The Linklaters US SEC Transactions and Compliance group has published its annual update on Form 20-F amendments and disclosure trends.
For the 2023 reporting cycle, foreign private issuers preparing their annual reports on Form 20-F will need to prepare for mandatory cybersecurity and compensation clawback disclosure.
The key areas of disclosure focus are set out below. For our full release on Form 20-F amendments and disclosure trends to consider during the 2023 reporting cycle, click here.
Key areas of disclosure focus
1
Cybersecurity
U.S.-listed companies (including foreign private issuers) are now required to make disclosures about their cybersecurity risk management, strategy and governance in their annual reports under new cybersecurity disclosure rules. The new rules add Item 16K to Form 20-F, which requires companies to disclose certain information regarding their cybersecurity risk management, strategy and governance in their annual reports.
NYSE- and Nasdaq-listed companies must adopt policies to recover incentive-based compensation following an accounting restatement, even when there is no misconduct on the part of the recipient, by December 1, 2023. Along with filing their clawback policies as exhibits to their annual reports on Form 20-F, listed companies must also make disclosures relating to the recovery of any erroneously awarded compensation if the policy has been triggered.
According to the SEC’s most recent regulatory agenda, the SEC has pushed back the adoption of its climate change disclosure proposal to spring 2024. In the meantime, companies should look to the SEC’s prior guidance, such as the 2010 guidance and the 2021 sample letter, and recent comment letters as a guide to disclosure.
Non-GAAP financial measures continues to be a major focus of SEC comments. At the end of 2022, the SEC published updated Compliance and Disclosure Interpretations (“C&DIs”) about non-GAAP financial measures. The SEC Staff often refers to the C&DIs in its non-GAAP comments, so it is worth reviewing the guidance before drafting any non-GAAP disclosure.
Companies should keep in mind the SEC’s 2022 sample letter to companies regarding disclosures about Russia’s invasion of Ukraine and related supply chain issues. Although the SEC has not issued a sample letter regarding the Israel-Hamas War, we expect that the SEC Staff would ask questions similar to those in the Ukraine sample letter.
Foreign private issuers with fiscal years beginning on or after April 1, 2023 must comply with the new Rule 10b5-1/insider trading plan disclosure rules (requiring, among other things, insider trading plans to be filed as exhibits to Form 20-F). December and March year end companies will not be required to make the new disclosures until their next reporting cycle.
