503 [Amended].

0
11. Amend Sec. 229.503 by removing ``risk factors'' from the section
heading and removing and reserving paragraph (c).

Sec. 229.512 [Amended].

0
12. Remove and reserve paragraphs (c), (d), (e), and (f) of Sec.
229.512.
0
13. Amend Sec. 229.601 by:
0
a. Revising paragraph (a)(1);
0
b. Adding paragraphs (a)(5) and (a)(6);
0
c. Revising entry (b)(4) from the exhibit table in paragraph (a) to add
a subsection (vi) titled ``Description of registrant's securities'' and
to add an ``X'' under column 10-K;
0
d. Revising entry (21) from the exhibit table in paragraph (a) to read
``Subsidiaries of the registrant and entity identifiers '';
0
e. Revising entry (104) from the exhibit table in paragraph (a) to read
``Cover Page Interactive Data File'' and adding an ``X'' under columns
8-K, 10-Q and 10-K;
0
f. Adding paragraph (b)(4)(vi) and the instructions to paragraph
(b)(4)(vi) and paragraph (b)(10)(iv);
0
g. Revising paragraphs (b)(2), (b)(10), (b)(13), (b)(21)(i), and
(b)(99); and
0
h. Adding paragraph (b)(104) to read as follows:

Sec. 229.601 (Item 601) Exhibits.

(a) Exhibits and index required. (1) Subject to Rule 411(c) (Sec.
230.411(c) of this chapter) under the Securities Act and Rule 12b-23(c)
(Sec. 240.12b-23(c) of this chapter) under the Exchange Act regarding
incorporation of exhibits by reference, the exhibits required in the
exhibit table must be filed as indicated, as part of the registration
statement or report.
* * * * *
(5) Schedules (or similar attachments) to the exhibits required by
this Item are not required to be filed unless such schedules contain
information material to an investment or voting decision and that
information is not otherwise disclosed in the exhibit or the disclosure
document. Each exhibit filed must contain a list briefly identifying
the contents of all omitted schedules. In addition, the registrant must
provide a copy of any omitted schedule to the Commission staff upon
request.
(6) The registrant may redact information from exhibits required to
be filed by this Item if disclosure of such information would
constitute a clearly unwarranted invasion of personal privacy (e.g.,
disclosure of bank account numbers, social security numbers, home
addresses and similar information).
* * * * *
(b) * * *
(2) Plan of acquisition, reorganization, arrangement, liquidation,
or succession. Any material plan of acquisition, disposition,
reorganization, readjustment, succession, liquidation, or arrangement
and any amendments thereto described in the statement or report.
* * * * *
(4) * * *
(vi) For each class of securities that is registered under Section
12 of the Exchange Act, provide the information required by Item
202(a)-(d) and (f) of Regulation S-K (Sec. 229.202 of this chapter),
Description of registrant's securities.
* * * * *
Instruction 1 to paragraph (b)(4)(vi). A registrant is only
required to provide the information called for by Item 601(b)(4)(vi) if
it is filing an annual report under Exchange Act Section 13(a) or
15(d).
Instruction 2 to paragraph (b)(4)(vi). For purposes of Item
601(b)(4)(vi), all references in Item 202 to securities to be or being
registered, offered, or sold will mean securities that are registered
as of the end of the period covered by the report with which the
exhibit is filed. In addition, for purposes of this Item, the
disclosure will be required for classes of securities that have not
been retired by the end of the period covered by the report.
Instruction 3 to paragraph (b)(4)(vi). The registrant may
incorporate by reference to a prior annual report under Exchange Act
Section 13(a) or 15(d) containing the disclosure required by Item
601(b)(4)(vi) of Regulation S-K, as applicable, so long as there has
not been any change to the information called for by Item 202,
(Description of the registrant's securities) since the filing date of
the linked filing. Such hyperlink will be deemed to satisfy the
requirements of Item 601(b)(4)(vi) for the current filing.
* * * * *
(10) Material contracts. (i) Every contract not made in the
ordinary course of business that is material to the registrant and is
to be performed in whole or in part at or after the filing of the
registration statement or report. In addition, for newly reporting
registrants, every contract not made in the ordinary course of business
that is material to the registrant and that was entered into not more
than two years before the date on which such registrant:
(A) First files a registration statement or report; or
(B) completes a transaction that had the effect of causing it to
cease being a public shell company.

The only contracts that need to be filed are those to which the
registrant or a subsidiary of the registrant is a party or has
succeeded to a party by assumption or assignment or in which the
registrant or such subsidiary has a beneficial interest.
* * * * *
(iv) The registrant may redact provisions or terms of exhibits
required to be filed by paragraph (b)(10) of this Item if those
provisions or terms are both (i) not material and (ii) competitively
harmful to the registrant if publicly disclosed. If it does so, the
registrant should mark the exhibit index to indicate that portions of
the exhibit or exhibits have been omitted and include a prominent
statement on the first page of the redacted exhibit that certain
identified information has been excluded from the exhibit because it is
both (i) not material and (ii) competitively harmful to the registrant
if publicly disclosed. The registrant also must indicate by brackets
where the information is omitted from the filed version of the exhibit.
If requested by the Commission staff, the registrant must promptly
provide an unredacted paper copy of the exhibit on a supplemental
basis. The Commission staff also may request the registrant to provide
its materiality and competitive harm analyses on a supplemental basis.
Upon evaluation of the registrant's supplemental materials, the
Commission staff may request the registrant to amend its filing to
include in the exhibit any previously redacted information that is not
adequately supported by the registrant's materiality and competitive
harm analyses.
The registrant may request confidential treatment of the
supplemental material submitted under paragraph (iv) of this Item
pursuant to Rule 83 (Sec. 200.83 of this chapter) while it is in the
possession of the Commission staff. After completing its review of the
supplemental information, the Commission staff will return or destroy
it at the request of the registrant, if the registrant complies with
the procedures outlined in Rules 418 or

[[Page 51035]]

12b-4 (Sec. 230.418 or 240.12b-4 of this chapter).
Instruction 1 to paragraph (b)(10) of Item 601: For purposes of
paragraph (b)(10)(i) of this Item, a ``newly reporting registrant'' is
(i) any registrant filing a registration statement that, at the time of
such filing, is not subject to the reporting requirements of Section
13(a) or 15(d) of the Exchange Act, whether or not such registrant has
ever previously been subject to the reporting requirements of Section
13(a) or 15(d), (ii) any registrant that has not filed an annual report
since the revival of a previously suspended reporting obligation, and
(iii) any registrant that (a) was a shell company, other than a
business combination related shell company, as defined in Rule 12b-2
under the Exchange Act (17 CFR 240.12b-2), immediately before
completing a transaction that has the effect of causing it to cease
being a shell company and (b) has not filed a registration statement or
Form 8-K as required by Items 2.01 and 5.06 of that form, since the
completion of such transaction. For example, newly reporting
registrants would include (i) a registrant that is filing its first
registration statement under the Securities Act or the Exchange Act,
and (ii) a registrant that was a public shell company, other than a
business combination related shell company, and completes a reverse
merger transaction causing it to cease being a shell company.
Instruction 2 to paragraph (b)(10): With the exception of
management contracts, in order to comply with paragraph (iii) above,
registrants need only file copies of the various compensatory plans and
need not file each individual director's or executive officer's
personal agreement under the plans unless there are particular
provisions in such personal agreements whose disclosure in an exhibit
is necessary to an investor's understanding of that individual's
compensation under the plan.
Instruction 3 to paragraph (b)(10): If a material contract is
executed or becomes effective during the reporting period reflected by
a Form 10-Q or Form 10-K, it must be filed as an exhibit to the Form
10-Q or Form 10-K filed for the corresponding period. See paragraph
(a)(4) of this Item. With respect to quarterly reports on Form 10-Q,
only those contracts executed or becoming effective during the most
recent period reflected in the report must be filed.
* * * * *
(13) Annual or quarterly report to security holders. (i) The
registrant's annual report to security holders for its last fiscal year
or its quarterly report to security holders, if all or a portion
thereof is incorporated by reference in the filing. Such report, except
for those portions thereof that are expressly incorporated by reference
in the filing, is to be furnished for the information of the Commission
and is not to be deemed ``filed'' as part of the filing. If the
financial statements in the report have been incorporated by reference
in the filing, the accountant's certificate must be manually signed in
one copy. See Rule 439 (Sec. 230.439 of this chapter).
(ii) Electronic filings. If all, or any portion, of the annual or
quarterly report to security holders is incorporated by reference into
any electronic filing, all, or such portion of the annual or quarterly
report to security holders so incorporated, must be filed in electronic
format as an exhibit to the filing.
* * * * *
(21) Subsidiaries of the registrant and entity identifiers. (i)
List the following information for the registrant and each of its
subsidiaries: The name, the legal entity identifier (if a legal entity
identifier has been obtained), the state or other jurisdiction of
incorporation or organization, and the names under which the entity
does business. This list may be incorporated by reference from another
filed document which includes a complete and accurate list. ``Legal
entity identifier'' means, with respect to any registrant or its
subsidiaries, the legal entity identifier as assigned by a utility
endorsed or otherwise governed by the Global LEI Regulatory Oversight
Committee or accredited by the Global LEI Foundation.
* * * * *
(99) Additional exhibits. (i) Any additional exhibits that the
registrant may wish to file must be so marked as to indicate clearly
the subject matters to which they refer.
(ii) If pursuant to Section 11(a) of the Securities Act (15 U.S.C.
77k(a)) an issuer makes generally available to its security holders an
earnings statement covering a period of at least 12 months beginning
after the effective date of the registration statement, and if such
earnings statement is made available by ``other methods'' than those
specified in paragraphs (a) or (b) of Sec. 230.158 of this chapter, it
must be filed as an exhibit to the Form 10-Q or the Form 10-K, as
appropriate, covering the period in which the earnings statement was
released.
* * * * *
(104) Cover Page Interactive Data File. A Cover Page Interactive
Data File (as defined in Sec. 232.11 of this chapter) as required by
Rule 406 of Regulation S-T (17 CFR 232.406), and in the manner provided
by the EDGAR Filer Manual.
* * * * *
0
14. Amend Sec. 229.1100 by:
0
a. Revising Instruction 1 to paragraph (c)(1) of Item 1100; and
0
b. Redesignating instructions 2 through 5 to paragraph (c)(1) as
``Instruction 2 to paragraph (c)(1) of Item 1100.'', ``Instruction 3 to
paragraph (c)(1) of Item 1100'', ``Instruction 4 to paragraph (c)(1) of
Item 1100.'', and ``Instruction 5 to paragraph (c)(1) of Item 1100'' to
read as follows:

