November 3, 2021

Annual Reporting: Don’t Read New MD&A Rules in a Vacuum

Last year, the SEC amended Reg S-K’s financial disclosure rules, including several provisions of Item 303, which governs the content of the MD&A section of periodic reports and registration statements.  This Bryan Cave blog provides a reminder that the new rules are now in effect, and that compliance will be required in any report filed for a fiscal year ending on or after August 9, 2021,  So, if you’re a Sept. 30 fiscal year end company, this means you!

This excerpt points out that although the new disclosure requirements were intended to streamline the MD&A, they shouldn’t be read in a vacuum:

The 2020 amendments were adopted by the SEC in a 3-2 vote along party lines. Since that time, the composition of the SEC has changed, reflecting President Biden’s appointment of Gary Gensler as Chair of the SEC. The pendulum may be swinging back, at least somewhat, from principles-based disclosure to rules-based disclosure. Accordingly, while companies must comply with the current MD&A requirements of Item 303 of Regulation S-K, those requirements should be read in conjunction with other recent guidance, such as the SEC’s recently published sample comment letter on climate change discussed in our September 23, 2021 post.

The blog also points out that the SEC is expected to propose climate change and potentially other ESG disclosure requirements in the coming months. Those proposed rules are unlikely to become effective before the upcoming reporting season, but they still may impact investor expectations and Staff comments.

John Jenkins