Request for Rulemaking for
Clarification of Material Disclosures With Respect to Financially Significant Environmental Liabilities and Compliance with Existing Material Financial Disclosures
File No. 4-463
The following comment on Letter Type A,
or variations thereof, was submitted by
79 individuals.
Subject: Proxy Voting
Form Type Letter A:
RE: SEC File # 4-463
Dear Secretary Katz,
Improved disclosure practices are a key part of restoring investor confidence
in America’s capital markets. As a necessary part of restoring that confidence,
and to help implement the recent Congressional mandate for accounting reform
represented by the Sarbanes/Oxley Act, I write to urge the Commission to clarify
and tighten standards for the reporting of financially significant environmental
liabilities.
Specifically, I direct the Commission’s attention to the rulemaking petition
(SEC File # 4-463) submitted by the Rose Foundation for Communities and the
Environment and supported by numerous mutual funds, labor, and charitable
organizations. That petition recommends the adoption of standards developed
by the respected professional engineering association, the American Society
of Testing and Materials, for evaluating and disclosing environmental
liabilities, and comes on the heels of extensive requests to the Commission
from many investors urging attention to environmental and social disclosure.
Commission action to guide the reporting of financially material environmental
liabilities is needed because these liabilities are regularly under-reported by
SEC registrants. For example, in March 2001, the United States Environmental
Protection Agency released a report that demonstrated that 74% of companies
facing environmentally-related legal actions contemplated or initiated by a
governmental agency seeking $100,000 or more, do not adequately disclose these
liabilities to shareholders as mandated by SEC Regulation S-K, Item 303. The
same report showed that 96% of publicly traded companies facing Resource
Conservation & Recovery Act corrective actions failed to accurately disclose
these liabilities. Companies failing to adequately report environmental
liabilities often seek to justify their conduct by maintaining that such liabilities
are difficult or impossible to quantify. Many companies also currently hide
environmental liabilities from investors by practicing piecemeal accounting –
where each environmental liability is evaluated in isolation and deemed immaterial,
even if the sum of all environmental liabilities is huge.
The new environmental and reporting guidelines developed by the American Society
for Testing and Materials would close these loopholes. By incorporating these
consensus-based, industry-generated standards, the Commission would enhance investor
confidence by helping to ensure that material environmental liabilities are accurately
and consistently reported. I urge the Commission to initiate rulemaking to define
environmental materiality based on the ASTM guidelines as soon as possible.
Sincerely,
http://www.sec.gov/rules/petitions/4-463/4-463typea.htm
