May 23, 2002
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, N.W., Stop 6-9
Washington, D.C. 20549
Re: File No. S7-08-02--Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports
Dear Mr. Katz:
The U.S. Advocacy Committee (USAC) and the Financial Accounting Policy Committee (FAPC) of the Association for Investment Management and Research (AIMR)1 appreciate the opportunity to comment on proposed rule amendments that would shorten the deadlines for the filing of quarterly and annual reports by seasoned issuers. The USAC is a standing committee of AIMR charged with responding to new regulatory, legislative, and other developments in the United States affecting the investment profession, the practice of investment analysis and management, and the efficiency of financial markets. The FAPC is a standing committee of AIMR charged with both maintaining liaison with and responding to initiatives of standard setters who develop financial accounting standards and regulate financial statement disclosures.
We believe that timely, full, and fair disclosure is vital to the protection of investors and a reasonable expectation of shareholders, and that "those who either lack information or who do not understand the information that is available to all are at a distinct disadvantage in buying or selling securities. Therefore, no matter how efficient or inefficient a financial market may be, information is its lifeblood."2
Today's environment, replete with forecasts, earnings announcements, and media "sound bites," leads investors to believe they have sufficient information on which to make informed investment decisions. In actuality, much of the information provided may be misleading, or at the very least incomplete. At a time when investor confidence regarding the reliability of information is being questioned, we believe it is essential that investors and other market participants are provided with more information on a "real-time" basis. We therefore support aspects of the Proposal that seek to accomplish that end by improving the timeliness and quality of information provided to investors and other market participants.
The USAC and FAPC believe that periodic reports must be accessible on an equal basis to all investors. Currently, there is a time lag between the issuance of earnings announcements and the filing of periodic reports with the SEC. We support the reduction of this time lag, and encourage the SEC to specify a maximum allowable time period between these two dates. We believe that shortening the allowable time period will reduce market volatility and provide investors with reliable information on a more timely basis.
Accelerated Filing Deadlines
In the current fast-paced marketplace, information (financial and non-financial) is most useful when disseminated quickly and widely. Additionally, such dissemination of information promotes the efficient allocation of capital within the marketplace.
Thus, the USAC and FAPC strongly support the proposal to accelerate filing deadlines for both the quarterly reports (on Form 10-Q) and annual reports (on Form 10-K) and believe that shortening the filing deadlines to 30 and 60 calendar days, respectively, is appropriate. Companies that qualify as "seasoned issuers" should already have most, if not all of the information called for in the reports significantly before the current filing dates. Thus, the proposed filing dates should provide affected companies with sufficient time to prepare the reports, without undue hardship or significant additional costs.
While the technology to disseminate information has advanced considerably, we recognize that not all investors currently have the ability to access documents electronically. Thus, incorporating certain documents by reference in paper filings may not result in increased access to information for some investors. We therefore recommend that issuers provide a short summary of the information contained in the referenced documents and the filing date of the reports in their preliminary prospectuses or term sheets. We also recommend that issuers make this information available on their company Websites or provide direct links to those reports.
Inclusion of Foreign Issuers
While we support the proposed filing dates, we do not believe that the scope of the Proposal goes far enough. If foreign issuers want access to particular capital markets, we believe that these issuers must provide information that is comparable to what is required of other market participants, and on the same timely basis. In light of the global nature of our marketplace, we cannot conceive of any reason why foreign issuers should be treated differently. We therefore recommend that the final rule explicitly extend to foreign issuers that meet the applicable "seasoned issuer" criteria.
Use of Company Website
The USAC and FAPC strongly support aspects of the Proposal that encourage companies to provide investors with access to their Exchange Act reports on their company Websites. We believe that investors must have a consistent singular place where they can look for, and obtain, company information on more of a real-time basis. Use of company Websites is an important step toward modernizing the disclosure system under the federal securities laws.
We therefore support the Proposal's disclosure requirements in Form 10-K with respect to providing the company's Website address, addressing whether company filings are available free of charge on its Website and explaining why filings may not be available. We believe, however, that the Proposal does not go far enough. Specifically, we believe that if a company has a Website, then it should be required to make reports on Forms 10-K, 10-Q and 8-K available on its Website at the time of filing or as soon as reasonably possible. Moreover, while the Proposal encourages companies to make filings available to investors free of charge, we believe that this should also be required. Our experience with "encouraged" disclosure or filings has been consistently negative. We strongly believe that the SEC needs to require filings.
Regulation S-X and Proxy Filings
The USAC and FAPC support the SEC's proposal to accelerate the filing of schedules required by Article 12 of Regulation S-X and believe that these should be filed with the Form 10-K reports. Filing within 60 days concurrent with the Regulation S-X filings would be reasonable. We also support an accelerated filing of the annual proxy and related materials to ensure that investors have timely information with which to make informed investment decisions.
The USAC and FAPC support the SEC's attempt, through this Proposal, to improve the quality and timeliness of information that is made available to market participants. However, we strongly urge the SEC to consider our suggestions above to expand the final rule's applicability to foreign issuers, and to require companies to use their Websites to provide public information free of charge to investors.
We greatly appreciate the opportunity to comment on this Proposal. If we can provide additional information related to positions in this letter, please do not hesitate to contact us.
|/s/ Deborah A. Lamb
Deborah A. Lamb
Chair, U.S. Advocacy
| /s/ Ashwinpaul C. Sondhi
Ashwinpaul C. Sondhi, Ph.D.
Chair, Financial Accounting Policy
cc: U.S. Advocacy Committee
Financial Accounting Policy Committee
Patricia D. Walters, Ph.D., CFA - Sr. Vice President, AIMR Professional Standards and Advocacy
Rebecca T. McEnally, Ph.D., CFA - Vice President, AIMR Advocacy
Linda L. Rittenhouse, Esq. - Associate, AIMR Professional Standards and Advocacy
Nazir Rahemtulla, CFA - Associate, AIMR Professional Standards and Advocacy
|1||With headquarters in Charlottesville, VA, and regional offices in Hong Kong and London, the Association for Investment Management and Research® is a non-profit professional organization of 57,000 financial analysts, portfolio managers, and other investment professionals in 107 countries of which 44,800 are holders of the Chartered Financial Analyst® (CFA®) designation. AIMR's membership also includes 106 affiliated societies and chapters in 29 countries. AIMR is internationally renowned for its rigorous CFA curriculum and examination program, which has more than 100,000 candidates from 143 nations enrolled for the June 2002 exam.|
|2||Association for Investment Management and Research, Financial Reporting in the 1990's and Beyond 12 (1993).|