Following the completion of one of the most divisive presidential elections in U.S. history, the election of President Trump and the retention of Republican majorities in both the U.S. Senate and House will impact the public disclosures of many U.S. public companies. The expectation of the securities markets that the results of these elections will significantly impact the prospects of many companies was reflected in the sharp movements in the stock prices in various sectors which occurred shortly after the 2016 elections. While the overall stock market trend since the 2016 elections has been positive, companies in certain sectors such as manufacturing and financial institutions have achieved gains significantly in excess of market norms, with companies in other sectors, such as utility and certain healthcare sectors, having underperformed in relation to market norms (although some healthcare companies have recovered from stock market declines seen in the immediate aftermath of the elections).
With the onset of the annual reporting season for calendar-year end public companies, companies will want to consider how the results of the 2016 elections might impact their securities disclosures, particularly in connection with Annual Reports on Form 10-K which will be filed by calendar-year companies in late February or March. In this regard, public companies are required to disclose risk factors in their Form 10-Ks, as well as to disclose material trends (positive and negative) in the Management Discussion and Analysis section of the Form 10-Ks. Similarly, public companies making securities offerings will need to consider similar risk factor and MD&A-related issues. Public companies in certain market sectors dealt with similar (not fully anticipated) political-related considerations in connection with the U.K. referendum resulting in a majority vote to exit the European Union in June 2016, which resulted in certain companies with multi-national operations updating their risk factors in their 2016 second quarter 10-Qs to disclose the potential negative impact and uncertainties associated with such referendum and a potential future exit of the United Kingdom from the European Union.
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