Mellon Financial Corporation
Carl Krasik
Associate General Counsel and Secretary

May 22, 2002

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549

Re: File No. S7-08-02

Dear Mr. Katz:

Mellon Financial Corporation appreciates the opportunity to offer its comments on the proposed acceleration of deadlines for the filing of reports on Form 10-Q and 10-K. We believe the proposal as currently drafted is not in the best interests of the investing public.


As discussed in greater detail below, the following summarizes our recommendations for the staff's consideration:

Our comments on the proposed filing deadlines are based on the assumption that the substantive requirements for these Forms remain unaltered. Obviously, if the Forms were changed to abbreviate the disclosure requirements, this would have to be taken into account in establishing reasonable filing deadlines.


We offer these comments from the perspective of a large, seasoned reporting company that would be subject to the rule as proposed. Mellon is a global financial services company providing a comprehensive range of financial products and services in domestic and selected international markets. And, over the past few years Mellon has sharpened its strategic focus, in part through a number of significant acquisitions and divestitures. These factors have combined to make it particularly important to explain our business performance to the investing public in a clear and understandable way. We are committed to meeting that challenge, both as a legal responsibility and because we value our relationship with the investing community. As one of the largest asset managers in the world, we understand the importance of quality in disclosure. Providing quality disclosure, however, takes time. We are concerned that earlier deadlines will increase the difficulty of providing disclosure at the standard we have set for ourselves, which the analyst community demands and which the public deserves.

We also offer some clarifying suggestions on the proposal for website posting of Forms 10-Q, 10-K and 8-K.

Our Reporting Pattern

Our Form 10-Q for the first quarter of 2002 contained 63 pages, excluding exhibits. Of this, 15 pages were devoted to the required unaudited financial statements and notes, and 42 pages were devoted to Management's Discussion and Analysis.

Our 2001 10-K was 35 pages in length, excluding exhibits. The audited financial statements and Management's Discussion and Analysis were incorporated by reference to our 2001 Financial Annual Report to Shareholders. In that report, the audited financial statements and notes were 47 pages in length, and Management's Discussion and Analysis was 46 pages.

The length of the disclosure in these reports, particularly of the Management's Discussion and Analysis, results from many factors, including the following:

First, pursuant to applicable legal and accounting requirements, and in order to help investors understand the relative contributions of each of the lines of business in which we are engaged, we provide disclosure on a business sector basis. Detailed income, expense and other information for each of our business sectors is included in the reports. And we discuss results and trends for each of the sectors presented. For the 2001 10-K we considered five separate business sectors in this way. In 2002, as a result of a further sharpening of our strategic focus, we redefined our business sectors into two overall reportable groups, each containing three business sectors. The sector presentation and discussion in the first quarter 2002 10-Q followed this new alignment. In our discussion of separate results for each of our six business areas, we furnish more disclosure than the legal and accounting minimum. Doing so requires substantially more time than a single discussion of our overall results, but we believe it helps the investor to better understand our business.

Second, we have worked hard to provide information to allow the investor to compare our period to period results in an informed, "apples to apples" way. Our business has changed significantly over time, in part through a number of important business acquisitions and divestitures. Such activity can sometimes make it more difficult for investors to evaluate period to period trends on a truly comparable basis. We include a substantial amount of numerical data and textual discussion to assist the reader in making such comparisons. Such discussion has included, where necessary, an analysis of the impact on each period of new accounting rules.

Third, we believe it is important for investors to understand the degree to which our revenues are made up of fee revenue on the one hand, and interest revenue on the other hand. Our fee generating businesses have opportunities and risks which can be significantly different than those involved in the traditional businesses of lending. It is important for investors to understand the degree to which the overall enterprise is dependent upon each of these areas. As a result, we present separate fee and interest revenue information for the reader and discuss trends in each category. In addition, there are certain specialized disclosures which are necessary to a consideration of our lending business, which we also include in the reports.

For Mellon, the preparation of disclosure documents which are responsive to these considerations is a substantial task, requiring the participation of a large number of individuals both internal and at our independent accountants and one or more law firms. We find that doing the job right requires a full 40 days following the close of each quarter for the 10-Q, and a full 75 days following the close of the year for the 10-K.

