[Federal Register Volume 84, Number 164 (Friday, August 23, 2019)]
[Proposed Rules]
[Pages 44358-44390]
[FR Doc No: 2019-17410]

Vol. 84

Friday,

No. 164

August 23, 2019

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 239, and 240

Modernization of Regulation S-K Items 101, 103, and 105; Proposed Rule

Federal Register / Vol. 84 , No. 164 / Friday, August 23, 2019 /
Proposed Rules

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SECURITIES AND EXCHANGE COMMISSION

17 CFR 229, 239, and 240

[Release Nos. 33-10668; 34-86614; File No. S7-11-19]
RIN 3235-AL78

Modernization of Regulation S-K Items 101, 103, and 105

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is
proposing for public comment amendments to modernize the description of
business, legal proceedings, and risk factor disclosures that
registrants are required to make pursuant to Regulation S-K. These
disclosure items have not undergone significant revisions in over 30
years. The proposed amendments are intended to update our rules to
account for developments since their adoption or last amendment, to
improve these disclosures for investors, and to simplify compliance
efforts for registrants. Specifically, the proposed amendments are
intended to improve the readability of disclosure documents, as well as
discourage repetition and disclosure of information that is not
material.

DATES: Comments should be received on or before October 22, 2019.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/proposed.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number S7-11-19 on the subject line.

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.

All submissions should refer to File Number S7-11-19. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. We will post all comments on our internet website (https://www.sec.gov/rules/proposed.shtml). Comments are also available for
website viewing and printing in our Public Reference Room, 100 F Street
NE, Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. All comments received will be posted without
change. Persons submitting comments are cautioned that we do not redact
or edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly.
    We or the staff may add studies, memoranda, or other substantive
items to the comment file during this rulemaking. A notification of the
inclusion in the comment file of any such materials will be made
available on our website. To ensure direct electronic receipt of such
notifications, sign up through the ``Stay Connected'' option at
www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Sandra Hunter Berkheimer or Elliot
Staffin, Office of Rulemaking, at<PHONE_NUMBER>, in the Division of
Corporation Finance, U.S. Securities and Exchange Commission, 100 F
Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are proposing to amend 17 CFR 229.101
(``Item 101''), 17 CFR 229.103 (``Item 103''), and 17 CFR 229.105
(``Item 105'') of 17 CFR 229.10 et seq. (``Regulation S-K'') under the
Securities Act of 1933 (the ``Securities Act'') and the Securities
Exchange Act of 1934 (the ``Exchange Act'').

Table of Contents

I. Introduction and Background
II. Description of the Proposed Amendments
    A. General Development of Business (Item 101(a))
    B. Narrative Description of Business (Item 101(c))
    C. Legal Proceedings (Item 103)
    D. Risk Factors (Item 105)
III. General Request for Comments
IV. Economic Analysis
    A. Baseline and Affected Parties
    B. Potential Costs and Benefits
    C. Anticipated Effects on Efficiency, Competition, and Capital
Formation
    D. Alternatives
    E. Request for Comments
V. Paperwork Reduction Act
    A. Summary of the Collections of Information
    B. Summary of the Proposed Amendments' Effects on the
Collections of Information
    C. Incremental and Aggregate Burden and Cost Estimates for the
Proposed Amendments
VI. Regulatory Flexibility Act Certification
VII. Small Business Regulatory Enforcement Fairness Act
VIII. Statutory Authority and Text of Proposed Rule and Form
Amendments

I. Introduction and Background

    We are proposing amendments to modernize the description of
business (Item 101), legal proceedings (Item 103), and risk factor
(Item 105) disclosure requirements in Regulation S-K. We are proposing
amendments to these items to improve these disclosures for investors
and to simplify compliance for registrants.\1\
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    \1\ The proposed amendments are also consistent with and further
promote the objectives of the Fixing America's Surface
Transportation Act (``FAST Act''). See Public Law 114-94, 129 Stat.
1312 (Dec. 4, 2015) (requiring, among other things, that the SEC
conduct a study, issue a report and issue a proposed rule on the
modernization and simplification of Regulation S-K). In the Report
on Modernization and Simplification of Regulation S-K, the staff
recommended that the Commission consider combining the description
of material physical properties required in Item 102 with the
description of business in Item 101(c). See Report on Modernization
and Simplification of Regulation S-K (Nov. 23, 2016), available at
https://www.sec.gov/reportspubs/sec-fast-act-report-2016.pdf. The
Commission considered the staff recommendation, but did not propose
to combine Item 102 with Item 101. See FAST Act Modernization and
Simplification of Regulation S-K, Release No. 33-10425 ((Oct. 11,
2017) [82 FR 50988 (Nov. 2, 2017)]. Instead, the Commission adopted
amendments to Item 102 to emphasize the materiality standard
applicable to that disclosure, while preserving the industry-
specific instructions to that Item. See FAST Act Modernization and
Simplification of Regulation S-K, Release No. 33-10618 (Mar. 20,
2019) [84 FR 12674 (April 2, 2019)] (``FAST Act Adopting Release'').
We believe that, in light of our proposed amendments to Item 101,
combining the two items would not improve registrants' business
disclosure or simplify compliance.
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    Pursuant to Section 108 of the Jumpstart Our Business Startups Act
(``JOBS Act''),\2\ the Commission staff prepared the Report on Review
of Disclosure Requirements in Regulation S-K (``S-K Study''),\3\ which
recommended that the Commission conduct a comprehensive evaluation of
its disclosure requirements. Based on the S-K Study's recommendation,
the staff initiated an evaluation of the information our rules require
registrants to disclose, how this information is presented, where this
information is disclosed, and how we can better leverage technology as
part of these efforts (collectively, the ``Disclosure Effectiveness
Initiative'').\4\ The overall objective of the Disclosure Effectiveness
Initiative is to improve our disclosure regime for both investors and
registrants.
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    \2\ Public Law 112-106, Sec. 108, 126 Stat. 306 (2012). Section
108 of the JOBS Act required the Commission to conduct a review of
Regulation S-K to determine how such requirements can be updated to
modernize and simplify the registration process for emerging growth
companies.
    \3\ See Report on Review of Disclosure Requirements in
Regulation S-K (Dec. 2013), available at https://www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf (``S-K
Study'').
    \4\ See SEC Spotlight on Disclosure Effectiveness, available at
https://www.sec.gov/spotlight/disclosure-effectiveness.shtml.

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    In connection with the S-K Study and the launch of the Disclosure
Effectiveness Initiative, the Commission staff received public input on
how to improve registrant disclosures.\5\ In a separate Concept Release
issued in 2016,\6\ the Commission staff revisited the business and
financial disclosure requirements in Regulation S-K and requested
public comment on whether they provide the information that investors
need to make informed investment and voting decisions, and whether any
of our rules have become outdated or unnecessary.
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    \5\ In connection with the S-K Study, we received public
comments on regulatory initiatives to be undertaken in response to
the JOBS Act. See Comments on SEC Regulatory Initiatives Under the
JOBS Act: Title I--Review of Regulation S-K, available at http://www.sec.gov/comments/jobs-title-i/reviewreg-sk/reviewreg-sk.shtml.
To facilitate public input on the Disclosure Effectiveness
Initiative, members of the public were invited to submit comments.
See Request for Public Comment, available at http://www.sec.gov/spotlight/disclosure-effectiveness.shtml. Public comments received
to date on the topic of Disclosure Effectiveness are available on
our website. See Comments on Disclosure Effectiveness, available at
https://www.sec.gov/comments/disclosure-effectiveness/disclosureeffectiveness.shtml. We refer to these letters throughout
as ``Disclosure Effectiveness'' letters.
    \6\ See Business and Financial Disclosure Required by Regulation
S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23915 (Apr. 22,
2016)] (``Concept Release'').
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    In developing the proposed amendments, we considered input from
comment letters we received in response to these disclosure
modernization efforts.\7\ We also took into account the staff's
experience with Regulation S-K arising from the Division of Corporation
Finance's disclosure review program and changes in the regulatory and
business landscape since the adoption of Regulation S-K.
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    \7\ Unless otherwise indicated, comments cited in this release
are to the public comments on the Concept Release, supra note 6,
which are available at https://www.sec.gov/comments/s7-06-16/s70616.htm.
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    Regulation S-K was adopted in 1977 to foster uniform and integrated
disclosure for registration statements under both the Securities Act
and the Exchange Act, and other Exchange Act filings, including
periodic and current reports.\8\ In 1982, the Commission expanded and
reorganized Regulation S-K to be the central repository for its non-
financial statement disclosure requirements.\9\ The Commission's goals
in adopting integrated disclosure were to revise or eliminate
overlapping or unnecessary disclosure requirements wherever possible,
thereby reducing burdens on registrants and enhancing readability
without affecting the provision of information material to an
investment decision.\10\
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    \8\ The Commission adopted the initial version of Regulation S-K
following issuance of the report by the Advisory Committee on
Corporate Disclosure led by former Commissioner A.A. Sommer, Jr.,
which recommended adoption of a single integrated disclosure system.
See Report of the Advisory Committee on Corporate Disclosure to the
Securities and Exchange Commission, Cmte. Print 95-29, House Cmte.
On Interstate and Foreign Commerce, 95th Cong., 1st. Sess (Nov. 3,
1977) (``Report of the Advisory Committee''), available at http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/papers/1970/1977_1103_AdvisoryDisclosure.pdf. This version of
Regulation S-K included only two disclosure requirements--a
description of business and a description of properties. See Concept
Release, supra note 6, and accompanying text.
    \9\ See Adoption of Integrated Disclosure System, Release No.
33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)] (``1982
Integrated Disclosure Adopting Release'').
    \10\ See id.
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    The Commission adopted line-item requirements in Regulation S-K to
elicit specific disclosure within broad categories of information
material to an investment decision. Some of these requirements provide
registrants with the flexibility to determine the disclosure that is
material to an investment decision.\11\ These disclosure requirements
are often referred to as ``principles-based'' because they articulate a
disclosure concept rather than a specific line-item requirement.\12\
Principles-based rules rely on a registrant's management to evaluate
the significance of information in the context of the registrant's
overall business and financial circumstances and to determine whether
disclosure is necessary.\13\ As the Commission stated in the Concept
Release, emphasizing principles-based disclosure may allow a registrant
to more effectively tailor its disclosure to provide the information
about its specific business and financial condition that is material to
an investment decision and in turn may reduce the amount of disclosure
that may be irrelevant, outdated or immaterial.\14\
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    \11\ On several occasions, the Commission has reiterated that
its requirements seek disclosure of information material to an
investment decision. See, e.g., Commission Guidance Regarding
Disclosure Related to Climate Change, Release No. 33-9106 (Feb. 8,
2010) [75 FR 6290 (Feb. 8, 2010)] (``Climate Change Release'') at
6292-6293 (reiterating that information is material if there is a
substantial likelihood that a reasonable investor would consider it
important in deciding how to vote or make an investment decision,
or, put another way, if the information would alter the total mix of
available information); Statement of the Commission Regarding
Disclosure of Year 2000 Issues and Consequences by Public Companies,
Investment Advisers, Investment Companies, and Municipal Securities
Issuers, Release No. 33-7558 (July 29, 1998) [63 FR 41394 (Aug. 4,
1998)] at 41395 (stating that our disclosure framework requires
companies to disclose material information that enables investors to
make informed investment decisions).
    \12\ See Executive Compensation and Related Person Disclosure,
Release No. 33-8732A (Aug. 29, 2006) [71 FR 53157 (Sept. 8, 2006)]
(``As described in the Proposing Release and as adopted, the
Compensation Discussion and Analysis requirement is principles-
based, in that it identifies the disclosure concept and provides
several illustrative examples.'').
    \13\ See Report of the Advisory Committee, supra note 8
(``Although the initial materiality determination is management's,
this judgment is, of course, subject to challenge or question by the
Commission or in the courts.'').
    \14\ See Concept Release, supra note 6.
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    In contrast, some line-item requirements in Regulation S-K employ
bright-line, quantitative thresholds to specify when disclosure is
required, or require all registrants to disclose the same type of
information. These requirements are sometimes referred to as
``prescriptive'' disclosure requirements because they do not rely on
management's judgment to determine when disclosure is required. The
benefits of prescriptive disclosure requirements can include
comparability, consistency, and ease in determining when information
must be disclosed.\15\
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    \15\ See id. For a discussion of the potential economic effects
of switching from a prescriptive to a more principles-based
disclosure requirement, including a potential loss of comparability,
see infra Sections IV.B.1 and 2 and IV.D.
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    The Concept Release sought input on whether our disclosure
requirements should be more principles-based, prescriptive, or a
combination of both. Many commenters supported a more principles-based
approach \16\ while

