SEC Amends Regulation S-K Item 101, 103 and 105

Regulation S-K

On August 26, 2020, the Securities and Exchange Commission (the “SEC”) finalized its proposed rule amending the disclosure requirements under Items 101, 103, and 105 of Regulation S-K. The revisions to Regulation S- K modernize SEC disclosure requirements and provide investors with more meaningful information about an issuer’s business, legal proceedings, and risks of an investment in the issuer’s securities. They also reduce the burden on issuers to disclose certain information that might be immaterial to the issuer’s business. Items 101, 103 and 105 have not been substantially revised for over 30 years.  Issuers conducting direct public offerings or filing registration statements on Form F-1 or Form S-1 should be aware of these changes and adjust their filings appropriately.

The revisions to Regulation S-K will become effective 30 days after the final rule is published in the Federal Register.

The revisions are discussed in detail below.

Item 101(a) Description of the Business

Prior to the Regulation S-K revisions, Item 101(a) of Regulation S-K required disclosure of the general development of an issuer’s business, its subsidiaries, and any predecessors in the past five years, or such shorter period as the issuer may have been engaged in business, and set specific categories of disclosure.

Revised Item 101(a) eliminates the five-year timeframe in order to permit issuers to make disclosures as frequently as appropriate, and requires disclosure of all information material to an investor’s understanding of the general development of the issuer’s business. Under amended Item 101, disclosure may include, but should not be limited to, the following information:

  • material changes to the issuer’s previously disclosed business strategy;
  • the nature and effects of any material event such as bankruptcy, receivership, or similar proceeding with respect to the issuer or its significant subsidiaries;
  • the nature and effects of any material reclassification, merger, or consolidation of the issuer or its significant subsidiaries; and
  • the acquisition or disposition of any material amount of assets by the issuer other than in the ordinary course of business.

Item 101(a), as amended, permits the issuer to incorporate by reference, by use of a hyperlink, the most recent full discussion of the general development of its business from a prior SEC filing and to provide only an update to disclose material changes for the applicable reporting period.

As amended, Item 101(a) only permits reference to a single prior document for the full discussion of the business. If the issuer disclosed material changes in prior filings that did not contain the full discussion of the development of the business, the updated disclosures must be included in the current filing again. In the alternative, the issuer may provide a full discussion of the development of the business in any subsequent filing without linking back to its prior disclosures.

Item 101(c) Description of the Business Narrative

Regulation S-K Item 101(c) previously required a narrative description of the issuer’s business, including, to the extent material, a list of line item disclosures. The amendments to Item 101(c) sets forth a non-exclusive list of disclosures:

  • revenue-generating activities, products, and/or services, and any dependence on revenue-generating activities, key products, services, product families, or customers, including governmental customers;
  • status of development efforts for new or enhanced products, trends in market demand, and competitive conditions (with the caveat that disclosure of proprietary information is not required);
  • resources material to an issuer’s business; including both sources and availability of raw materials and the duration and effect of all patents, trademarks, licenses, franchises, and concessions held;
  • a description of any material portion of the business that may be subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government;
  • seasonality of the business;
  • material effects that compliance with government regulations, including environmental regulations, may have upon the capital expenditures, earnings, and competitive position of the issuer and its subsidiaries, including the estimated capital expenditures for environmental control facilities for the current fiscal year and any other material subsequent period; and
  • a description of the issuer’s human capital resources, including the number of persons employed by the issuer, and any human capital measures or objectives that the issuer focuses on in managing the business (such as, depending on the nature of the issuer’s business and workforce, measures or objectives that address the development, attraction, and retention of personnel).

The amendments to Item 101(c) add as a disclosure item the description of the issuer’s human capital resources and refocuses the regulatory compliance disclosures to include all material government regulations and not only environmental laws.

Item 101(h) Smaller Reporting Companies

Amended Regulation S-K includes corresponding amendments to the disclosure requirements for smaller reporting companies in Item 101(h) of Regulation S-K. As amended, the rule eliminates the three-year disclosure period and permits the use of hyperlinks to prior disclosures in subsequent filings.

Item 103 Legal Proceedings

Item 103 of Regulation S-K requires disclosure of any material pending legal proceedings, excluding routine litigation incidental to the business, and disclosure of certain details of the proceeding (court or agency, date, parties, facts as alleged, relief sought). In addition, Item 103 currently requires disclosure of proceedings under environmental laws unless the issuer believes the reward under such proceeding would not exceed $100,000.

Item 103, as amended, allows an issuer to use hyperlinks or cross-references to other sections of an SEC filing where these same details are provided. In addition, the SEC increased the $100,000 of monetary sanctions to $300,000 for disclosure of certain environmental proceedings or such other amount that the issuer determines, in its discretion. If the issuer elects to use a threshold other than $300,000, it must also disclose that threshold in each annual and quarterly report. It should be noted  that disclosure is required, regardless of the issuer’s determination of its threshold, for any proceeding that could result in sanctions over the lesser of one million dollars or 1% of the current assets of the issuer and its subsidiaries.

Item 105 Risk Factors

Item 105 of Regulation S-K requires disclosure of the material risks impacting an investment in the issuer. The amendments require:

  • a concise, bulleted, or numbered summary of the risk factors, no longer than two pages in length, if the risk factors section exceeds 15 pages,
  • disclosure of only the “material” risk factors opposed to the “most significant” risk factors, and
  • disclosure of risk factors under relevant headings in addition to the subcaptions currently required, with any risk factors that may generally apply to an investment in the issuer’s securities disclosed at the end of the risk factor section under a separate heading.


These amendments to Regulation S-K will make it easier for issuers to comply with the disclosures required by Items 101, 103 and 105.  Being allowed to reference prior disclosures using hyperlinks and cross-references will eliminate duplicative disclosures.

Issuers should make sure to read and understand the requirements of the new final rule, and to implement them in all future periodic filings made with the SEC.

For further information, please contact us at [email protected] or 561-416-8956. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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