Annual SEC Reporting – Two Points to Note

Capital Markets Blog
February 2, 2023

Public companies with a calendar fiscal year are already in the process of preparing their Annual Report on Form 10-K and their glossy Annual Report to Shareholders.  Here are two technical points to remember that are new this year:

Form 10-K Cover Page

The Securities and Exchange Commission (SEC) recently finalized an updated template for the Form 10-K cover page with two new paragraphs.  The changes come from final rules the SEC adopted last October that require the NYSE and Nasdaq to adopt listing requirements relating to the clawback of erroneously awarded compensation in the event of a restatement of financial statements (whether “big R” or “little r”). The following go between the check box on internal control over financial reporting (ICFR) attestation under 404(b) and the “shell company” check box:

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Each of these check boxes will require an in-line XBRL element, so including them may be necessary for EDGAR to accept the filing.

The SEC staff recently added a CDI concerning the Form 10-K cover page changes.  CDI 121H.01 explains that companies subject to the new NYSE and Nasdaq listing standards will not be required to adopt a recovery policy for 60 days after the date on which the applicable listing standard becomes effective and that those new listing standards are not required to be effective until November 28, 2023.  The CDI goes on to say that even though the Form 10-K, Form 40-F and Form 20-F will be updated to include the questions shown above, companies are not required to answer them until after they have a recovery policy under the applicable listing standard.

Despite this staff position, a company may want to check the box on the first question if their financial statements do include a restatement, so that the cover page matches disclosure within the filing.

Glossy Annual Report to Shareholders

In June 2022, the SEC adopted amendments that will require companies to submit their “glossy” Annual Report to Shareholders in electronic form on EDGAR, under cover of Form ARS.  Companies that have relied on SEC staff guidance from 2016 permitting them to omit filing paper copies with the SEC by instead posting the glossy annual report on their website for at least a year, may drop that practice now that the report must be filed on EDGAR, although we expect many companies will continue to post their glossy annual reports as an investor relations matter.  Because glossy annual reports often contain many pictures and graphics, they may exceed EDGAR’s file size limits.  We recommend planning ahead for this new filing requirement to ensure that the Annual Report to Shareholders can be filed in electronic form.  Compressing the form may run afoul of the final rule’s requirement that the PDF capture the graphics, styles of presentation and prominence of disclosures contained in the report, and the SEC’s admonition that the glossy report not be re-formatted, re-sized or otherwise re-designed for purposes of the submission to EDGAR. The SEC’s adopting release also signaled that EDGAR may be upgraded in the future to support formats other than PDF for the glossy annual report.

If you have any questions about these changes, your regular Locke Lord contact or any of the authors can discuss these matters with you.

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