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embark_Get to know_blog graphics_v1-05Maybe you’re a newly public company. Or just thinking about ringing the bell at some point and wanting to get your ducks in a row. Or maybe you’re just thirsty for knowledge on reporting and disclosure requirements from the U.S. Securities and Exchange Commission because, well, why not?

Whatever led you to this point, Embark is happy you’re here and promises we’ll make it worth your while. So, yes, we’ll definitely cover 10-Ks and Qs and all of those meaty topics. But we’re also going to take a more detailed look at SEC reporting, including areas that might not seem as important at first but, as you’ll see, are instrumental to completing the SEC reporting puzzle.

Going Public: The Pre-IPO Timeline

So on that note, let’s dive into some high-grade reporting and disclosure insights, along with best practices from Embark’s decades of experience on the SEC reporting frontlines.


Public Company SEC Reporting Requirements

You don’t wake up one morning with the sudden desire to go public, fire out a quick S-1 registration, maybe a few press releases, and – boom – you’re the new belle of Wall Street. Like it or not, there’s a long, often demanding pre-IPO process that requires extensive thought, patience, organization, and expertise to begin public life on the right foot.

But the seemingly never-ending process leading to your initial public offering is a topic we’ve previously discussed. So, for brevity’s sake, we’ll assume you’ve successfully navigated those complex waters and must now focus on your SEC filings. And we’re going to begin by taking a high-level view of basic filing requirements, followed by a deeper dive into the actual reports and forms.

The Securities Act of 1933

Known as the Securities Act, this mighty slab of legislation rules the regulatory roost, the primary driver behind most of your SEC reporting. Specifically, it “require(s) that investors receive financial and other significant information concerning securities being offered for public sale, and prohibit(s) deceit, misrepresentations, and other fraud in the sale of securities.”

Registration Under the Securities Act

SEC rules under the Securities Act also require certain filings before your IPO, mainly your registration statement and prospectus. And while we suggest reading our previous thoughts on the S-1 – the most common registration – to better understand what it means for your company and leadership, the S-1 isn’t the only item on your registration to-do list.

  • Form S-1: The initial registration form for new securities issued by a U.S.-based public company, usually accompanying an IPO.
  • Form S-3: Typically used for post-IPO secondary offerings, providing simplified reporting – with respect to the S-1 – if a company meets certain criteria.
  • Form S-4: Mandatory filing for public or reporting companies that provides material information stemming from a business combination or companies undergoing an exchange offer. Companies may also use Form S-4 to register private debt securities previously issued under Securities Act Rule 144A with registration rights.

For our more eagle-eyed readers, we didn’t mistakenly skip Form S-2. The SEC retired it back in 2005 in favor of an enhanced Form S-1.

The Securities Exchange Act of 1934

Another critical piece of legislation, the Securities Exchange Act of 1934 – commonly referred to as the Exchange Act – mandates ongoing reporting, the most common being:

  • Form 10-K
  • Form 10-Q
  • Form 8-K
  • Proxy statements 

Why so many requirements, you ask? Well, the reports you file with the SEC are available to the public through the SEC’s EDGAR portal – more on that topic in a bit. These filings provide transparency and critical financial information so shareholders and the general investing public can make well-informed decisions.

Of course, every company is different, so we recommend fully understanding the filing requirements specific to your organization. For instance, certain securities offerings – intrastate, limited size, government-issued, and limited private offerings – are often exempt from SEC registration.

Likewise, the Exchange Act only requires filings like Form 8-K and reports related to corporate insiders – Form 144, amongst others – under certain circumstances. Therefore, your reporting and disclosure requirements could very well change from year-to-year, maybe even quarter-to-quarter. That’s why it’s so important to have either sufficient in-house expertise on SEC reporting requirements or a reliable third party to work with on an ongoing basis.


SEC Filings You Need to Know

Now that the highest-level overview is behind us, let’s take a closer look at the different SEC filings, both for mandatory reporting as well as your situational requirements. And we’re going to start with some semantics.

What Are SEC Filings?

When we say “SEC filings,” we’re referring to financial statements and other formal reports or documents that a company submits to the SEC. Some filings are one-time, one-off forms, often as part of an IPO. However, as the following forms demonstrate, companies also have several ongoing filing requirements to meet as a public entity. 