Sec. 229.1100 (Item 1100) General.

* * * * *
Instruction 1 to paragraph (c)(1) of Item 1100. In addition to the
conditions in paragraph (c)(1) of this section, any information
incorporated by reference must comply with all applicable Commission
rules pertaining to incorporation by reference, such as Rule 303 of
Regulation S-T (Sec. 232.303 of this chapter), Rule 411 of Regulation
C (Sec. 230.411 of this chapter), and Rule 12b-23 of Regulation 12B
(Sec. 240.12b-23 of this chapter), except that for purposes of
paragraph (c)(1), an asset-backed issuer may incorporate by reference
to a second document that incorporates pertinent information by
reference to a third document.
* * * * *

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
15. The authority citation for part 230 continues to read in part as
follows:

Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h,
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o,78o-7
note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126
Stat. 313 (2012), unless otherwise noted.
* * * * *
0
16. Amend Sec. 230.405 by adding in alphabetical order the definition
of Sub-underwriter to read as follows:

Sec. 230.405 Definition of terms.

* * * * *
Sub-underwriter. The term sub-underwriter means a dealer that is
participating as an underwriter in an offering by committing to
purchase securities from a principal underwriter for the securities but
is not itself in privity of contract with the issuer of the securities.
* * * * *

[[Page 51036]]

0
17. Revise Sec. 230.411 to read as follows:

Sec. 230.411 Incorporation by reference.

(a) Prospectus. Except as provided by this section, Item 1100(c) of
Regulation AB (Sec. 229.1100(c) of this chapter) for registered
offerings of asset-backed securities, or unless otherwise provided in
the appropriate form, information must not be incorporated by reference
into the prospectus. Where a summary or outline of the provisions of
any document is required in the prospectus, the summary or outline may
incorporate by reference particular items, sections or paragraphs of
any exhibit and may be qualified in its entirety by such reference. In
any financial statements, incorporating by reference, or cross-
referencing to, information outside of the financial statements is not
permitted unless otherwise specifically permitted or required by the
Commission's rules.
(b) Information not required in a prospectus. Information may be
incorporated by reference in answer, or partial answer, to any item of
a registration statement that calls for information not required to be
included in a prospectus. Except as provided in the Commission's rules,
financial information required to be given in comparative form for two
or more fiscal years or periods must not be incorporated by reference
unless the information incorporated by reference includes the entire
period for which the comparative data is given. In any financial
statements, incorporating by reference, or cross-referencing to,
information outside of the financial statements is not permitted unless
otherwise specifically permitted or required by the Commission's rules.
(c) Exhibits. Any document or part thereof filed with the
Commission pursuant to any Act administered by the Commission may be
incorporated by reference as an exhibit to any registration statement
filed with the Commission by the same or any other person. If any
modification has occurred in the text of any document incorporated by
reference since the filing thereof, the registrant must file with the
reference a statement containing the text of such modification and the
date thereof.
(d) Hyperlinks. Include an active hyperlink to information
incorporated into a registration statement or prospectus by reference
if such information is publicly available on the Commission's
Electronic Data Gathering, Analysis and Retrieval System (``EDGAR'') at
the time the registration statement or prospectus is filed. For
hyperlinking to exhibits, please refer to Item 601 of Regulation S-K
(Sec. 229.601 of this chapter) or the appropriate form.
(e) General. Include an express statement clearly describing the
specific location of the information you are incorporating by
reference. The statement must identify the document where the
information was originally filed or submitted and the location of the
information within that document. The statement must be made at the
particular place where the information is required, if applicable.
Information must not be incorporated by reference in any case where
such incorporation would render the disclosure incomplete, unclear, or
confusing. For example, unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document.
0
18. Revise Sec. 230.491 to read as follows:

Sec. 230.491 Information to be furnished under paragraph (6) of
Schedule B.

Any foreign government filing a registration statement pursuant to
Schedule B of the act need state, in furnishing the information
required by paragraph (6), the names and addresses only of principal
underwriters, namely, underwriters in privity of contract with the
registrant, provided they are designated as principal underwriters and
a brief statement is made as to the discounts and commissions to be
received by sub-underwriters or dealers.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
19. The authority citation for part 232 continues to read in part as
follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *
0
20. In Sec. 232.11 in alphabetical order add the definition of Cover
Page Interactive Data File in to read as follows:

Sec. 232.11 Definitions of terms used in Part 232.

* * * * *
Cover Page Interactive Data File. The term Cover Page Interactive
Data File means the machine-readable computer code that presents in
Inline XBRL electronic format the cover page information for specified
forms as required by Rule 406 (Sec. 232.406 of this chapter).

Note to definition of Cover Page Interactive Data File: When a
filing is submitted using Inline XBRL, if permitted or required and
as provided by the EDGAR Filer Manual, a portion of the Cover Page
Interactive Data File must be embedded into a form with the
remainder submitted as an exhibit to the form.

* * * * *
0
21. Revise the second sentence of paragraph (a) and the third sentence
of paragraph (d) of Sec. 232.102 to read as follows:

Sec. 232.102 Exhibits.

(a) * * * Previously filed exhibits, whether in paper or electronic
format, may be incorporated by reference into an electronic filing to
the extent permitted by Rule 411 under the Securities Act (Sec.
230.411 of this chapter), Rule 12b-23 under the Exchange Act (Sec.
240.12b-23 of this chapter), Rule 0-4 under the Investment Company Act
(Sec. 270.0-4 of this chapter) or Rule 303 of Regulation S-T (Sec.
232.303). * * *
* * * * *
(d) * * * For electronic filings on Form S-6 (Sec. 239.16 of this
chapter), Form N-14 (Sec. 239.23 of this chapter), Form F-10 (Sec.
239.40 of this chapter), Form 20-F (Sec. 249.220f of this chapter),
Form N-5 (Sec. 274.5 of this chapter), Form N-1A (Sec. 274.11A of
this chapter), Form N-2 (Sec. 274.11a-1 of this chapter), Form N-3
(Sec. 274.11b of this chapter), Form N-4 (Sec. 274.11c of this
chapter), Form N-6 (Sec. 274.11d of this chapter), Form N-CSR (Sec.
274.128 of this chapter), or filings subject to Item 601 of Regulation
S-K (Sec. 229.601 of this chapter), each exhibit identified in the
exhibit index (other than an exhibit filed in eXtensible Business
Reporting Language or an exhibit that is filed with Form ABS-EE (Sec.
249.1401 of this chapter)) must include an active link to an exhibit
that is filed with the document or, if the exhibit is incorporated by
reference, an active hyperlink to the exhibit separately filed on
EDGAR. * * *
* * * * *
0
22. Amend Sec. 232.105 by revising paragraph (d) and adding paragraph
(e) as follows:

Sec. 232.105 Use of HTML and hyperlinks.

