Regulation S-K is a prescribed regulation under the US Securities Act of 1933 that lays out reporting requirements for various SEC filings used by public companies. Companies are also often called issuers (issuing or contemplating issuing shares), filers (entities that must file reports with the SEC) or registrants (entities that must register (usually shares) with the SEC).
Regulation S-K is generally focused on qualitative descriptions while the related Regulation S-X focuses on financial statements.
Applicability In a company's history, Regulation S-K first applies with the Form S-1 that companies use to register their securities with the U.S. Securities and Exchange Commission (SEC) as the "registration statement under the Securities Act of 1933". Thereafter, Regulation S-K applies to the ongoing reporting requirements in documents such as forms 10-K and 8-K.
Regulation S-K applies to: registration statements under the Securities Act to the extent provided in the forms to be used for registration under that Act; registration statements under section 12 of the Securities Exchange Act of 1934, also known as subpart C of part 249 of this chapter (17 CFR Part 229); annual or other reports under sections 13 and 15(d); going-private transaction statements under section 13; tender offer statements under sections 13 and 14; annual reports to security holders and proxy and information statements under section 14; and any other documents required to be filed under the Exchange Act, to the extent provided in the forms and rules under that Act.
A public company is initially impacted by Regulation S-K with its IPO (initial public offering of shares). Form S-1 contains the basic business and financial information on an issuer with respect to a specific securities offering. Investors may use the prospectus to consider the merits of an offering and make educated investment decisions. A prospectus is one of the main documents used by an investor to research a company prior to an initial public offering.
Form S-1 has an OMB approval number of 3235–0065 and the online form is only 8 pages. However, the simplicity of the form's design is belied by the OMB Office's figure of the estimated average burden – 972 hours.
Regulation S-K (the "K" can be thought of as a reporting classification as for Form 10-K) cannot be considered in a vacuum, and indeed all the securities regulations and associated law may form a very large body of information. Professionals in the field of securities compliance reporting will need to be aware of other rules and regulations as noted at the Division of Corporation Finance.
Rules, regulations, and schedules commonly associated with Regulation S-K Regulation S-X [17 CFR Part 210]: Form and content of and requirements for financial statements Regulation M-A [17 CFR 229.1000 – 229.1016]: Mergers and acquisitions Regulation AB [17 CFR 229.1100 – 229.1123]: Asset-backed securities Industry Guides: Securities Act and Exchange Act Industry Guides General Rules and Regulations from the Securities Act of 1933 [17 CFR Part 230] Rule 144 [17 CFR 230.144]: Defines persons legally deemed not to be engaged in a distribution and therefore not treated as underwriters Regulation C [17 CFR 230.401 – 230.498]: Registration and filing requirements Regulation D [17 CFR 230.501 – 230.508]: Rules for limited offer and sale of securities without registration Regulation S [17 CFR 230.901 – 230.905]: Rules governing offers and sales made outside the United States
Regulation S-K: Highlights by item
Item 10: General Item 10 suggests management make reasonable projections for the future. Security ratings are voluntarily permitted for classes of debt securities, convertible debt securities, and preferred stock. Incorporation by reference is defined; no piggy-back referencing (no reference to a reference in another filed document) is allowed. Non-GAAP financial measures are discouraged. Smaller companies are allowed to only fill in items 101, 201, 301, 302, 303, 305, 402, 404, 407, 503, 504, and 601.
Business
Item 101: Description of Business The initial portion of this information is relatively simple – e.g., incorporation and address – but item 101 then asks for how the company is doing in its various industry segments and a thorough description of both the company's current business and how it intends to do business in future. These requirements provide transparency to the company's investors and may provide information relevant to competitors. Some requirements for reports to shareholders are also stated.
Item 102: Description of Property This section requires disclosure of information on physical property, such as land, buildings such as plants, mines, oil, and gas reserves; this requirement has likewise been criticized, by some commenters to the December 12, 2007 concept release for potentially assisting a company's competitors. Industry Guides sometimes indicate what must be disclosed.
Item 103: Legal Proceedings This section requires disclosure of any material pending legal proceedings (other than ordinary routine litigation incidental to the business, such as lawsuits against an insurance company's customers) to which the registrant or any of its subsidiaries is a party or of which any of their property is the subject; this especially includes "environmental actions" and any (other) proceedings known to be under contemplation by governmental authorities. This section must include a description of the factual basis alleged to underlie the proceedings and the court action(s) sought.
Item 104: Mine Safety Disclosure This section requires disclosure of certain information pertaining to mine operations, if the registrant operates mines.