Form 10-K

Form 10-K is a comprehensive report, typically filed two to three months after your year-end. Note, however, that the specific timing depends on your public float and whether you’re a large accelerated filer, an accelerated filer, or a non-accelerated filer. Unlike the report you send to shareholders before an annual meeting and shareholder vote, this is a much more in-depth look at certain topics, including:

  • Corporate history
  • Organizational structure and leadership
  • Financial statements
  • Information on subsidiaries
  • Executive compensation details
  • Key metrics like earning per share (EPS) and other pertinent data

Further, the 10-K is divided into five main sections:

  • Business – A general overview your company’s business, particularly main lines of operations
  • Risk Factors – A look at any risks you either face now or might face in the future
  • Selected Financial Data – Financial data points that provide a clearer view of recent company performance
  • Management’s Discussion and Analysis (MD&A) – Where leadership can explain the results of operations from the previous year and provide color that would ordinarily be lacking, including recently-amended changes like:
    • Overall objectives of MD&A
    • Material changes
    • Disclosure of prospective information
    • Liquidity and capital resources
    • Contractual obligations table
    • Off-balance sheet arrangements
    • Critical accounting estimates
    • Discussion and analysis of interim-period results
  • Financial Statements and Supplementary Data (F-pages) – Your main financials, including your income statement, balance sheet, and statement of cash flows, as well as a certification from your auditor

Thanks to the Sarbanes-Oxley Act (SOX) compliance requirements, your 10-K must also include signed certifications from your CEO and CFO, attesting to the report’s accuracy.


Form 10-Q 

Think of Form 10-Q as a condensed version of the 10-K. Companies typically file them 40-45 days after the close of the first three quarters of the fiscal year, again determined by your public float. Note that the 10-K typically takes the place of the 10-Q for the fourth quarter.

Also, like its bigger sibling in the 10-K, the 10-Q provides a detailed look into your financial performance for the quarter. Thus, the 10-K provides investors with unaudited financial statements, MD&A, and disclosures on risk factors – and your internal controls when material changes occur.

Investors often use your 10-Q to look at fluctuations in your working capital, inventory, accounts receivable, and for relevant information on legal issues. The 10-Q also sheds vital light on share buybacks, material mergers, acquisitions, or divestitures, or other unregistered equity sales. Thus, the 10-Q is more of a frequent vitals check rather than the more elaborate annual physical – the 10-K – that you have with your doctor.


Form 8-K

While not exactly a catch-all, Form 8-K is an unscheduled “current report” that serves several different needs, providing information on particular events like:

  • New or ending material definitive agreement
  • Completion of either acquiring or disposing of assets
  • Unregistered securities sales
  • Material modifications to security holders’ rights
  • Changing your certifying accountant
  • Changing control of the organization
  • New or departing directors or principal officers
  • Amending company bylaws or charter
  • And oh-so-much-more

Companies primarily use the 8-K to report significant events occurring between other filings, using it to keep stockholders and the investing public up to speed on pertinent information. A Form 8-K filing is due within 4 business days of the significant event.

Proxy Statements

Most people dislike surprises. Shareholders really dislike them, making proxy statements essential in delivering timely information that’s relevant for annual or special shareholder meetings and votes.

Maybe you want to expand your board of directors or change executive compensation. Or perhaps you have a piece of news to deliver that’s especially revelatory or significant. Those types of material matters go on a proxy statement through Form DEF 14A, keeping shareholders attuned to what’s going on in your organization, particularly at the executive and board levels.


Where to Find SEC Filings 

So that was quite the list, huh? And while we certainly hit the main points, there are many other possible filings in your public entity future. In fact, it can be hard for shareholders – or you, for that matter – to keep track of everything. But that’s what makes the SEC’s EDGAR system so incredibly useful.

EDGAR is an efficient way to search for any publicly available SEC filing, letting shareholders stay fully informed during their decision-making process. But EDGAR isn’t just for investors, though. If, for instance, you’re prepping your first 10-Q, filings from a publicly-traded competitor could be extremely useful by providing a template to go by.


Other Factors to Keep in Mind

Everything you’ve read so far is pretty cut-and-dry. So, to be perfectly honest, it’s all available in countless textbooks and “guides” on SEC reporting and securities laws strewn across the interwebs. However, while a basic, textbook-style understanding of reporting requirements is absolutely critical – especially for noobs – your filings don’t exist in a vacuum.

Put another way, successfully conquering the SEC reporting mountain isn’t just about the ins-and-outs of Form 10-K, for instance. Just as importantly, it’s about understanding the bigger picture. And that’s what makes the following additional factors so critical to your success as a public company.


What Happens If You’re Late With an SEC Filing?

Sometimes things happen. Life and/or the marketplace throws you a massive curveball and you just can’t make a periodic reporting deadline. Granted, that’s far from an ideal position to put yourself in. But it’s also not the end of the world.

Still, there’s a reason why companies try to move mountains to file timely SEC reports – the alternative can quickly become unpleasant, and that’s putting it mildly. But what does a late 10-K or 10-Q filing entail? Let’s take a look. 

  • For whatever reason, you’re going to miss a regulatory deadline. As a result, you file SEC Form 12b-25, a Notification of Late Filing.
  • Pursuant to 12b-25, you must explain the reason behind the missed deadline and any anticipated changes in your operations and earnings for the applicable period.
  • Proper filing of 12b-25 provides a filing extension, five calendar days for the 10-Q and 15 for the 10-K. Please note this does not apply to an 8-K or other filings, just the annual and quarterly reports.
  • If you miss the extended deadline or fail to file at all, the SEC could seek monetary or other penalties against your company, officers, and directors, including revocation of your Exchange Act registrations

None of that is great, that’s for sure. But if you meet your extended deadlines, the SEC will still consider your filing as timely. However, that doesn’t mean you’re out of the woods. Not by a long shot.