other commenters supported some combination of both principles-based
and prescriptive rules.\17\
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    \16\ See letters from R.G. Associates, Inc. (July 6, 2016)
(``RGA''), American Bankers Association (July 15, 2016), Deloitte &
Touche LLP (July 15, 2016) (``Deloitte''), New York State Society of
Certified Public Accountants (July 19, 2016) (``NYSSCPA''), U.S.
Chamber of Commerce (July 20, 2016) (``Chamber''), BDO USA LLP (July
20, 2016) (``BDO''), Corporate Governance Coalition for Investor
Value (July 20, 2016) (``CGCIV''), International Integrated
Reporting Council (July 20, 2016) (``IIRC''), Railpen Investments
(July 21, 2016) (``Railpen''), National Association of Manufacturers
(July 21, 2016) (``NAM''), American Chemistry Council (July 19,
2016) (``ACC''), The American Petroleum Institute (July 21, 2018)
(``API''), Business Roundtable (July 21, 2016), UnitedHealth Group,
Inc. (July 21, 2016) (``United Health''), Center for Audit Quality
(July 21, 2016) (``CAQ''), Securities Industry and Financial Markets
Association (July 21, 2016) (``SIFMA''), Ernst & Young LLP (July 21,
2016) (``E&Y''), PNC Financial Services Group (July 21, 2016)
(``PNC''), Edison Electric Institute and American Gas Association
(July 21, 2016) (``EEI and AGA''), Grant Thornton LLP (July 21,
2016) (``Grant''), KPMG LLP (July 21, 2016) (``KPMG''),
PricewaterhouseCoopers LLP (July 21, 2016) (``PWC''), Cornerstone
Capital Inc. (July 21, 2016) (``Cornerstone''), Crowe Horwath LLP
(July 21, 2016) (``Crowe''), America Gas Association (July 21, 2016)
(``AGA''), Prologis, Inc. (July 21, 2016) (``Prologis''), National
Association of Real Estate Investment Trusts (July 21, 2016)
(``NAREIT''), Allstate Insurance Company (July 21, 2016)
(``Allstate''), Davis Polk & Wardwell LLP (July 22, 2016)
(``Davis''), Chevron Corporation (July 22, 2016) (``Chevron''),
Fenwick West LLP (Aug. 1, 2016) (``Fenwick''), Reardon Firm (Aug. 3,
2016) (``Reardon''), National Investor Relations Institute (Aug. 4,
2016) (``NIRI''), Sullivan & Cromwell LLP (Aug. 9, 2016), Exxon
Mobil Corporation (Aug. 9, 2016), FedEx Corporation (July 21, 2016)
(``FedEx''), Institute of Management Accountants (July 29, 2016),
Shearman & Sterling LLP (Aug. 31, 2016) (``Shearman''), Nasdaq, Inc.
(Sept. 16, 2016) (``Nasdaq''), Northrop Grumman Corporation (Sept.
27, 2016), General Motors Company (Sept. 30, 2016) (``General
Motors'') and Financial Executives International (Oct. 3, 2016)
(``Financial Executives International'').
    \17\ See letters from Council of Institutional Investors (July
8, 2016) (``CII''), Railpen, New York State Comptroller (July 21,
2016) (``NYSC''), California State Teachers' Retirement System (July
21, 2016) (``CalSTRS''), Pension Investment Association of Canada
(July 17, 2016), Medical Benefits Trust (July 15, 2016) (``Medical
Benefits Trust''), Principles for Responsible Investment (July 19,
2016) (``PRI''), Legal & General Investment Management (July 20,
2016) (``LGIM''), Walden Asset Management (July 19, 2016)
(``Walden''), SEC Investor Advisory Committee (June 15, 2016)
(``IAC''), AFLAC (July 19, 2016) (``AFLAC''), Domini Social
Investments LLC (July 21, 2016) (``Domini Social''), NYC Comptroller
(July 21, 2016) (``NYC Comptroller''), AFL-CIO (July 21, 2016)
(``AFL-CIO''), California Public Employees' Retirement System (July
21, 2016) (``CalPERS''), British Columbia Investment Management
Corporation (July 21, 2016), Stephen Percoco (July 24, 2016) (``S.
Percoco''), Americans for Financial Reform (Aug. 10, 2016)
(``Americans for Financial Reform'') and CFA Institute (Oct. 6,
2016) (``CFA Institute''). Four commenters supported a combination
that emphasized a principles-based approach (Walden, AFLAC, Ball
Corporation (July 19, 2016) (``Ball Corporation'') and S. Percoco)
and seven commenters supported a combination that emphasized a
prescriptive approach (IAC, NYC Comptroller, American Federation of
State, County and Municipal Employees (July 21, 2016) (``AFSCME''),
Maryland State Bar Association (July 21, 2016) (``Maryland Bar
Securities Committee''), AFL-CIO, Americans for Financial Reform and
CFA Institute).
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    We are proposing amendments to Items 101, 103, and 105 \18\ in
light of the many changes that have occurred in our capital markets and
the domestic and global economy in the more than 30 years since their
adoption, including changes in the mix of businesses that participate
in our public markets, changes in the way businesses operate, which may
affect the relevance of current disclosure requirements, changes in
technology (in particular the availability of information), and changes
such as inflation that have occurred simply with the passage of
time.\19\ For example, Item 101 mandates certain disclosures that may
be outdated while Item 103 includes a dollar threshold for proceedings
related to environmental protection laws that was set in 1982.\20\
Further, numerous commenters cited the risk factor disclosure
requirements as needing improvement.\21\ We believe that modernizing
these disclosure items would result in improved disclosure, tailored to
reflect registrants' particular circumstances, and reduce disclosure
costs and burdens.
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    \18\ The Commission recently rescinded Item 503(c) of Regulation
S-K and replaced it with new Item 105 of Regulation S-K. See FAST
Act Adopting Release, supra note 1.
    \19\ See infra note 279 (noting that while Items 101, 103, and
105 have not undergone significant revisions in over 30 years, many
characteristics of the registrants have changed substantially over
this time period).
    \20\ See id.
    \21\ See, e.g., letters from CAQ, AFLAC, Chamber, FedEx, CGCIV,
NAM, ACC, SIFMA, E&Y, EEI and AGA, Wilson Sonsini Goodrich & Rosati
(July 21, 2016) (``Wilson Sonsini''), NAREIT, Davis, Fenwick, NIRI,
Shearman, PWC, General Motors, and Financial Executives
International.
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    For each of the disclosure requirements addressed in this release,
we considered the merits and drawbacks of pursuing a principles-based
versus prescriptive approach. We also considered each requirement as a
component of a broader framework that will achieve the disclosure
objectives of the Securities Act and the Exchange Act in the most
effective and efficient manner. As discussed in greater detail in
Section II below, we propose to revise Items 101(a) (description of the
general development of the business), 101(c) (narrative description of
the business), and 105 (risk factors) to emphasize a principles-based
approach because the current disclosure requirements may not reflect
what is material to every business, and, as past developments have
demonstrated, disclosure requirements, and in particular prescriptive
disclosure requirements, can become outdated in these areas. We believe
this approach would elicit more relevant disclosures about these items.
In contrast, we are proposing a more prescriptive approach for Item 103
because that requirement depends less on the specific characteristics
of individual registrants.
    Our proposed amendments would: \22\
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    \22\ We are also proposing amendments to Item 101(h) of
Regulation S-K [17 CFR 229.101(h)], which permits a smaller
reporting company to fulfill its disclosure obligations under Item
101, including with respect to its business development, by
providing the disclosure specified under paragraph (h). ``Smaller
reporting company'' is defined in 17 CFR 229.10(f) as an issuer that
is not an investment company, an asset-backed issuer (as defined in
17 CFR 229.1101), or a majority-owned subsidiary of a parent that is
not a smaller reporting company and that: (i) Had a public float of
less than $250 million; or (ii) had annual revenues of less than
$100 million and either: (A) No public float; or (B) a public float
of less than $700 million. Business development companies, which are
a type of investment company, are not eligible to be smaller
reporting companies. See, e.g., Smaller Reporting Company Regulatory
Relief and Simplification, Release No. 33-8819 [(July 5, 2007) [72
FR 39670 (July 19, 2007)], at 39674.
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     Revise Item 101(a) to be largely principles-based,
requiring:
    [cir] Disclosure of information material \23\ to an understanding
of the general development of the business and eliminating a prescribed
timeframe for this disclosure; and
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    \23\ Information is material if there is a substantial
likelihood that a reasonable investor would consider the information
important in deciding how to vote or make an investment decision.
See supra note 14 and accompanying text.
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    [cir] In filings made after a registrant's initial filing, only an
update of the general development of the business with a focus on
material developments in the reporting period with a hyperlink to the
registrant's most recent filing (e.g., initial registration statement
or more recent filing if one exists) that, together with the update,
would contain the full discussion of the general development of the
registrant's business.
     Revise Item 101(c) to:
    [cir] Clarify and expand its principles-based approach, with
disclosure topics drawn from a subset of the topics currently contained
in Item 101(c);
    [cir] Include, as a disclosure topic, human capital resources,
including any human capital measures or objectives that management
focuses on in managing the business, to the extent such disclosures
would be material to an understanding of the registrant's business; and
    [cir] Refocus the regulatory compliance requirement by including
material government regulations, not just environmental laws, as a
topic.
     Revise Item 103 to:
    [cir] Expressly state that the required information may be provided
by including hyperlinks or cross-references to legal proceedings
disclosure located elsewhere in the document in an effort to encourage
registrants to avoid duplicative disclosure; and
    [cir] Revise the $100,000 threshold for disclosure of environmental
proceedings to which the government is a party to $300,000 to adjust
for inflation.
     Revise Item 105 to:
    [cir] Require summary risk factor disclosure if the risk factor
section exceeds 15 pages;
    [cir] Refine the principles-based approach of Item 105 by changing
the disclosure standard from the ``most significant'' factors to the
``material'' factors; and
    [cir] Require risk factors to be organized under relevant headings,
with any risk factors that may generally apply to an investment in
securities disclosed at the end of the risk factor section under a
separate caption.\24\
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    \24\ The proposed amendments to Items 101 and 103 will affect
only domestic registrants and ``foreign private issuers'' that have
elected to file on domestic forms. This is because Regulation S-K
does not apply to foreign private issuers unless a form reserved for
foreign private issuers (such as Securities Act Form F-1, F-3, or F-
4) specifically refers to Regulation S-K. Instead of Items 101 and
103, the foreign private issuer forms refer to Part I of Form 20-F.
See, e.g., Item 4.a. of Form F-1. In contrast, the proposed
amendment to Item 105 will affect both domestic and foreign
registrants because Forms F-1, F-3, and F-4, like their domestic
counterparts, all refer to that Item. See, e.g., Item 3 of Form F-1.
A foreign private issuer is any foreign issuer other than a foreign
government, except for an issuer that (1) has more than 50% of its
outstanding voting securities held of record by U.S. residents; and
(2) any of the following: (i) A majority of its officers and
directors are citizens or residents of the United States; (ii) more
than 50% of its assets are located in the United States; or (iii)
its business is principally administered in the United States. 17
CFR 230.405. See also 17 CFR 240.3b-4(c).

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    We welcome feedback and encourage interested parties to submit
comments on any or all aspects of the proposed amendments. When
commenting, it would be most helpful if you include the reasoning
behind your position or recommendation.

