June 9, 2020Client Alert

SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions and Dispositions of Businesses

On May 21, 2020, the US Securities and Exchange Commission (SEC) announced that it adopted amendments to its rules and forms to improve the manner of disclosure of the financial information about acquired or disposed businesses (Release No. 33-10786). The SEC adopted these amendments to facilitate more timely access to capital and to reduce the complexity and costs to prepare the related disclosure. The current amendments will update the SEC’s rules which have not been comprehensively addressed since they were originally adopted over 30 years ago. The amendments will be effective on January 1, 2021, but voluntary compliance will be permitted in advance of the effective date.

The amendments to the financial disclosures about acquired and disposed business involve amendments to Rules 3-05, 3-14, 8-04, 8-06, and Article 11, as well as other related rules and forms. The Commission also amended the test in the “significant subsidiary” definition of Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2, in part, to assist registrants in making determinations of whether a subsidiary or an acquired or disposed business is significant. In addition, the Commission adopted new requirements regarding fund acquisitions specific to registered investment companies and business development companies.

In the SEC’s press release, SEC commissioner Jay Clayton commented that the amendments will benefit investors, registrants, and the markets by enhancing the quality of information that investors receive while eliminating unnecessary costs and burdens.

Michael Best’s Securities & Capital Markets team has experts who advise public companies, broker-dealers, and investment advisors on compliance with the SEC regulations. Please do not hesitate to contact a member of the Securities & Capital Markets team for additional information on these matters.

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