A late filing isn’t just an administrative nightmare that can prompt the SEC to drop the hammer. Perhaps even more importantly, it’s a giant, flashing, neon red sign to investors that something is awry with your company. 

Yes, there are absolutely legitimate reasons to file late but, from an investor or shareholder’s view, even the most legitimate ones can be the equivalent of the dog eating your homework. Investors rely on trust, transparency into your financial condition, and performance. If any of those appear even remotely in danger, the impact on your shares – and company – will be most unpleasant.


Reporting Requirements for Company Insiders and Ownership 

As we briefly mentioned before, the Exchange Act has several different filing requirements related to company insiders that you must always be aware of. This is particularly true in an environment where – once again – the slightest whiff of malfeasance can be disastrous for a company.

Forms 3, 4, and 5 

All corporate insiders – your officers, directors, and any beneficial owners of more than 10% of your Exchange Act registered securities – must file these forms. This requirement provides transparency into the shares they own and is an important mechanism to prevent insider trading. Form 3 is the initial filing, Form 4 details any ownership changes, and Form 5 is an annual report. 

Form 144 

This is the form your corporate insiders must file when they sell company stock amounting to more than 5,000 shares or $50,000 within three months. The insider must enact at least a portion of the disclosed transaction within 90 days of filing. 

Schedule 13D

Also known as the Beneficial Ownership Report, the SEC mandates Schedule 13D when a stock owner acquires 5% or more of your company’s voting shares. It requires information on several different items, including:

  • Item 1 – Security and Issuer
  • Item 2 – Identity and Background
  • Item 3 – Source and Amount of Funds or Other Considerations
  • Item 4 – Purpose of Transaction
  • Item 5 – Interest in Securities of the Issuer
  • Item 6 – Contracts, Arrangements, Understandings, or Relationships with Respect to Securities of the Issuer
  • Item 7 – Material to be Filed as Exhibits

Schedule 13G

This is essentially a shorter, quicker version of Schedule 13D that a stock owner can file when acquiring 5% or more of your voting shares. It takes the place of 13D and is available under certain circumstances, the most common being: 

  • An institutional investor meets the 5% ownership threshold but doesn’t intend on exerting control over you, the issuing company
  • A non-institutional investor that doesn’t intend on exerting control over your company and owns less than 20% of your equity securities, either directly or indirectly 

SOX Compliance

We understand ‘SEC reporting’ doesn’t immediately scream SOX for many. However, keep in mind that, under SOX Section 302, your CEO and CFO must certify your financial statements’ accuracy and legitimacy, which, naturally, are a key component of your 10-K.

Also, the relative health of your internal control environment can directly impact your financial reporting (ICFR), which falls under SOX Section 404 requirements. This section requires management to annually assess the effectiveness of your ICFR and report the results. In addition, the company’s auditor must also attest on the company’s ICFR.

Termination of Reporting Requirements

Well, you had a good run as a public entity, but now you want to pull back, maybe reemerge as a private company, or close up shop altogether. Either way, there’s a process to it that entails delisting and deregistration.

  • Delisting – Removal of your company’s stock from the exchange it was traded on
  • Deregistration – Attaining eligibility to terminate your registration and all of your reporting obligations as stated under Sections 12(b), 12(g), and 15(d) of the Exchange Act

It goes without saying that this process does not occur overnight and requires an organized, meticulous approach guided by expertise and experience – in-house counsel, third party specialists, or both.

New Reporting Requirements

Lastly, it’s essential to remember that reporting isn’t set in stone. Like the marketplace itself – not to mention your own organization – it’s constantly evolving to meet ever-changing, often restless demands.

The years-long project of updating Regulation S-K is a perfect example of such change. Although they certainly took their time, the SEC staff obviously made a conscious effort to modernize and streamline reporting to better meet the needs of investors and companies alike.

Of course, Regulation S-K is just a single example – one we’ve detailed elsewhere – of the many reporting and accounting requirements on the move. Therefore, we recommend investing the time, effort, and resources you'll need to ensure you remain at the forefront of compliance requirements. Considering you still have a company to run with countless responsibilities on your plate, many CFOs find it useful to work with an experienced third-party to ensure adequate reporting compliance on an ongoing basis.


Embark’s Final Word

Given the sheer scope of SEC reporting and disclosure requirements, there’s obviously a lot more to it than what we’ve discussed here. However, these insights will give you a significant head start in successfully tackling such requirements.

When future questions or concerns arise, we recommend utilizing the SEC’s Financial Reporting Manual, a veritable cornucopia of regulatory goodness that is equal parts comprehensive, insightful, and beneficial. Even better, Embark’s decades of collective wisdom and experience in reporting, compliance, GAAP, PCAOB audits, and other key areas are here for you and your team. So let's get you going on this exciting – but sometimes overwhelming – new course. Public entity greatness awaits.

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