II. Description of the Proposed Amendments

A. General Development of Business (Item 101(a))

    Item 101(a) of Regulation S-K requires a description of the general
development of the business of the registrant during the past five
years, or such shorter period as the registrant may have been engaged
in business.\25\ In describing the general development of the business,
Item 101(a)(1) requires disclosure of the following:
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    \25\ 17 CFR 229.101(a). Item 101(a) states that information
shall be disclosed for earlier periods if material to an
understanding of the general development of the business.
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     The year in which the registrant was organized and its
form of organization;
     The nature and results of any bankruptcy, receivership or
similar proceedings with respect to the registrant or any of its
significant subsidiaries;
     The nature and results of any other material
reclassification, merger or consolidation of the registrant or any of
its significant subsidiaries;
     The acquisition or disposition of any material amount of
assets otherwise than in the ordinary course of business; and
     Any material changes in the mode of conducting the
business.\26\
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    \26\ 17 CFR 229.101(a).
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    The Concept Release solicited input on whether the disclosure
provided under this Item continues to be useful and how this Item might
be improved.\27\ A number of commenters recommended eliminating or
streamlining the requirements in Item 101(a).\28\ Several of these
commenters recommended limiting Item 101(a) disclosure to material
developments,\29\ and a few commenters supported executive summaries
and layering techniques for the business section.\30\
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    \27\ See Concept Release, supra note 6, at 23932.
    \28\ See letters from Allstate, Chamber, FedEx, CGCIV, EEI and
AGA, Fenwick, NAREIT, NIRI, NYSSCPA, PNC, SIFMA, Davis, General
Motors, and Financial Executives International.
    \29\ See letters from NAREIT, PNC, SIFMA, and Fenwick.
    \30\ See letters from Deloitte and CAQ.
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    In light of the feedback received, we are proposing amendments to
Item 101(a)(1) that would provide more flexibility to tailor
disclosures to the unique circumstances of each registrant, which in
turn could result in improved disclosures for investors. In addition,
for filings other than initial registration statements, we are
proposing to require only material updates to this disclosure.
1. Eliminate Prescribed Timeframe
    Item 101(a) requires a description of the general development of
the registrant's business during the past five years, or such shorter
period as the registrant may have engaged in business.\31\ A
requirement to provide a brief outline of the general development of
the business for the preceding five years was included in the earliest
form requirements for registration statements and annual reports,\32\
and the first version of Regulation S-K adopted in 1977 included a
requirement to describe the development of the registrant's business
during the prior five years, or such shorter period as the registrant
may have been in business.\33\
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    \31\ 17 CFR 229.101(a).
    \32\ See, e.g., Item 6 of Form A-2 adopted in 1935, which
required registrants to outline briefly ``the general development of
the business for the preceding five years.'' See Release No. 33-276
(Jan. 14, 1935) [not published in the Federal Register].
Additionally, Item 5 of Form A-1, adopted in 1933, required
registrants to briefly describe the length of time the registrant
had been engaged in its business. See Release No. 33-5 (July 6,
1933) [not published in the Federal Register]. See also S-K Study,
supra note 3 at 32, n. 88.
    \33\ See Adoption of Disclosure Regulation and Amendments of
Disclosure Forms and Rules, Release No. 33-5893 (Dec. 23, 1977) [42
FR 65554 (Dec. 30, 1977)].
---------------------------------------------------------------------------

    The Concept Release solicited comments on whether the current five-
year timeframe for this disclosure is appropriate, or whether a shorter
or longer timeframe should be considered.\34\ Several commenters
recommended reducing the five-year timeframe for disclosure to a two-
or three-year timeframe, or permitting well-established companies to
provide the information through other means (such as a filer
information page on the company's website) with updates only required
every three years or more frequently if there has been a substantial
change.\35\ One of these commenters suggested linking the timeframe to
the two years presented in the financial statements to allow users to
focus on material events in the current period.\36\ Some of these
commenters noted that this information does not change significantly
from year to year and indicated that repeating these disclosures each
year, especially for well-established companies, provides limited value
to investors and may potentially obscure or distract from more
important information included in the document.\37\
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    \34\ See Concept Release, supra note 6.
    \35\ See letters from Allstate, NYSSCPA, and EEI and AGA.
    \36\ See letter from Allstate.
    \37\ See letters from EEI and AGA.
---------------------------------------------------------------------------

    We do not think it is necessary to prescribe a timeframe for which
registrants should provide disclosure regarding the general development
of their business. The currently required five-year timeframe may not
elicit the most relevant disclosure for every registrant. Some
registrants may prefer to describe the development of their business
over a longer period in order to provide the information that may be
material to an investment decision, while others may conclude that the
material aspects of their business development can be described over a
shorter timeframe. We are proposing to revise Item 101(a) to eliminate
the five-year disclosure timeframe and require registrants to focus on
the information material to an understanding of the development of
their business, irrespective of a specific timeframe. For similar
reasons, we are also proposing to revise Item 101(h) to eliminate the
provision that currently requires smaller reporting companies to
describe the development of their business during the last three
years.\38\ We believe that these proposed revisions would result in
disclosure of information that is material to investors' understanding
of the development of a registrant's business while reducing outdated
and irrelevant disclosure.
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    \38\ We are proposing only to eliminate the required timeframe
in Item 101(h). We are, however, proposing to retain the requirement
that if a smaller reporting company has not been in business for
three years, it must provide the same information for its
predecessors if there are any.
---------------------------------------------------------------------------

2. Require Only Updated Disclosure in Subsequent Filings
    Currently registrants are required to provide disclosure regarding
the general development of the business in

registration statements and annual reports.\39\ The Concept Release
sought comment on whether to allow registrants to omit this disclosure
from filings other than the initial Securities or Exchange Act
registration statement filed by the registrant and instead disclose
only material changes in subsequent reports.\40\
---------------------------------------------------------------------------

    \39\ See 17 CFR 229.101(a).
    \40\ See Concept Release, supra note 6.
---------------------------------------------------------------------------

    Several commenters recommended revising the requirement to
distinguish between new and established registrants, stating that much
of the disclosure required under this Item is redundant for registrants
already subject to the reporting requirements.\41\ Many of these
commenters supported limiting the full disclosure required by Item
101(a) to the initial filing and only requiring disclosure of material
changes in subsequent filings,\42\ with a few of these commenters
supporting the use of cross-references or hyperlinks to either the
prior full disclosure or the relevant Form 8-K \43\ reports of material
developments.\44\ A few commenters opposed limiting the full disclosure
required by Items 101(a) and 101(c) to initial filings with follow-up
disclosure of material changes in subsequent filings based on the
belief that such a revision would require investors to search through
multiple filings in a time-consuming attempt to understand the current
state of a registrant's business development and operations.\45\
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    \41\ See letters from Chamber, FedEx, CGCIV, EEI and AGA, PNC,
and SIFMA.
    \42\ See letters from SIFMA, PNC, Allstate, and Fenwick.
    \43\ 17 CFR 249.308.
    \44\ See letters from SIFMA and PNC.
    \45\ See letter from Maryland Bar Securities Committee; see also
letter from RGA (stating that it is not always possible to fully
understand a registrant's business if its business development must
be ascertained from a variety of sources).
---------------------------------------------------------------------------

    We propose to retain the requirement for registrants to describe
the general development of the business in initial registration
statements under the Securities Act and Exchange Act.\46\ For filings
subsequent to a registrant's initial registration statement, we propose
revising Item 101(a)(1) to require an update of this disclosure, with a
focus on material developments, if any, in the reporting period,
including if the business strategy has changed.\47\ We also propose to
require that, pursuant to Sec.  230.411 or Sec.  240.12b-23, a
registrant incorporate by reference, and include an active hyperlink
\48\ to, the most recently filed disclosure that, together with the
update, would present a full discussion of the general development of
its business.\49\ Under this approach, a reader would have access to a
full discussion by reviewing the updated disclosure and one hyperlinked
disclosure.\50\ As noted by one commenter, registrants often repeat
information from year-to-year in annual reports on Form 10-K,\51\ with
this disclosure changing very little from filing to filing.\52\ This
commenter also observed that there is no need for registrants to
include this disclosure in both registration statements and annual
reports as investors can easily access information about the general
development of business through company websites or the Commission's
EDGAR system, which was not the case when Regulation S-K was first
adopted.\53\ Because repetitive information may obscure more important
information, we believe the proposed amendments would help focus
investor attention on material developments in the reporting period. By
also requiring that a registrant use one hyperlink to connect the
updated disclosure with the previous disclosure, which together would
result in a full discussion of its general business development, the
amendment as proposed would help limit any burdensome effect on
investors caused by this discussion being located in more than one
document.\54\
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    \46\ Although, as discussed below, we propose to amend Item
101(a)(1), we are retaining Item 101(a)(2) and redesignating it as
Item 101(a)(3).
    \47\ Registrants are currently permitted to provide Item 101(a)
disclosure by incorporating by reference some or all of the required
disclosure from a previous filing pursuant to Securities Act Rule
411 (17 CFR 230.411) or Exchange Act Rule 12b-23 (17 CFR 240.12b-
23). Therefore, our proposal to require only an update of the Item
101(a)(1) disclosure in a filing made subsequent to a registrant's
initial registration statement is a clarification of our existing
rules rather than a substantive change.
    \48\ The SEC Investor Advisory Committee has recommended the use
of hyperlinks to reduce redundant disclosure in SEC filings. See
letter from IAC.
    \49\ The Commission recently revised Rules 411 and 12b-23 to
require the inclusion of an active hyperlink to information
incorporated into a registration statement or report by reference if
such information is publicly available on the Commission's
Electronic Data Gathering, Analysis, and Retrieval system
(``EDGAR''). See FAST Act Adopting Release, supra note 1 at 12694-
12695.
    \50\ Alternatively, a registrant may elect to provide a complete
discussion of its business development, including material updates,
in which case no hyperlink would be required.
    \51\ 17 CFR 249.310.
    \52\ See letter from PNC.
    \53\ See id.
    \54\ For similar reasons, we are proposing to permit a smaller
reporting company, for filings other than initial registration
statements, to provide an update to the general development of the
business disclosure, instead of a full discussion, that complies
with proposed Item 101(a)(2), including the proposed hyperlink
requirement. See the proposed amendment of Item 101(h).
---------------------------------------------------------------------------

3. Include Material Changes to Business Strategy as Potential
Disclosure Topic
    We are proposing to amend Item 101(a)(1) to be more principles-
based by providing a non-exclusive list of the types of information
that a registrant may need to disclose, and by requiring disclosure of
a topic only to the extent such information is material to an
understanding of the general development of a registrant's
business.\55\ We believe that such an approach would elicit material
disclosure for investors while also providing the flexibility to tailor
the disclosure to reflect the circumstances of each registrant.
---------------------------------------------------------------------------

    \55\ Proposed Item 101(a) refers to materiality in the
introductory language of paragraph (a)(1). While materiality is
repeated in three of the four listed topics that follow, this is not
intended to create a second or different analysis regarding
materiality for any such topic.
---------------------------------------------------------------------------

    Three of the four matters that we are proposing to list as
disclosure topics are currently covered in Item 101(a)(1):
     Material bankruptcy, receivership, or any similar
proceeding;
     The nature and effects of any material reclassification,
merger or consolidation of the registrant or any of its significant
subsidiaries; and
     The acquisition or disposition of any material amount of
assets otherwise than in the ordinary course of business.
    We are also proposing to include as a listed disclosure topic, to
the extent material to an understanding of the registrant's business,
transactions and events that affect or may affect the company's
operations, including material changes to a registrant's previously
disclosed business strategy. Item 101(a) does not currently require
disclosure of material changes to a registrant's previously disclosed
business strategy. The Concept Release solicited input on whether Item
101(a) should be revised to require the disclosure of a registrant's
business strategy; whether investors would find such disclosure
important or useful and, if so, whether this requirement should be
included in Management's Discussion and Analysis (``MD&A''); \56\ and
whether ``business strategy'' should be defined.\57\ Commenters were
divided on whether disclosure of a registrant's business strategy
should be a requirement.\58\ Most of the commenters

that opposed a mandatory business strategy disclosure requirement did
so on the grounds that because a registrant's business strategy could
be proprietary, its disclosure could cause competitive harm.\59\
---------------------------------------------------------------------------

    \56\ Item 303(a) [17 CFR 229.303(a)].
    \57\ See Concept Release, supra note 6.
    \58\ Several commenters supported requiring disclosure of a
registrant's business strategy. See, e.g., letters from IIRC, NEI
Investments (July 21, 2016), NYSSCPA, PRI, S. Percoco, AFL-CIO and
International Corporate Accountability Roundtable (July 19, 2016).
Other commenters opposed requiring disclosure of a registrant's
business strategy. See letters from Allstate, Fenwick, Maryland Bar
Securities Committee and CFA Institute, although CFA Institute
supported voluntary disclosure of a registrant's business strategy.
    \59\ See letters from Allstate, Fenwick, and Maryland Bar
Securities Committee.
---------------------------------------------------------------------------

    Many registrants currently include disclosure regarding their
business strategy in their initial registration statements. We believe
that information regarding material changes to a previously disclosed
business strategy may be material information for investors. We are
therefore proposing to include material changes to a registrant's
previously disclosed business strategy as a listed disclosure topic
under Item 101(a). However, if a registrant has not previously
disclosed its business strategy, we are not proposing to make the
disclosure of that strategy mandatory in a Commission filing because of
the concerns raised by commenters that such a requirement could force
registrants to disclose proprietary information that could be harmful
to their competitive position.\60\
---------------------------------------------------------------------------

