The SEC recently published final rules that allow publicly traded bank holding companies and banks to simplify their public disclosures and provide more meaningful information to investors. Most of the rules become effective on May 2, 2019, which allow many registrants to benefit from them on their Form 10-Q filings for the quarter ended March 31, 2019.
This post is intended to highlight those changes that we expect to be most significant to registrants in the banking industry. BCLP has also produced a more thorough summary of the final rules as applicable to all registrants. The complete, 252-page adopting release is available here.
Most registrants provide three years of MD&A narrative. The new rule allows such registrants to omit discussion of the earliest of the three years if such discussion was previously filed, so that the 10-K MD&A will address only the year being reported and the previous year. Smaller reporting companies are only required to provide two years of financials and MD&A (and emerging growth companies are allowed to omit periods prior to their IPO), so these registrants will not see any benefit from this change.
The revisions to the MD&A requirements also eliminate the requirement that issuers provide a year-to-year comparison. In the related commentary in the adopting release, the SEC characterizes this change as providing registrants flexibility to tailor their presentation. Hopefully, over time, the SEC’s expressed purpose will encourage creative approaches to this area.
Exhibits – Material Contracts
Previously, a two year “lookback” applied, such that material contracts entered into in the two years prior to the filing were required to be disclosed on the exhibit index even if the contracts had been fully performed. A common example is merger agreements—companies are currently required to continue to file merger agreements as exhibits even after closing. The new rule eliminates this requirement (other than for newly public companies), such that material contracts that have been fully performed are no longer required to be disclosed.