* * * * *
(d) Electronic filers submitting Form S-6 (Sec. 239.16 of this
chapter), Form N-14 (Sec. 239.23 of this chapter), Form F-10 (Sec.
239.40 of this chapter), Form 20-F (Sec. 249.220f of this chapter),
Form N-5 (Sec. 274.5 of this chapter), Form N-1A (Sec. 274.11A of
this chapter), Form N-2 (Sec. 274.11a-1 of this chapter), Form N-3
(Sec. 274.11b of this chapter), Form N-4 (Sec. 274.11c of this
chapter), Form N-6

[[Page 51037]]

(Sec. 274.11d of this chapter), Form N-CSR (Sec. 274.128 of this
chapter), or a registration statement or report subject to Item 601 of
Regulation S-K (Sec. 229.601 of this chapter), must submit such
registration statement or report in HTML and each exhibit identified in
the exhibit index (other than an exhibit filed in eXtensible Business
Reporting Language or an exhibit filed with Form ABS-EE (Sec. 249.1401
of this chapter)) must include an active link to an exhibit that is
filed with the registration statement or report or, if the exhibit is
incorporated by reference, an active hyperlink to the exhibit
separately filed on EDGAR, unless such exhibit is filed in paper
pursuant to a temporary or continuing hardship exemption under Rules
201 or 202 of Regulation S-T (Sec. 232.201 or Sec. 232.202) or
pursuant to Rule 311 of Regulation S-T (Sec. 232.311).
Instructions to paragraph (d): (1) No hyperlink is required for any
exhibit incorporated by reference that has not been filed with the
Commission in electronic format.
(2) An electronic filer must correct an inaccurate or
nonfunctioning link or hyperlink to an exhibit, in the case of a
registration statement that is not yet effective, by filing an
amendment to the registration statement containing the inaccurate or
nonfunctioning link or hyperlink; or, in the case of a registration
statement that has become effective or an Exchange Act report, an
electronic filer must correct the inaccurate or nonfunctioning link or
hyperlink in the next Exchange Act periodic report that requires, or
includes, an exhibit pursuant to Item 601 of Regulation S-K (Sec.
229.601 of this chapter), Form N-CSR (Sec. 274.128 of this chapter),
or, in the case of a foreign private issuer (as defined in Sec.
229.405 of this chapter), Form 20-F (Sec. 249.220f of this chapter) or
Form F-10 (Sec. 239.40 of this chapter). In the case of a registration
statement on Form S-6 (Sec. 239.16 of this chapter), Form N-14 (Sec.
239.23 of this chapter), Form N-5 (Sec. 274.5 of this chapter), Form
N-1A (Sec. 274.11A of this chapter), Form N-2 (Sec. 274.11a-1 of this
chapter), Form N-3 (Sec. 274.11b of this chapter), Form N-4 (Sec.
274.11c of this chapter), or Form N-6 (Sec. 274.11d of this chapter)
that has become effective, an electronic filer must correct an
inaccurate or nonfunctioning link or hyperlink in the next post-
effective amendment, if any, to the registration statement.
Alternatively, an electronic filer may correct an inaccurate or
nonfunctioning link or hyperlink in a registration statement that has
become effective by filing a post-effective amendment to the
registration statement.
(e) Except for exhibits, which are covered by paragraph (d) of this
section, electronic filers that are incorporating information by
reference pursuant to Rule 411 under the Securities Act (Sec. 230.411
of this chapter), Rule 12b-23 under the Exchange Act (Sec. 240.12b-23
of this chapter), or Rule 0-4 under the Investment Company Act (Sec.
270.0-4 of this chapter) must submit such registration statement or
report in HTML and must include an active hyperlink to such
incorporated information when required by those rules. A hyperlink is
not required if the incorporated information is filed in paper pursuant
to a temporary or continuing hardship exemption under Rules 201 or 202
of Regulation S-T (Sec. 232.201 or Sec. 232.202) or pursuant to Rule
311 of Regulation S-T (Sec. 232.311).
Instruction 1 to paragraph (e) of Rule 105. No hyperlink is
required for any information incorporated by reference that has not
been filed with the Commission in electronic format.
Instruction 2 to paragraph (e) of Rule 105. In the case of a
registration statement that is not yet effective, an electronic filer
must correct an inaccurate or nonfunctioning hyperlink by filing an
amendment to such registration statement.
* * * * *
0
23. Revise the first sentence of paragraph (b) of Sec. 232.303 to read
as follows:

Sec. 232.303 Incorporation by reference.

* * * * *
(b) If a filer incorporates by reference into an electronic filing
any portion of an annual or quarterly report to security holders, it
must also file the portion of the annual or quarterly report to
security holders in electronic format as an exhibit to the filing, as
required by Regulation S-K Item 601(b)(13) (Sec. 229.601(b)(13) of
this chapter). * * *
0
24. Add Sec. 232.406 to read as follows:
* * * * *

Sec. 232.406 Cover Page XBRL Data Tagging.

Electronic filers submitting Forms 10-K (Sec. 249.310 of this
chapter), 10-Q (Sec. 249.308a of this chapter), 8-K (Sec. 249.308 of
this chapter), 20-F (Sec. 249.220f of this chapter) and 40-F (Sec.
249.240f of this chapter) must tag in Inline XBRL electronic format, in
the manner provided by the EDGAR Filer Manual, all of the information
provided by the electronic filer on the cover page of these forms.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
25. The authority citation for part 239 continues to read in part as
follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-
3, 77sss, 78c, 78l, 78m, 78n, 78o(d),78o-7 note, 78u-5, 78w(a),
78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24,
80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106,
126 Stat. 312, unless otherwise noted.
* * * * *
0
26. Amend Form S-1 (referenced in Sec. 239.11) by revising the last
sentence of Instruction V. under ``General Instructions'', the first
paragraph of Instruction VII. under ``General Instructions'' and Item 3
to read as follows:

Note: The text of Form S-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

V. Registration of Additional Securities

* * * See Rule 439(b) under the Securities Act (17 CFR 230.439(b)).
* * * * *

VII. Eligibility To Use Incorporation by Reference

If a registrant meets the following requirements in paragraphs A-F
immediately prior to the time of filing a registration statement on
this Form, it may elect to provide information required by Items 3
through 11 of this Form in accordance with Item 11A and Item 12 of this
Form. Notwithstanding the foregoing, in the financial statements,
incorporating by reference or cross-referencing to information outside
of the financial statements is not permitted unless otherwise
specifically permitted or required by the Commission's rules. * * *
* * * * *

Item 3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.

Furnish the information required by Items 105 and 503 of Regulation
S-K

[[Page 51038]]

(Sec. 229.105 and Sec. 229.503 of this chapter).
* * * * *
0
27. Amend Form S-3 (referenced in Sec. 239.13) by revising the last
sentence of Instruction IV.A. under ``General Instructions'', Item 3,
and paragraph (d) of Item 12 to read as follows:

Note: The text of Form S-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

IV. Registration of Additional Securities and Additional Classes of
Securities

A. Registration of Additional Securities Pursuant to Rule 462(b). *
* * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].
* * * * *

Item 3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.

Furnish the information required by Items 105 and 503 of Regulation
S-K (Sec. 229.105 and Sec. 229.503 of this chapter).
* * * * *

Item 12. Incorporation of Certain Information by Reference.

* * * * *
(d) Any information required in the prospectus in response to Item
3 through Item 11 of this Form may be included in the prospectus
through documents filed pursuant to Section 13(a), 14, or 15(d) of the
Exchange Act that are incorporated or deemed incorporated by reference
into the prospectus that is part of the registration statement.
Notwithstanding the foregoing, in the financial statements,
incorporating by reference or cross-referencing to information outside
of the financial statements is not permitted unless otherwise
specifically permitted or required by the Commission's rules.
* * * * *
0
28. Amend Form S-6 (referenced in Sec. 239.16) by revising
``Instructions as to Exhibits'' to add a paragraph to read as follows:

Note: The text of Form S-6 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form S-6

* * * * *
INSTRUCTIONS AS TO EXHIBITS
* * * * *
Each exhibit identified in the exhibit index must include an active
link to an exhibit that is filed with the registration statement or, if
the exhibit is incorporated by reference an active hyperlink to the
exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
29. Amend Form S-11 (referenced in Sec. 239.18) by revising the last
sentence of Instruction G. under ``General Instructions'', the first
paragraph of instruction H. under ``General Instructions'' and Item
3(a) to read as follows:

Note: The text of Form S-11 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-11

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF
CERTAIN REAL ESTATE COMPANIES
GENERAL INSTRUCTIONS
* * * * *

G. Registration of Additional Securities

* * * Any opinion or consent required in the Rule 462(b)
registration statement may be incorporated by reference from the
earlier registration statement with respect to the offering, if: (i)
Such opinion or consent expressly provides for such incorporation; and
(ii) such opinion relates to the securities registered pursuant to Rule
462(b). See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].

H. Eligibility to Use Incorporation by Reference

If a registrant meets the following requirements in paragraphs 1-6
immediately prior to the time of filing a registration statement on
this Form, it may elect to provide information required by Items 3
through 28 of this Form in accordance with Item 28A and Item 29 of this
Form. Notwithstanding the foregoing, in the financial statements,
incorporating by reference or cross-referencing to information outside
of the financial statement is not permitted unless otherwise
specifically permitted or required by the Commission's rules. * * *
* * * * *

Item 3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.