    \60\ See, e.g., letter from Fenwick.
---------------------------------------------------------------------------

    To the extent that other matters beyond those listed in the amended
item are material to an understanding of the general development of a
registrant's business, the registrant would be required to disclose
those matters as well.
Request for Comment
    1. Is a prescribed timeframe for disclosure regarding the general
development of a registrant's business necessary or desirable? If we
should retain a prescribed timeframe, is the current five-year
timeframe appropriate, or should it be longer or shorter?
    2. Alternatively, should we require a more detailed discussion of a
registrant's general development of business on a periodic basis, such
as every three years, and summary disclosure in other years? If so,
would three years be an appropriate period, or should it be shorter or
longer?
    3. For filings other than initial registration statements, should
we no longer require a full discussion of the general development of
the registrant's business, and require instead an update to the general
development of the business disclosure with a focus on material
developments in the reporting period, as proposed?
    4. When only updated business disclosure is provided in a filing,
should we require the incorporation by reference of, and active
hyperlink to, the most recently filed disclosure that, together with
the update, would present a full discussion of the general development
of a registrant's business, as proposed? Would such an approach, which
would enable a reader to review the updated disclosure and one
hyperlinked disclosure, facilitate an investor's understanding of the
general development of a registrant's business?
    5. Would registrants find it difficult to apply the proposed
principles-based requirements? How could we alleviate any expected
difficulties?
    6. Would principles-based requirements for Item 101(a) effectively
facilitate the provision of information that is material to an
investment decision? If not, how might Item 101(a) be further improved?
    7. Should we provide a list of topics that may be material to an
understanding of a registrant's business development, as proposed? Are
the proposed topics (transactions and events that affect or may affect
the company's operations, including material changes to a previously
disclosed business strategy; bankruptcy, receivership, or any similar
proceeding; the nature and effects of any other material
reclassification, merger or consolidation of the registrant or any of
its significant subsidiaries; and the acquisition or disposition of a
material amount of assets other than in the ordinary course of
business) appropriate? Should we exclude any of our proposed topics?
Are there other topics that should be added (e.g., material changes in
the mode of conducting the business)? Should we require disclosure of
any or all of the proposed topics in all circumstances?
    8. Should we make disclosure of business strategy mandatory in
Commission filings? If so, how should ``business strategy'' be defined
and what can we do to address concerns about confidentiality?
    9. Should we revise Item 101(h) to eliminate the provision that
currently requires smaller reporting companies to describe the
development of their business during the last three years, as proposed?
Is a prescribed timeframe for such disclosure necessary or desirable?
If we should retain a prescribed timeframe, is the current three-year
timeframe appropriate, or should it be longer or shorter?
    10. We are proposing to retain the current requirement in Item
101(h) that if a smaller reporting company has not been in business for
three years, it must provide the same information for predecessor(s) of
the smaller reporting company if there are any. Should we eliminate or
adjust this predecessor disclosure requirement for smaller reporting
companies? A registrant that is not a smaller reporting company must
also provide information about its predecessors in certain
circumstances under current Item 101(a)(2). Should we eliminate the
predecessor disclosure obligations for those registrants?
    11. Should we permit certain registrants to provide the general
business development disclosure by other means (e.g., by a filer
information page on the company's website)? If so, which registrants?
Should we limit the use of such alternative means to well-known
seasoned issuers? Are there concerns raised by the posting of the
disclosure on a company's website (e.g., regarding how long the company
must retain the business development disclosure, when it must update
the disclosure, and liability issues)? If so, how should those concerns
be resolved?

B. Narrative Description of Business (Item 101(c))

    Item 101(c) requires a narrative description of the business done
and intended to be done by the registrant and its subsidiaries,
focusing upon the registrant's dominant segment or each reportable
segment about which financial information is presented in the financial
statements. To the extent material to an understanding of the
registrant's business taken as a whole, the description of each such
segment must include ten specific items listed in Item 101(c) (see
Items (1)-(10) in the list below). Item 101(c) specifies two other
items that must be discussed with respect to the registrant's business
in general (see Items (11)-(12) in the list below), although, where
material, the registrant must also identify the segments to which those
matters are significant: \61\
---------------------------------------------------------------------------

    \61\ Item 101(c)(1) [17 CFR 229.101(c)(1)] specifies that, to
the extent material to an understanding of the registrant's business
taken as a whole, the description of each segment must include the
information specified in paragraphs (c)(i) through (x). Information
in paragraphs (c)(xi) through (xiii) is required to be discussed for
the registrant's business in general; where material, the segments
to which these matters are significant also must be identified.
---------------------------------------------------------------------------

    (1) Principal products produced and services rendered;
    (2) New products or segments;
    (3) Sources and availability of raw materials;
    (4) Intellectual property;
    (5) Seasonality of the business;
    (6) Working capital practices;
    (7) Dependence on certain customers;
    (8) Dollar amount of backlog orders believed to be firm;

    (9) Business subject to renegotiation or termination of government
contracts;
    (10) Competitive conditions;
    (11) The material effects of compliance with environmental laws;
and
    (12) Number of employees.\62\
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    \62\ The Commission recently removed and reserved Item
101(c)(1)(xi), which required disclosure of company- and customer-
sponsored research and development activities, largely because U.S.
GAAP requires similar, but broader, disclosure. See Disclosure
Update and Simplification Final Rule, Release No. 33-10532 (Aug. 17,
2018) [83 FR 50148 (Oct. 4, 2018) (``DUSTR Adopting Release'').
Thus, there currently are twelve enumerated disclosure items under
Item 101(c).
---------------------------------------------------------------------------

    The earliest forms of registration statements and annual reports
required a brief outline of the general character of the business done
and intended to be done by a registrant.\63\ Many of the enumerated
disclosure requirements in Item 101(c) were adopted in 1973.\64\ The
1973 adopting release noted that, in making investment decisions,
venture capitalists and underwriters typically obtained specific
information from companies about their competitive position and methods
of competition in their respective industries and, accordingly, the new
requirements were expected to provide similar information to the
investing public.\65\ At the same time, the Commission also added
requirements for the disclosure of the amount of backlog orders, the
sources and availability of raw materials essential to the business,
the number of employees and working capital practices.\66\
---------------------------------------------------------------------------

    \63\ See, e.g., Item 5 of Form A-2 adopted in 1935, which
required registrants to outline briefly ``the general character of
the business done and intended to be done by the registrant and its
subsidiaries.'' See Release No. 33-276 (Jan. 14, 1935) [not
published in the Federal Register]. Additionally, Items 3 through 5
of Form A-1, adopted in 1933, required registrants to briefly
describe ``the character of business done or intended to be done,''
disclose a list of states where the issuer owned property and was
qualified to do business, and the length of time the registrant had
been engaged in its business. See Release No. 33-5 (July 6, 1933)
[not published in the Federal Register].
    \64\ See New Ventures, Meaningful Disclosure, Release No. 33-
5395 (June 1, 1973) [38 FR 17202 (June 29, 1973)].
    \65\ See id.
    \66\ See id.
---------------------------------------------------------------------------

    In the S-K Study, the staff recommended reviewing the description
of business for continuing relevance in light of changes that have
occurred in the way businesses operate, which may make other
disclosures relevant that are not expressly addressed under the current
requirements.\67\ The Concept Release sought comment on whether Item
101(c) continues to provide useful information to investors and how the
Item's requirements may be improved.\68\ In particular, the Concept
Release sought comment on the impact of listing the then thirteen
requirements and whether the prescriptive items result in disclosure of
information that is not important to some registrants.\69\
---------------------------------------------------------------------------

    \67\ See S-K Study, supra note 3, at 99-100.
    \68\ See Concept Release, supra note 6.
    \69\ See id.
---------------------------------------------------------------------------

    A number of commenters recommended revising Item 101(c) to make it
more principles-based.\70\ A few commenters recommended emphasizing
that the sub-items enumerated in Item 101(c) are examples only,\71\
while another commenter recommended revising the Item to specify that
registrants should consider whether information that does not fall into
the enumerated examples should nonetheless be disclosed.\72\ Some
commenters recommended retaining the Item as it currently stands.\73\
---------------------------------------------------------------------------

    \70\ See letters from Chamber, FedEx, CGCIV, BDO, United Health,
CAQ, SIFMA, E&Y, Grant, PWC, Allstate, Davis, Fenwick, General
Motors, Financial Executives International, and CFA Institute.
    \71\ See letters from SIFMA and Allstate.
    \72\ See letter from SIFMA.
    \73\ See letters from RGA, CalSTRS and S. Percoco.
---------------------------------------------------------------------------

    Because the 12 items may not be relevant to all registrants, they
can elicit disclosure that is not material to a particular registrant.
For the most part, Item 101(c) currently provides that a registrant
must disclose the enumerated items to the extent material to an
understanding of the registrant's business taken as a whole. Based on
the comments received that were critical of this provision,\74\ it
appears, however, that many registrants may interpret Item 101(c) as
requiring disclosure of each enumerated item, even if it is not
material. We believe that shifting to an updated and more principles-
based disclosure framework for Item 101(c) would encourage registrants
to exercise judgment in evaluating what disclosure to provide, which
would result in disclosure more appropriately tailored to a
registrant's specific facts and circumstances.
---------------------------------------------------------------------------

    \74\ See supra note 70.
---------------------------------------------------------------------------

    The Concept Release further sought comment on whether any of the
current requirements in Item 101(c) should be presented in a different
context, such as MD&A or risk factors.\75\ A number of commenters
provided recommendations on the requirement to disclose working capital
practices.\76\ Several of these commenters stated that working capital
practices might be better addressed in MD&A,\77\ while one commenter
suggested eliminating this disclosure from Item 101(c) because it is
typically addressed in MD&A.\78\ In addition to being explicitly
identified as a disclosure item in Item 101(c) for all registrants,
Instruction 5 to Item 303(a) states that a discussion of working
capital may be appropriate in MD&A for certain registrants.\79\ In an
effort to consolidate working capital disclosure in one location and to
avoid duplicative disclosure, we do not propose to include working
capital practices as a possible topic in Item 101(c) with the
expectation that working capital would be discussed in a registrant's
MD&A, to the extent material.
---------------------------------------------------------------------------

    \75\ See Concept Release, supra note 6.
    \76\ See letters from Chamber, FedEx, CGCIV, and Fenwick.
    \77\ See letters from Chamber, FedEx, and CGCIV.
    \78\ See letter from Fenwick.
    \79\ Instruction 5 to Item 303(a) (``For example, a discussion
of working capital may be appropriate for certain manufacturing,
industrial or related operations but might be inappropriate for a
bank or public utility.'').
---------------------------------------------------------------------------

    To facilitate application of our principles-based revisions to Item
101, we propose to include in Item 101(c) the non-exclusive list of
disclosure topics discussed below.\80\ We believe that the proposed
topics would likely be material to many registrants and, thus, would
facilitate the disclosure of information material to an investment
decision while providing flexibility to tailor disclosure to the
specific circumstances of each registrant. The proposed topics would
not be line-item requirements, but to the extent that a topic is
material to an understanding of a registrant's business, disclosure
would be required.\81\
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    \80\ We are not proposing to amend the more prescriptive
alternative disclosure standards regarding business development,
description of business, and other information specified under Item
101(h)(1) through (6). We believe that this approach will continue
to permit smaller reporting companies to provide a less detailed
description of their business, consistent with the current scaled
disclosure requirements for these companies.
    \81\ Similar to Item 101(a), proposed Item 101(c) refers to
materiality in the introductory language of paragraphs (c)(1) and
(2). While materiality is repeated in some of the listed topics that
follow, this is not intended to create a second or different
analysis regarding materiality for any such topic.
---------------------------------------------------------------------------

    Under our proposal, the revised rule would not explicitly reference
some of the disclosure requirements currently contained in Item 101(c).
In addition to working capital practices, the proposed amendments would
no longer list the following topics: Disclosure about new segments and
dollar amount of backlog orders believed to be firm. Nevertheless,
under the proposed principles-based approach, registrants still would
have to provide disclosure about these topics, as well as any other
topics regarding the registrants' business, if they are material to an
understanding of their business.
    The proposal retains Item 101(c)'s distinction between disclosure
topics

for which segment disclosure should be the primary focus, and those for
which the focus should be on the registrant's business taken as a
whole. The proposal clarifies, however, that, for any listed topic,
disclosure is required only to the extent that it is material to an
understanding of the registrant's business taken as a whole.
    Similar to current Item 101(c), most of the listed disclosure
topics would fall into the category for which segment disclosure would
be required to the extent the topic is material to an understanding of
the registrant's business taken as a whole.\82\ We believe that, for
the topic regarding the material effects of compliance with government
regulation, including environmental regulation, and the topic regarding
human capital resources, the appropriate primary focus should be with
respect to the registrant's business taken as a whole. Similar to the
current rule, however, if the information elicited regarding these two
topics is material to a particular segment, the registrant would
additionally be required to identify that segment.\83\
---------------------------------------------------------------------------

