SEC clarifies required comparative periods for companies filing their registration statements

COMPANIES registering their shares with the Securities and Exchange Commission (SEC) are required to submit two comparative periods for the past three fiscal years to show changes in their financial condition, the regulator said.

The commission issued the clarification amid mixed interpretations of a specific provision under the Securities Regulations Code (SRC).

In Memorandum Circular No. 13 signed by SEC Chairperson Emilio B. Aquino on Sept. 12, the securities regulator clarified Part III, paragraph A, subparagraph 2 (a) of Annex C of the SRC regarding the comparative periods required in the management’s discussion and analysis in a company’s prospectus. 

Annex C of Rule 12 contains details for the non-financial disclosure requirements in the registration statements that should be filed with the SEC.

The circular clarified that a registrant should provide the following disclosure comprising two comparative periods for the last three fiscal years in the management’s discussion and analysis portion of its prospectus.

“The foregoing portion of Annex C gave rise to conflicting views and varying interpretations as to the number of fiscal years required to be disclosed in the management’s discussion and analysis portion of the prospectus,” the circular said.

The SEC’s markets and securities regulation department sought guidance from the commission en banc on the interpretation of the phrase “for each of the last three fiscal years” as provided in Annex C, which was subsequently clarified during an en banc meeting on Sept. 5.

According to the circular, the interpretation will apply prospectively to registrants required to file registration statements and other reportorial documents, which include disclosure of a management’s discussion and analysis.

Sought for further comment, SEC Commissioner Kelvin Lester K. Lee said the circular aims to allow easier ways to raise capital. 

“The rationale is to make it easier to file registration statements and as a result make it easier to raise capital.  This covers registration statements and/or other reportorial documents, which include a disclosure of a management’s discussion and analysis,” Mr. Lee told BusinessWorld in a Viber message.

“This is for those that intend to file registration statements,” he added.

The SEC said the interpretation under the circular would take effect 15 days from its publication. — Revin Mikhael D. Ochave