May 19, 2014

Where Did “Form 10-K” Get That “10” & “K” From Anyways?

As the proxy season ends for many, it’s time to unwind with some trivial pursuit in the “securities law” category. The full answer is probably lost to the bins of history, but a member recently asked the question in our “Q&A Forum” (#7837) about where do the “10” and “K” come from in “Form 10-K,” comparing the logic of the “Q” in “Form 10-Q”? Here is Dave’s answer:

Form 10-K was adopted shortly after the creation of the SEC in 1934. Form 10-Q was adopted many, many years after that in Release 34-9004 (October 28, 1970). When Form 10-Q was adopted, the SEC rescinded Form 9-K, which had required semi-annual reports. I think what happened is the SEC had adopted many reports with a “K” designation over the years, and then moved away from that with 10-Q and some other more recent vintage forms.

When to Register Under the ’34 Act? The Messy Test for # of Shareholders

As noted in this Conglomerate Blog, the Section 12(g) registration test continues to be a topic that is debated. It reminded me of this Keith Bishop blog about how messy the threshold is. And it also reminds me of this note from a member back when Congress was fast-tracking the JOBS Act without any analysis:

500, 1,000, 2,000 – pick a number, any number. I note that the 1964 Special Study conducted a comprehensive survey of companies that traded in the OTC market to support developing (1) what the measure should be and (2) what the threshold under that measure should be. And actually, based on the data, the Study recommended a threshold of 300 holders. Now maybe someone in Congress today could actually develop a basis for their figure, but that would be asking way too much. I think we need a new measure, but Congress seems hell-bent on # of holders. Oh well – lost opportunity.

History Lesson: ’34 Act Reporting Requirements

A member responded to my recent history blog by providing me some background on the Section 12 reporting requirements. This provides some background to my statement: “I just found a reference that only exchange-listed companies in the early ’60s had to file 10-Ks with SEC.” Here’s today’s history lesson:

– Section 12(g) didn’t exist prior to 1964, it was added to the ’34 Act in 1964 by Section 3(c) of the Securities Acts Amendments of 1964.
– The purpose was to bring OTC securities into the ’34 Act reporting regime and put them on same footing as exchange-listed securities.
– A report of the House Committee on Interstate and Foreign Commerce accompanying H.R. 6793, the version of the bill introduced in the House, stated that “Section 3(c) of the bill would .. . provide for registration of securities traded in the over- the-counter market and for disclosure by issuers thereof comparable to the registration and disclosures required in connection with listed securities.”
– A 1981 SEC release cited a report on its study that led to the 1964 Amendments, describing the scope of the registration and reporting provisions of Exchange Act as extending “to all issuers presumed to be the subject of active investor interest in the over-the-counter market.”
– A 1986 SEC release stated that the numerical thresholds contained in Section 12(g) were selected because it was believed “that issuers in these categories had sufficiently active trading markets and public interest and consequently were in need of mandatory disclosure to ensure the protection of investors.”

– Broc Romanek