Introduction to the SEC and Company Filings Overview

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Introduction to the SEC and Company Filings Overview

1 About the SEC 2 Who Files with the SEC? 3 SEC Filings Overview 4 Why Can't I Find What I Need? 5 Material Events 6 SEC Filings--what do all those

numbers and letters mean? 7 Major Corporate Forms 8 Registration Statements 9 Ownership Filings 10 Foreign Filings

1 About the SEC The Securities and Exchange Commission (SEC) is one of the regulatory watchdogs of the U.S. government, created in the 1930s to protect investors, maintain fair and efficient markets, and facilitate capital formation. This is accomplished by collecting and disseminating documents that disclose financial and other company information so the public can make sound investment decisions.

To fulfill this responsibility, the SEC has the authority to require publicly-traded companies to file disclosure documents, which are then made available to the investing public via EDGAR, the SEC's online database of public company filings. Morningstar Document Research provides subscriber access to the full EDGAR database, with enhanced search and download functionality.

For example, when a private company elects to "go public," i.e., sell shares of the company to the public on a stock exchange like NASDAQ, it files a Form S-1, also called the Initial Public Offering, or IPO. The S-1 is one type of Registration Statement ? a class of filings generated by companies in connection with the sale of securities.

Once it has gone public, the typical U.S.-based company is required to file Quarterly and Annual Reports on a schedule determined by its fiscal year. It must also file a Proxy Statement in connection with its annual shareholder meeting. Finally, any major developments that arise throughout the year are disclosed immediately in the Current Report. These four filing types are commonly referred to as the Major Corporate Forms, and are described more fully in Section 7, below.

2 Who Files with the SEC? All companies (including foreign entities) that publicly sell securities in the U.S. must be registered with the SEC and comply with its filing requirements. There are about 15,000 publicly-traded companies in the U.S., and many foreign companies and government entities also submit filings to the SEC.

Privately-held companies such as SC Johnson and Levi Strauss are generally not subject to SEC regulation and are therefore not required to disclose company information, ownership records, or financial results.

3 SEC Filings Overview Every public company must file certain forms with the SEC--some are submitted on a regular schedule, and others are filed on an as-needed basis. While there are hundreds of active form types, the filing requirements for any given company are determined by factors such as its business activities, financial status, and domicile.

Foreign entities are also subject to SEC filing requirements, if they list equity shares on a U.S. stock exchange. A foreign issuer is a foreign government or a company organized under the laws of a foreign country. A foreign private issuer may file forms like the 20-F, 6-K, and F-1. Companies that do not qualify as a foreign private issuer are subject to the same reporting requirements as their U.S.-based counterparts. See Section 10, below, for more information about foreign issuers and foreign filings.

4 Why Can't I Find What I Need? When searching for information within SEC filings, remember that public companies disclose information such as financials and business plans pursuant to legal requirements, not out of a general commitment to openness. The details provided can and will be scrutinized by investors, regulators, competitors, the media, and even business partners, to reveal corporate strengths and weaknesses. For this reason, it is in a company's interest to disclose no more than the minimum required

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Introduction: SEC and Company Filings

and in ways that may escape casual readers. As a result,

[Form Type]/A (i.e., 10-K/A)--when a company first

media outlets have been known to call companies

submits a filing like the Annual Report, it is identified by its

out for being less than candid about certain matters, or to Form Type?in this case, the Form 10-K. If the company

claim relevant information was "buried in the footnotes." needs to make any changes to the original filing, such as

correcting erroneous statements or providing additional

The key take-away is that researchers should closely

disclosures, an amended filing is submitted to the

scrutinize filings, keeping in mind that a company

SEC, with /A added to the Form Type to set it apart from

is unlikely to provide as much detail as desired, and that

the original, which remains in the system. If more than one

silence on an issue is an unreliable indicator of no

amendment is submitted, as with IPO-related filings, all

relevant activity. The intended audience for SEC-regulated amendments bear the same designation, like this: S-1/A.

disclosures is the investing public, and the primary

goal is a safe and stable financial equity market. While

NT [Form Type] (i.e., NT 10-Q)--when a company is

researchers from practically every industry are able

unable to submit a filing by the SEC deadline, it must file a

to discover significant information from the filings--from

notice to that effect, including an explanation for

the corporate analyst seeking competitive intelligence

the delay.

to the university development officer tracking alumni

& prospective donors ? these are secondary uses of the

[Form Type]12B or [Form Type]12G (i.e., 20FR12B

data provided.

or 15-12G)--The 12B and 12G designations refer to filings

submitted pursuant the requirements of Sections 12(b)

5 Material Events

and 12(g) of the Securities Exchange Act of 1934 (`34 Act).

