SEC Brings Disclosure Into Silicon Era

Updated from 5:46 p.m. EDT

The Securities and Exchange Commission has adopted new rules that require insiders to report stock trades within two days and tighten the deadlines for filing quarterly and annual reports.

Over the next three years, the SEC will shorten the deadline for annual reports to 60 days from 90 days, and for quarterly reports to 35 days from 45 days. No changes will take place next year, however.

Separately, speedier disclosure of insider transactions was approved to reflect the terms of the recently passed Sarbanes-Oxley congressional bill. Beforehand, insiders could take more than a month to report a trade.

SEC officials believe the new measures bring disclosure up to speed with the current investment era.

"The securities disclosure requirements were largely written 68 years ago in the Tin Lizzie era," said John Nester, an SEC spokesman. "They are hardly sufficient to keep up with the information superhighway that people now use when making their investment decisions."

The SEC also said that CEOs and CFOs of all companies publicly traded in the U.S. will have to certify their financial statements, also a requirement of the Sarbanes-Oxley measure.

"These steps give investors faster access to company finances and officer transactions, as well as provide assurance that financial statements are complete and accurate," said Nester.

The SEC measures come as investors are looking for better disclosure following a raft of corporate scandals. But some public companies, including Coca-Cola ( KO) and Dell ( DELL), which said stricter deadlines would compromise the accuracy of financial reports, have objected to the new rules.

"This accelerated timing could decrease the quality of the filed information and increase the likelihood of errors and omissions," wrote Robert Davis, vice president of Dell, in a complaint in April.

Coca-Cola, in a separate letter last spring, said that it needs all the time it gets to report results.

"Coke operates in over 200 countries. The technological advancements available in many of the world's developed countries are not necessarily available in all of the countries in which we do business," wrote Connie McDaniel, vice president and controller of Coca-Cola last April. "Therefore, our company still has significant challenges in collecting and properly analyzing data required by the SEC."

The SEC accommodated companies by extending the filing time from 30 days, the original proposal, to 35 days. "This was certainly an effort to reach out to businesses, with respect to timing," said Jay Dubow, a lawyer at Wolf Block Schorr & Solis-Cohen, a Philadelphia-based law firm.

Still, some object to the price companies will have to pay to comply with the new rules. "It will be potentially very difficult to comply with the rules," said Diane Frankle, a partner Gray Cary Ware & Freidenrich, a Palo Alto, Calif., law firm. "That could increase costs and impact bottom lines."

Frankle's firm primarily advises small technology firms, where she believes the burden of the rules will be felt the strongest. "They don't have billions of dollars in revenue to put processes in place that can speed up reporting."

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