    \82\ See proposed Item 101(c)(1).
    \83\ See proposed Item 101(c)(2).
---------------------------------------------------------------------------

1. Revenue-Generating Activities, Products and/or Services, and any
Dependence on Key Products, Services, Product Families, or Customers,
Including Governmental Customers
    While we recognize that the twelve enumerated items in Item 101(c)
may not be relevant across all industries or businesses, we continue to
believe that disclosure regarding revenue-generating activities,
products and/or services, and any dependence on key products, services,
product families, or customers, including governmental customers, would
generally be material to an investment decision. We agree with the
commenter who stated that these elements are key to how reasonable
investors often evaluate the future prospects of a registrant's
business and that highlighting these topics should elicit more
informative disclosures.\84\ As such, we propose to retain as a listed
disclosure topic information regarding revenue-generating activities,
products and/or services, and any dependence on key products, services,
product families or customers, including governmental customers, to the
extent this information is material to an understanding of the
registrant's business.\85\
---------------------------------------------------------------------------

    \84\ See letter from E&Y.
    \85\ See proposed Item 101(c)(1)(i). Form S-4 refers to the
current version of Item 101(c)(1)(i), which pertained to a
registrant's principal products or services, but also refers to
Items 101(b) and (d), which pertain, respectively, to certain
financial information about business segments and geographic areas.
See paragraph (b)(3)(i) of Item 12 under Part I, Section B of Form
S-4. The Commission recently eliminated Items 101(b) and (d) as
business disclosure requirements because much of the disclosure was
duplicative of disclosure in the registrant's financial statements.
See DUSTR Adopting Release, supra note 62, at 50168-50169. Because
proposed Item 101(c)(1)(i) would continue to pertain to a
registrant's products or services, we are proposing to retain this
Item 101 provision in Form S-4, but remove Items 101(b) and (d) from
that Form to reflect their elimination from Regulation S-K. The same
paragraph of Form S-4 also includes descriptions of disclosure items
included under Items 101(b), (c)(1)(i), or (d). We are proposing to
remove the descriptor that pertains to Item 101(d) (``foreign and
domestic operations and export sales''), but retain the descriptor
``industry segments'' since that descriptor would continue to apply
to Item 101(c)(1)(i). We are proposing to substitute the descriptor
``key products or services'' for ``classes of similar products or
services'' because the proposed amendment to Item 101(c)(1)(i) would
include the former but would eliminate the latter as a listed
disclosure topic under Item 101(c)(1)(i).
---------------------------------------------------------------------------

2. Status of Development Efforts for New or Enhanced Products, Trends
in Market Demand and Competitive Conditions
    We continue to believe that disclosure regarding development
efforts for new or enhanced products, and trends in market demand and
competition would generally be material to an investment decision. In
response to the Concept Release, several commenters suggested
additional disclosure related to competitive conditions. One commenter
recommended requiring disclosure of the registrant's competitive
landscape, noting that companies not only compete within their industry
but also with entities external to their industry segment.\86\ Another
commenter supported greater disclosure of a registrant's competitive
position and especially the market share of its products, competitive
landscape and industry trends shaping the nature of competition.\87\
Rather than prescribe additional disclosures for this topic that must
be provided in all circumstances, we believe that a principles-based
approach that allows flexibility for registrants to disclose this
information to the extent it is material to an understanding of their
business would better accommodate the variety of competitive conditions
that registrants may face.\88\
---------------------------------------------------------------------------

    \86\ See letter from CFA Institute.
    \87\ See letter from S. Percoco.
    \88\ See proposed Item 101(c)(1)(ii).
---------------------------------------------------------------------------

3. Resources Material to a Registrant's Business
    Currently two of the twelve disclosure requirements in Item 101(c)
relate to registrants' resources: Item 101(c)(1)(iii) requires
disclosure of the sources and availability of raw materials, and Item
101(c)(1)(iv) requires disclosure of the importance, duration and
effect of all patents, trademarks, licenses, franchises, and
concessions held, each to the extent material to an understanding of
the registrant's business taken as a whole.\89\
---------------------------------------------------------------------------

    \89\ 17 CFR 229.101(c)(1)(iii) and (iv).
---------------------------------------------------------------------------

    As discussed in greater detail below, we propose modernizing these
disclosure requirements to refocus registrants' disclosure on all
resources material to their business. We believe that this approach
would elicit more informative disclosure tailored to the specific
circumstances of each company or its industry. To facilitate
application, we propose including (a) raw materials, and (b) patents,
trademarks, licenses, franchises and concessions held, as examples of
resources that may be material to a registrant's business.
a. Raw Materials
    Item 101(c)(1)(iii) currently requires disclosure of the sources
and availability of raw materials.\90\ In response to the Concept
Release's solicitation of feedback,\91\ we received several comment
letters that specifically addressed the requirement to disclose the
sources and availability of raw materials.\92\ Two commenters
recommended retaining this requirement.\93\ One of these commenters
specified that the disclosure requirement should be retained with a
materiality overlay,\94\ while the other commenter stated that
disclosure should only be required if raw materials are difficult to
obtain.\95\ One commenter stated that, where material, registrants
generally discuss the specific sub-items in Item 101(c), including
sources and availability of raw materials, in the business narrative or
elsewhere, including MD&A.\96\
---------------------------------------------------------------------------

    \90\ 17 CFR 229.101(c)(1)(iii).
    \91\ See Concept Release, supra note 6.
    \92\ See letters from Chamber, FedEx, CGCIV, Davis, Fenwick, and
NYSSCPA.
    \93\ See letters from Fenwick and NYSSCPA.
    \94\ See letter from Fenwick.
    \95\ See letter from NYSSCPA.
    \96\ See letter from Davis.
---------------------------------------------------------------------------

    We propose retaining sources and availability of raw materials as a
listed disclosure topic in Item 101(c) \97\ because, while not
applicable to all registrants, raw materials are fundamental to
businesses that depend on them. Although some registrants include
disclosure regarding raw materials elsewhere in disclosure documents
(such as in MD&A), this disclosure often has a different focus.\98\

Further, our proposal to shift Item 101(c) to a more principles-based
approach would help clarify that disclosure regarding sources and
availability of raw materials by registrants is required only when
material to their business.
---------------------------------------------------------------------------

    \97\ See proposed Item 101(c)(1)(iii)(A).
    \98\ For example, a discussion of raw materials in a
registrant's MD&A may focus more narrowly on the effect that
spending on, or budgeting for, raw materials may have on a
registrant's liquidity and capital resources, whereas Item 101(c)(1)
attempts to elicit broader disclosure concerning activities
involving raw materials, including identifying and procuring sources
for those raw materials, that may be material to an understanding of
the registrant's business as a whole.
---------------------------------------------------------------------------

b. The Duration and Effect of all Patents, Trademarks, Licenses,
Franchises, and Concessions Held
    Item 101(c)(1)(iv) requires disclosure of the importance, duration,
and effect of all patents, trademarks, licenses, franchises, and
concessions held to the extent material to an understanding of the
registrant's business taken as a whole.\99\ The Concept Release
solicited input on whether to maintain, expand or revise the current
scope of this Item and requested comment on the competitive costs of
this disclosure.\100\ It also sought comment on whether to limit this
disclosure requirement to certain industries.\101\
---------------------------------------------------------------------------

    \99\ 17 CFR 229.101(c)(1)(iv).
    \100\ See Concept Release, supra note 6.
    \101\ See id.
---------------------------------------------------------------------------

    Numerous commenters supported maintaining the current scope of Item
101(c)(1)(iv),\102\ while several commenters opposed expanding this
Item based on competitive concerns.\103\ Item 101(c)(1)(iv) currently
does not refer to disclosure of copyrights or trade secrets and many
commenters expressed concern that requiring such disclosure would
impose substantial costs and be unduly burdensome by requiring
registrants to systematically identify and catalog such intellectual
property.\104\ Further, several commenters suggested that because trade
secret protection is contingent on the owner taking reasonable measures
to keep the information secret, any revision to this Item to require
disclosure of ``intellectual property'' would, by definition, include
trade secrets and endanger these assets.\105\ In addition, some
commenters opposed establishing different intellectual property
requirements by industry \106\ and some commenters supported
maintaining the current materiality threshold for disclosure.\107\
---------------------------------------------------------------------------

    \102\ See letters from 36 Organizations with an Interest in
Trade Secret Protection (Aug. 8, 2016) (``36 Organizations''),
Association of American Publishers (July 21, 2016), American
Intellectual Property Law Association (Aug. 9, 2016) (``American IP
Law Association''), Chamber, FedEx, Intellectual Property Owners
Association (July 15, 2016) (``IP Owners Association''), S. Percoco,
NAM, NYSSCPA, the Software Association, the Entertainment Software
Association and the Software Information Industry Association (July
21, 2016) (``Software Associations''), Financial Services Roundtable
(July 21, 2016), General Motors, and Financial Executives
International.
    \103\ See letters from 36 Organizations (focusing only on trade
secrets), American IP Law Association; Chamber, FedEx, Financial
Services Roundtable (focusing only on trade secrets), IP Owners
Association, NAM, Association of American Publishers (focusing only
on copyrights), General Motors, Financial Executives International,
and Software Associations.
    \104\ See, e.g., letters from 36 Organizations, American IP Law
Association, Chamber, FedEx, IP Owners Association, NAM, and
Association of American Publishers.
    \105\ See letters from 36 Organizations, American IP Law
Association, Chamber, FedEx, Financial Services Roundtable, IP
Owners Association, and NAM.
    \106\ See letters from IP Owners Association, NYSSCPA, Software
Associations, and American IP Law Association.
    \107\ See letters from American IP Law Association, IP Owners
Association, NAM, ACC and NYSSCPA.
---------------------------------------------------------------------------

    Conversely, a number of commenters recommended generally expanding
the scope of Item 101(c)(1)(iv).\108\ In this regard, some commenters
stated that a more complete record of a public company's intellectual
property is useful to the public, shareholders, researchers, and the
financial markets generally.\109\ One of these commenters recommended
expanding the requirement to include detailed intellectual property
information for both material and immaterial intellectual property with
the caveat that immaterial intellectual property should be required
only if the information is readily available to report and within the
knowledge of the company.\110\ Another commenter, in recommending
expansion of this requirement, noted that intellectual property assets
are a major driver of value in corporations, and asserted that more
open disclosure would allow shareholders to better assess the value of
corporate intellectual property assets and monitor directors'
stewardship of these assets.\111\
---------------------------------------------------------------------------

    \108\ See letters from Black Stone IP, LLC (May 19, 2016), IIRC,
Colleen V. Chien et al. (July 22, 2016) (``IP Professors''), Prof.
Denoncourt (July 31, 2016), and CFA Institute.
    \109\ See letters from IP Professors and Prof. Denoncourt.
    \110\ See letter from IP Professors.
    \111\ See letter from Prof. Denoncourt.
---------------------------------------------------------------------------

    Another commenter recommended including copyrights under this item
and requiring detailed tabular disclosure by asset type.\112\ This
commenter also opposed establishing different disclosure requirements
by industry.\113\
---------------------------------------------------------------------------

    \112\ See letter from CFA Institute.
    \113\ See id.
---------------------------------------------------------------------------

    A broad range of industries directly and indirectly benefit from
intellectual property \114\ and intellectual property has become
increasingly important to business performance.\115\ Certain industries
produce or use significant amounts of intellectual property or rely
more heavily on these rights.\116\ Accordingly, some registrants
provide detailed disclosure in response to Item 101(c)(1)(iv), although
disclosure varies among registrants and across industries.
---------------------------------------------------------------------------

