767 Fifth Avenue
New York, NY 10153
(212) 418-6901 Fax
May 23, 2002
Mr. Jonathan G. Katz
U. S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington DC 20549
File No. S7-08-02
Dear Mr. Katz:
Maverick Capital is a hedge fund that manages $20 billion of assets, gross. Our goal is to preserve as well as to grow capital. Our investment style relies on strong fundamental research into the companies in our portfolio. We rely on timely, accurate, relevant, and complete financial reporting, and appreciate the opportunity to respond to the proposed changes in reporting requirements.
We are strongly in support of accelerating the filing deadlines for Forms 10K and 10Q. We believe that 60 days and 30 days are appropriate maximum filing deadlines. However, we believe that the final rule should require that 10Qs and 10Ks be filed no later than a specified short time period, such as 2 to 3 days, subsequent to the earnings release. We do not believe that this would cause a significant delay in earnings releases or put a significant burden on the preparer.
Companies currently release income statements and balance sheets at the time of releasing earnings; companies are prepared to discuss significant items on conference calls. Companies should not be unduly burdened to file complete documents within a short period following their earnings release. We do not believe that the accelerated filing deadlines should be limited to selected items; rather, fully conforming 10Ks and 10Qs should be filed by the accelerated deadlines.
We note that some companies have written that the accelerated deadlines, particularly for 10Ks, will create pressures for CPAs doing reviews and audits. However, CPAs are performing their reviews, presumably, prior to earnings releases by companies. In addition, it appears, based on the dates of the auditors' reports, that the auditors have completed their field work for 10Ks often within a 3 to 4 week period following year-end. One outcome of adopting these proposals could be greater auditor involvement in the performance of field work throughout the year, which could lead to the more timely identification of reporting problems or issues. Anecdotally, we understand that the required timely interim reviews by auditors prior to filings of 10Qs have resulted in the earlier identification and resolution of reporting issues. We see this as a potential benefit to the audit quality.
We would prefer that the Schedules required by Article 12 of Regulation S-X be filed at the same time that the 10K is filed. We suspect that most of the data has been developed and is available at the time that the 10K is filed. We believe that the reasoning for accelerating the filing of the 10K is also appropriate for the proxy statement and encourage the Commission to accelerate the proxy deadline, also.
Accelerated deadlines and more frequent filing requirements are essential for foreign registrants also. We find that receiving solely annual financial statements that are 6 months stale place investors at a tremendous disadvantage and certainly place foreign registrants at an incredible advantage to domestic registrants. We note that the level (and questionable appropriateness) of aggregation of items provided in the earnings releases can seriously mislead investors who may wait 14 months to actually have insight into the detailed components of revenues, for example.
We can support the exemption of small or unseasoned businesses from the accelerated deadlines, but recommend that the Commission amend those deadlines to be framed as the earlier of 90 days (or 45 days) OR 2 to 3 days following the release of earnings.
We support the direction of the SEC in encouraging companies to provide electronic website access to their SEC filings on a same day basis, and cerrtainly in requiring companies to disclose information about access to those filings.
Please contact me at 212 418 6910, or Jane Adams at 212 418 6915, if you have any questions or issues that you would like to discuss.
|Lee S. Ainslie III
|Jane B. Adams