SEC gives executives 2 days to disclose their stock trading

Commission also adopts earlier deadlines for quarterly, annual reports

August 28, 2002|By BLOOMBERG NEWS

WASHINGTON - The Securities and Exchange Commission adopted rules yesterday that require executives to disclose stock trades in as little as two days and reduce the time that companies have to report quarterly and annual earnings.

The SEC voted to shorten to 35 days from 45 days, phased in over three years, the time companies have after the end of a quarter to file their quarterly reports. For annual reports, the companies will have 60 days instead of 90 days to file, also to be phased in over three years. Coca-Cola Co., Eastman Kodak Co. and at least 50 other U.S. companies had objected to the proposed stricter deadlines.

"Everyone saw this coming," securities lawyer Sandra F. Kinsey said of the SEC's votes. "There was a lot of interest in getting information about insider trades out to the market more quickly and in getting companies' financial reports out to the public in a more timely way."

With the unanimous votes, the SEC began implementing parts of an accounting oversight law enacted last month, including a congressional call for executives' trades to be reported within two days.

The SEC also implemented the law's requirement that top executives of domestic and foreign companies trading on U.S. exchanges vouch for their companies' financial reports.

In addition, the SEC voted to require top executives at mutual funds to certify the accuracy of their financial reports. The first mutual-fund certifications are due at the end of next month, said Paul F. Roye, SEC's investment management director.

Yesterday's SEC meeting was the first by a full complement of five commission members in more than two years. Four members - Democrats Roel C. Campos and Harvey L. Goldschmid and Republicans Cynthia A. Glassman and Paul S. Atkins - were confirmed by the Senate last month, joining Chairman Harvey L. Pitt, a Republican .

SEC vacancies had become a concern to Congress and President Bush while they were seeking to reassure investors whose confidence was shaken by accounting scandals at Enron Corp., WorldCom Inc. and other companies.

Faced with opposition from companies, the SEC voted to phase in the tighter deadlines for quarterly and annual reports.

The deadlines will remain the same for the first year. In the second year, quarterly reports will be due in 40 days and annual reports in 75 days. In the third year and later, the deadlines will be 35 days for quarterly reports and 60 days for annual reports.

The rules will apply to U.S. companies with market values of at least $75 million. The first to be affected will be accelerated filers with fiscal years ending on or after Dec. 15 next year, a SEC fact sheet said.

At least 50 companies in the Fortune 500 urged the SEC to drop or scale back the proposal. They said the tighter deadlines would lead to erroneous and incomplete reports asthe SEC pushes for fuller and more accurate disclosure.

Coca-Cola Co., the world's largest soft-drink maker, said in a comment letter that it faced problems processing financial information in the shorter time, especially from operations in less-developed countries that lack modern computer systems.

Eastman Kodak said the accelerated deadlines "would have a negative impact on the quality of information reported" by the largest photography company.

The SEC's original proposal called for the quarterly deadline to be cut to 30 days.

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