On June 1, the SEC issued a new Interim Final Rule, amending Item 16 of Part IV to the Form 10-K, specifically permitting issuers to include a summary section in an Annual Report on Form 10-K.
The summary section will permit issuers to summarize information contained in other parts of the Form 10-K that is filed, provided the items are presented fairly and accurately. While the use of summary sections in Annual Reports was not prohibited by the SEC, the new interim final rule will require that any summary now contain hyperlinks to the more fulsome, relevant sections of the Form 10-K.
The SEC did not provide any guidance as to the length, content or location of a summary section. However, the SEC did express concern that investors may choose only to focus on the summary section instead of the full Annual Report. Based on the SEC’s approach to registration statements containing summary sections, we would anticipate that any summary in a Form 10-K will be required to contain “balanced” disclosure, covering both positive information, as well as material risks.
If an issuer chooses to not include the executive compensation and other disclosures required by Part III of the Form 10-K and instead includes such disclosure in the proxy statement, the summary does not need to updated.