8 Helpful Tips Issuers Should Know
The SEC’s new rule amendment requiring issuers who present exhibits in numerous regulatory forms to begin providing active hyperlinks is drumming up plenty of questions. The confusion is particularly acute because larger issuers are required to begin adhering to the SEC’s new hyperlinking rule Sept. 1, 2017. John Truzzolino, Director, Corporate Governance Services for the Global Capital Markets Division at Donnelley Financial Solutions, provides answers to common questions and misunderstandings.
Among the many Securities and Exchange Commission (SEC) rule announcements made March 1 was one requirement that affects numerous issuers and will change how they present exhibits to regulators, investors and the general public. It states that issuers may no longer simply list exhibits for many forms, but must provide active hyperlinks to the listed exhibits as well.
On Sept. 1, the hyperlinking rule will apply to larger issuers filing periodic and current reports subject to the exhibit requirements explained in Item 601 of Regulation S-K — as well as foreign issuers that file Forms F-10 and 20-F.
Requiring registrants to link to the actual filings in the exhibit index will provide investors and other interested parties with easier access to exhibits incorporated by reference.
While life may soon become easier for anyone who searches through a registrant’s filings to view a given exhibit, public companies are scrambling to understand their new responsibilities given how quickly the requirement goes into effect.
The following are helpful answers to eight key questions. All issuers should take note.
- What are the relevant forms? The list is quite lengthy: S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, F-10,20-F, SF-1, SF-3, 10, 10-K, 10-Q and 8-K.
- Which forms are excluded from the hyperlinking requirement? Excluded from the rule are Form ABS-EE exhibits, XBRL exhibits, Form 6-K or other forms under the multijurisdictional disclosure system used by certain Canadian issuers, exhibits filed in paper pursuant to a temporary or continuing hardship exemption under Rules 201 or 202 of Regulation S-T or pursuant to Rule 311 of Regulation S-T.
- Can issuers filing on EDGAR continue to use ASCII? Although many issuers are using HyperText Markup Language, otherwise known as “HTML,” some have stuck with ASCII. Non-accelerated filers and smaller reporting companies will need to begin a transition to HTML, but they have a year after the final rules go into effect to do so. Issuers may choose to continue using ASCII for proxies and forms that are not subject to the exhibit filing requirements under Item 601.
- What are the hyperlink requirements for foreign private issuers? The hyperlink requirements will go into effect for Forms F-10 and 20-F. The SEC is not, however, requiring exhibit hyperlinks for Form 6-K or other forms filed under the multijurisdictional disclosure system that is used in Canada.
- Must all companies begin hyperlinking immediately? The SEC is adopting a one-year phase-in period after the final rules go into effect for non-accelerated filers and smaller reporting companies that submit filings in ASCII. The effective date for those filings is September 1, 2018.
- Are there exceptions to the hyperlinking requirement? Certain filings on Form 10-D will have a delayed adoption. Additionally, Form ABS EE issuers will need to comply with the hyperlinking rule once the SEC completes technical programming to allow issuers to include these forms in a single submission.
- What if a hyperlink is inaccurate or does not function properly? Registrants must correct a nonfunctioning hyperlink or hyperlink to the wrong exhibit by filing (in the case of a registration statement that is not yet effective) a pre-effective amendment to that registration statement. When a registration statement is already effective or part of an Exchange Act report, an amendment with a proper link to the exhibit is required in the next Exchange Act periodic report.
- Can an issuer link to an external website? The SEC reminded issuers that EDGAR does not accept documents with hyperlinks to external websites.
Comprehending the nuances of hyperlinking will help issuers understand how the new rules will modernize disclosure procedures and make it easier for investors to locate exhibits attached to their corporate financial filings by streamlining the search process. By asking the right questions now, issuers will be able to implement new practices effectively and ensure minimal disruption once the changes go into effect.
This piece is a follow-up to an earlier article by John Truzzolino, SEC Votes on Inline Use of XBRL.