May 23, 2002 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20459 E-mail address: rule-comments@sec.gov Re: File No. S7-08-02 Release No. 33-8089; 34-45741 Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports Dear Mr. Katz: The Corporate and Securities Law Committee of the American Corporate Counsel Association (“ACCA”) is pleased to provide comments on the Securities and Exchange Commission’s proposed rules on acceleration of periodic report filing dates and disclosure concerning website access to reports as set forth in Release No. 33-8089; 34-45741 (the “Release”). ACCA is the only global bar association exclusively serving the professional needs and interests of in-house counsel to corporations and other private sector organizations. ACCA has more than 13,000 individual members who act as in-house counsel to more than 6,000 business entities. The Corporate and Securities Law Committee is the largest of ACCA’s Committees, with over 4,000 attorney members, most of whom work in public companies subject to the Commission’s disclosure requirements. We believe our comments provide the Commission with a perspective that is particularly important regarding the issues raised in the Release. We fully support timely disclosure of periodic reports to the investment community, and we believe the proposed rule concerning website access is an effective way to encourage issuers to make these reports quickly available to investors. However, as discussed below, we are concerned that the proposal to accelerate the filing of Forms 10-K and 10-Q may work against recent efforts by the Commission to improve the quality of these reports. Acceleration of Filing Dates for Form 10-K and 10-Q The proposed rules would accelerate for certain filers the deadline for filing the Form 10-K from 90 days to 60 days from the end of the fiscal year and the deadline for filing the Form 10-Q from 45 days to 30 days from the end of the fiscal quarter. While we appreciate the Commission’s desire to make information about issuers available as quickly as possible, we believe that any benefits to investors from the accelerated filing deadlines would be outweighed by the increased difficulty that issuers would have in maintaining a high quality of reporting. We suggest that the existing filing deadlines be retained or, if the Commission continues to favor some acceleration, that the filing deadline for the 10-K be 75 days after the end of the fiscal year and the filing deadline for the 10-Q be 40 days after the end of the fiscal quarter. We believe that providing issuers with more time to prepare their reports than was proposed in the Release would result in more thoughtful disclosure that the investment community would find worth waiting for. A. There are many steps required to prepare the Form 10-K and Form 10-Q after the earnings release is issued The Commission is correct in its understanding that a company’s audit or review is substantially complete by the time the company issues its earnings announcement, but much additional work must necessarily be done prior to filing the Form 10-K or Form 10-Q. In the Release, the Commission asked what steps are needed to prepare the disclosures necessary to complete the periodic report after the earnings announcement or completion of the audit or review. The particular steps will vary depending on the company and the industry, but typically issuers must, among other tasks: … complete the consolidated statement of cash flows; … draft the notes to the financial statements; … draft the MD&A; … draft the non-financial sections; … have the report reviewed by internal reviewers in the legal and accounting departments, by senior management, and by outside auditors; … discuss the report with the Audit Committee; … for the Form 10-K, submit the report to the full Board of Directors for approval and signature; … revise the report and re-solicit comments, often several times; and … edgarize the report. While some of this work can be begun before the earnings release is issued, much of it generally is accomplished after the earnings are released, either because the information is not yet available or the staff is dedicated to compiling the information necessary for the earnings release. We think that filing deadlines longer than those proposed in the Release are necessary to properly complete these procedures. In addition, many companies have recently worked to implement more rigorous drafting and review procedures, especially to increase the involvement the Audit Committee. We think these efforts should be encouraged, but we are concerned that the filing deadlines proposed in the Release would make these improved procedures much more difficult to fully implement. B. Any benefits of earlier disclosure should be balanced against the importance of higher-quality disclosure Over the past few months the Commission has issued a number of releases encouraging issuers to improve their financial reporting, particularly in the MD&A. We support these improvements and believe the resulting improvement in the quality of the reports will be of significant value to investors. However, we are concerned that the filing deadlines proposed in the Release will make it less likely that issuers will achieve the improved quality of reporting that is desired by the Commission. In addition, while it is clear to us that the investment community places a high value on accurate and comprehensive disclosures in Forms 10-K and 10-Q, we have not experienced any particular pressure from the investment community to file our periodic reports more quickly than the current due dates require. The filing of a Form 10-K or 10-Q typically does not have the immediate effect on stock prices that an earnings release may have, and it generally does not give occasion to the analyst or investor conference calls that issuers often hold following the publication of earnings releases. This is not to say that information in the Form 10-K and Form 10-Q is unimportant to investors or that the information contained in these reports is stale. To the contrary, the detailed information contained in these documents is of great importance in understanding an issuer’s recent results, its current business and financial condition and its outlook. However, it seems to us that investors generally look upon this information as useful for more detailed, longer-term analysis than the information in the earnings release, and are more interested in accuracy and completeness than they are in obtaining the reports earlier. While issuers should be encouraged to file these reports as quickly as possible without sacrificing the quality of the reports, we think that accelerating the mandatory filing dates may force issuers to sacrifice quality for unnecessary speed. C. The filing deadlines should either remain as they currently are or be set at 75 days for the Form 10-K and 40 days for the Form 10-Q. We believe investors would be best served by retaining the current filing deadlines of 90 days for the Form 10-K and 45 days for the Form 10-Q. However, if the Commission continues to believe that investors would benefit from accelerated filing dates, we suggest deadlines of 75 days from the end of the fiscal year for the Form 10-K and 40 days from the end of the fiscal quarter for the Form 10-Q. While not ideal, these deadlines, compared to the proposed deadlines, would provide valuable additional time that issuers could use to provide higher quality reports. Disclosure Concerning Web Site Access to Reports We support the proposal to require a company subject to the proposed acceleration rules to disclose in its Form 10-K whether its periodic reports will be available on the company’s website on the day the report is filed. We believe that prompt distribution of corporate information by electronic means should be encouraged. Many issuers make their periodic reports available on their websites by including a link to a third party site, which often is the Commission’s own website. We are pleased to see that the Commission anticipates eliminating the 24-hour delay for filings posted on its website, which for many issuers is a convenient way to make their periodic reports available on their websites at little or no cost. To avoid disruption and added costs to issuers who intend to continue to link to the SEC website, we suggest that the 24-hour delay for filings on the Commission’s website be lifted prior to the effective date of this rule. We appreciate the opportunity to comment on the Commission’s proposals, and would be pleased to provide additional information to the Staff upon request. Very truly yours, Michael D. Cahn, Chair Corporate & Securities Law Committee American Corporate Counsel Association cc: Hon. Harvey L. Pitt Chairman of the Securities and Exchange Commission Hon. Isaac C. Hunt, Jr. Commissioner Hon. Cynthia A. Glassman Commissioner Alan L. Beller Director, Division of Corporation Finance Elizabeth M. Murphy Chief, Office of Rulemaking Jeffrey J. Minton Special Counsel