Thursday, June 02, 2016

Commission moves to finalize FAST Act’s 10-K summary page

By Mark S. Nelson, J.D.

The Commission published an interim final rule that will implement the Form 10-K summary page mandated by the Fixing America’s Surface Transportation (FAST) Act. The release also seeks public comment on eight specific questions about the usefulness of the summary, how it should be displayed on EDGAR, whether other information should be included (e.g., MD&A), and whether other annual reporting forms should be altered in a similar manner. The interim rule is effective upon publication in the Federal Register, while comments are due 30 days later (Release No. 34-77969, June 1, 2016).

Section 72001 of the FAST Act permits an issuer to submit a summary page on Form 10-K, if each item in the summary page also includes cross-references (e.g., electronic links) to related information in the issuer’s Form 10-K. Congress directed the SEC to issue regulations to implement the provision within 180 days after the FAST Act’s date of enactment (December 4, 2015).

Despite there being no current ban on a registrant from providing a voluntary summary, the Commission nevertheless opted to amend Part IV of Form 10-K to add an Item 16 that will explicitly allow the summary page permitted by the FAST Act. Specifically, each item in the summary must be presented fairly and accurately and include hyperlinks to related material in the Form 10-K. Item 16 also clarifies that this requirement includes materials contained in exhibits to the filed Form 10-K.

A related instruction to Item 16 explains that the summary must refer only to Form 10-K disclosures in the form when it is filed. Moreover, a summary that includes information required by Part III of Form 10-K would itself not have to be updated for information to be incorporated by reference from a later filed proxy or information statement, but the summary would have to state that it omits this information because it will be incorporated by reference at a later time.

The Commission also explained that the FAST Act’s reference to a “summary page” does not necessarily fix a particular length, such as a single page. The Commission said the summary should be “brief” and yet the rule amendment is “flexible” and “principles-based.”

The release is No. 34-77969.

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