    \114\ See Economics and Statistics Administration and United
States Patent and Trademark Office, Intellectual Property and the
U.S. Economy: Industries in Focus (Mar. 2012) at iv, available at
http://www.uspto.gov/sites/default/files/news/publications/IP_Report_March_2012.pdf (``Intellectual Property Report'').
    \115\ See, e.g., Kelvin W. Willoughby, What impact does
intellectual property have on the business performance of technology
firms?, Int. J. Intellectual Property Management, Vol. 6, No. 4
(2013).
    \116\ See Intellectual Property Report, supra note 114. This
report identifies seventy-five industries as ``IP-intensive.'' In
this report, patents, trademarks and copyrights were the categories
of intellectual property assessed. The methodology for designating
each of these subcategories as ``IP-intensive'' is outlined further
in this report. For patent intensive industries, the report utilized
the North American Industry Classification System (NAICS) codes and
identified, as the four most patent-intensive industries, those
industries classified in computer and electronic product
manufacturing (NAICS 334). This three-digit NAICS industry includes
computer and peripheral equipment; communications equipment; other
computer and electronic products; semiconductor and other electronic
components; and navigational, measuring, electro-medical, and
control instruments.
---------------------------------------------------------------------------

    In the biotechnology and pharmaceutical industries, registrants
that provide detailed patent disclosure often disclose the jurisdiction
in which the patent was filed, year of expiration, type of patent
(e.g., composition of matter, method of use, method of delivery or
method of manufacturing), products or technologies to which the patent
relates and how the patent was acquired (e.g., licensed from another
entity or owned and filed by the registrant). Some registrants in these
industries aggregate patent disclosure by groups of patents,
potentially making disclosure about individual material patents
difficult to discern. As registrants in the biotechnology and
pharmaceutical industries regularly sell one or more patented products
that generate substantial revenue, disclosure of ``patent cliffs,''
\117\ which may result

in material adverse financial effects, may be required in the risk
factors section or MD&A.\118\
---------------------------------------------------------------------------

    \117\ The term ``patent cliff'' as used in the biotechnology and
pharmaceutical industry refers to a future loss of patent protection
and consequential loss of revenue. These potential future losses are
known to registrants far in advance of their onset. When they occur,
they often precipitate material adverse financial effects. See,
e.g., Andrew Jack, Pharma tries to avoid falling off `patent cliff,'
Financial Times, May 6, 2012 and Cliffhanger, Economist, Dec. 3,
2011. See also Ed Silverman, Big Pharma Faces Some Big Patent
Losses, but Pipelines are Improving, Wall St. J.: L. Blog, available
at http://blogs.wsj.com/pharmalot/2015/02/09/big-pharma-faces-some-big-patent-losses-but-pipelines-are-improving/.
    \118\ See generally ``Interpretation: Commission Guidance
Regarding Management's Discussion and Analysis of Financial
Condition and Results of Operations,'' Release No. 33-8350 (Dec. 19,
2003) [68 FR 75056 (Dec. 29, 2003)], available at https://www.sec.gov/rules/interp/33-8350.htm.
---------------------------------------------------------------------------

    In the information technologies and services industry, registrants
protect their intellectual property through the use of patents,
trademarks, copyrights, trade secrets, licenses, and confidentiality
agreements.\119\ Registrants with large portfolios of intellectual
property often disclose that their products, services, and technologies
are not dependent on any specific patent, trademark, copyright, trade
secret, or license. As a result, these registrants often provide only
high-level discussions of their intellectual property portfolios, which
include general statements of a registrant's development, use, and
protection of its intellectual property. Registrants with smaller
intellectual property portfolios tend to provide slightly more detailed
discussions, including, for example, disclosure of the total number of
issued patents, a range of years during which those patents expire and
the total number of pending patent applications.
---------------------------------------------------------------------------

    \119\ See Bruce Abramson, Promoting Innovation in the Software
Industry: A First Principles Approach to Intellectual Property
Reform, 8 B.U. J. Sci. & Tech. L. 75 (2002) (discussing the software
industry's use of intellectual property law).
---------------------------------------------------------------------------

    In general, registrants in the information technologies and
services industry use copyrights to protect against the unauthorized
copying of software programs \120\ and trade secrets to protect
proprietary and confidential information that derives its value from
continued secrecy.\121\ Since Item 101(c)(1)(iv) does not require
disclosure about copyrights or trade secrets, registrants currently
make disclosure about such matters voluntarily.
---------------------------------------------------------------------------

    \120\ See Dennis S. Karjala, Copyright Protection of Operating
Software, Copyright Misuse, and Antitrust, 9 Cornell J.L. & Pub.
Pol'y 161, 172 (1999) (discussing the dependence of software
technology companies on copyright).
    \121\ See Raymond T. Nimmer & Patricia Ann Krauthaus, Software
Copyright: Sliding Scales and Abstracted Expression, 32 Hous. L.
Rev. 317, 325 (1995) (distinguishing among the software industry's
use of trade secret law, patent law and copyright law).
---------------------------------------------------------------------------

    We propose to retain as a listed disclosure topic the importance,
duration and effect of patents, trademarks, licenses, franchises, and
concessions held as non-exclusive types of property that may be
material to a registrant's business.\122\ In response to concerns
expressed by commenters on the Concept Release, however, we are not
proposing to expand this topic to include copyrights and trade secrets.
In addition to competitive concerns, commenters noted that because
copyright and trade secret protection is not contingent on
registration, a requirement to disclose even a subset of these two
types of intellectual property would force registrants to
systematically identify and catalog these types of intellectual
property, which could impose substantial costs and require significant
time.\123\
---------------------------------------------------------------------------

    \122\ See proposed Item 101(c)(1)(iii)(B).
    \123\ See, e.g., letters from 36 Organizations, American
Intellectual Property Law Association (Aug. 9, 2016), U.S. Chamber
of Commerce (July 20, 2016), FedEx Corporation (July 21, 2016),
Intellectual Property Owners Association (July 15, 2016), National
Association of Manufacturers (July 21, 2016), Association of
American Publishers (July 21, 2016). But see also letters from
International Integrated Reporting Council (July 20, 2016) and CFA
Institute (Oct. 6, 2016) (supporting the inclusion of copyrights
under Item 101(c)).
---------------------------------------------------------------------------

4. A Description of Any Material Portion of the Business That May Be
Subject to Renegotiation of Profits or Termination of Contracts or
Subcontracts at the Election of the Government
    Item 101(c)(1)(ix) requires, to the extent material to an
understanding of the registrant's business taken as a whole, disclosure
of any material portion of a business that may be subject to
renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.\124\
---------------------------------------------------------------------------

    \124\ 17 CFR 229.101(c)(1)(ix).
---------------------------------------------------------------------------

    Business contracts with agencies of the U.S. government and the
various laws and regulations relating to procurement and performance of
U.S. government contracts impose terms and rights that are different
from those typically found in commercial contracts. In a 1972 Notice to
Registrants, the Commission noted that government contracts are subject
to renegotiation of profit and to termination for the convenience of
the government.\125\ At any given time in the performance of a
government contract, an estimate of its profitability is often subject
not only to additional costs to be incurred, but also to the outcome of
future negotiations or possible claims relating to costs already
incurred.\126\
---------------------------------------------------------------------------

    \125\ See Defense and Other Long Term Contracts; Prompt and
Accurate Disclosure of Information, Release No. 33-5263 (June 22,
1972) [37 FR 21464 (Oct. 11, 1972)].
    \126\ See id.
---------------------------------------------------------------------------

    Registrants with U.S. government contracts tend to disclose that
the funding of these contracts is subject to the availability of
Congressional appropriations and that, as a result, long-term
government contracts are partially funded initially with additional
funds committed only as Congress makes further appropriations. These
registrants disclose that they may be required to maintain security
clearances for facilities and personnel in order to protect classified
information. Additionally, these registrants state that they may be
subject to routine government audits and investigations, and any
deficiencies or illegal activities identified during the audits or
investigations may result in the forfeiture or suspension of payments
and civil or criminal penalties. We are proposing to retain
renegotiation or termination of government contracts as a listed
disclosure topic \127\ because we continue to believe that, when
material to a business, disclosure of this information is important for
investors.
---------------------------------------------------------------------------

    \127\ See proposed Item 101(c)(1)(iv).
---------------------------------------------------------------------------

5. The Extent to Which the Business Is or May Be Seasonal
    Item 101(c)(1)(v) requires disclosure of the extent to which the
business of the segment is or may be seasonal to the extent material to
an understanding of the registrant's business taken as a whole.\128\
The Commission recently considered whether to delete Item
101(c)(1)(v).\129\ While the Commission initially proposed deleting
this Item,\130\ noting that both Regulation S-K \131\ and U.S. GAAP
\132\ require disclosures about seasonality in interim periods,\133\
the Commission ultimately decided to delete Instruction 5 to Item
303(b) of Regulation S-K, which also required a discussion of any
seasonal aspects that have had a material effect on a registrant's
financial condition or results of operations,\134\ and retain Item
101(c)(1)(v). The Commission based its decision to retain this Item on
a concern about the potential loss of information in the fourth quarter
about the extent to which the business of a registrant or its
segment(s) is or may be seasonal

because U.S. GAAP may not elicit this disclosure.\135\
---------------------------------------------------------------------------

    \128\ 17 CFR 229.101(c)(1)(v).
    \129\ See Disclosure Update and Simplification Proposed Rule,
Release No. 33-10110 (July 13, 2016) [81 FR 51607 (Aug. 4, 2016)]
(``DUSTR Proposing Release''). Public comments on the DUSTR
Proposing Release are available at https://www.sec.gov/comments/s7-15-16/s71516.htm. We refer to these letters throughout as ``DUSTR''
letters.
    \130\ See DUSTR Proposing Release, supra note 129.
    \131\ Instruction 5 to Item 303(b) of Regulation S-K [17 CFR
229.303(b)] required a discussion of any seasonal aspects of a
registrant's business where the effect is material.
    \132\ ASC 270-10-45-11.
    \133\ See DUSTR Proposing Release, supra note 129.
    \134\ The Commission decided to delete Instruction 5 to Item
303(b) because of its belief that U.S. GAAP in combination with the
remainder of Item 303 requires disclosures in interim reports that
convey reasonably similar information to the disclosures required by
Instruction 5 to Item 303(b). See DUSTR Adopting Release, supra note
62, at 50169.
    \135\ See id. ASC 270-10-45-11 states that entities should
consider supplementing interim reports with information for 12-month
periods ended at the interim date to avoid the possibility that
interim results with material seasonal variations may be taken as
fairly indicative of the estimated results for a full fiscal year.
---------------------------------------------------------------------------

    In light of the Commission's recent evaluation of this disclosure
item, we propose including as a disclosure topic in Item 101(c) the
extent to which the business is or may be seasonal.\136\
---------------------------------------------------------------------------

    \136\ See proposed Item 101(c)(1)(v).
---------------------------------------------------------------------------

6. Compliance With Material Government Regulations, Including
Environmental Regulations
    Item 101(c)(1)(xii) requires disclosure of the material effects of
compliance with environmental laws on the capital expenditures,
earnings and competitive position of the registrant and its
subsidiaries, as well as any material estimated capital expenditures
for the remainder of the fiscal year, the succeeding fiscal year, and
such future periods that the registrant deems material.\137\
---------------------------------------------------------------------------

    \137\ 17 CFR 229.101(c)(1)(xii).
---------------------------------------------------------------------------

    The Concept Release solicited input on whether to increase or
reduce the disclosure required by this Item and whether this disclosure
is important to investors.\138\ It also sought comment on whether to
require this disclosure in a different format.\139\ Some commenters
supported retaining Item 101(c)(1)(xii).\140\ A few of these commenters
stated that this disclosure would increase in importance given trends
toward an enhanced regulatory approach to environmental
protection.\141\ Several commenters supported retaining the Item but
opposed expanding it to include additional requirements.\142\ Other
commenters supported expanding this Item.\143\ A few of these
commenters supported requiring more detailed disclosure of
environmental fines, violations, and litigation (e.g., whether these
are rare or recurring).\144\ One commenter recommended including this
requirement in a broader category of government regulations.\145\
---------------------------------------------------------------------------

    \138\ See Concept Release, supra note 6.
    \139\ See id.
    \140\ See letters from PRI, the Carbon Tracker Initiative (July
20, 2016), S. Percoco, Chamber, FedEx, CGCIV, NIRI, and CFA
Institute.
    \141\ See, e.g., letters from PRI and the Carbon Tracker
Initiative.
    \142\ See letters from Chamber, FedEx, CGCIV, and NIRI.
    \143\ See letters from CalPERS, DHC Consulting, Impax Asset
Management Limited (July 19, 2016) (``Impax''), Good Jobs First,
Domini Social, and GRI.
    \144\ See letters from Impax, Domini Social and Good Jobs First.
    \145\ See letter from Fenwick.
---------------------------------------------------------------------------

