[Last updated: 1 January 2024, unless otherwise noted]
A Nasdaq listed company is required to promptly disclose "any material information that would reasonably be expected to affect the value of its securities or influence investors' decisions." The disclosure may be made through any method that complies with the SEC's Regulation FD (Fair Disclosure), including a broadly disseminated press release.
If unusual market activity takes place in a company's Nasdaq-listed securities, the company should determine whether there is material information or news that should be disclosed. If activity or rumors indicate that information regarding important developments has been leaked or has become known to the investing public, the company may be required to make a public announcement. For example, the announcement may need to disclose negotiations, plans or even information that has not yet been presented to the company's board of directors. Occasionally, a company may have to deny false or inaccurate rumors that may affect the market activity in its securities. The MarketWatch department may, in some instances, determine that a trading halt is necessary until the information is properly disseminated.
Nasdaq must also be notified of various other changes affecting the listed company and its securities.
Materials provided to shareholders
The Nasdaq rules generally require that companies provide annual and quarterly reports and solicit proxies or voting instructions from their
SEC periodic filings
As long as a company continues to meet the definition of "foreign private issuer" described above, its required periodic reporting with the SEC is limited to:
- Furnishing to the SEC, from time to time, by means of a simple cover page report known as the Form 6-K, copies of significant press releases, reports, and other disclosures that the issuer otherwise makes public as well as information on material cybersecurity incidents that the issuer discloses in a foreign jurisdiction to any stock exchange or securityholder.
- Filing an annual report on Form 20-F, which includes new required disclosures on cybersecurity risk management and governance as well as new required disclosures regarding insider trading policies and procedures.
Form 6-K. A foreign private issuer must furnish a Form 6-K to the SEC from time to time. This is required by the SEC to report information that:
- The company makes public pursuant to the law of its home country.
- The company files with any non-US stock exchange on which its securities are listed and that is made public by the exchange.
- The company distributes to its security holders.
This information could concern changes in management or control, acquisitions or dispositions of a material amount of assets, changes in the company's certifying accountants, the company's financial condition and results of operations, material legal proceedings, material cybersecurity incidents, or any other information that the company deems of importance.
Interim financial statements. Under Nasdaq rules, a foreign private issuer is required to publicly disclose its interim balance sheet and income statement as of the end of its second quarter by submitting such information on Form 6-K to the SEC. This information does not have to be reconciled to US GAAP.
Form 20-F. A listed company has financial reporting obligations under the
The financial statements required by the Form 20-F annual report are the same as those required under a Form 20-F registration statement, discussed above. They may be prepared in accordance with US GAAP, IFRS (as issued by IASB) or local GAAP. If the statements are in compliance with IFRS, the compliance must be explicitly stated, and an auditor's certification must be provided. If financial statements and schedules are prepared according to local GAAP, the principles must be disclosed and the material variations with US GAAP and SEC Regulation S-X must be discussed.
For Domestic Issuers:
Domestic issuers must file periodic and current reports on Form 10-K (annual reports), Form 10-Q (quarterly reports) and Form 8-K (current reports). The Form 10-K must include annual financial statements (prepared in conformity with US GAAP) along with information updating previously filed information regarding the issuer and its business. The Form 10-K must be filed within 90 days after the end of the fiscal year of the issuer or in a shorter period prescribed by regulation for certain larger reporting companies that are "accelerated filers". Quarterly reports containing unaudited quarterly financial information regarding the issuer must be filed within 45 days after the end of the fiscal quarter for the first three quarters of the year with shorter filing deadlines applying to accelerated filers. Current reports on Form 8-K are required for a variety of enumerated circumstances including inter alia, material acquisitions or dispositions, reporting of financial results (such as earnings releases) entering into material financing arrangements, changes to senior management and the board of directors, any change in the issuer's accounting firm, material cybersecurity incidents, and certain insolvency events. In most cases a Form 8-K is due within four business days of the prescribed event. Form 8-Ks are often typically filed or furnished by issuers to report other material developments that are not subject to mandatory disclosures.
Further, unlike foreign private issuers, domestic issuers are subject to the SEC's proxy statement regime which requires the filing with the SEC and distribution to shareholders of a lengthy mandated report in relation to any annual or special meetings of shareholders that contains certain mandated disclosures regarding the matters to be considered the meeting (such as the election of directors at an annual meeting). Most domestic issuers include their disclosures relating to executive compensation in their proxy statement for the issuer's annual meeting of shareholders. As a result of increased SEC and shareholder focus on compensation, the disclosures around executive compensation are very complex and lengthy.
Sales and holdings by affiliates
<st2:country-region>US</st2:country-region> securities laws limit the extent to which officers, directors and other control persons of a public company can sell their securities publicly in the US. Generally, in the absence of any available exemption (such as SEC Rule 144, which provides for resales subject to limitations on the quantity and timing) none of the principal officers or directors of a public company may sell their shares in the US market unless there is a registration statement then in effect, covering their shares. However, sales by officers and directors of a foreign private issuer of ordinary shares through ordinary brokerage transactions on most major non-US stock exchanges are unrestricted by US federal securities laws.
In addition, if a person or group of persons acting in concert acquires beneficial ownership of more than 5% of any registered class of voting equity securities, they will need to make a filing with the SEC on Form 13D or 13G. These filings also must be amended or updated from time to time. In October 2023, the SEC adopted amendments to Regulation 13D – G under the Exchange Act. For further discussion of the amendments, see our Client Alert: SEC issues new deadlines for Section 13 filings.
Anti-fraud laws and insider trading
SEC and stock exchange disclosure rules are intended to ensure that securities markets receive information regarding material events that might affect the trading prices of public company securities so that investors have adequate information available to them on a timely basis. These disclosures are subject to the antifraud provisions of US federal securities laws, including SEC Rule 10b-5. This rule makes it unlawful to engage in fraudulent or manipulative practices or "to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading."
These anti-fraud laws provide the basis for a significant amount of securities litigation, which is relatively prevalent in the US. As a result, public companies and their "insiders" (such as officers, directors and controlling persons) have potential liability if they fail to deal fairly with investors with respect to matters that could affect the price of the company's stock. A public company must have a policy of prompt and complete disclosure to stockholders and the financial community of all material developments, good or bad, that could reasonably be expected to influence the price of the company's stock. The company and its officers, directors and other insiders must refrain from all transactions in the company's securities during any period when there is undisclosed material information about the company. For this reason, most public companies have formal trading policies applicable to insiders. Similarly, the company should ensure that all material information is disseminated uniformly to the marketplace and must avoid activities designed to manipulate the company's stock price.