(a) Furnish the information required by Items 105 and 503 of
Regulation S-K (Sec. 229.105 and Sec. 229.503 of this chapter).
* * * * *
0
30. Amend Form N-14 (referenced in Sec. 239.23) by:
0
a. Revising the third paragraph of General Instruction G; and
0
b. Revising the Instruction to Item 16 to add a paragraph to read as
follows:

Note: The text of Form N-14 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-14

* * * * *
GENERAL INSTRUCTIONS
* * * * *

G. Incorporation by Reference and Delivery of Prospectuses or Reports
Filed with the Commission

* * * * *
All incorporation by reference must comply with the requirements of
this Form and the following rules on incorporation by reference: rule
411 under the Securities Act [17 CFR 230.411] (general rules on
incorporation by reference in a prospectus) and rule 303 of Regulation
S-T [17 CFR 232.303] (specific requirements for electronically filed
documents).
* * * * *

Item 16. Exhibits

* * * * *

Instruction:

* * * * *
Each exhibit identified in the exhibit index must include an active
link to an exhibit that is filed with the registration statement or, if
the exhibit is incorporated by reference an active hyperlink to the
exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
31. Amend Form S-4 (referenced in Sec. 239.25) by revising the last
sentence of Instruction K. under ``General

[[Page 51039]]

Instructions'' and the first sentence of Item 3 to read as follows:

Note: The text of Form S-4 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

K. Registration of Additional Securities.

* * * Any opinion or consent required in the Rule 462(b)
registration statement may be incorporated by reference from the
earlier registration statement with respect to the offering, if: (i)
such opinion or consent expressly provides for such incorporation; and
(ii) such opinion relates to the securities registered pursuant to Rule
462(b). See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].
* * * * *

Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information.

Provide in the forepart of the prospectus a summary containing the
information required by Items 105 and 503 of Regulation S-K (Sec.
229.105 and Sec. 229.503 of this chapter) and the following:
* * * * *
0
32. Amend Form F-1 (referenced in Sec. 239.31) by revising the last
sentence of Instruction V. under ``General Instructions'', the first
paragraph of instruction VI. under ``General Instructions'' and Item 3
to read as follows:

Note: The text of Form F-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

V. Registration of Additional Securities

* * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].

VI. Eligibility to Use Incorporation by Reference

If a registrant meets the following requirements immediately prior
to the time of filing a registration statement on this Form, it may
elect to provide information required by Item 3 and Item 4 of this Form
in accordance with Item 4A and Item 5 of this Form. Notwithstanding the
foregoing, in the financial statements, incorporating by reference or
cross-referencing to information outside of the financial statements is
not permitted unless otherwise specifically permitted or required by
the Commission's rules.
* * * * *

Item 3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.

Furnish the information required by Items 105 and 503 of Regulation
S-K (Sec. 229.105 and Sec. 229.503 of this chapter).
* * * * *
0
33. Amend Form F-3 (referenced in Sec. 239.33) by revising the last
sentence of Instruction IV.A. under ``General Instructions'' and Item 3
to read as follows:

Note: The text of Form F-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
* * * * *
GENERAL INSTRUCTIONS
* * * * *
IV. Registration of Additional Securities and Additional Classes of
Securities
A. Registration of Additional Securities Pursuant to Rule 462(b). *
* * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].
* * * * *

Item 3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.

Furnish the information required by Items 105 and 503 of Regulation
S-K (Sec. 229.105 and Sec. 229.503 of this chapter).
* * * * *
0
34. Amend Form F-4 (referenced in 239.34) by revising the last sentence
of Instruction H. under ``General Instructions'' and Item 3 to read as
follows:

Note: The text of Form F-4 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *
H. * * * See Rule 439(b) under the Securities Act [17 CFR
230.439(b)].
* * * * *

Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information.

Note: The text of Form F-7 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-7

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS

* * * * *

Item 3. Incorporation of Certain Information by Reference

[[Page 51040]]

under the Exchange Act. For information that you are incorporating by
reference, identify the document where the information was originally
filed or submitted and the specific location of the information within
that document. The statement must be made at the particular place where
the information is required, if applicable. Unless expressly permitted
or required, disclosure must not be incorporated by reference from a
second document if that second document incorporates information
pertinent to such disclosure by reference to a third document. If any
information is incorporated by reference into the prospectus, the
prospectus must provide the name, address and telephone number of an
officer of the Registrant from whom copies of such information may be
obtained upon request without charge.
* * * * *
0
36. Revise Item 3 of Form F-8 (referenced in Sec. 239.38) to read as
follows:

Note: The text of Form F-8 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-8

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

* * * * *

Item 3. Incorporation of Certain Information by Reference

Information called for by this Form, including exhibits, may be
incorporated by reference at the Registrant's option from documents
that the Registrant has filed previously with the Commission pursuant
to Section 13(a) or 15(d) of the Exchange Act or submitted to the
Commission pursuant to Rule 12g3-2(b) under the Exchange Act. For
information that you are incorporating by reference, identify the
document where the information was originally filed or submitted and
the specific location of the information within that document. The
statement must be made at the particular place where the information is
required, if applicable. Unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document. If any information is
incorporated by reference into the prospectus, the prospectus must
provide the name, address, and telephone number of an officer of the
Registrant from whom copies of such information may be obtained upon
request without charge.
* * * * *
0
37. Revise Item 4 of Form F-10 (referenced in Sec. 239.40) to read as
follows:

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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-10

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

* * * * *

Item 4. Incorporation of Certain Information by Reference

Information called for by this Form, including exhibits, may be
incorporated by reference at the Registrant's option from documents
that the Registrant has filed previously with the Commission pursuant
to Section 13(a) or 15(d) of the Exchange Act or submitted to the
Commission pursuant to Rule 12g3-2(b) under the Exchange Act. For
information that you are incorporating by reference, identify the
document where the information was originally filed or submitted and
the specific location of the information within that document. The
statement must be made at the particular place where the information is
required, if applicable. Unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document. If any information is
incorporated by reference into the prospectus, the prospectus must
provide the name, address, and telephone number of an officer of the
Registrant from whom copies of such information may be obtained upon
request without charge.
* * * * *
0
38. Revise Item 3 of Form F-80 (referenced in Sec. 239.41) to read as
follows:

Note: The text of Form F-80 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-80

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

* * * * *

Item 3 Incorporation of Certain Information by Reference

Information called for by this Form, including exhibits, may be
incorporated by reference at the Registrant's option from documents
that the Registrant has filed previously with the Commission pursuant
to Section 13(a) or 15(d) of the Exchange Act or submitted to the
Commission pursuant to Rule 12g3-2(b) under the Exchange Act. For
information that you are incorporating by reference, identify the
document where the information was originally filed or submitted and
the specific location of the information within that document. The
statement must be made at the particular place where the information is
required, if applicable. Unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document. If any information is
incorporated by reference into the prospectus, the prospectus must
provide the name, address, and telephone number of an officer of the
Registrant from whom copies of such information may be obtained upon
request without charge.
* * * * *
0
39. Amend Form SF-1 (referenced in Sec. 239.44) by revising the last
sentence of Instruction III. under ``General Instructions'' and the
last sentence of Item 2 to read as follows:

Note: The text of Form SF-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

[[Page 51041]]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM SF-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

III. Registration of Additional Securities

* * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].
* * * * *

Item 2. Inside Front and Outside Back Cover Pages of Prospectus.

Furnish the information required by Items 105 and 503 of Regulation
S-K (17 CFR 229.105 and 17 CFR 229.503) and Item 1103 of Regulation AB
(17 CFR 229.1103).
* * * * *
0
40. Amend Form SF-3 (referenced in Sec. 239.45) by revising the last
sentence of Instruction III. under ``General Instructions'' and the
last sentence of Item 2 to read as follows:

Note: The text of Form SF-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM SF-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

III. Registration of Additional Securities Pursuant to Rule 462(b).

* * * See Rule 439(b) under the Securities Act [17 CFR 230.439(b)].
* * * * *

Item 2. Inside Front and Outside Back Cover Pages of Prospectus.

Furnish the information required by Items 105 and 503 of Regulation
S-K (17 CFR 229.105 and 17 CFR 229.503) and Item 1103 of Regulation AB
(17 CFR 229.1103).
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
41. The authority citation for part 240 continues to read in part as
follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq., and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106,
sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
0
42. Revise Sec. 240.12b-13 to read as follows:

Sec. 240.12b-13 Preparation of statement or report.

Except as provided by the appropriate form, the statement or report
must contain the numbers and captions of all items of such form. The
text of the items may be omitted if the answers thereto are so prepared
as to indicate to the reader the coverage of the items without the
necessity of referring to the text of the items or instructions
thereto. Where any item requires information to be given in tabular
form, it must be given in substantially the tabular form specified in
the item. All instructions, whether appearing under the items of the
form or elsewhere therein, must be omitted. Unless expressly provided
otherwise, if any item is inapplicable or the answer thereto is in the
negative, an appropriate statement to that effect must be made.
0
43. Revise Sec. 240.12b-23 to read as follows:

Sec. 240.12b-23 Incorporation by reference.

