May 3, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Jonathan G. Katz, Secretary
Re: File No. S7-08-02
Release Nos. 33-8089; 34-45741
Acceleration of Periodic Report Filing Dates and Disclosure Concerning
Website Access to Reports
Ladies and Gentlemen:
I am writing as Chair of the Committee on Federal Regulation of Securities of the Section of Business Law of the American Bar Association to request that the Securities and Exchange Commission provide additional time to comment on its release dated April 12, 2002 entitled Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports (the "Release").1 In the Release, the Commission proposes to accelerate the filing deadlines for Annual Reports on Form 10-K from 90 days to 60 days after the end of the fiscal year and for Quarterly Reports on Form 10-Q from 45 days to 30 days after the end of the fiscal quarter.
The Commission has limited the time for comment on the proposals in the Release to 30 days. We do not believe that this period is long enough to permit the Commission to receive the informed comments it should have in making a decision on a proposal that can have such significant consequences on the processes and quality of disclosure for so many public companies who would be subject to the accelerated filing requirements.2 The proposal to accelerate filing deadlines would affect a large percentage of U.S. public companies. In the Release, the Commission has acknowledged that the changes might adversely affect disclosure quality and the abilities of auditors, audit committees, and outside counsel to perform their responsibilities and seeks comment on whether and the extent to which this is the case. For these reasons, the Commission should allow sufficient time for all interested parties to assimilate the proposal, assemble data, and furnish meaningful comments. This is especially true for the reporting companies who may not be accustomed to responding to rulemaking proposals but from whom the Commission most needs to hear. Before adopting the proposal to accelerate the filing of periodic reports, the Commission should have meaningful input from issuers whether they will be able to make filings in the shortened time frames that are thoughtful and accurate. Without that input, the Commission will not have a valid picture of the extent to which accelerated filing deadlines are realistic.
The Commission has justified the unusually short comment period on the grounds that it previously proposed to accelerate the filing of periodic reports in the Aircraft Carrier Release in 1998. We do not believe this justifies the shorter comment period for the following reasons:
We believe, moreover, that additional time for comment is needed so that commenters can take into account the additional accounting and disclosure requirements, particularly those relating to MD&A, that have been issued, proposed and promised by the Commission.3 Without taking into account the impact that these initiatives will have on the process of preparing periodic reports, the comments provided to the Commission will be less meaningful. Similarly, additional filings of current reports of Form 8-K will increase the disclosure burdens on companies in ways that are not fully known at this time.4
We are concerned that many issuers may not be aware of these proposals or may not be accustomed to filing comments themselves. Because we believe the Commission will be best-served by hearing directly from affected companies, we have communicated to our Committee members the importance of urging their clients to comment, regardless of whether they may favor or disfavor the Commission's proposals. The Commission should encourage and facilitate comments by those whose disclosure practices it regulates by extending the comment period. At a minimum, the Commission should extend this period for an additional 30 days to permit it to obtain more accurate information on the burdens that will be imposed on issuers and the potential impact on the quality of their disclosure.
Very truly yours,
Stanley Keller, Chair
Committee on Federal Regulation of Securities
cc: Hon. Harvey L. Pitt
Chairman of the Securities and Exchange Commission
Hon. Isaac C. Hunt, Jr., Commissioner
Hon. Cynthia A. Glassman, Commissioner
Alan L. Beller, Esq., Director of Division of Corporation Finance
|1||This letter does not represent an official position of the American Bar Association, the Section or the Committee.|
|2||We appreciate the pressures in the present environment to act quickly to restore investor confidence. However, we do not believe this consideration justifies acting to accelerate filing periods before the Commission is able to receive and give appropriate consideration to informative comments on the proposal. The interests of investors and the marketplace are best served by making sure that companies are able to fulfill their obligations to provide quality disclosure.|
|3||We note, for example, that the Commission's proposals regarding disclosure of critical accounting policies approved on April 30, 2002, as they are described in the official announcement since the proposing release is not yet out, requires a depth of analysis and detail in disclosure that was not foreshadowed by the Commission's earlier Cautionary Advice or MD&A Statement.|
|4||Ideally, proposals to shorten filing periods should be considered after, not before, the contemplated significant changes to the contents of periodic reports have been adopted by the Commission and assimilated into the reporting practices of public companies. We will address that point further in our comment letter on the merits.|