Fidelity Management & Research Company
Eric D. Roiter
Senior Vice President and General Counsel
82 Devonshire Street
Boston, MA 02109-3614
May 31, 2002
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Acceleration of Periodic Report Filing Dates (File No. S7-08-02), SEC Release Nos. 33-8089, 34-45741 (April 12, 2002)
Dear Mr. Katz:
On behalf of Fidelity Investments, I write to address the Commission's proposal to accelerate the deadlines for companies filing quarterly and annual reports on Forms 10-Q and 10-K. Fidelity participated in the preparation of the comment letter filed by the Investment Company Institute, dated May 21, 2002 and concurs in the ICI's recommendation that the SEC amend its rules to require that companies issuing earnings announcements set forth at the same time a reconciliation of those earnings numbers to GAAP, and that such GAAP-reconciled announcements be filed with the Commission as current reports on Form 8-K. We also agree with the ICI that this change to the Commission's disclosure rules should not depend upon whether the Commission decides to shorten the deadline for the filing of 10-Q and 10-K reports.
Requiring pro-forma earnings to be contemporaneously reconciled to GAAP should help foreclose dislocations that can arise in the pricing of securities in the secondary markets when companies are left free (at least for a temporary period) to custom-tailor their financial numbers, and will enhance the ability of investors to base their investment decisions upon comparisons among companies in the same industry and across different industries.
Shortening the filing deadline for periodic reports by 15 or 30 days after the close of a fiscal period - all other things being equal - would, of course, offer some improvement over the current disclosure regime. We find it difficult to assess, however, whether this step poses any significant potential that companies and their auditors would face undue time constraints that could contribute to a deterioration in the quality of disclosure, particularly with regard to year-end financial statements. We do note that the failure of Enron and other events have underscored the critical role to be played by outside auditors, and one might expect that auditors will be giving careful thought to ways in which they may more effectively probe for irregularities or weaknesses in companies' financial statements or internal controls. This could lead to expanded audit plans and extended audits. At the same time, the Commission, quite appropriately, will be requiring management to improve MD&A disclosure to address critical accounting policies and to enhance disclosure in other ways. This is not to say that either auditors or company management will be unable to carry out their duties under a shortened timetable. We would urge the Commission, however, to adopt the shortened reporting deadlines only if it is able to conclude that there is little likelihood that such deadlines will pose an appreciable risk to the quality of disclosure and financial reporting.
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Fidelity appreciates the opportunity to comment on the Commission's proposal, and applauds the Commission's efforts to enhance the ability of investors to reach informed investment decisions based upon timely, accurate and effective corporate disclosure.
Eric D. Roiter
cc: Mr. Alan Beller
Mr. Paul Roye