(a) Registration statement or report. Except as provided by this
section or in the appropriate form, information may be incorporated by
reference in answer, or partial answer, to any item of a registration
statement or report.
(b) Financial information. Except as provided in the Commission's
rules, financial information required to be given in comparative form
for two or more fiscal years or periods must not be incorporated by
reference unless the information incorporated by reference includes the
entire period for which the comparative data is given. In the financial
statements, incorporating by reference, or cross-referencing to,
information outside of the financial statements is not permitted unless
otherwise specifically permitted or required by the Commission's rules.
(c) Exhibits. Any document or part thereof filed with the
Commission pursuant to any Act administered by the Commission may be
incorporated by reference as an exhibit to any statement or report
filed with the Commission by the same or any other person. Any document
or part thereof filed with an exchange pursuant to the Act may be
incorporated by reference as an exhibit to any statement or report
filed with the exchange by the same or any other person. If any
modification has occurred in the text of any document incorporated by
reference since the filing thereof, the registrant must file with the
reference a statement containing the text of any such modification and
the date thereof.
(d) Hyperlinks. You must include an active hyperlink to information
incorporated into a registration statement or report by reference if
such information is publicly available on the Commission's Electronic
Data Gathering, Analysis and Retrieval System (``EDGAR'') at the time
the registration statement or form is filed. For hyperlinking to
exhibits, please refer to Item 601 of Regulation S-K (Sec. 229.601 of
this chapter) or the appropriate form.
(e) General. Include an express statement clearly describing the
specific location of the information you are incorporating by
reference. The statement must identify the document where the
information was originally filed or submitted and the location of the
information within that document. The statement must be made at the
particular place where the information is required, if applicable.
Information must not be incorporated by reference in any case where
such incorporation would render the disclosure incomplete, unclear, or
confusing. For example, unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document.

Sec. 240.12b-32 [Removed and reserved].

0
44. Remove and reserve Sec. 240.12b-32.
0
45. Revise the first sentence of Note D.1 of Sec. 240.14a-101 to read
as follows:

Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.

* * * * *
D. * * *
1. Disclosure must not be incorporated by reference from a second
document if that second document incorporates information pertinent to

[[Page 51042]]

such disclosure by reference to a third document. * * *
* * * * *
0
46. Remove and reserve paragraph (e) of Sec. 240.16a-3.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
47. The authority citation for part 249 continues to read in part 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.
* * * * *
0
48. Remove and reserve paragraph (c) of General Instruction 3 to Form 3
(referenced in Sec. 249.103).
0
49. Remove and reserve paragraph (c) of General Instruction 2 to Form 4
(referenced in Sec. 249.104).
0
50. Remove and reserve paragraph (c) of General Instruction 2 to Form 5
(referenced in Sec. 249.105).
0
51. Amend Form 8-A (referenced in Sec. 249.208a) by revising the
Instructions as to Exhibits to read as follows:

Note: The text of Form 8-A does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-A

FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

* * * * *

INSTRUCTIONS FOR EXHIBITS

If the securities to be registered on this form are to be
registered on an exchange on which other securities of the registrant
are registered, or are to be registered pursuant to Section 12(g) of
the Act, copies of all constituent instruments defining the rights of
the holders of each class of such securities, including any contracts
or other documents which limit or qualify the rights of such holders,
must be filed as exhibits with each copy of the registration statement
filed with the Commission or with an exchange, subject to Rule 12b-
23(c) regarding incorporation of exhibits by reference.
0
52. Amend Form 10 (referenced in 249.210) by revising the first
sentence in Item 1A and Instruction C(a) under ``General Instructions''
to read as follows:

Note: The text of Form 10 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

GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

* * * * *

INFORMATION REQUIRED IN REGISTRATION STATEMENT

* * * * *

Item 1A. Risk Factors.

Set forth, under the caption ``Risk Factors,'' where appropriate,
the risk factors described in Item 105 of Regulation S-K (Sec. 229.105
of this chapter) applicable to the registrant. * * *
* * * * *

GENERAL INSTRUCTIONS

* * * * *

C. Preparation of Registration Statement.

(a) This form is not to be used as a blank form to be filled in,
but only as a guide in the preparation of the registration statement on
paper meeting the requirements of Rule 12b-12 [17 CFR 240.12b-12]. The
numbers or captions of items are not required unless expressly required
by this form or the referenced disclosure requirements. The text of the
items may be omitted. Otherwise, the answers to the items must be
prepared in the manner specified in Rule 12b-13 [17 CFR 240.12b-13].
* * * * *
0
53. Amend Form 20-F (referenced in Sec. 249.220f) by:
0
a. Adding a field to the cover page to include trading symbol(s);
0
b. Revising Instruction C(a) under ``General Instructions'';
0
c. Adding Instruction 6 under ``Instructions to Item 5'';
0
d. Revising Instruction 1(b) under ``Instructions to Item 10'';
0
e. Revising Instructions 1 and 2 under ``Instructions to Item 12'';
0
f. Revising the introductory text, Instruction 4(a) and Instruction 8
and adding Instructions 2(d) and 104 under ``Instructions As To
Exhibits'' to read as follows:

Note: The text of Form 20-F does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

* * * * *
Securities registered or to be registered pursuant to Section 12(b)
of the Act.

----------------------------------------------------------------------------------------------------------------

* * * * *

GENERAL INSTRUCTIONS

* * * * *

C. How to Prepare Registration Statements and Reports on This Form.

(a) Do not use this Form as a blank form to be filled in; use it
only as a guide in the preparation of the registration statement or
annual report. General Instruction E states which items must be
responded to in a registration statement and which items must be
responded to in an annual report. The number or captions of items are
not required unless expressly required by this form. You may also omit
the text following each caption in this Form, which describes what must
be disclosed under each item. Omit the text of all instructions in this
Form. If an item is inapplicable or the answer to the item is in the
negative, respond to the item by making a statement to that effect.
* * * * *

Item 5. Operating and Financial Review and Prospects

* * * * *

[[Page 51043]]

Instructions to Item 5:
* * * * *
6. Generally, the discussion shall cover the periods covered by the
financial statements and the registrant may use any format that in the
registrant's judgment enhances a reader's understanding.
For registrants providing financial statements covering three years
in a filing, disclosure about the earliest year would not be required
if (i) that disclosure is not material to an understanding of the
registrant's financial condition, changes in financial condition and
results of operations and (ii) the registrant has filed its prior year
Form 20-F on EDGAR containing an Operating and Financial Review and
Prospects discussion of the earliest of the three years included in the
financial statements of the current filing.
* * * * *

Item 10. Additional Information

* * * * *
Instructions to Item 10:
* * * * *

1 * * *

(b) If the information called for by Item 10.B has been reported
previously in a registration statement on Form 20[dash]F or a
registration statement filed under the Securities Act and has not
changed, you may incorporate that information by a specific reference
in the annual report to the previous registration statement or, to the
extent that this information has been provided in the exhibit required
by instruction 2(d) of the Instructions as to Exhibits, you may refer
to the exhibit for this information.
* * * * *

Item 12. Description of Securities Other than Equity Securities

* * * * *
Instructions to Item 12:
* * * * *
1. If you are using the form as an annual report, provide the
information required by Item 12.D.3 and Item 12.D.4 under this Item of
your annual report and provide the remainder of the information
required by this Item in an exhibit to such report pursuant to
paragraph 2(d) of Instructions as to Exhibits.
2. You do not need to include any information in a registration
statement, prospectus, or annual report on Form 20-F in response to
Item 305(a)(2) of the Trust Indenture Act of 1939, 15 U.S.C. 77aaa et
seq., as amended, if the information is not otherwise required by this
Item or Instruction 2(d) under Instructions as to Exhibits of this
Form.