Item 105: Risk Factors This section requires disclosure of the material factors that make an investment in the registrant or offering speculative or risky. The risk factors must be written in plain english and organized logically with relevant headings. Registrants are discouraged from presenting risks that could apply generically to any registrant. Instead, registrants must concisely explain how each risk affects the registrant or the securities being offered.
Securities of the registrant
Item 201: Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters While this information is usually available through Internet search engines, it must still be disclosed in detail. This disclosure is especially important for smaller companies whose stocks trade infrequently and for companies trading on multiple markets (including more than one market per type of common stock). The number of shareholders and all holders of five percent or more of shares must be revealed.
Dividend history and intent to pay or not pay dividends must be discussed. Securities authorized for issuance under equity compensation plans must be revealed; this also involves Regulation S-X. A performance graph that shows the "yearly percentage change in the registrant's cumulative total shareholder return on a class of common stock" is required. Figures must also be compared with one or more "peer issuer(s) selected in good faith".
Item 202: Description of Registrant's Securities This section involves describing different share classes and any provisions of the registrant's charter or by-laws that affect them, such as any clauses that may act as a "poison pill". In addition, such factors as liability of shares to foreign tax must be disclosed.
Financial information
Item 301: Selected Financial Data
This item asks for selected financial data to be presented, in a comparative columnar form, for each of the last five fiscal years and any additional fiscal years necessary to prevent the information from being misleading.17 C.F.R. §229.301 Such financial data should include net sales or operating revenues, income (loss) from continuing operations, income (loss) from continuing operations per common share, total assets, long-term obligations and redeemable preferred stock, and cash dividends declared per common share.See S-K Item 301, Instructions 1 and 2 The financial data can also include any additional items that would help with understanding the financial condition and results of operations.See S-K Item 301, Instruction 2.
Item 302: Supplementary Financial Information Regarding quarterly financial data, this item looks for changes caused by such events as: disposals of business segments; extraordinary, unusual or infrequently occurring items; and matters related to gas and oil. Regulation S-X is relevant to this item.
Item 303: Management's discussion and analysis (MD&A) of financial condition and results of operations Item 303 requires a narrative explanation of any changes in the financial condition or results of operation of a company. The SEC expects that the MD&A meaningfully reflects the results of operations, liquidity, capital resources, and the impact of inflation.See Reg S-K, Item 303 Its objectives are: to provide in one section of a filing, material historical and prospective textual disclosure enabling investors and others to assess the financial condition and result of operations of the registrant, with particular emphasis on the registrant's prospects for the future.Securities Act Release No. 6835 (May 18, 1989) Because the registrant must disclose a known trend or uncertainty that would likely have a material effect on the registrant's financial condition or result of operations, the MD&A should include management's identification and evaluation of the information important to providing investors and others an accurate understanding of the company's current and prospective financial position and operating results.See Securities Act Release No. 6835 (May 18, 1989); Instructions to Item 303 Per Regulation S-K, in the MD&A companies are required to disclose any known trends, events, or uncertainties that are "reasonably likely to result in a registrant's liquidity increasing or decreasing in a material way".
This section can be lengthy. E.g., in Google, Inc.'s 2009 10-K filing, the "Management's discussion and analysis of financial condition and results of operations" section was 20 pages long.Google's 2009 10-K filing
Item 304: Changes In and Disagreements With Accountants on Accounting and Financial Disclosure This item highlights any disagreements between the company and its auditors and accountants. Such disagreements can cause difficulties with the validity of financial statements and with Regulation S-X, so are rarely reported under this item.
Item 305: Quantitative and Qualitative Disclosures about Market Risk Companies are given a choice of three disclosure alternatives: Tabular presentation of information related to market risk sensitive instruments; Sensitivity analysis of potential loss in future earnings, fair values, or cash flows of market risk sensitive instruments; or Value-at-risk disclosures of the potential loss in future earnings, fair values, or cash flows of market risk sensitive instruments from relevant market rates or prices. This disclosure may be done either mathematically or with a narrative explanation within, for instance, the company's Annual Report.Wal-Mart Market risk assessment
Item 307: Disclosure Controls and Procedures This extremely brief item asks "Disclose the conclusions of the registrant's principal executive and principal financial officers ... regarding the effectiveness of the registrant's disclosure controls and procedures ... as of the end of the period covered by the report, based on the evaluation of these controls and procedures". Despite its brevity, this item requires significant auditing and other work.
Item 308: Internal Control over Financial Reporting