The role of the SEC in regulating financial disclosures
The Securities and Exchange Commission (SEC) was established to govern market trading of company securities in the United States. One of the SEC’s primary focuses is to regulate financial disclosures by requiring public companies to file specific annual and periodic reports. These filings provide accurate and relevant information to data consumers and investors about the company’s financial position and business operations.
Why companies are required to file these forms
Companies are required to file annual and periodic reports with the SEC and adhere to strict reporting standards to provide transparency regarding the company’s performance and protect investors so they can make informed investment decisions. These reporting standards set by the SEC ensure consistency in financial reporting. Filings such as public company registration statements, periodic reports and other securities forms are made available and can be accessed by consumers and investors through the EDGAR system.
Why it matters: The significance of transparency and investor protection
Transparency is the foundation for a healthy financial market. By requiring companies to disclose their financial performance and business operations, it enables investors to develop an ongoing understanding of a company’s financial story and evaluate opportunities and risks essential for making smart investment decisions.
SEC Forms in-focus
Form 10-K: The annual financial story
SEC Form 10-K is a report that public companies are required to file annually with the SEC within a certain amount of time after the end of their fiscal year. The deadline to file a Form 10-K is based on a company’s filer status:
- Large accelerated filers: 60 days after FYE
- Accelerated filers: 75 days after FYE
- All other filers: 90 days after FYE
This report provides a comprehensive view of a company’s financial position and additional business disclosures, such as key operational details, audited financial statements, market risks, and corporate governance. Form 10-K provides essential information for investors to gain a deep understanding of a company’s long-term performance.
Form 10-Q: The quarterly pulse check
SEC Form 10-Q is a quarterly performance report that is required to be filed with the SEC for the first three quarters of the fiscal year. This report includes unaudited financial statements and provides investors with an ongoing, comprehensive view of a company’s financial performance during the year. Form 10-Q allows investors to identify any emerging trends or issues by comparing the prior quarter to the current one, and the same quarter last year to the current one.
Form 20-F: The annual report for foreign companies
SEC Form 20-F is the primary disclosure document for foreign private issuers that are listed on U.S. exchanges. Equivalent to the 10-K, Form 20-F provides reporting information about the company’s key operational details, market risks, corporate governance and financial statements. This form ensures that foreign private issuers adhere to standardized reporting requirements, providing transparency and making it easier for investors to compare them with domestic companies.
Form 40-F: The Canadian connection
SEC Form 40-F, also known as the Registration and Annual Report, is filed by Canadian companies for two purposes depending upon the content being disclosed.
- As an annual report
- As a registration statement under the 1934 Act
Similar to the Form 10-K and Form 20-F, this form provides a comprehensive view of the company’s financial position and business operations. This form helps maintain consistency and transparency for Canadian companies trading in the U.S. market, enabling investors to make well-informed decisions.
Form 8-K: Current report for significant events
SEC Form 8-K is used to report major material events or significant corporate changes that occur between reporting periods. Companies are required to file a Form 8-K within four business days of most events to ensure the SEC and investors are immediately informed of the material change. Examples of events that must be reported include:
- Acquisitions
- Bankruptcy
- Change or removal of a director
Form 6-K: Foreign private issuer report
SEC Form 6-K is filed by foreign private issuers with the SEC to report any material information that foreign companies make public in their home country. This form helps to ensure cross-border transparency of information and investor protection. Form 6-K is also used to report any additional material information arising between annual reports and often includes the issuer’s latest financials.
Building a complete financial picture and the importance of cross-referencing information
In summary, Forms 10-K, 10-Q, 20-F and 40-F share detailed information and insights into the company’s overall financial performance and business operational details, while Forms 8-K and 6-K are filed to provide timely and relevant updates on significant material changes.
With access to these various forms on SEC.gov, investors can utilize the information shared collectively within these filings to spot emerging trends and risks. Through analyzing these filings and noticing significant trends, investors can develop a more accurate understanding of a company’s financial story to make informed investment decisions. For example, an investor might compare a Form 10-K and Form 10-Q to identify changes within the financials, while also viewing a Form 8-K to gather information on potential material changes that could be impacting the company’s financial performance.
Inline XBRL tagging provides transparency
The SEC requires Inline XBRL tagging of the financial statements in Form 10-K, 10-Q, 20-F and 40-F filings, as well as the cover page of these filings and 8-K submissions. The SEC has increasingly adopted structured data, including Inline XBRL, to improve the quality and transparency of disclosures to investors and the market. Inline XBRL embeds the tagging within the HMTL document making the data both human and machine readable. The SEC has expanded iXBRL tagging in recent years to include an array of other disclosures within periodic reports, including recently cybersecurity and Insider Trading practices. Quality tagging of financial and other disclosures in interim and annual reports allows comparison of data across companies and improves the data that investors use to make investment decisions.
How Toppan Merrill can help
For 55+ years, the dedicated SEC reporting experts at Toppan Merrill have supported issuers navigating the ’33, ’34 and ’40 Act regulatory disclosure requirements and filing process. Connect with one of our experts at [email protected] or by calling 800.688.4400.
