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Acceleration of SEC Periodic Reporting Deadlines and Disclosure of Website Access to Reports

Client Advisory

October 24, 2002

The purpose of this memorandum is to summarize the recent amendments to the deadlines for filing company periodic reports under the Securities Exchange Act of 1934. These amendments, which become effective on November 15, 2002, apply to all U.S. domestic issuers and those foreign private issuers that elect to file their 34 Act reports on the domestic issuer forms (10-K, 10-Q and 8‑K). Proposed changes were also adopted that require companies to disclose in their annual reports information regarding where investors can access the company's filings.

Accelerated Filings

Release No. 33-8128 (September 5, 2002) provides that accelerated filers will eventually have to file their annual Form 10-K reports no later than 60 calendar days after fiscal year end, instead of the current 90 days, and will eventually have to file their quarterly Form 10-Q reports no later than 35 calendar days after the end of the first, second and third fiscal quarters, instead of the current 45 days. The three year phase-in period and the new filing deadlines are described in the following chart:

For Fiscal Years Ending On or After

Form 10-K Deadline

Form 10-Q Deadline

December 15, 2002

90 days after fiscal year-end

45 days after fiscal quarter-end

December 15, 2003

75 days after fiscal year-end

45 days after fiscal quarter-end

December 15, 2004

60 days after fiscal year-end

40 days after fiscal quarter-end

December 15, 2005 and thereafter

60 days after fiscal year-end

35 days after fiscal quarter-end

An accelerated filer is a company filing an Exchange Act report

  • that has a public float[1] of $75 million or more as of the last business day of its most recently completed second fiscal quarter;
  • that has been subject to the periodic reporting requirements of Section 13(a) or 15(d) of the Exchange Act for at least 12 calendar months preceding the filing of such report;
  • that has previously filed at least one annual report under Section 13(a) or 15(d) of the Exchange Act, and
  • that is not eligible to use Forms 10-KSB and 10-QSB.).[2]

Once a company becomes an accelerated filer, it will remain one, even if its public float goes below $75 million, unless and until it becomes eligible to use the "small business issuer" Exchange Act reporting forms (Forms 10-KSB and 10-QSB).

The SEC release explains when a filer would become and an accelerated filer:

"If a calendar year-end company meets the public float requirement, but has not filed its first annual report as of December 31, 2002, it does not become an accelerated filer and remains subject to existing deadlines for its 2002 annual report and its 2003 quarterly reports. However, if on December 31, 2003, the company meets the public float test as of the last business day of its second fiscal quarter ending June 30, 2003 and meets the other requirements of the accelerated filer definition, the company becomes an accelerated filer subject to the accelerated deadlines for its 2003 annual report, 2004 quarterly reports and all periodic reports thereafter."

The proposing SEC release for the new filing deadlines (No. 33-8089, April 12, 2002) explains how a filer would cease to be an accelerated filer:

"If, in subsequent years, the company's public float fell to the point that it became eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly reports, it would no longer be an accelerated filer subject to accelerated deadlines. If the company subsequently became ineligible to use Forms 10-KSB and 10-QSB and once again met the public float and reporting history conditions, it would again become an accelerated filer subject to accelerated deadlines."

The proposing release noted that over 30 years have passed since these filing deadlines were last changed, and that:

"In the interim, advances in communications and information technology have made it easier for companies to process and disseminate information swiftly. Many large seasoned reporting companies capture and evaluate information and announce their quarterly and annual financial results well before they file their formal reports with the Commission. These earnings announcements are generally less complete in their disclosure than quarterly or annual reports and can emphasize information that is less prominent in quarterly and annual reports."

The Commission staff has estimated that over the past ten years, registrants on average issued their year-end earnings announcements approximately 43 days after fiscal year- end, and quarterly earnings announcements approximately 27 days after quarter end. The new filing deadlines are an attempt to strike a balance between the urgent need in the public markets for timely information, particularly for large seasoned companies, and the perception that mandated disclosures are becoming increasingly complex.

Conforming Amendments for other Commission Filings

The SEC accelerated the requirements in Regulation S-X for the age of the financial statements of accelerated filers in other SEC filings. The adopting release describes the changes below:

"the amendments to Regulation S-X were adopted to conform the timeliness requirements for the inclusion of financial information in other Commission filings, such as Securities Act and Exchange Act registration statements and proxy statements and information statements under Section 14 of the Exchange Act. Under the conforming amendments, financial information included in these documents still will be required to be at least as current as financial information filed under the Exchange Act. However, in response to the concerns of commenters, separate financial statements of subsidiaries not consolidated and 50% or less owned persons required by Rule 3-09 if Regulation S-X will not be accelerated for inclusion in a company's annual report on Form 10-K if the subsidiary or 50% or less owned person is not an accelerated filer. Companies will be able to file these financial statements by amendment within the existing time periods."

The Commission also adopted conforming amendments to enable accelerated filers to maintain an extra 30 days to file schedules required by Article 12 of Regulation S-X as an amendment to their Annual Report on Form 10-K, if needed.

Form 10-K currently permits a filer to omit certain information about its management, management compensation and principal shareholders if within 120 days of fiscal year end the issuer files definitive proxy material containing such information and incorporates such information into its Form 10-K report. The SEC did not change this 120-day deadline.

Foreign private issuers that file their annual reports on Form 20-F must do so within six months after their fiscal year-ends. The SEC did not change this deadline.

A company which cannot meet a filing deadline for a 34 Act report files a Rule 12b-25 notice to obtain an extension of the filing deadline -- fifteen calendar days in the case of a Form 10-K and five calendar days in the case of a Form 10-Q. The SEC did not extend these periods.

Website Access to Reports

The following changes were adopted in order to "promote direct, uniform and more widespread dissemination of timely information to investors and the markets." The adopting release amends Item 101 of Regulation S-K to require the company to disclose in its annual reports on Form 10-K:

  • the company's website address, if it has one;
  • whether the company makes available free of charge on or through its website, if it has one, its annual, quarterly and current Exchange Act reports, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Commission;
  • if the company does not make its filings available in this manner, the reasons why it does not do so (including, where applicable, that it does not have an Internet website); and
  • if the company does not make its filings available in this manner, whether the company voluntarily will provide electronic or paper copies of its filings free of charge upon request.

Accelerated filers must begin complying with the new disclosure requirement starting with their annual reports to be filed for fiscal years ending on or after December 15, 2002.

The SEC noted that many companies already provide website access to their Exchange Act reports as a matter of good corporate practice. The SEC's Office of Economic Analysis examined a sample of 152 companies having at least a $75 million public float and determined that all of the companies sampled maintained an Internet website, and that approximately 83% of those with websites provided some form of access to their Commission filings through their websites, either via a hyperlink with a third-party service providing real-time access to the filings (45%), by posting the filings directly on their websites (29%), or via a hyperlink to the EDGAR database (15%).


Questions regarding this advisory maybe directed to Stephen V. Burger (burger@clm.com or 212-238-8742), or Peter Flägel (flagel@clm.com or 212-238-8649.)


Endnotes

[1] The aggregate market value of the voting and non-voting common stock held by non-affiliates of the company. This $75 million public float provision mirrors the eligibility requirements for the registration of primary offerings for cash on short Form S-3 under the Securities Act of 1933.

[2] To be eligible to use the SB forms, a company must meet the definition of small business issuer at the end of two fiscal years. A small business issuer is defined as a U.S. or Canadian company that is not an investment company and that has revenues and a public float of less than $25 million.

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
© Copyright 2002

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