Securities and Exchange Commission Filings

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Jan. 2, 2012
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Donald W. Reynolds National Center for Business Journalism at Arizona State University

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James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass Communications University of Kansas jgentry@ku.edu

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Securities and Exchange Commission

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Created in wake of Crash of 1929 to restore faith in markets Securities Act of 1933 Securities Exchange Act of 1934 Justice Brandeis role

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SEC Role
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Protect investors through disclosure of certain information Maintain a fair, orderly and efficient trading market, i.e. prevent misrepresentation Maintain investor confidence Facilitate capital formation
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SEC Philosophy
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All investors should have access to certain basic information about an investment before buying it and as long as they hold it.

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Who Files
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Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports.

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Accessing SEC Documents

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Finance.yahoo, other financial sites Company websites SEC: www.sec.gov SEC Filings and Forms (EDGAR) n www.sec.gov/edgar.shtml EDGAR: Electronic Data-Gathering, Analysis and Retrieval System

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Key SEC Documents

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10-K 8-K 10-Q Proxy statement Prospectus Form 13-D Form 4

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Form 10-K or Annual Report

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Historically, had been filed within 90 days after end of company fiscal year Today, 60, 75 or 90 days after fiscal year ends, depending on companys public float Extensive financial data, including income statement, balance sheet and statement of cash flows
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Form 10-K (cont.)

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Extensive company information Auditors report MD&A, or Management Discussion and Analysis Extensive footnotes

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Form 8-K or Current Update

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Material events Since August 2004, companies have four business days to file. SEC posts them almost instantly upon receipt. Number of filings more than doubled since rule change but has slowed
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Form 8-K (cont.)

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Change in company auditor and why Bankruptcy-protection filing Expanded disclosure involving director or officer resignation or appointments Restatement of financial results Key litigation Termination of material agreements
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Form 8-K (cont.)

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Notice of de-listing by a stock exchange Significant costs of leaving a business New off-books deals involving significant debt Changes in company bylaws Changes in company fiscal year www.sec.gov/answers/form8k.htm
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Form 10-Q or Quarterly Update

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Activities for the quarter (1, 2, 3) Legal proceedings Defaults Labor negotiations Discussion of seasonality MD&A Site of incorporation
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Form 10-Q (cont.)

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Many companies file 8-K with earnings release. Material facts must be in the 10-Q that might not be included in the 10-K Key point: Unaudited

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Form 14 or Proxy Statement

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Information regarding upcoming annual meeting Matters to be voted on at meeting Executive compensation Information on board members Shareholder proposals Major shareholders
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Form S-1 or Registration Statement

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Also called prospectus Going public or selling new shares Financing, use of proceeds Risk factors Part I and Part II Red herring

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Form S-1 (cont.)

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Look at exhibits, which may include the CEOs employment contract or a list of the companys real estate around the world.

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Form13-D
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Must be filed by any outside investor who buys 5 percent or more of a public companys stock Information on investors, even if are private partnerships of individuals

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Form 4
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Announces changes in holdings of directors and officers (even if hold no stock), and shareholders owning 10 percent or more of the companys stock

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Comment Letters
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SEC posting online comment letters that it sends to public companies and mutual funds about their annual reports, public offerings and other filings Makes it easier for investors and company rivals to understand the weaknesses of the disclosures and what financial issues are of concern to regulators

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Why a Private Company Files with SEC

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If a private company has any debt that trades on an exchange. Even if a public company is bought by a private equity group and taken private, the obligation to file with the SEC continues if the debt remains under previous conditions.

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Why a Private Company Files with SEC

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If the debt was issued on a registration statement and is held by more than 500 holders of record, even if it is not traded on an exchange. Obligation continues until the number of shareholders of record falls below 300.

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Why a Private Company Files with SEC

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If a company sold bonds or notes as part of a contract sale and the buyer said the company must file with the SEC until the bonds are retired. Most common reason.

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SEC Commissioners
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Elisse Walter, D, Chairman Daniel Gallagher, R, Commissioner Troy Paredes, R, Commissioner Luis Aguilar, D, Commissioner Unfilled position, D, Commissioner

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SEC Commissioners (cont.)

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Serve five-year terms Appointed by the president No more than three from the same political party

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SEC Commissioners (cont.)

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Interpret federal securities laws Amend existing rules Propose new rules to address changing market conditions Enforce rules and laws

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SEC Challenges
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Approximately 15,000+ public companies Before 2004, SEC had about 3,100 employees, small by federal agency standards Over last four years has had 3,500 3,600 employees and a budget of approximately $900 million Because of flat budgets, been 10 percent reduction of employees and cut of more than 50 percent in new technology investments
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SEC Challenges (cont.)

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Requested $1.03 billion for FY 2010 and $1.2 billion for FY 2011 Discussion of making it self-funded with control of its own budget Has twice the turnover of the average government agency 2 1/2 years is average employment of an SEC attorney

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SEC Challenges (cont.)

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For three years before Enrons bankruptcy, the SEC did not review its filings Market meltdown of 2008 Bernard Madoff

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SEC Revolving Door

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In summer 2004: Enforcement division manager to partner in major law firm (white-collar defense) Regional director to partner in major law firm (white-collar defense) Deputy director, investment management, to major bank (compliance) Associate director to major law firm (securities practice)
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SEC Uncertain Future

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XBRL eXtensible Business Reporting Language Frustration with its performance Legislative self-righteousness Various proposals for restructuring oversight

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