You Want It When? SEC Proposes Shorter Filing Periods

Wants quarterly reports within 30 days, info on D&O transactions in 2 days. Plus: California may require auditor rotation, Calpers sees 41 percent health-benefit hike next year, and Intel's CFO did okay in 2001.


As reported in January (“8K in a Day?”), the Securities and Exchange Commission wants publicly traded corporations to get news to investors sooner. Toward that: on Friday, the SEC voted unanimously to require companies to dramatically speed up the filing of financial reports.

Comments on the proposal are due within 45 days after publication in the Federal Register.

Specifically, the commission is proposing that quarterly reports be filed within 30 calendar days after the quarter ends instead of the current 45, and annual reports be filed within 60 days after the fiscal year ends—instead of the current 90 days.

The SEC’s proposal also requires companies to state whether periodic reports are available free on their Web site, and, if not, those companies must explain why.

The SEC is also proposing that companies report stock transactions by officers and directors within 2 business days. Currently, a company is required to report these trades by the 10th day of the month following the transactions.

California to Adopt Auditor Rotation?

California lawmakers are expected on Monday to propose new rules that would require companies to change auditors every four years, according to published reports. The new rules would also restrict consulting work by auditing firms.

The bills are intended to boost investor confidence in corporate financial reports.

“Our goal is very simple: reestablish credibility to the auditing process,” Assemblyman Lou Correa (D-Anaheim), chairman of the Business and Professions Committee, told the Associated Press.

Not everyone agrees that investors have lost confidence in the auditing process, however.

Last week, KPMG released a survey of company chief executives and chairmen revealing that “an overwhelming 96 percent said investor trust and confidence [in their audited accounts] was either ‘very high’ or ‘high.'”

Of course, it’s hard to imagine that CEOs would say investors have little trust in their audited financial statements. It should also be noted that the KPMG survey on investor trust (conducted by YouGov Opinion Research) did not actually poll any investors.

The KPMG-sponsored survey also revealed that 85 percent of company executives thought that professional service firms handled conflicts of interest well. That seems to jibe with the results of an NFO Worldgroup poll released of purchasers of outside business services. In that poll, released last week, respondents gave their outside accountants high marks for ethical behavior. The respondents were less thrilled with the performance of their outside accountants, however. Purchasers of accounting services gave their auditors a near-failing grade on that score.

Says Shubhra Ramchandani, who headed up the NFO study: “The problem isn’t integrity—it is value. Most clients rate their outside accountants’ business ethics very highly, but what they question is the performance and value of the services they receive.”

Andersen’s Latest Defections

Since Friday, several more corporations announced plans to drop Arthur Andersen as independent auditor.

  • Drexler Technology Corp. named PricewaterhouseCoopers as its new accountant for the fiscal year ended March 31, according to a securities filing.
  • Datatec Systems Inc. withdrew its proposal to appoint Andersen as the company’s independent auditor, effective immediately. The company appointed Deloitte & Touche instead.
  • ESoft Inc. on Sunday also hired Deloitte & Touche as its new independent accountant for the fiscal year ending December 31.
  • Right Management Consultants Inc. and NDCHealth Corp. brought in Ernst & Young to replace Andersen as the companies’ independent auditor.

Short Takes

>> According to proxy filings, Intel CFO Andy Bryant took home more than $4.1 million in total compensation last year. Bryant received a salary of $260,000, a $468,000 bonus, and $121,800 in other compensation. In addition, he enjoyed realized gains of $3,325,392 from exercising stock options.

>> The share price of JetBlue Airways Corp. stock surged more than 66 percent on Friday to close at $45 in the company’s first day of public trading. Morgan Stanley and Merrill Lynch & Co. were the lead underwriters for the JetBlue IPO.

>> As if you needed another sign that health-insurance premiums are getting out of hand: on Sunday, the California Public Employees Retirement System (Calpers), one of the insurance industry’s biggest customers, reported that its health-insurance rates could rise by up to 41 percent in 2003.

For this year, Calpers was able to hold a rate hike to 13 percent by upping its members’ out-of-pocket costs for office visits and prescription drugs, according to reports.

>> The IRS and Treasury Department on Friday issued final rules allowing businesses with $10 million or less to use the cash accounting method for their income and expenses instead of the more costly accrual and inventory methods. The changes are effective beginning with the 2002 tax year.

>> Two accountants—Roosevelt Drummer and Roy Lentz—pleaded guilty to participating in an illegal tax scheme marketed by Anderson’s Ark & Associates, an offshore trust. The guilty pleas were entered last year but remained sealed until April 11, according to published reports.

More than $100 million in false deductions were reported to the IRS by Anderson’s, according to these reports, citing court documents.

>> KPMG Central and Eastern Europe and Andersen said Friday that they have terminated negotiations regarding the proposed combination of their practices in Central Europe. This, according to wire service reports citing a statement by KPMG Czech Republic spokeswoman Marcela Chlumova.

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