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Rules Approved for Annual Report Summary Pages

The SEC has approved interim final rules to allow public companies to include a summary page in their annual reports. The rules were mandated under the Fixing America’s Surface Transportation Act.

The SEC has approved interim final rules to allow public companies to include a summary page containing certain financial information in their annual reports, a requirement of the Fixing America’s Surface Transportation (FAST) Act.

The commission issued the rules on June 1, 2016, in Release No. 34-77969, Form 10-K Summary. The rules go into effect upon publication in the Federal Register, followed by a 30-day comment period.

While companies aren’t barred from providing a voluntary summary page in their Form 10-K annual reports, Release No. 34-77969 will “expressly allow a registrant, at its option” to do so, according to the SEC. The rule requires the page to include links that cross-reference more detailed disclosures elsewhere in the report.

Such a summary “could make disclosure more effective by enhancing the ability of investors and other users to process relevant information and/or by reducing their processing time and search costs” and could be particularly useful for complex annual reports, SEC staff wrote in their economic analysis of the rule.

Release No. 34-77969 is the latest in a string of small-scale rulemakings stemming from the FAST Act, a highway funding bill passed in late 2015 that contained a cluster of amendments tweaking securities laws. The amendments were attached by House Financial Services Committee Chairman Jeb Hensarling and mirror the language of bills passed by the committee over the year.

Specifically, the FAST Act provision that mandated the 10-K summary rules comes from H.R. 1525, the Disclosure Modernization and Simplification Act, sponsored by Rep. Scott Garrett, a New Jersey Republican.

In January, the SEC issued interim final rule under the FAST Act in Release No. 33-10003, Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies, which cut disclosures requirements for smaller issuers preparing to go public.