The Securities and Exchange Commission has approved an interim final rule that clarifies how Form 10-K filers may provide a summary of business and financial information contained in the annual report. It implements a provision of the Fixing America’s Surface Transportation (FAST) Act.

The interim rule provides filers with flexibility in preparing the summary as long as it includes hyperlinks to related, more detailed disclosures in the Form 10-K.

Although current rules do not prohibit a registrant from including voluntary information, such as a summary, in its Form 10-K, the SEC is amending Part IV of Form 10-K to add new Item 16. It will expressly allow a registrant, at its option, to include a summary in the Form 10-K. To implement the statutory requirement that each item in the summary be accompanied by an electronic or other cross-reference, new Item 16 requires that each summary topic be hyperlinked to the related, more detailed disclosure item in the Form 10-K. 

“In light of the varied nature of registrants’ size and operations, we believe that registrants should have the flexibility to determine how best to prepare the summary,” the interim final rule says. “Accordingly, the amendment does not prescribe the length of the summary (other than to state that the summary shall be brief), specify the Form 10-K disclosure items that should be covered by the summary, or dictate where the summary must appear in the Form 10-K.”  The SEC recognizes that “it might not be practicable or necessary to summarize every Form 10-K disclosure item,” therefore the amendment is principles-based, affording registrants flexibility when deciding which items to summarize, as long as the information is presented fairly and  accurately.

The interim rule solicits public comment on whether a revised version should include other specific requirements and guidance, or be expanded to include other annual reporting forms. Specific questions include:

Are companies and investors likely to find a Form 10-K summary useful? If so, should we propose mandating a summary?

Would it be helpful to EDGAR users for the Form 10-K summary or a link to the summary to be displayed on a registrant’s EDGAR search results landing page?

Should we impose a length limitation on the summary? If so, what limitation would be appropriate (a page limit, word limit, character limit)?

Should we provide further guidance on preparation of the summary?

Should we require that the summary appear at the beginning of the Form 10-K?

Should we require certain content or a specific format for the Form 10-K summary? Should we propose to require registrants choosing to prepare a summary to include specified Form 10-K items, such as the MD&A?

Are there some items that registrants should not be permitted to include in a summary? If so, which items should be required to be included in, or excluded from, the summary?

Should we require registrants that cannot include a summary of Part III information (because that information will be incorporated by reference from a later filed proxy or information statement involving the election of directors) to file a Form 10-K amendment to update the summary to reflect the Part III information when that information is filed with the proxy or information statement?  

Are there other cross-reference methods that we should allow in lieu of, or in addition to, hyperlinks? 

Should we propose to amend other annual reporting forms, such as Form 20-F filed by foreign private issuers, or Form 1-K filed by issuers that have conducted a Regulation A offering, to expressly allow a summary similar to the approach we are adopting for Form 10-K? Would such revisions be useful given that our rules do not prohibit such registrants from voluntarily including a summary in their annual reports?

The interim final rule will become effective when published in the Federal Register and the public comment period will remain open for 30 days.