New SEC Rule Accelerates Financial Reporting Deadlines

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The U.S. Securities and Exchange Commission published a final rule last week 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 If companies do not publish their SEC filings on their own Web sites or provide links to other sites that provide the filings, they will have to explain why they have chosen not to do so.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 datesaccelerates 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 serious problems with financial reports filed 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 repeatedly in their discussion of the final rule to letters submitted by the ACLI; the Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York; and AFLAC Inc., Columbus, Ga.

TIAA-CREF sided with consumer groups and investors groups that supported the new reporting deadlines, agreeing with proponents at the SEC that the changes would improve the efficiency of the capital markets.

The ACLI and AFLAC joined with other financial services companies and accounting firms that worried that the changes might weaken the quality of financial reports, by leading to heavier use of estimates and boilerplate.

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 on SEC filings.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.