August 26, 2002
Mr. Jonathan Katz
U.S. Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549-0609
Re: File No: S7-22-02
Comments on Proposed Rule - Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date
Dear Mr. Katz:
The authors of this submission are practicing securities lawyers with the firm of Altheimer & Gray, Chicago, Illinois. This letter represents the personal views of the authors and not necessarily those of Altheimer & Gray or any of its clients.
We do not propose in this letter to comment on the substantive requirements of the proposed rule regarding expansion of Form 8-K disclosure requirements and acceleration of filing dates. Subject to certain reservations on points of detail that have already been expressed by other commentators, we generally commend and welcome the purpose and substance of the proposed rule.
Instead, we wish to highlight a procedural matter that we believe will assume great importance if and when the filing deadline for Forms 8-K is reduced to two business days. We believe that the facilitation of timely disclosure of information would be greatly enhanced by modifications to the existing EDGAR filing system to simplify the filing process for disclosures of the type envisaged by the proposed rule.
The ability to make timely and inexpensive EDGAR filings is already a concern following enactment of the Sarbanes-Oxley Act, in particular as regards the requirement that EDGAR filing of Section 16(a) reports will become mandatory (including, in the case of Forms 4, within two business days following the reportable transaction) and the requirement for the Commission to consider rule-making regarding real time disclosures by issuers.
Currently, the EDGAR document filing process can be complicated and time-consuming. In addition, although costs can vary with the circumstances of the individual filing and the issuer, the costs involved in making a Form 8-K filing are not necessarily inconsequential. The complexities of the present filing system are such that it is unrealistic to expect issuers to have the expertise and technological capability to make EDGAR filings themselves and issuers are usually required to enlist the help of a third party service provider, most commonly a financial printer. Irrespective of who physically makes a filing, depending on the length of the document and its exhibits, the "Edgarization" process can take a day or more, and issuers are required to factor this delay into the existing filing deadlines. In the event of imposition of a two-day filing requirement for Forms 8-K, Edgarization could take up at least one day of the two-day filing period, using valuable time that could otherwise be better spent on the preparation and review of the filing and effectively imposing an earlier deadline. In extreme cases, this may result in a filing not being made on a timely basis.
We suggest that the Commission should consider the implementation of a simplified, email or Internet-based system for the filing of Forms 8-K (and, additionally, Section 16(a) reports) on EDGAR. So that issuers could easily utilize the system themselves, it would be a pre-requisite of the system that it should accommodate word processing systems of the type currently commonly in use and that it should not require significant specialist training or expensive software. We appreciate that the maintenance of the security of the EDGAR system would be a concern, but we would expect that appropriate safeguards could be implemented with use of existing passwords or some other method.
Most listed issuers already disseminate material information regarding business developments by press release to newswire services. This is an inexpensive and speedy means of distributing information to the public. Under the current EDGAR filing system, Forms 8-K concerning the same matters as press releases are often not filed until a number of days after release to the newswire services, at least in part as a result of the technical complications of making EDGAR filings. Ideally, we would envisage a system whereby an issuer could make a Form 8-K filing at the same time and the same manner (or as close as practicable) as the relevant press release, in order to ensure timely and widespread dissemination of the information. This would also have the advantage of making the EDGAR system a more current source of information regarding material developments affecting an issuer, the primary purpose of the proposal to accelerate Form 8-K filing deadlines, and reasonably up-to-date in comparison to other Internet-based sources.
We thank the Commission for the opportunity to comment on the proposal. Please contact either of the undersigned with any questions regarding this submission.
John E. Lowe and Jonathan Baird
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois, 60606
Tel: (312) 715-4800
Email: firstname.lastname@example.org and email@example.com