May 23, 2002
Electronic Mail: email@example.com
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Proposed Rule: Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports - File No. S7-08-02
Dear Mr. Katz:
The American Insurance Association (AIA) is a trade association consisting of 410 property-casualty insurers that provide coverage to businesses and individuals throughout the United States and internationally. Most of our members are affiliates of publicly held groups that are registrants with the Securities and Exchange Commission (SEC).
All 410 of our member insurers are required to file extensive Quarterly and Annual Statements with the insurance departments in every state in which they do business. These Annual Statements include over 100 pages, sometimes much more, of detailed analyses, including information about investments, reinsurance and more than 50 pages of loss development analysis, by types of insurance. The Annual Statements are due on March 1 and, historically, have taxed our members to the limits of their financial reporting staffs. An SEC registrant that is an insurance holding company group might be composed of 50 or more insurers, each of which would be required to file a separate Annual Statement. This proposed SEC rule would make the registrants' SEC 10K filing due at approximately the same time and would impose significant additional burdens on insurer registrants and their accounting and financial reporting staffs, whose work loads are already strained.
We believe that commenters to the 1998 SEC release proposing reform of the Securities Act registration process did a good job of enumerating the reasons that an "accelerated filer" would have difficulties complying with the revised filing dates, especially the reference to additional and more complex reporting requirements. Therefore, we will not repeat them here, but needless to say, the complexity of reporting requirements has further increased since 1998.
We believe that this proposed SEC rule to accelerate the filing requirements will be counterproductive to the SEC's efforts to encourage more reliable financial statements. Further, because the public's principal concerns related to the financial statements of Enron and other troubled companies had more to do with the reliability than the timeliness of those statements, we believe that this proposed SEC rule will exacerbate the public's principal concerns related to financial statements.
Compliance with this proposed SEC rule may require registrants to "close their books" prior to the end of the reporting period. If that were to occur, it is not clear what would happen if a significant event occurred at the end of the period. Compliance with this proposed SEC rule may also result in more standard language or "boilerplate" language to describe relevant transactions that might be prepared in advance because of time constraints.
In addition, we have heard from independent auditing firms that their audit procedures cannot be speeded up, so, in order to comply with this proposed SEC rule, they would require accelerated filers to prepare their financial statements and supporting documentation 30 days earlier so that the audits could be completed in a timely fashion.
Finally, the suggestion in this proposed SEC rule to link the periodic filing dates to the release dates of earnings might result in registrants delaying their release dates, which would result in less timely release of earnings information.
In conclusion, we appreciate the SEC's interest in making information in the 10K and 10Q available to the public as soon as possible and the disclosure of the information on the Internet will represent a major improvement. But we respectfully suggest that the acceleration of the due dates for filing requirements for the 10K and 10Q will do more harm to reliability than any benefit that might result from timeliness.
Vice President - Financial Reporting and
Associate General Counsel
cc: AIA Committee on Financial Reporting Principles