    Pursuant to the National Environmental Policy Act of 1969
(``NEPA''),\146\ which mandated consideration of the environment in
regulatory action, in 1973, the Commission adopted a new provision to
require disclosure of the material effects that compliance with
Federal, state and local environmental laws may have on the capital
expenditures, earnings, and competitive position of the registrant, now
designated as Item 101(c)(1)(xii).\147\ Subsequent litigation \148\
concerning both the denial of a rulemaking petition and adoption of the
1973 environmental disclosure requirements resulted in the Commission
initiating public proceedings primarily to elicit comments on whether
the provisions of NEPA required further rulemaking.\149\ As a result of
these proceedings, the Commission in 1976 amended the Item 101
requirements to specifically require disclosure of any material
estimated capital expenditures for environmental control facilities for
the remainder of the registrant's current and succeeding fiscal years,
and for any further periods that are deemed material.\150\
---------------------------------------------------------------------------

    \146\ Public Law 91-190, 42 U.S.C. 4321-4347 (Jan. 1, 1970)
(``NEPA'').
    \147\ See Disclosure with Respect to Compliance with
Environmental Requirements and Other Matters, Release 33-5386 (Apr.
20, 1973) [38 FR 12100 (May 9, 1973)] (``Environmental Disclosure
Adopting Release'').
    \148\ See Natural Resources Defense Council, Inc. v. SEC, 389 F.
Supp. 689 (D.D.C. 1974); and Natural Resources Defense Council, Inc.
v. SEC, 606 F.2d 1031 (DC Cir. 1979), rev'g 432 F. Supp. 1190
(D.D.C. 1977). See also U.S. Sec. & Exch. Comm'n,, Staff Report on
Corporate Accountability 1, 251-259 (Comm. Print 1979) (``Staff
Report'') (providing a description of this litigation).
    \149\ See Disclosure of Environmental and Other Socially
Significant Matters, Release No. 33-5569 (Feb. 11, 1975) [40 FR 7013
(Feb. 18, 1975)].
    \150\ See Conclusions and Final Action on Rulemaking Proposals
Relating to Environmental Disclosure, Release No. 33-5704 (May 6,
1976) [41 FR 21632 (May 27, 1976)]. For further discussion of how
the Commission has sought to consider environmental effects in its
business disclosure requirements, see infra Section II.C.2.
---------------------------------------------------------------------------

    While there is no separate line item requiring disclosure of
government regulations that may be material to a registrant's business,
it is common practice for many registrants to include disclosure
regarding such information in response to Item 101(c)(1)(xii). The
Concept Release sought comment on whether to require registrants to
disclose government regulations material to their business given that
many registrants already voluntarily provide such information.\151\ In
addition, it sought input on whether to require disclosure of foreign
regulations applicable to the operation of the registrant's
business.\152\ A few commenters supported a specific requirement to
disclose government regulations \153\ while one commenter opposed such
a requirement, stating that it would not provide significant additional
information.\154\ Some commenters supported requiring disclosure of
foreign regulatory risks.\155\ Two commenters specified that this
requirement should be limited to foreign regulations material to the
registrant's business.\156\ One commenter opposed a requirement to
discuss foreign regulations that affect a registrant's business and,
instead, recommended revising Item 103 to require disclosure of any
foreign tax audits or actions with negative findings, stating this
would be less costly and time consuming than a requirement to disclose
foreign regulations.\157\
---------------------------------------------------------------------------

    \151\ See Concept Release, supra note 6.
    \152\ See id.
    \153\ See letters from Fenwick and S. Percoco.
    \154\ See letter from NYSSCPA.
    \155\ See letters from IAC, NYSSCPA, and SIFMA.
    \156\ See letters from NYSSCPA and SIFMA.
    \157\ See letter from E. Bean.
---------------------------------------------------------------------------

    Although not required by Item 101(c), many registrants currently
discuss government regulations relevant to their business, often in the
form of a list. Healthcare and insurance providers regularly disclose
their collection, use and protection of individually-identifiable
information and compliance with the Health Insurance Portability and
Accountability Act of 1996,\158\ as well as the impact of the Patient
Protection and Affordable Care Act \159\ on their business.
Biotechnology or medical device companies often disclose the status of
and process for FDA approval of significant new drugs or medical
devices. Public utilities typically discuss regulation by various
Federal, state, and local authorities and include information about
state ratemaking procedures, which determine the rates utilities charge
and the return on invested capital.
---------------------------------------------------------------------------

    \158\ Public Law 104-191, 110 Stat. 1936 (1996).
    \159\ Public Law 111-148, 124 Stat. 119 (2010).
---------------------------------------------------------------------------

    Registrants in the financial services industry regularly describe
Federal and state regulation as well as supervision by the Federal
Reserve Board, while registrants with a material amount of U.S.
government contracts disclose the laws and regulations for government
contracts. Registrants with tax strategies involving foreign
jurisdictions typically disclose that they are subject to income taxes
in both the U.S. and numerous foreign jurisdictions, and that future
changes to U.S. and non-U.S. tax law could adversely affect their
anticipated financial position and results. Some

registrants disclose the impact of tax treaties between the U.S. and
one or more foreign jurisdictions on their business.
    Consistent with the current practice of many registrants, as
observed by the staff in its review of filings, we propose including
the material effects of compliance with material government
regulations, not just environmental laws, as a listed disclosure topic
in Item 101(c).\160\ This disclosure topic would focus on the material
effects that compliance with material governmental regulations, both
foreign and domestic, may have upon the capital expenditures, earnings
and competitive position of the registrant and its subsidiaries. We
believe that this more principles-based approach would help provide
investors with the information material to an investment decision about
a registrant's compliance with the government regulations that
materially affect the registrant's business so that investors may
achieve a more complete understanding of the registrant's business.
This approach would also enable each registrant to tailor its
disclosure regarding its compliance with those governmental regulations
that are of particular importance to the registrant. Finally, the
proposed approach would codify what has become common practice
regarding government regulation disclosure.
---------------------------------------------------------------------------

    \160\ See proposed Item 101(c)(2)(i). We note that, despite the
repetition of materiality within this topic in relation to both
effects of compliance and government regulations, we do not foresee
any circumstances whereby a registrant could determine there are
material effects from compliance with a government regulation, but
that the government regulation itself is not material to the
registrant's business taken as a whole.
---------------------------------------------------------------------------

    While we propose to retain the requirement that a registrant
disclose material estimated capital expenditures for environmental
control facilities for the current fiscal year and any other subsequent
period that the registrant deems material,\161\ we are not proposing to
require the disclosure of additional specific expenditures related to
environmental compliance, as some commenters have suggested.\162\ We
believe that a more principles-based approach would permit a registrant
to tailor its disclosure by focusing on the effects of environmental
compliance that are material to its particular business. This proposed
approach would also benefit investors by helping to reduce or eliminate
boilerplate or other disclosure concerning the effects of environmental
compliance that may not be material to an understanding of the business
of a particular registrant.
---------------------------------------------------------------------------

    \161\ Current Item 101(c)(i)(xii) requires the disclosure of
material estimated capital expenditures for environmental control
facilities for the remainder of a registrant's current fiscal year
and its succeeding fiscal year as well as for such further periods
as the registrant may deem material. In order to simplify the
disclosure, and in keeping with our more principles-based approach,
we are proposing to revise Item 101(c) to require such environmental
control facilities expenditures disclosure for the registrant's
current fiscal year and any other subsequent period deemed material
by the registrant. See proposed Item 101(c)(2)(i).
    \162\ See, e.g., letters from DHC Consulting, Domini Social, and
Impax. Our proposed approach is consistent with the views of several
commenters that supported the retention of Item 101(c)'s
environmental compliance disclosure provision while opposing its
expansion. See supra note 142.
---------------------------------------------------------------------------

7. Human Capital Disclosure
    Item 101(c)(1)(xiii) currently requires disclosure of the number of
persons employed by the registrant.\163\ The Concept Release solicited
input on this disclosure requirement; \164\ in particular, we requested
feedback on:
---------------------------------------------------------------------------

    \163\ 17 CFR 229.101(c)(1)(xiii).
    \164\ In addition, there has been congressional interest in the
topic of modernizing human capital disclosures by registrants. See,
e.g., letter from Sen. Mark R. Warner (July 19, 2018) (``Sen.
Warner'').
---------------------------------------------------------------------------

     Whether this disclosure is important to investors;
     Whether to require or permit registrants to provide a
range of its number of employees or independent contractors;
     Whether disclosure regarding anticipated material changes
in the number of employees would be useful to investors; and
     Whether to require registrants to provide disclosure
distinguishing among their total employees such as by full-time and
part-time or seasonal employees; employees and independent contractors;
or domestic or foreign employees.\165\
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    \165\ See Concept Release, supra note 6.
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    Many commenters recommended retaining and expanding the requirement
to disclose the number of persons employed by the registrant,\166\ with
some asserting that disclosure of the exact number of employees would
help investors understand the risks of potential material labor and
human rights violations and that, for contractors or subcontractors,
disclosing a range of these workers would be acceptable if sufficiently
narrow and accompanied by disclosure explaining why the exact number is
unavailable.\167\ Conversely, a number of commenters questioned the
utility of requiring registrants to disclose the number of persons
employed by the registrant.\168\ Several of these commenters opposed
expanding the requirement,\169\ while another commenter stated that
this disclosure is typically immaterial and any change in the number of
employees that materially affects the registrant's results of
operations would be disclosed in MD&A.\170\
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    \166\ See letters from RGA, E. Bean (July 6, 2016), CII,
Railpen, NYSC, Interfaith Center on Corporate Responsibility (July
14, 2016) (``ICCR''), US SIF Foundation (July 14, 2016) (``US
SIF''), Dana Investment Advisors (July 15, 2016) (``Dana
Investment''), Douglas Hileman Consulting LLC (July 15, 2016) (``DHC
Consulting''), Sisters of Charity of Saint Elizabeth (July 18, 2016)
(``Sisters of Charity''), Christian Church Foundation (July 18,
2016) (``CCF''), Park Foundation (July 19, 2016) (``Park''), OIP
Trust (July 19, 2016) (``OIP''), Priests of the Sacred Heart (July
20, 2016) (``Sacred Heart''), Sister Schools of St. Francis (July
20, 2016) (``S.S. St. Francis''), Friends Fiduciary Corporation
(July 20, 2016) (``Friends''), LGIM, Everence Financial and the
Praxis Mutual Funds (July 20, 2016) (``Everence''), Sister Schools
of Notre Dame (July 21, 2016) (``SSND''), Provincial of the School
Sisters of St. Francis of St. Joseph Convent (July 20, 2016)
(``SSSF-Wisconsin''), As You Sow (July 21, 2016), CAQ, GRI (July 21,
2016), Domini Social, E&Y, CalSTRS, Hermes Investment Management
(July 21, 2016), NYC Comptroller, Good Jobs First (July 21, 2016),
Maryland Bar Securities Committee, Tri-State Coalition for
Responsible Investment (July 21, 2016) (``TSCRI''), Addenda Capital
(July 21, 2016), AFSCME, AFL-CIO, Bloomberg (July 21, 2016), Oxfam
America (July 21, 2016), Presbyterian Church U.S.A. (July 21, 2016)
(``PC USA''), Allstate, Cornerstone, Christian Brothers Investment
Services (July 21, 2016) (``CBIS''), S. Percoco, Responsible
Sourcing Network (July 21, 2016) and CalPERS.
    \167\ See letters from US SIF and US SIF Foundation (July 14,
2016) (``US SIF''), ICCR, Dana Investment, Sisters of Charity, CCF,
Park, OIP, Sacred Heart, S.S. St. Francis, Friends, Everence, SSND,
SSSF-Wisconsin, As You Sow, TSCRI, PC USA and CBIS.
    \168\ See letters from Chamber, FedEx, CGCIV, and Fenwick.
    \169\ See letters from Chamber, FedEx, and CGCIV.
    \170\ See letter from Fenwick. Another commenter stated that
this information is immaterial, does not provide information about
the size or scope of the business, and does not provide any clarity
to the overall strategy of the company. See letter from United
Health. Further, one commenter asserted that disclosures that comply
with the current prescriptive requirement may not provide investors
with the most appropriate information.
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    With respect to whether anticipated material changes in the number
of employees would be useful to investors, several commenters supported
disclosure of employee turnover.\171\ Numerous commenters further
recommended requiring registrants to distinguish among their total
employees.\172\ Most of these commenters recommended requiring this
disclosure for both registrants and their suppliers, and specified
inclusion