Disclosure rules and reporting requirements for public

companies rely upon the concept of "materiality," or

7 Major Corporate Forms

whether certain information about a company could affect Every public company is required to file certain forms with

its market value and/or influence investment decisions.

the SEC--some are submitted once a year or every quarter,

Companies are required to disclose material events such as while others (like the 8-K) are filed on an as-needed basis.

bankruptcy or merger activity, new credit and licensing

agreements, earnings results, changes in control, and stock 10-Q--quarterly report that includes unaudited financial

splits, because failure to do so would be unfair to current statements and provides a continuing view of the

and prospective investors.

company's financial position at a specific point in time.

The report must be filed within 35 days of the end

Materiality is a somewhat imprecise and subjective

of the first three quarters of the company's fiscal year.

determination that can be influenced by several

factors, including company size, industry practice, and

10-K--annual report that provides a comprehensive

generally accepted accounting principles (GAAP).

review of the company's business and financial condition,

Consider employment and compensation agreements--the along with audited financial statements. It also includes

CEO's contract passes the materiality test, while that

the management's discussion and analysis, risk factors,

of a branch manager does not.

properties, legal proceedings, executive compensation

information, and much more. The 10-K is due 60-90

days after the end of the company's fiscal year, depending

6 SEC Filings--What Do All Those Numbers and

on company size. Although similarly named, the annual

Letters Mean?

report on Form 10-K is distinct from the Annual Report to

It can be hard to navigate hundreds of filing types with

Shareholders (ARS), which a company must send to

obscure titles like 485BPOS and N-8B-2/A! Here are a few its shareholders when it holds the annual meeting to elect

helpful guidelines to ease the confusion:

directors. The SEC does not require companies to file the

ARS, although some do so voluntarily.

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Introduction: SEC and Company Filings

Additional 10-K filing types: 10-KT--Transitional Annual Report filed by a company that is changing its fiscal year.

of the company's business, including information about the company's management and financial statements certified by independent accountants.

10-KSB--Annual Report for Small Businesses, an abbreviated version of the 10-K filed by most large public companies. The 10-KSB and 10-QSB were phased out in 2009.

8-K--the "current report" companies must file with the SEC to alert shareholders to major events, such as preliminary earnings announcements, merger activity, bankruptcy filings, change of executive or director, new material agreements or direct financial obligations, change in certifying accountant, and other activity that could affect the value of a company's stock.

Schedule 14A--the "proxy statement" must disclose all important facts about issues on which shareholders will vote, often in connection with the annual shareholder meeting, such as election of directors and executive compensation ("say on pay"). The Proxy's value lies in the concise, understandable overview of a company's health, relationships, risks, and future plans.

Selected Schedule 14A filing types: PRE 14A--preliminary proxy statement filed prior to shareholder votes on issues not related to contested matters or merger activity.

DEF 14A--definitive proxy statement, most commonly filed in conjunction with the annual shareholder meeting. Additional proxy materials may be filed in a DEFA14A.

PREC14A & DEFC14A--proxy statements filed in connection with shareholder votes on a contested proxy solicitation, also known as a "hostile takeover."

PREM14A & DEFM14A--proxy statements related to shareholder votes on issues related to a merger or acquisition.

8 Registration Statements The "registration statement" describes a class of filings used when a company offers shares for sale to the public. It provides essential facts and detailed descriptions

S-1--Initial Public Offering (IPO), used when a private company first goes public. Comprised mainly of the prospectus, which contains important information about the company. A new public company typically has no prior reporting history, so the information that can inform a decision to invest often can only be found in the prospectus. Companies normally file several amendments (S-1/A) prior to going public.

S-3--simplified registration statement for subsequent (secondary) share offerings; can be used by companies with at least a 12-month history of timely filing under the '34 Act.

S-4--used to register securities in connection with business combinations (i.e., mergers) and exchange offers.

S-6--registration statement for unit investment trusts registered on Form N-8B-2.

S-8--used to register securities to be offered to company employees via incentive plans.

S-11--for the registration of securities issued by certain real estate companies, including real estate investment trusts (REITs).