INSTRUCTIONS AS TO EXHIBITS

File the exhibits listed below as part of an Exchange Act
registration statement or report. Exchange Act Rule 12b-23(c) explains
the circumstances in which you may incorporate exhibits by reference.
Exchange Act Rule 24b-2 explains the procedure to be followed in
requesting confidential treatment of information required to be filed.
Previously filed exhibits may be incorporated by reference. If any
previously filed exhibits have been amended or modified, file copies of
the amendment or modification or copies of the entire exhibit as
amended or modified.
If the Form 20-F registration statement or annual report requires
the inclusion, as an exhibit or attachment, of a document that is in a
foreign language, you must provide instead either an English
translation or an English summary of the foreign language document in
accordance with Exchange Act Rule 12b-12(d) (17 CFR 240.12b-12(d)) for
both electronic and paper filings. You may submit a copy of the
unabridged foreign language document along with the English translation
or summary as permitted by Regulation S-T Rule 306(b) (17 CFR
232.306(b)) for electronic filings or by Exchange Act Rule 12b-12(d)(4)
(17 CFR 240.12b-12(d) (4)) for paper filings.
Include an exhibit index in each registration statement or report
you file, immediately preceding the exhibits you are filing. The
exhibit index must list each exhibit according to the number assigned
to it below. If an exhibit is incorporated by reference, note that fact
in the exhibit index. For paper filings, the pages of the manually
signed original registration statement should be numbered in sequence,
and the exhibit index should give the page number in the sequential
numbering system where each exhibit can be found.
Schedules (or similar attachments) to the exhibits required by this
Form 20-F are not required to be filed unless such schedules contain
information material to an investment or voting decision and that
information is not otherwise disclosed in the exhibit or the disclosure
document. Each exhibit filed must contain a list briefly identifying
the contents of all omitted schedules. In addition, the registrant must
provide a copy of any omitted schedule to the Commission staff upon
request.
The registrant may redact information from exhibits required to be
filed by this Form 20-F if disclosure of that that information would
constitute a clearly unwarranted invasion of personal privacy (e.g.,
disclosure of bank account numbers, social security numbers, home
addresses and similar information). The registrant is not required to
undertake or provide to the Commission upon request a materiality or
competitive harm analysis of this redacted information.
* * * * *
2 * * *
(d) If a registrant is filing an annual report under Exchange Act
Section 13(a) or 15(d), the registrant must provide as an exhibit a
description of the rights of each class of securities that is
registered under Section 12 of the Exchange Act as of the end of the
period covered by the report with which the exhibit is filed. The
description must include information for the securities comparable to
that required by Item 9.A.3, A.5, A.6, and A.7, Item 10.B.3, B.4, B.6,
B.7, B.8, B.9, and B.10, and Item 12.A, 12.B, 12.C, and 12.D.1 and
12.D.2 of Form 20-F (collectively, the ``Description of Securities'').
However, for purposes of this paragraph 2(d), all references in those
Items to securities to be or being registered, offered or sold will
mean securities that are registered as of the end of the period covered
by the report with which the exhibit is filed. In addition, for
purposes of this Item, the disclosure will be required for classes of
securities that have not been retired by the end of the period covered
by the report. A registrant may incorporate by reference and provide an
active hyperlink to a prior periodic filing containing the disclosure
required by this paragraph 2(d) so long as there has not been any
change to the information called for by the Description of Securities
since the filing date of the linked filing. Such hyperlink will be
deemed to satisfy the requirements of this paragraph 2(d) for the
current filing.
* * * * *
4.(a) Every contract not made in the ordinary course of business
that is material to the registrant and is to be performed in whole or
in part at or after the filing of the registration statement or report.
In addition, for newly reporting registrants, every contract not made
in the ordinary course of business that is material to the registrant
and that was entered into not more than two years before the date on
which such registrant:
(i) first files a registration statement or report; or
(ii) completes a transaction that had the effect of causing it to
cease being a public shell company.
The only contracts that must be filed are those to which the
registrant or a subsidiary of the registrant is a party or

[[Page 51044]]

has succeeded to a party by assumption or assignment or in which the
registrant or such subsidiary has a beneficial interest.
The registrant may redact provisions or terms of exhibits required
to be filed by this Form 20-F if those provisions or terms are both (i)
not material and (ii) competitively harmful to the registrant if
publicly disclosed. If it does so, the registrant should mark the
exhibit or exhibits to indicate that portions of the exhibit or
exhibits have been omitted and include a prominent statement on the
first page of the redacted exhibit that certain identified information
has been excluded from the exhibit because it is both (i) not material
and (ii) competitively harmful to the registrant if publicly disclosed.
The registrant also must indicate by brackets where the information is
omitted from the filed version of the exhibit.
If requested by the Commission staff, the registrant must provide
an unredacted paper copy of the exhibit on a supplemental basis. The
Commission staff also may request the registrant to provide its
materiality and competitive harm analyses on a supplemental basis. Upon
evaluation of the registrant's supplemental materials, the Commission
staff may request the registrant to amend its filing to include in the
exhibit any previously redacted information that is not adequately
supported by the registrant's materiality and competitive harm
analyses.
The registrant may request confidential treatment of the
supplemental material submitted to the Commission or the staff pursuant
to Rule 83 (17 CFR 200.83) while it is in the possession of the
Commission staff. After reviewing the supplemental information, the
Commission staff will return or destroy it at the request of the
registrant, if the registrant complies with the procedures outlined in
Rules 418 or 12b-4 (17 CFR 230.418 or 17 CFR 240.12b-4).

Note: A ``newly reporting registrant'' is (i) any registrant
filing a registration statement that, at the time of such filing, is
not subject to the reporting requirements of Section 13(a) or 15(d)
of the Exchange Act, whether or not such registrant has ever
previously been subject to the reporting requirements of Section
13(a) or 15(d), (ii) any registrant that has not filed an annual
report since the revival of a previously suspended reporting
obligation, and (iii) any registrant that (a) was a shell company,
other than a business combination related shell company, as defined
in Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2), immediately
before completing a transaction that has the effect of causing it to
cease being a shell company and (b) has not filed a Form 20-F since
the completion of such transaction. For example, newly reporting
registrants would include (i) a registrant that is filing its first
registration statement under the Securities Act or the Exchange Act,
and (ii) a registrant that was a public shell company, other than a
business combination related shell company, and completes a reverse
merger transaction causing it to cease being a shell company.

* * * * *
8. List the following information for the registrant and each of its
subsidiaries: the name, the legal entity identifier (if any), the state
or other jurisdiction of incorporation or organization, and the names
under which the entity does business. This list may be incorporated by
reference from another filed document which includes a complete and
accurate list. ``Legal entity identifier'' means, with respect to any
registrant or its subsidiaries, the legal entity identifier as assigned
by a utility endorsed by the Global LEI Regulatory Oversight Committee
or accredited by the Global LEI Foundation. You may omit the names of
subsidiaries that, in the aggregate, would not be a ``significant
subsidiary'' as defined in rule 1-02(w) of Regulation S-X as of the end
of the year covered by the report. You may omit the names of multiple
wholly owned subsidiaries carrying on the same line of business, such
as chain stores or service stations, if you give the name of the
immediate parent company, the line of business and the number of
omitted subsidiaries broken down by U.S. and foreign operations.
* * * * *
102 and 103 [Reserved]
104. Cover Page Interactive Data File. If the Form 20-F is being used
as an annual report, a Cover Page Interactive Data File (as defined in
17 CFR 232.11) as required by Rule 406 of Regulation S-T [17 CFR
232.406], and in the manner provided by the EDGAR Filer Manual.
0
54. Amend Form 40-F (referenced in Sec. 249.240f) by:
0
a. Adding a field to the cover page to include trading symbol(s); and
0
b. Adding paragraph B.17 under ``General Instructions'' to read as
follows:

Note: The text of Form 40-F does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 40-F

* * * * *
Securities registered or to be registered pursuant to Section 12(b)
of the Act.

----------------------------------------------------------------------------------------------------------------

* * * * *
B. Information To Be Filed on this Form
* * * * *
(17) Cover Page Interactive Data File. If the Form 40-F is being used
as an annual report, a Cover Page Interactive Data File (as defined in
17 CFR 232.11) as required by Rule 406 of Regulation S-T [17 CFR
232.406], in the manner provided by the EDGAR Filer Manual and listed
as exhibit 104.
* * * * *
0
55. Amend Form 8-K (referenced in Sec. 249.308) by adding a field to
the cover page for securities registered pursuant to Section 12(b) of
the Exchange Act, the title of each class of such securities, trading
symbol(s) and name of each exchange on which registered:

Note: The text of Form 8-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 8-K

* * * * *
Securities registered pursuant to Section 12(b) of the Act:

[[Page 51045]]

----------------------------------------------------------------------------------------------------------------
Trading
Title of each class symbol(s) Name of each exchange on which registered
----------------------------------------------------------------------------------------------------------------
................................................
----------------------------------------------------------------------------------------------------------------

* * * * *
0
56. Amend Form 10-Q (referenced in Sec. 249.308a) by adding a field to
the cover page for securities registered pursuant to Section 12(b) of
the Exchange Act, the title of each class of such securities, trading
symbol(s) and name of each exchange on which registered:

Note: The text of Form 10-Q 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-Q

* * * * *
Securities registered pursuant to Section 12(b) of the Act:

* * * * *
0
57. Amend Form 10-K (referenced in Sec. 249.310) by:
0
a. Revising Instruction (C)(1) and the last sentence of Instruction
(G)(3) under ``General Instructions'', the first sentence in Item 1A,
and paragraph (a) under ``Supplemental Information to be Furnished With
Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which
Have Not Registered Securities Pursuant to Section 12 of the Act'';
0
b. Removing the second sentence of Instruction (G)(4) under ``General
Instructions'', the checkbox that relates to disclosure under Item 405,
and the instruction to Item 10; and
0
c. Adding a field to the cover page to include trading symbol(s) 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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

