SEC Increases Flexibility in Reporting Environmental Legal Proceedings

The U.S. Securities and Exchange Commission recently announced significant changes to Regulation S-K affecting the disclosure of environmental liabilities for publicly traded companies.  Currently, Regulation S-K has a $100,000 threshold for the disclosure of legal proceedings related to federal, state, or local environmental protection laws (17 C.F.R. 229.103).  The new rule modifies this threshold by providing companies with the choice of:

• Adopting a bright line threshold of $300,000, or

• Adopting an alternative threshold that the company determines is reasonably designed to result in disclosure of material environmental proceedings. Under this option the threshold cannot exceed the lesser of $1 million or 1 percent of current assets. If a company elects a threshold other than $300,000, the adopted threshold must be specified in quarterly and annual reports.

The rule will become effective 30 days after it is published in the Federal Register.