Long Aldridge & Norman
May 23, 2002
By E-Mail (email@example.com)
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: File S7-08-02: Comments to Proposed Rule Accelerating Periodic Report Filing Dates
Dear Mr. Katz:
We are writing to provide comments on the above-referenced proposed rule. In particular, we wish to comment on the proposed acceleration of the filing deadline for Form 10-K.
There can be no question that the filing of Exchange Act reports in a timely fashion is essential to achieving the Act's intent. Furthermore, the proposed rule correctly notes the tremendous advances in communication and information technology available to issuers and to investors both as to speed and the amount of information available. These do not, however, assure quality.
As to the 10-Q it appears the accelerated deadline poses no threat to quality. It is comprised of unaudited data, and management's interpretation of that data.
But for the 10-K, that is simply not the case. The Form 10-K is the single most demanding ongoing reporting requirement in the life of a public company. The process of preparing, drafting, reviewing and producing a 10-K is replete with opportunities for error. Such mistakes not only disadvantage investors but, as the Enron and Global Crossing debacles continue to demonstrate, also create serious legal exposure for the reporting company. To compress the present timetable by 1/3 is to weaken safeguards critical to the entire process of collecting and reviewing 10-K data.
In our experience the process is generally a 60-day one, because production time - for proxy use and filing - is a 30 day process itself. The last 15-20 days of that 60 days is spent wrestling the footnotes and wrestling the issues concerning where some items will appear - in the statements or in the footnotes - the very source of much of the current problem. To lop another 30 days from the process effectively cuts preparation time in half, and will risk the quality of the disclosure, especially the footnote disclosure.
As an alternative, we suggest that accelerated filers should be required to file an interim, or summary version of certain financial statement data within 60, perhaps even 45 calendar days, following the end of the fiscal year. This "preliminary 10-K" would contain not only the same data companies generally include in their yearly earnings press releases but additional information as well, not unlike the selected financial or summary data included in registration statements. Under this suggested format, the Form 10-K would continue to be filed 90 calendar days following the end of a company's fiscal year.
Very truly yours,