GENERAL INSTRUCTIONS

* * * * *

C. Preparation of Report.

(1) This form is not to be used as a blank form to be filled in,
but only as a guide in the preparation of the report on paper meeting
the requirements of Rule 12b-12. Except as provided in this instruction
and General Instruction G, the answers to the items must be prepared in
the manner specified in Rule 12b-13. The numbers or captions of items
are not required unless expressly required by this form or the
referenced disclosure requirements.
* * * * *

G. Information to be Incorporated by Reference.

* * * * *
(3) * * * See the Instruction to Item 401 of Regulation S-K (Sec.
229.401 of this chapter).
* * * * *

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

Securities registered pursuant to Section 12(b) of the Act:

----------------------------------------------------------------------------------------------------------------

* * * * *
Item 1A. Risk Factors. Set forth, under the caption ``Risk
Factors,'' where appropriate, the risk factors described in Item 105 of
Regulation S-K (Sec. 229.105 of this chapter) applicable to the
registrant. * * *
* * * * *

Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act

(a) Except to the extent that the materials enumerated in (1) and/
or (2) below are specifically incorporated into this Form by reference,
every registrant which files an annual report on this Form pursuant to
Section 15(d) of the Act must furnish to the Commission for its
information, at the time of filing its report on this Form, four copies
of the following: * * *
* * * * *
0
58. Amend Form 10-D (referenced in Sec. 249.312 of this chapter) by:
0
a. Removing and reserving General Instruction D(2)(a); and
0
b. Revising General Instruction D(2)(d) to read as follows:

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

[[Page 51046]]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-D

ASSET-BACKED ISSUER DISTRIBUTION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

GENERAL INSTRUCTIONS

* * * * *
(d) Exchange Act Rules 12b-23 (17 CFR 240.12b-23) (additional rules on
incorporation by reference for reports filed pursuant to Sections 13
and 15(d) of the Act).
* * * * *

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1934

0
59. The authority citation for part 270 continues to read in part as
follows:

Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *
0
60. Revise Sec. 270.0-4 to read as follows:

Sec. 270.0-4 Incorporation by reference.

(a) Registration statements and reports. Except as provided by this
section or in the appropriate form, information may be incorporated by
reference in answer, or partial answer, to any item of a registration
statement or report. Where an item requires a summary or outline of the
provisions of any document, the summary or outline may incorporate by
reference particular items, sections, or paragraphs of any exhibit and
may be qualified in its entirety by such reference.
(b) Financial information. Except as provided in the Commission's
rules, financial information required to be given in comparative form
for two or more fiscal years or periods must not be incorporated by
reference unless the information incorporated by reference includes the
entire period for which the comparative data is given. In the financial
statements, incorporating by reference, or cross-referencing to,
information provided pursuant to the non-financial information
disclosure requirements is not permitted unless otherwise specifically
permitted or required by the Commission's rules.
(c) Exhibits. Any document or part thereof, including any financial
statement or part thereof, filed with the Commission pursuant to any
Act administered by the Commission may be incorporated by reference as
an exhibit to any registration statement, application, or report filed
with the Commission by the same or any other person. If any
modification has occurred in the text of any document incorporated by
reference since the filing thereof, the registrant must file with the
reference a statement containing the text of any such modification and
the date thereof.
(d) Hyperlinks. Include an active hyperlink to information
incorporated into a registration statement, application, or report by
reference if such information is publicly available on the Commission's
Electronic Data Gathering, Analysis and Retrieval System (``EDGAR'') at
the time the registration statement, application, or report is filed.
For hyperlinking to exhibits, please refer to the appropriate form.
(e) General. Include an express statement clearly describing the
specific location of the information you are incorporating by
reference. The statement must identify the document where the
information was originally filed or submitted and the location of the
information within that document. The statement must be made at the
particular place where the information is required, if applicable.
Information must not be incorporated by reference in any case where
such incorporation would render the disclosure incomplete, unclear, or
confusing. For example, unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document.

Sec. 270.8b-23 [Removed and reserved].

0
61. Remove and reserve Sec. 270.8b-23.

Sec. 270.8b-24 [Removed and reserved].

0
62. Remove and reserve Sec. 270.8b-24.

Sec. 270.8b-32 [Removed and reserved].

0
63. Remove and reserve Sec. 270.8b-32.
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1934

0
64. The authority citation for part 274 continues to read in part as
follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78(o)(d), 80a-8, 80a-26, 80a-29, and Pub. L. 111-203, sec.
939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *
0
65. Amend Form N-5 (referenced in Sec. 274.5 of this chapter) by
revising ``Instructions as to Exhibits'' to add a paragraph to read as
follows:

Note: The text of Form N-5 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-5

* * * * *

INSTRUCTIONS AS TO EXHIBITS

* * * * *
Each exhibit identified in the exhibit index must include an active
link to an exhibit that is filed with the registration statement or, if
the exhibit is incorporated by reference an active hyperlink to the
exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
66. Amend Form N-1A (referenced in Sec. 274.11A of this chapter) by:
0
a. Revising General Instruction D.2; and
0
b. Revising the Instruction to Item 28 to read as follows:

Note: The text of Form N-1A does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-1A

* * * * *

GENERAL INSTRUCTIONS

* * * * *

D. Incorporation by Reference

* * * * *

2. General Requirements

All incorporation by reference must comply with the requirements of
this Form and the following rules on incorporation by reference: rule
411 under the Securities Act [17 CFR 230.411] (general rules on
incorporation by reference in a prospectus); rule 303 of Regulation S-T
[17 CFR 232.303] (specific requirements for electronically filed
documents); and rule 0-4 [17 CFR 270.0-4] (additional rules on
incorporation by reference for Funds).
* * * * *

Item 28. Exhibits

* * * * *

Instruction

Each exhibit identified in the exhibit index (other than an exhibit
filed in eXtensible Business Reporting Language) must include an active
link to an exhibit that is filed with the registration statement or, if
the exhibit is incorporated by reference an active hyperlink to the
exhibit separately filed

[[Page 51047]]

on EDGAR. If the registration statement is amended, each amendment must
include active hyperlinks to the exhibits required with the amendment.
A Fund that is a Feeder Fund also must file a copy of all codes of
ethics applicable to the Master Fund.
* * * * *
0
67. Amend Form N-2 (referenced in Sec. 274.11a-1 of this chapter) by:
0
a. Revising General Instruction F; and
0
b. Revising the Instructions to Item 25.2 to add Instruction 4 to read
as follows:

Note: The text of Form N-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-2

* * * * *

GENERAL INSTRUCTIONS

* * * * *

F. Incorporation by Reference

Incorporation by reference permits a Registrant to include
documents and exhibits filed previously with the Commission as part of
the registration statement by making reference to where, and under what
designation, these documents can be found in previous filings. A
Registrant may incorporate all or part of the Statement of Additional
Information (the ``SAI'') into the prospectus delivered to investors
without physically delivering the SAI with the prospectus, so long as
the SAI is available to investors upon request at no charge and any
information or documents incorporated by reference into the SAI are
provided along with the SAI, except to the extent provided by paragraph
F.3 below.
In general, a Registrant may incorporate by reference, in response
to any item of Form N-2 not required to be included in the prospectus,
any information contained elsewhere in the registration statement or in
other statements, applications, or reports filed with the Commission.
A Registrant may incorporate by reference into the prospectus or
the SAI in response to Item 4.1 or 24 of this form the information
contained in Form N-CSR [17 CFR 249.331 and 274.128] or any report to
shareholders meeting the requirements of Section 30(e) of the 1940 Act
[15 U.S.C. 80a-29(e)] and Rule 30e-1 [17 CFR 270.30e-1] thereunder (and
a Registrant that has elected to be regulated as a business development
company may so incorporate into Items 4.2, 8.6.c, or 24 of this form
the information contained in its annual report under the Securities
Exchange Act of 1934 [15 U.S.C. 78a et seq.] (the ``Exchange Act'')),
provided:
1. The material incorporated by reference is prepared in accordance
with, and covers the periods specified by, this form.
2. The Registrant states in the prospectus or the SAI, at the place
where the information required by Items 4.1, 4.2, 8.6.c, or 24 of this
form would normally appear, that the information is incorporated by
reference from a report to shareholders or a report on Form N-CSR. (The
Registrant also may describe briefly, in either the prospectus, the
SAI, or Part C of the registration statement (in response to Item 25.1)
those portions of the report to shareholders or report on Form N-CSR
that are not incorporated by reference and are not a part of the
registration statement.)
3. The material incorporated by reference is provided with the
prospectus and/or the SAI to each person to whom the prospectus and/or
the SAI is sent or given, unless the person holds securities of the
Registrant and otherwise has received a copy of the material. (The
Registrant must state in the prospectus and/or the SAI that it will
furnish, without charge, a copy of such material on request and provide
the name, address, and telephone number of the person to contact.)
All incorporation by reference must comply with the requirements of
this Form and the following rules on incorporation by reference: rule
411 under the Securities Act [17 CFR 230.411] (general rules on
incorporation by reference in a prospectus); rule 303 of Regulation S-T
[17 CFR 232.303] (specific requirements for electronically filed
documents); and rule 0-4 [17 CFR 270.0-4] (additional rules on
incorporation by reference for investment companies).
* * * * *