of migrant, contract, or temporary workers.\173\
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    \171\ See letters from DHC Consulting, LGIM, Railpen, CalPERS,
AFL-CIO, NYC Comptroller, AFSCME, CAQ, Domini Social, E&Y, Hermes
Investment Management, and Cornerstone.
    \172\ See letters from ICCR, Dana Investment, DHC Consulting,
Sisters of Charity, CCF, Park, OIP, Sacred Heart, S.S. St. Francis,
Friends, Everence, SSND, SSSF-Wisconsin, As You Sow, TSCRI, PC USA,
CBIS, GRI, US SIF, Railpen, CalPERS, AFL-CIO, CAQ, Domini Social,
CalSTRS, Good Jobs First, Maryland Bar Securities Committee,
Bloomberg, and NYC Comptroller.
    \173\ See letters from ICCR, Dana Investment, DHC Consulting,
Sisters of Charity, CCF, Park, OIP, Sacred Heart, S.S. St. Francis,
Friends, Everence, SSND, SSSF-Wisconsin, As You Sow, TSCRI, PC USA,
CBIS, GRI, and Good Jobs First.
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    The Concept Release also solicited feedback on additional line-item
disclosure requirements about a registrant's business that would
improve the quality and consistency of disclosure, and specifically
sought input on whether to require additional information about a
registrant's employees or employment practices.\174\ A number of
commenters advocated for greater human capital disclosure,\175\ with a
variety of commenters recommending various specific disclosure topics,
including:
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    \174\ See Concept Release, supra note 6.
    \175\ See, e.g., letters from M. Ferguson (July 7, 2016), Norges
Bank Investment Management (July 15, 2016), P. Linzmeyer (July 19,
2016), LGIM, Railpen, Hermes Investment Management, NYC Comptroller,
Addenda Capital, AFSCME, Working IDEAL (July 21, 2016), AFL-CIO,
National Partnership for Women & Families (Aug. 8, 2016), and
Rockefeller & Co., Inc. (July 21, 2016), and Sen. Warner.
---------------------------------------------------------------------------

     Worker recruitment, employment practices, and hiring
practices;\176\
---------------------------------------------------------------------------

    \176\ See letters from ICCR, Dana Investment, Sisters of
Charity, CCF, Park, OIP, Sacred Heart, S.S. St. Francis, Friends,
Everence, SSND, SSSF-Wisconsin, As You Sow, TSCRI, CalPERS, PC USA,
CBIS, and Domini Social.
---------------------------------------------------------------------------

     Employee benefits and grievance mechanisms; \177\
---------------------------------------------------------------------------

    \177\ See letters from ICCR, Dana Investment, Sisters of
Charity, CCF, Park, OIP, Sacred Heart, S.S. St. Francis, Friends,
Everence, SSND, SSSF-Wisconsin, As You Sow, TSCRI, PC USA, and CBIS.
---------------------------------------------------------------------------

     ''Employee engagement'' or investment in employee
training; \178\
---------------------------------------------------------------------------

    \178\ See letters from LGIM, Railpen, CalPERS, AFL-CIO, NYC
Comptroller, AFSCME, Addenda Capital and Hermes Investment
Management. See also letter from Joseph V. Carcello, Chair, Investor
as Owner Subcommittee, on behalf of Subcommittee members, of the
SEC's Investor Advisory Committee (November 22, 2016) (in response
to FAST Act--SEC Required Study on Modernization and Simplification
of Regulation S-K).
---------------------------------------------------------------------------

     Workplace health and safety; \179\
---------------------------------------------------------------------------

    \179\ See letters from LGIM, Railpen, CalPERS, NYC Comptroller,
AFSCME, AFL-CIO, and US SIF.
---------------------------------------------------------------------------

     Strategies and goals related to human capital management
and legal or regulatory proceedings related to employee management;
\180\
---------------------------------------------------------------------------

    \180\ See letters from AFL-CIO and Domini Social.
---------------------------------------------------------------------------

     Whether employees are covered by collective bargaining
agreements; \181\ and
---------------------------------------------------------------------------

    \181\ See letter from Good Jobs First.
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     Employee compensation or incentive structures.\182\
---------------------------------------------------------------------------

    \182\ See letters from NYC Comptroller, AFL-CIO, CalPERS, and
Domini Social.
---------------------------------------------------------------------------

    We also received a rulemaking petition requesting that the
Commission adopt new rules, or amend existing rules, to require
registrants to disclose information about their human capital
management policies, practices and performance (the ``Human Capital
Rulemaking Petition'').\183\ Many of the comment letters received in
support of the Human Capital Rulemaking Petition asserted the
importance of human capital management in assessing the potential value
and performance of a company over the long term.\184\ Further, a number
of commenters asserted that companies with poor management of human
capital may face operational, legal, and reputational risks while, in
contrast, companies with strong human capital management may develop a
competitive advantage.\185\ While the Human Capital Rulemaking Petition
did not include specific recommendations for disclosure requirements
related to human capital management, it included categories of
information that it characterized as fundamental to furthering
investors' understanding of how well a company is managing its human
capital.\186\
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    \183\ See Rulemaking petition to require registrants to disclose
information about their human capital management policies, practices
and performance, File No. 4-711 (July 6, 2017), available at https://www.sec.gov/rules/petitions/2017/petn4-711.pdf and related comments
available at https://www.sec.gov/comments/4-711/4-711.htm. We refer
to these letters throughout as ``Human Capital Rulemaking Petition''
letters.
    \184\ See, e.g., letters from British Columbia Municipal Pension
Board of Trustees (Sept. 29, 2017) [Human Capital Rulemaking
Petition letter], CalPERS and CalSTRS (July 10, 2017) (``CalPERS and
CalSTRS 1'') [Human Capital Rulemaking Petition letter], Center for
Safety and Health Sustainability (June 15, 2018) (``Center for
Safety'') [Human Capital Rulemaking Petition letter], David F.
Larcker (Dec. 15, 2017) [Human Capital Rulemaking Petition letter],
League of Allies (Apr. 25, 2018) [Human Capital Rulemaking Petition
letter], and AFL-CIO (Sept. 22, 2017) [Human Capital Rulemaking
Petition letter].
    \185\ See letters from Australian Council of Superannuation
Investors (Nov. 20, 2017) [Human Capital Rulemaking Petition
letter], British Columbia Municipal Pension Board of Trustees,
CalPERS and CalSTRS 1, and Center for Safety.
    \186\ See Human Capital Rulemaking Petition, supra note 183
(suggesting that the key categories of information are: Workforce
demographics; workforce stability; workforce composition; workforce
skills and capabilities; workforce culture and empowerment;
workforce health and safety; workforce productivity; human rights
commitments and their implementation; workforce compensation and
incentives).
---------------------------------------------------------------------------

    Item 101(c)(1)(xiii) dates back to a time when companies relied
significantly on plant, property, and equipment to drive value. At that
time, a prescriptive requirement to disclose the number of employees
may have been an effective means to elicit information material to an
investment decision. Today, intangible assets represent an essential
resource for many companies.\187\ Because human capital may represent
an important resource and driver of performance for certain companies,
and as part of our efforts to modernize disclosure, we propose to amend
Item 101(c) to refocus registrants' human capital resources
disclosures.\188\ Specifically, we propose replacing the current
requirement to disclose the number of employees with a requirement to
disclose a description of the registrant's human capital resources,
including in such description any human capital measures or objectives
that management focuses on in managing the business, to the extent such
disclosures would be material to an understanding of the registrant's
business. We recognize that the exact measures or objectives included
in a registrant's human capital resource disclosure may change over
time and may depend on the industry. The proposed amendment provides
non-exclusive examples of human capital measures and objectives that
may be material, depending on the nature of the registrant's business
and workforce, such as measures or objectives that address the
attraction, development, and retention of personnel.
---------------------------------------------------------------------------

    \187\ See infra note 279.
    \188\ See proposed Item 101(c)(2)(ii).
---------------------------------------------------------------------------

    In assessing the best way to approach disclosure regarding human
capital, we were mindful that each industry, and even each company
within a specific industry, has its own human capital considerations,
and that those considerations may evolve over time. In light of this
fact, and with the principle of materiality in mind, it is our view
that prescribing fixed, specific line item disclosures in this area for
all registrants would not result in the most meaningful
disclosure.\189\ Instead, we believe that investors would be better
served by understanding how each company looks at its human capital
and, in particular, where management focuses its attention in this
space. The intent of the proposed requirement is to elicit, to the
extent material to an understanding of the registrant's business,
disclosures regarding human capital that allow investors to better
understand and evaluate this company resource and to

see through the eyes of management how this resource is managed.
---------------------------------------------------------------------------

    \189\ The Investor Advisory Committee recently recommended that
the SEC take measures to improve the disclosure of a registrant's
human capital management, and suggested that ``any requirements
should be crafted so as to reflect the varied circumstances of
different businesses, and to eschew simple `one-size-fits-all'
approaches that obscure more than they add.'' Recommendation of the
Investor Advisory Committee Human Capital Management Disclosure
(March 28, 2019), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/human-capital-disclosure-recommendation.pdf.
---------------------------------------------------------------------------

Request for Comment
    12. Should we shift to a more principles-based approach for Item
101(c), as proposed? Would registrants find it difficult to apply the
principles-based requirements?
    13. Would the proposed principles-based requirements elicit
information that is material to an investment decision? If not, how
might Item 101(c) be further improved? Are there any additional
disclosure topics that we should include in Item 101(c) to facilitate
disclosure? Alternatively, should we exclude any of our proposed
disclosure topics?
    14. Should we instead require disclosure of any or all of the
topics addressed in our proposed examples? If so, which topics? Should
we require other types of business information? If so, what
information?
    15. Should we retain Item 101(c)'s distinction between disclosure
topics for which segment disclosure should be the primary focus, and
those for which the focus should be on the registrant's business taken
as a whole, as proposed? If so, is our allocation of the listed
disclosure topics into the two categories appropriate?
    16. We are proposing to amend Item 101(c) to include as a listed
disclosure topic the status of development efforts for new or enhanced
products, trends in market demand and competitive conditions. Would the
disclosure elicited in response to this amendment overlap with the
disclosure provided in response to our proposed amendment to Item
101(a) to include material changes to business strategy as a disclosure
topic? If so, should business strategy changes be included as a listed
disclosure topic in Item 101(c) instead of Item 101(a)?
    17. Currently, the duration and effect of copyright and trade
secret protection is not included within the scope of Item 101(c)
disclosure. Should we include it as a listed disclosure topic that
could be provided?
    18. Is backlog typically discussed in MD&A or is it better suited
for disclosure under Item 101(c) to the extent material? Similarly, is
working capital typically sufficiently disclosed in MD&A or is it
better addressed under Item 101(c)?
    19. Should the extent to which the business is or may be seasonal
be included as a listed disclosure topic, as proposed? Alternatively,
should we require this disclosure in all circumstances? We note that
fourth quarter disclosure about the extent to which the business of a
registrant or its segment(s) is or may be seasonal may not be elicited
by U.S. GAAP. We further note that there is no longer a separate
seasonality instruction to MD&A. Do these considerations support the
continued inclusion of seasonal aspects of a registrant's business, to
the extent material to the understanding of a registrant's business, as
a listed disclosure topic?
    20. Should we include as a listed disclosure topic the material
effects of compliance with material government regulations, as
proposed, or should we focus more narrowly on compliance with
environmental regulations, as currently required under Item 101(c)?
Would the proposed more principles-based approach to governmental
regulatory compliance disclosure elicit the appropriate level of
disclosure about environmental and foreign regulatory risks? If not,
are there more specific disclosures that we should require? Should we
continue to include material estimated capital expenditures for
environmental control facilities as a disclosure topic under Item
101(c)?
    21. Should disclosure regarding human capital resources, including
any material human capital measures or objectives that management
focuses on in managing the business, be included under Item 101(c) as a
listed disclosure topic, as proposed? Should we define human capital?
If so, how?
    22. With respect to human capital resource disclosure, should we
provide non-exclusive examples of the types of measures or objectives
that management may focus on in managing the business, such as,
depending on the nature of the registrant's business and workforce,
measures or objectives that address the attraction, development, and
retention of personnel, as proposed? Would providing specific examples
potentially result in disclosure that is immaterial and not tailored to
a registrant's specific business? Would not including such examples
result in a failure to elicit information that is material and in some
cases comparable across different issuers?
    23. With respect to human capital resource disclosure, should we
include other non-exclusive examples of measures or objectives that may
be material, such as the number and types of employees, including the
number of full-time, part-time, seasonal and temporary workers, to the
extent disclosure of such information would be material to an