SEC requires companies to report earnings earlier

WASHINGTON -- After a season of corporate scandal, federal regulators unanimously adopted rules Tuesday that require companies to file financial reports earlier and force chief executives to take responsibility for their accuracy.

"One has heard comments from CEOs and CFOs saying that that's not part of the job," said Alan Beller, director of the Division of Corporate Finance for the Securities and Exchange Commission. The congressionally mandated new rules, he said, are "intended to put an end to that debate once and for all. It is a part of the job."

Despite an outcry from public companies, commissioners voted 5-0 to require large U.S. firms to file quarterly reports within 35 days of the end of the period, 10 days sooner than current rules. Annual reports would be due within 60 days after the end of the year, instead of the current 90 days.

The SEC also cut the time that corporate insiders and large shareholders have to report trades of company stock to two business days. Currently, insiders have as much as 40 days to report trades in company stock on public markets; a transaction between company executives must be reported 45 days after the close of the year in which the deal occurred.

The regulations go into effect Thursday. The filing changes will be phased in during 2003 and 2004. Quarterly reports for firms whose fiscal years end Dec. 15 must be filed within 40 days next year and 35 days in 2004, according to the new rules. Annual reports will have to be filed within 75 days of 2003's end, 60 days the following year.

The accelerated filing rules apply only to domestic companies that have been under SEC regulation for at least a year, have filed at least one annual report and have a market value of at least $75 million.

The commission is waiting to see how well the new rules work before imposing them on smaller firms.

Under the guidelines, a company's chief executive and financial officers each must certify in writing that they have reviewed each report and that it does not contain any untrue statement of a material fact, or omit any material facts. The officers also will be required to affirm that the report fairly represents the company's financial condition.

The same officials are responsible for establishing and maintaining processes to make the reports public.

The new certification rules will apply to domestic companies and "foreign private issuers," publicly traded companies owned mostly by non-Americans.

The rules, mandated by a law enacted July 30, are the SEC's latest effort to crack down on corporate wrongdoing and boost investor confidence that was rattled by the accounting scandals at Enron Corp., WorldCom Inc., Adelphia Communications Corp. and many other big companies.

Violators can be prosecuted on federal fraud and other charges, officials said.

"We are determined to give real teeth and meaning to the protections of the new law," said SEC Chairman Harvey Pitt.

Analysts said the new rules might be good for investors, but also put logistical burdens on businesses -- particularly smaller ones that just barely qualify.

"More and timely disclosure is better for investors, but for companies, it means more pain, more headaches and more of a need to analyze information and to create these documents," said securities compliance expert David Copenhafer of Bowne & Co. "They'll have to change the way they do things internally."

The SEC in late June ordered 947 companies -- all with annual revenues exceeding $1.2 billion -- to submit the sworn statements. The rules approved Tuesday will replace the SEC's June order.

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