U.S. – SEC M&A, Takeover Disclosure

U.S. – SEC M&A, Takeover Disclosure

On 3 May 2019 SEC proposed simpler disclosure of business acquisition.

  • SEC voted to propose rule amendments to improve information given investors,
    regarding acquisition, disposition of businesses, including real estate operations.


  • Amendments aim to facilitate timely access to capital and lower compliance cost.
  • Proposed amendments changing financial disclosure requirements in Rules 3-05,
    3-14, and Article 11 of Regulation S-X, as well as other related rules and forms.
  • SEC also proposed new Rule 6-11 of Reg S-X, and amendments for Form N-14.

Current Rule 6-11

  • Rule 3-05 requires registrants to provide separate audited and unaudited interim
    pre-acquisition financial statements for some years, depending on certain factors.
  • Rule 3-14 on disclosure of registrant acquiring a significant real estate operation.
  • New Rule 6-11 covers reporting of acquisitions that involve investment company.

Proposed Changes

  • Proposed changes, among other things, would update "significance" tests under
    these rules by revising investment test and the income test, and expand the use
    of pro forma financial information in measuring their significance under the rules.
  • They would require financial statements of the acquired business to cover up to
    the two most recent fiscal years, rather than up to the three most recent ones.
  • They would not require separate acquired business financial statements once has
    been included in the post-acquisition financial statements for complete fiscal year.

SEC Jackson Issues Statement

  • SEC Commissioner Jackson issued public statement that same day after agreeing
    to send proposal for public comment, saying it provides some necessary updates.
  • But he said he was concerned the proposal treats mergers as an "unalloyed good."
  • He said you can't ignore data showing some M&As don't make sense for investors.
  • He urged investors to help SEC carefully consider how corporate insiders can use
    mergers as way to advance private interests over long-term interests of investors.

Comment Period

  • Proposal has 60-day public comment period following publication in federal register.