9 Ownership Filings Certain investors have a special obligation to disclose their relationship with publicly-traded companies, particularly the number and value of shares held, and information about their stock transactions. Three investor groups are subject to special reporting requirements: Company Insiders, Beneficial Owners, and Institutional Investors.

Insider Trading--when corporate insiders (officers, directors, and owners) buy and sell stock in their companies, or exercise stock options, they are required to report those transactions. Insiders are barred from trading on material, nonpublic data, such as unreleased earnings reports or new business relationships. Once the information has been released to investors, the insider

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Introduction: SEC and Company Filings

no longer has an unfair advantage over others and can legally trade on the information.

Form 3--initial insider filing; reports ownership amounts and is due within 10 days of a person becoming an Insider.

Form 4--reports any change in ownership such as stock purchases & sales and the exercise of stock options; should be filed within 2 business days of transaction(s).

Foreign Government--the government of any foreign country or political subdivision of a foreign country. The filing requirements differ from those for U.S. or foreign companies.

18-K--annual report for foreign governments that provides a comprehensive overview of the country's political and economic landscape; filed within 6 months of fiscal year end.

Form 5--annual summary of Form 4 transactions; also includes any other information that should have been reported previously.

Beneficial Ownership--when an individual, group, or other entity acquires at least 5% of a company's shares, that event triggers certain reporting requirements.

Schedule 13D--identifies all parties with voting or selling authority; must be filed within 10 days of any transaction. Note: even passive investors must file the 13D when their investment exceeds 20% of the company's stock.

Schedule 13G--filed by passive investors with an ownership stake between 5% and 20% and no intention to control the company; provides less information than the 13G.

Institutional Ownership--large investment entities with at least $100 million in assets under management (AUM) are required to file the quarterly Form 13F-HR, which discloses information about management and investment holdings. Institutional investors include banks, investment advisers, broker-dealers, pension funds, and insurance companies. Foreign Filings 10 As discussed previously, a foreign issuer is a foreign country, foreign national, or entity incorporated or organized under the laws of a foreign company that lists equity shares on a U.S. stock exchange. As such, they are subject to the SEC's reporting requirements. Any issuer that is not a foreign government or does not qualify as a foreign private issuer is subject to the standard filing requirements of the SEC, including the submission of major forms like the 10-K, 8-K, and S-1.

S-B--registration statement for foreign governments registering securities; includes descriptions of the country & government, offering terms, and planned use of proceeds.

18-12B & 18-12G--used for the initial registration of foreign government securities pursuant to specific sections of the '34 Act.

Foreign Private Issuer--a foreign company is classified as a foreign private issuer if less than 50% of its shares are held by U.S. citizens and NONE of the following conditions are met:

Most of its officers or directors are U.S. citizens, or Most of its assets are located in the U.S., or Most of its business is administered in the U.S.

If a company qualifies as a foreign private issuer, then it may submit these filings to the SEC:

20-F--integrated reporting form (similar to the 10-K) for foreign private issuers; can be used as a registration statement (rarely) or annual report (more common).

40-F--integrated reporting form for Canadian foreign private issuers; used both as an annual report and as a registration statement. The 40-F serves as a wraparound for the company's public reports.

6-K--current report (similar to the 8-K) regarding material events such as changes in control, acquisitions, bankruptcy, default, shareholder votes, or stock option grants. Because foreign private issuers do not file quarterly reports, the 6-K is also used to report quarterly financial results.

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Introduction: SEC and Company Filings

Foreign Registration Statements--used by foreign private issuers to register equities for sale in the U.S.

F-1--basic registration form authorized for certain foreign private issuers when other, more specialized, forms are not required.

F-3--simplified registration statement for secondary share offerings; can be used by foreign issuers with a 12-month filing history and a public market float above $75 million.

F-7--used by certain eligible publicly-traded Canadian foreign private issuers to register rights offers extended to their U.S. shareholders. Form F-7 acts as a wraparound for the relevant Canadian offering documents.

F-8 & F-80--these forms may be used by Canadian foreign private issuers to register securities offered in business combinations and exchange offers. The forms act as a wraparound for the relevant Canadian offering or disclosure documents.

F-4--used to register securities in connection with business combinations (i.e., mergers) and exchange offers involving foreign private issuers.

F-6--registration statement for shares represented by American Depositary Receipts (ADRs) issued against the deposit of a foreign issuer's securities.

F-9 & F-10--these forms may be used by Canadian foreign private issuers to register certain securities. The forms act as a wraparound for the relevant Canadian offering or disclosure documents.

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