NU Online News Service, Sept. 16, 5:15 p.m. – The U.S. Securities and Exchange Commission today published a final rule requiring publicly traded companies to speed up filing of quarterly and annual reports.
The rule, which phases in over three years, affects public companies with at least $75 million in common stock available for trading. After three years, the companies will have only 60 days to file their 10-K annual reports, down from 90 days today.
Big public companies will have only 35 days to file their 10-Q quarterly reports, down from 45 days.
The SEC will also require the “accelerated filers” to include notices in their annual reports stating where readers can go to find the companies’ SEC filings on the Web. If companies do not publish their SEC filings on their own Web sites or provide links to other sites that provide the filings, they will have to explain why they have chosen not to do so.
The SEC has not changed its 10-K and 10-Q reporting deadlines in more than 30 years, despite enormous advances in information technology and productivity, SEC officials write in a discussion of the process for developing the final rule.
“We believe that periodic reports contain valuable information for investors,” the SEC officials write. “Shortening the due dates ? accelerates the delivery of information to investors and the capital markets, enabling them to make more informed investment and valuation decisions more quickly. This helps the capital markets function more efficiently.”
Similarly, the SEC officials write, the Web information requirements should improve market efficiency by giving investors and others quicker, easier access to important financial information.
The SEC published an initial draft of the rule in April, while the financial markets were reeling from disclosures of allegations of serious financial reporting irregularities by several large energy companies, telecommunications companies and conglomerates.
The SEC ended up with more than 300 public comments on the draft, including letters from the American Council of Life Insurers, Washington, and several life insurers. SEC officials refer repeatedy in their discussion of the final rule from letters submitted by the ACLI; the Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York; and AFLAC Inc., Columbus, Ga.
TIAA-CREFF sided with consumer groups and investors groups that supported the accelerated reporting deadlines, agreeing with proponents at the SEC that the changes would improve the efficiency of the capital markets.
The ACLI and AFLAC sided with financial services companies and accounting firms that expressed concerns that the changes might weaken the quality of financial reports, by cutting down on the time available for reviewing the reports, leading to heavier use of estimates and boilerplate and letting more errors slip in.
But SEC officials concluded that the changes would help investors and add less than $1 million per year to the $1.5 billion that U.S. public companies already spend each year to generate 10-K and 10-Q reports.
The text of the final rule is available on the Web at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-23072-filed