Technology, Press Releases, Staffing

The proposing release suggests that advances in communication and information technology now make it possible for reporting companies to file these reports more quickly. The release notes the fact that many large seasoned reporting companies are able to assemble sufficient information to publicly release earnings within a short time following the end of the quarter or year. This fact, in the Commission's view, has opened an undesirable gap between early disclosure of results and the public availability of the periodic reports, and also supports a judgment that companies have the ability to more quickly put together information so that the 10-Q and 10-K could be filed earlier. From our experience, we take issue with each of these points.

We concur with the comments in the proposing release that since the current 60 and 90-day filing deadlines were adopted thirty years ago there have been enormous advances in communications technology. That, however, is only part of the story. In those thirty years, there have also been enormous advances in the information required, both by SEC rule and analyst community demands, in Forms 10-Q and 10-K filings. For example, the Form 10-K for 2002 will for the first time require enhanced disclosure of equity compensation. At the same time, business operations have also become much more complex. In 1970, Mellon was a traditional regional bank. In 2002, Mellon is a global financial services company. It is overly simplistic to equate technology as it exists in 2002 with the ability to produce 10-Q and 10-K filings of comparable quality in one-third less time.

The essential question is whether currently the quality of Mellon's filings improves because of work performed between Day 30 and 40 (in the case of 10-Q's) and Day 60 and 75 (in the case of 10-K's). We can assure the staff unequivocally that the many persons who have a role in these filings are hard at work on these filings during those periods. For the reasons discussed below, that work may not be able to be done if 30 and 60-day filing deadlines are adopted. We can also further assure the staff that these people are also hard at work on these filings between the date of the earnings release and Day 30 or Day 60, as the case may be.

Mellon generally announces earnings results between the 15th and 20th day following the end of the quarter or year. Our earnings release is detailed. The release announcing first quarter 2002 results was 21 pages in length, and this is the normal length of earnings announcements. We publish results on this time schedule because the investing public demands that we do so. And modern information technology has substantially assisted us in assembling the data this quickly.

But while the earnings release does include a discussion of our results, this discussion is much more abbreviated than the presentation in the 10-Q or 10-K. It is in these documents that the reader will find more detailed, and more reflective analysis of historical performance, period to period comparisons and trends. Technological advances are most helpful in the area of assembling the financial information upon which the discussion is based. However, in the process of thinking, developing, writing, reviewing and rewriting the analytical, descriptive discussion of the business, we find that technology has less of an impact. Word processors notwithstanding, thinking takes just as long as it ever did. So does reading. And for our business, the increased complexity of what we have to think about has a much bigger effect upon our schedule than any benefits we glean from better information technology.

A point should be made about staffing. It may be easy to think that a large organization such as ours can simply reallocate personnel to the task of preparing the 10-Q and 10-K to meet whatever deadline may be imposed. The reality is otherwise. Currently, 25 to 30 persons spend a substantial amount of time in the preparation and review of these reports. It would be possible to add additional staff if necessary. However, there are a limited number of individuals who have the experience and judgment which is needed to make the fundamental decisions as to the nature and scope of the disclosure we ought to be making. Adding more people to the project will not, in our judgment, materially assist these critical individuals in their task of development, review and refinement of the explanation of our business. As a result, devoting more resources to the project will not materially shorten the amount of time required.

For these reasons, our ability to generate a press release by the 15th - 20th day following the close of the quarter or year should not be taken as an indicator of the ease by which a full 10-Q or 10-K could then be quickly produced.

One must ask whether there is a problem created for the investing public by the 24 days or so which elapse between our quarterly earnings release and the filing of the 10-Q or the 60 days or so which elapse between our annual earnings release and the filing of the 10-K. We have seen no public discussion that any of the problems at Enron or any of the other recent highly publicized cases were speed of filing problems. They were quality of filing problems. If filings are of low quality, no amount of speed will help.

Members of the investing public, including securities analysts, have not hesitated to tell us what they want from us in terms of disclosure content, format and timeliness. We have crafted our disclosure to be specifically responsive to these needs and have worked hard to disseminate it as quickly as possible, while maintaining the highest quality standards.

Investors have insisted that earnings be announced on the time schedule we are now following. We have not heard any desire from investors that we accelerate our 10-Q and 10-K filings.

EDGAR Vendor Issues

Even under the current filing deadlines, we know that EDGAR vendors such as financial printers who provide EDGAR filing services can be backlogged on the deadline date. With accelerated deadlines, virtually no one will be able to file early, and we expect that this will create extreme pressure on the filing due dates. The likely results will be higher EDGAR filing fees and a disadvantage to smaller issuers who have less bargaining power with EDGAR providers. We urge the staff to probe this issue with EDGAR vendors and to take this practical reality into account before adopting any proposal to accelerate the filing deadlines.