Item 25. Financial Statements and Exhibits

* * * * *
2. Exhibits:
* * * * *

Instructions

* * * * *
4. Each exhibit identified in the exhibit index must include an
active link to an exhibit that is filed with the registration statement
or, if the exhibit is incorporated by reference an active hyperlink to
the exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
68. Amend Form N-3 (referenced in Sec. 274.11b of this chapter) by:
0
a. Revising General Instruction G; and
0
b. Revising the Instructions to Item 29(b) to add Instruction 3 to read
as follows:

Note: The text of Form N-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-3

* * * * *

GENERAL INSTRUCTIONS

* * * * *

G. Incorporation by Reference

A Registrant may, at its discretion, incorporate all or part of the
Statement of Additional Information into the prospectus, without
physically delivering the Statement of Additional Information to
investors with the prospectus. But the Statement of Additional
Information must be available to the investor upon request at no charge
and any information or documents incorporated by reference into the
Statement of Additional Information must be provided along with the
Statement of Additional Information.
In general, a Registrant may incorporate by reference, in the
answer to any item of Form N-3 not required to be in the prospectus,
any information elsewhere in the registration statement or in other
statements, applications, or reports led with the Commission.
Subject to these rules, a Registrant may incorporate by reference
into the prospectus or the Statement of Additional Information in
response to Items 4(a) or 28 of Form N-3 the information in Form N-CSR
[17 CFR 249.331 and 274.128] or any report to contract owners meeting
the requirements of Section 30(e) of the 1940 Act [15 U.S.C. 80a-29(e)]
and Rule 30e-1 [17 CFR 270.30e-1] provided:
1. The material incorporated by reference is prepared in accordance
with, and covers the periods specified by, this Form.
2. The Registrant states in the prospectus or the Statement of
Additional Information, at the place where the information would
normally appear, that the information is incorporated by reference from
a report to security holders or a report on Form N-CSR. The Registrant
may also describe, in either the prospectus, the Statement of
Additional Information, or Part C of the Registration Statement (in
response to Item 29(a)), any parts of the report to security holders or
the report on Form N-CSR that are not

[[Page 51048]]

incorporated by reference and are not a part of the Registration
Statement.
3. The material incorporated by reference is provided with the
prospectus or the Statement of Additional Information to each person to
whom the prospectus or the Statement of Additional Information is
given, unless the person holds securities of the Registrant and
otherwise has received a copy of the material. However, Registrant must
state in the prospectus or the Statement of Additional Information that
it will furnish, without charge, another copy of such report on request
and the name, address, and telephone number of the person to contact.
All incorporation by reference must comply with the requirements of
this Form and the following rules on incorporation by reference: rule
411 under the Securities Act [17 CFR 230.411] (general rules on
incorporation by reference in a prospectus); rule 303 of Regulation S-T
[17 CFR 232.303] (specific requirements for electronically filed
documents); and rule 0-4 [17 CFR 270.0-4] (additional rules on
incorporation by reference for investment companies).
* * * * *

Item 29. Financial Statements and Exhibits

* * * * *
(b) Exhibits:
* * * * *

Instructions

* * * * *
3. Each exhibit identified in the exhibit index must include an
active link to an exhibit that is filed with the registration statement
or, if the exhibit is incorporated by reference, an active hyperlink to
the exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
69. Amend Form N-4 (referenced in Sec. 274.11c of this chapter) by:
0
a. Revising General Instruction G; and
0
b. Revising the Instructions to Item 24(b) to add Instruction 3 to read
as follows:

Note: The text of Form N-4 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-4

* * * * *

GENERAL INSTRUCTIONS

* * * * *

G. Incorporation by Reference

Item 24. Financial Statements and Exhibits

* * * * *
(b) Exhibits:
* * * * *

Instructions:

* * * * *
3. Each exhibit identified in the exhibit index must include an
active link to an exhibit that is filed with the registration statement
or, if the exhibit is incorporated by reference an active hyperlink to
the exhibit separately filed on EDGAR. If the registration statement is
amended, each amendment must include active hyperlinks to the exhibits
required with the amendment.
* * * * *
0
70. Amend Form N-6 (referenced in Sec. 274.11d of this chapter) by:
0
a. Revising General Instruction D.2; and
0
b. Revising Item 26 to read as follows:

Note: The text of Form N-6 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-6

* * * * *

GENERAL INSTRUCTIONS

* * * * *

B. Filing and Use of Form N-6

* * * * *

4. What rules apply to the filing of a registration statement on Form
N-6?

* * * * *

D. Incorporation by Reference

* * * * *

2. General Requirements:

All incorporation by reference must comply with the requirements of
this Form and the following rules on incorporation by reference: rule
411 under the Securities Act [17 CFR 230.411] (general rules on
incorporation by reference in a prospectus); rule 303 of Regulation S-T
[17 CFR 232.303] (specific requirements for electronically filed
documents); and rule 0-4, [17 CFR 270.0-4] (additional rules on
incorporation by reference for investment companies).
* * * * *

Item 26. Exhibits

Subject to General Instruction D regarding incorporation by
reference and rule 483 under the Securities Act [17 CFR 230.483], file
the exhibits listed below as part of the registration statement. Letter
or number the exhibits in the sequence indicated and file copies rather
than originals, unless otherwise required by rule 483. Reflect any
exhibit incorporated by reference in the list below and identify the
previously filed document containing the incorporated material. Each
exhibit identified in the exhibit index must include an active link to
an exhibit that is filed with the registration statement or, if the
exhibit is incorporated by reference an active hyperlink to the exhibit
separately filed on EDGAR. If the registration statement is amended,
each amendment must include active hyperlinks to the exhibits required
with the amendment.
(a) * * *
* * * * *
0
71. Amend Form N-CSR (referenced in Sec. 274.128 of this chapter) by:
0
a. Revising General Instruction D; and
0
b. Revising the Instruction to Item 12 to read as follows:

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

[[Page 51049]]

Form N-CSR

* * * * *

GENERAL INSTRUCTIONS

* * * * *

D. Incorporation by Reference

A registrant may incorporate by reference information required by
Items 4, 5, and 12(a)(1). No other Items of the Form shall be answered
by incorporating any information by reference. The information required
by Items 4 and 5 may be incorporated by reference from the registrant's
definitive proxy statement (filed or required to be filed pursuant to
Regulation 14A (17 CFR 240.14a-1 et seq.)) or definitive information
statement (filed or to be filed pursuant to Regulation 14C (17 CFR
240.14c-1 et seq.)) involving the election of directors, if such
definitive proxy statement or information statement is filed with the
Commission not later than 120 days after the end of the fiscal year
covered by an annual report on this Form. All incorporation by
reference must comply with the requirements of this Form and the
following rules on incorporation by reference: Rule 303 of Regulation
S-T (17 CFR 232.303) (specific requirements for electronically filed
documents); Rule 12b-23 under the Exchange Act (17 CFR 240.12b-23)
(additional rules on incorporation by reference for reports filed
pursuant to Sections 13 and 15(d) of the Exchange Act); and Rule 0-4
(17 CFR 270.0-4) (additional rules on incorporation by reference for
investment companies).
* * * * *

Item 12. Exhibits.

* * * * *

Instruction to Item 12.

Letter or number the exhibits in the sequence that they appear in this
item. Each exhibit identified in the exhibit index must include an
active link to an exhibit that is filed with the report or, if the
exhibit is incorporated by reference an active hyperlink to the exhibit
separately filed on EDGAR. If the report is amended, each amendment
must include active hyperlinks to the exhibits required with the
amendment.
* * * * *

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

0
72. The authority citation for Part 275 continues to read, in part, as
follows:

Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless
otherwise noted.
* * * * *
73. Revise Sec. 275.0-6 to read as follows:

Sec. 275.0-6 Incorporation by reference in applications.

(a) Exhibits. Any document or part thereof, including any financial
statement or part thereof, filed with the Commission pursuant to any
Act administered by the Commission may be incorporated by reference as
an exhibit to any application filed with the Commission by the same or
any other person. If any modification has occurred in the text of any
document incorporated by reference since the filing thereof, the
registrant must file with the reference a statement containing the text
of any such modification and the date thereof.
(b) General. Include an express statement clearly describing the
specific location of the information you are incorporating by
reference. The statement must identify the document where the
information was originally filed or submitted and the location of the
information within that document. The statement must be made at the
particular place where the information is required, if applicable.
Information must not be incorporated by reference in any case where
such incorporation would render the disclosure incomplete, unclear, or
confusing. For example, unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document
if that second document incorporates information pertinent to such
disclosure by reference to a third document.
(c) Definition of Application. For purposes of this rule, an
``application'' means any application for an order of the Commission
under the Act other than an application for registration as an
investment adviser.

By the Commission.

Dated: October 11, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-22374 Filed 11-1-17; 8:45 am]
BILLING CODE 8011-01-P