SEC Seeks Public Input on Subpart 400 of Regulation S-K in Connection with its Disclosure Effectiveness Initiative

By Jack Bowling and Drew Kuettel

At the end of August, the U.S. Securities and Exchange Commission (SEC) issued a release seeking public input on the disclosure requirements found in Subpart 400 of Regulation S-K (Comments Request). Subpart 400 requires disclosure regarding a registrant’s management, certain substantial security holders, and corporate governance matters. The Comments Request is part of the SEC’s Disclosure Effectiveness Initiative, a program mandated in part by recent legislation such as the securities law portions of the Fixing America’s Surface Transportation Act (FAST Act) and the Jumpstart Our Business Startups Act (JOBS Act).

Prior to the Comments Request, the SEC issued a comprehensive concept release in April 2016, seeking public comment on modernizing the business and financial disclosure requirements of Regulation S-K, requirements that have remained largely unchanged for decades (Concept Release). Since Subpart 400 has been amended more frequently than other parts of Regulation S-K, the suggestions received pursuant to the Comments Release may initially take a back seat to those responsive to the Concept Release. Nevertheless, the Comments Request presents a unique opportunity for registrants to suggest potential changes to the disclosure requirements of Regulation S-K, Subpart 400:

  • Item 401 generally requires certain disclosures about a registrant’s directors, executive officers, promoters and control persons.
  • Item 402 generally requires disclosure of all plan and non-plan compensation awarded to, earned by, or paid to a registrant’s named executive officers and directors.
  • Item 403 generally requires a description of the security ownership of certain beneficial owners and management.
  • Item 404 generally requires a description of certain transactions with related persons, promoters and certain control persons.
  • Item 405 generally requires a registrant to identify certain persons who failed to file on a timely basis, as disclosed in certain forms, reports required by Section 16(a) of the Securities Exchange Act during the most recent fiscal year or prior fiscal years.
  • Item 406 generally requires disclosures about whether the registrant has adopted a code of ethics that applies to certain of the registrant’s executive officers, or persons performing similar functions, and, if it has not adopted such a code of ethics, an explanation why it has not done so.
  • Item 407 generally requires certain corporate governance disclosure about director independence, board meetings, various board committees (e.g., nominating, audit and compensation committees) and any process for shareholder communications.

Unlike certain other SEC requests for public commentary that seek specific feedback, the Comments Request broadly invites suggestions "that can include comments on existing requirements in [the] rules as well as potential disclosure issues that commenters believe the rules should address." Comments are due by October 31, 2016, and may be submitted in a variety of electronic and paper formats. See pages 1–2 of the Comments Release for specific instructions.

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