We understand that on the current 10-K and 10-Q filing deadline dates the Commission's own capabilities for accepting filings are tested and at times exceeded. This can result in substantial delays in effecting filings on the last available day. Under an accelerated regime, it can be expected that more reporting companies will end up filing on the last possible day, putting further strains on the system. We believe that no deadlines should be accelerated unless reporting companies can be assured that this problem has been thoroughly evaluated.


Based upon our experience, we urge that the deadline for the filing of the 10-Q not be earlier than 40 days following the end of the fiscal quarter and that the deadline for the filing of the 10-K not be earlier than 75 days following the end of the fiscal year.

If the proposed 30 and 60-day deadlines were to be adopted, we would seriously consider reevaluating our approach to 10-Q and 10-K disclosure with a view to determining what is the minimum amount of disclosure which is legally required. We could then opt to include additional information in a later filed 8-K. However, doing so would require investors to consult more than one document to assemble a full disclosure picture.

We also believe the transition provisions for the rule should be extended beyond what was suggested in the release. We note that the Commission has proposed a new disclosure requirement in the Management's Discussion and Analysis about the application of critical accounting policies. Although we have not yet considered this proposal in depth, we believe that a substantial amount of review and analysis will be required to comply with its requirements, if it is adopted. We suggest it is unwise to require reporting companies to begin to cope with this new requirement at the same time that the reporting deadlines are accelerated.

Without knowing the timetable for possible adoption of the new disclosure requirements, we cannot make a specific suggestion for the accelerated filing deadline transition period. However, we believe the new deadlines should not be effective for fiscal years earlier than those beginning on January 1, 2003. Thus, for calendar year companies the first 10-Q having an accelerated deadline should be no earlier than the report for the first quarter of 2003 and the first 10-K having such a deadline should be no earlier than the report for the year 2003. This would allow reporting companies to have at least one or two 10-Q filings and one 10-K filing prior to effectiveness of the new deadlines to experiment with actions that may be necessary to make timely filings under the new proposal.

Website Disclosure

We currently make available our SEC filings on our website because we believe this is an efficient way to make the disclosure broadly available. We offer four comments on the proposed rule regarding website disclosure.

First, if website disclosure is to be required, this would seem an appropriate time to revisit the adequacy of website disclosure for purposes of Regulation FD.

Second, there should be a degree of flexibility afforded in the rule to take account of the possibility that a 10-Q, 10-K or 8-K filing may be made late in the business day. In the case of filings made after 4:00 pm Eastern time, a registrant should be able to satisfy the rule by posting the filing on its website by 9:00 am on the following business day. Last minute changes can delay a filing for a matter of hours; under the rule requiring same-day website posting, an issuer exerting every effort to make a filing on a particular day may find itself considering deferring the filing until the next business day so that the required same-day website posting can be made. We do not believe such a deferral would be in the best interests of the investing public, and the limited flexibility we propose should not impose any material harm or inconvenience to investors.

Third, like many issuers, we contract with a third party to provide the service of posting our filings on our website. (We post our own 10-Q's and 10-K's - the third party is responsible for our other filings.) As the proposing release suggests, we provide a hyperlink directly to a list of the reports, rather than to the home page of the third-party service. However, we also include, on the page where the hyperlink appears, a disclaimer of our responsibility for the accuracy of the third-party service in providing access to our filings. We would appreciate an explicit indication in the rule or adopting release that such a disclaimer will not make the website posting ineffective for purposes of the rule.

Fourth, we believe the intent of the rule as proposed is that exhibits and information incorporated by reference in the 10-Q, 10-K or 8-K would not be required to be posted on the website. If so, we suggest that the exclusion of such items be made explicit in the rule, so as to avoid any confusion on the subject.


Again, we appreciate the opportunity to offer these comments. These are obviously difficult, if not unprecedented, times for America's business community, and there are certainly legitimate issues that need to be addressed. We caution, however, against too quick a reaction in which quality is sacrificed for speed. At the end of the day, the strength of our capital markets system is a function of the quality of the information on which investment decisions are made. That is not to say that speed is not also important, but speed should not be at the expense of quality.

Very truly yours,

/s/ Carl Krasik

cc: Martin G. McGuinn
Steven G. Elliott
Michael A. Bryson
Michael K. Hughey
James E. Blue
Daniel P. Reilly
Michael E. Bleier