In this blog post, we highlight five reminders that may be useful for issuers preparing and filing quarterly reports on Form 10-Q in the coming weeks.

1. Include Trading Arrangements Disclosure Under Item 408(a) of Regulation S-K. Domestic issuers (other than smaller reporting companies) are required to comply with the new disclosure requirements in Item 408(a) of Regulation S-K for fiscal quarters commencing on or after April 1, 2023.[1] For calendar-year issuers, compliance with the new disclosure requirements will be required in the upcoming second quarter Form 10-Q. See our previous post, Reminder: Tracking Rule 10b5-1 Plans and Disclosure Timing, for transition periods by fiscal year-end.

Under Item 408(a), issuers must disclose the adoption or termination of any “Rule 10b5-1 trading arrangement” and/or “non-Rule 10b5-1 trading arrangement” (collectively, “trading arrangements”) by directors or officers during the last fiscal quarter.[2] The new rules also provide that any modification or change to the amount, price, or timing of the purchase or sale of the securities in Rule 10b5-1 trading arrangements is a termination of the existing trading arrangement and the adoption of a new trading arrangement.[3] Therefore, disclosure under Item 408(a) would also need to reflect these changes to trading arrangements made by directors or officers during the last fiscal quarter.

Issuers are required to state whether the trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934 (Exchange Act) and include the material terms of the trading arrangement. The rules specifically exclude pricing terms from required disclosure, but list as examples of material terms the following: i) the name and title of the director or officer; ii) the adoption or termination date of the trading arrangement; and iii) the aggregate number of securities to be purchased or sold under the trading arrangement. When the number of securities to be sold is not readily ascertainable on the date of disclosure (for example, if the trading arrangement covers the sale of to-be-purchased ESPP shares or the sale of net shares after tax withholding), issuers should consider including both quantitative and qualitative information to help readers understand the potential aggregate number of securities that may be purchased or sold. Issuers may include additional disclosure regarding the trading arrangement if desired, including the purpose of the plan (for example, investment diversification, covering taxes), frequency of transactions, and/or the percentage of the director’s or officer’s holdings included or retained after the sales.

There is no prescribed form of disclosure, and issuers may decide to disclose information in narrative or tabular format, or a combination of both. Regardless of the form of disclosure, issuers will need to provide this disclosure in inline XBRL format, including block text tagging of narrative disclosures, and detail tagging of quantitative amounts disclosed within the narrative disclosures.

2. Include Share Repurchase Disclosure Under Current Item 703 of Regulation S-K. The new share repurchase disclosure rules will be effective on July 31, 2023, but the U.S. Securities and Exchange Commission (SEC) provided a transition period for compliance—domestic issuers will be required to comply with the new rules for fiscal quarters commencing on or after October 1, 2023. For a discussion of the new share repurchase disclosure rules, please see our previous Client Alert. For calendar-year issuers, compliance with the new rules will be required in the Form 10-K for the fiscal year ending December 31, 2023.[4] Although current Item 703 of Regulation S-K will be amended effective July 31, 2023, and domestic issuers will not be required to comply with amended Item 703 of Regulation S-K until the end of the transition period, issuers filing periodic reports on or after July 31, 2023, should continue to report repurchases under current Item 703 of Regulation S-K, including share repurchases per month on a quarterly basis, until required to disclose under amended Item 703 of Regulation S-K.

3. Review and Update Risk Factors, as Needed. Issuers should review the risk factors from their most recently filed Form 10-K, or 10-Q if applicable, and consider whether there are any material updates that should be made. Various events or circumstances, such as continuing macroeconomic issues, cybersecurity incidents, the expiration of the federal COVID-19 Public Health Emergency declaration effective in May 2023, recent updates to state privacy laws (for example, the recent updates discussed here and here), and the recent expansion of export controls and sanctions on Russia and Belarus, may warrant updates to risk factors.

4. Review and Update Exhibit List, as Needed. Issuers should review any corporate actions taken during the fiscal quarter covered by its upcoming Form 10-Q to ensure all applicable exhibits required under Item 601 of Regulation S-K are added to the exhibit list. Some possible updates to the exhibit list may include the following:

• where an issuer amended its charter or its equity plans following approval by its stockholders at its annual meeting of stockholders in May or June, including, for example, charter amendments providing for officer exculpation or equity plan amendments to increase the share reserve pool, the issuer should update the exhibit list in the Form 10-Q and file a complete copy of the amended charter or equity plan as an exhibit, or include a hyperlink to the complete copy of the amended charter or equity plan if included as an exhibit to a previous Form 8-K filing;
• where an issuer amended its bylaws during the fiscal quarter covered by its upcoming Form 10-Q including, for example, bylaw amendments in response to Exchange Act Rule 14a-19, the issuer should update the exhibit list in the Form 10-Q and file a complete copy of the amended bylaws as an exhibit, or include a hyperlink to the complete copy of the amended bylaws if included as an exhibit to a previous Form 8-K filing; and
• where an issuer entered into an immaterial amendment to a previously filed material contract, the issuer should file this amendment as an exhibit to the Form 10-Q.

5.Review Latest Form and Officer Certifications. On a quarterly basis, issuers should review the latest version of the Form 10-Q form including the cover page, which the SEC generally maintains here, and carefully review the officer certifications required under Items 601(b)(31) and (32) of Regulation S-K. Regarding the officer certifications, issuers should ensure that the certifications include the current names and titles of the applicable officers, include the applicable date, and include conformed signatures, prior to filing. In addition, where the issuer is no longer able to omit portions of the certification required under Item 601(b)(31) relating to the officers’ responsibility for designing, establishing, and maintaining internal control over financial reporting, the issuer should ensure that the full certification is included in each periodic filing going forward.[5]

[1] Item 408(a) of Regulation S-K does not apply to foreign private issuers (FPIs). In addition, smaller reporting companies are not required to comply with the new disclosure requirements in Item 408(a) of Regulation S-K until their first periodic report that covers the first full fiscal quarter that begins on or after October 1, 2023.

[2] Item 408(a) provides that a Rule 10b5-1 trading arrangement is any contract, instruction, or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c). In addition, Item 408(a) provides that an officer means officers as defined in Exchange Act Rule 16a-1(f).

Item 408(c) provides that a director or officer has entered into a non-Rule 10b5-1 trading arrangement where 1) the director or officer asserts that at a time when they were not aware of material nonpublic information about the security or the issuer of the security they had adopted a written arrangement for trading the securities and 2) the trading arrangement i) specified the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold; ii) included a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold; or iii) did not permit the director or officer to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition, that any other person who, pursuant to the trading arrangement, did exercise such influence must not have been aware of material nonpublic information when doing so.

[3] See Insider Trading Arrangements and Related Disclosures, 87 Fed. Reg. at 80382 (December 29, 2022) and Exchange Act Rule 10b5-1(c)(1)(iv).

[4] FPIs will be required to comply with the new rules beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024. The Form 20-F narrative disclosure (and tagging) that relates to the Form F-SR filings will be required beginning in the first Form 20-F after their first Form F-SR has been filed.

[5] Exchange Act Rule 13a-14(a) allows issuers to omit the portion of the introductory language in paragraph 4 and the language in paragraph 4(b) of the officer certifications required under Item 601(b)(31) that refer to the officers’ responsibility for designing, establishing, and maintaining internal control over financial reporting for the issuer until the issuer is required to file, or has filed, a Form 10-K for the prior fiscal year.