Download Full Disclosure System: A Review of SEC Activities in 2001 and more Exercises Accounting in PDF only on Docsity!
Full Disclosure System
The full disclosure system’s goals are to:
- foster investor confidence;
- provide investors with material information;
- contribute to the maintenance of fair and orderly markets;
- reduce the costs of capital raising; and
- inhibit fraud in the public offering, trading, voting, and tendering of securities.
The Division of Corporation Finance achieves these goals by reviewing the financial and non-financial disclosure made by companies in their periodic reports and transactional filings. The Division also achieves its goal by recommending to the Commission rules that facilitate and enhance corporate disclosure and interpreting these rules.
What We Did
- Completed reviews of the year-end financial statements of 2,400 reporting issuers and 1,195 new issuers.
- Adopted a new rule providing safe harbors from integration for a registered offering following an abandoned private offering or a private offering following an abandoned registered offering.
- Proposed rules to require companies to disclose securities authorized under compensation plans to address investors’ concerns about increased use of
equity compensation, particularly in the form of stock options.
- Proposed rule and form amendments that would require foreign private issuers and foreign governments to file their securities documents electronically through our Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
- Issued an exemptive order enabling companies to make option exchange offers to employees for compensatory purposes without complying with certain Commission tender offer rules.
- Initiated several special relief actions in the wake of the September 11, 2001 terrorist attacks.
2001 Statistics
Companies filed registration statements with the Commission covering $2.3 trillion in proposed securities offerings during the year, approximately the same as in 2000. Offerings filed by first- time registrants (IPOs) totaled approximately $154 billion, 17% less than in 2000.
Full Disclosure Reviews
Major Filing Reviews 1997 1998 1999 2000 2001
Securities Act Filings Initial Public Offerings 1,255 1,320 1,010 1,350 745 Repeat Issuers 723 720 510 270 620 P/E Amdts. a/ 41 28 10 10 25 Regulation A 111 81 65 70 50
Exchange Act Initial Registrations 349 338 680 1,015 400
Annual Report Reviews Full b/ 1,949 1,527 1,375 595 880 Full Financial 1,208 997 960 550 1,
Tender Offers (14D-1) 234 259 355 300 225
Going Private Schedules 94 115 180 115 145
Contested Proxy Solicitations 83 59 70 90 58
Proxy Statements Merger/Going Private 233 219 195 75 65 Others w/Financials 238 257 190 150 90
Reporting Issuer Reviews c/ 3,513 2,828 2,550 1,535 2,
New Issuer Reviews d/ 1,715 1,739 1,755 2,435 1,
Total Issuer Reviews 4,228 4,567 4,305 3,970 3,
a/ Post-effective amendments with new financial statements. b/ Includes annual reports reviewed in connection with the review of other filings that incorporated financial statements by reference. c/ Includes companies subject to Exchange Act reporting whose financial statements were reviewed during the year. d/ Includes reviews of Securities Act registration statements and Exchange Act registrations by non-Exchange Act reporting companies. Includes reviews of Regulation A filings.
With the decline in corporate merger activity and IPOs, the Division focused more of its resources on reviewing Securities Exchange Act of 1934 reports rather than transactional filings. During 2001, we reviewed fewer transactional filings than in 2000, 1,595 as compared with 1,925, but nearly twice as many Exchange Act reports, 2,280.
International Activities
Foreign companies’ participation in the U.S. public markets continued to grow in 2001. During the year, approximately 130 foreign companies from 29 countries entered the U.S. public markets for the first time. At year-end, there were over 1, foreign companies from 59 countries filing reports with us. Public offerings filed by foreign companies in 2001 totaled over $ billion as compared with $211 billion.
Recent Rulemaking, Interpretive and Related Matters
Rulemaking is undertaken to protect investors, facilitate capital formation, improve and simplify disclosure, establish uniform requirements, and eliminate unnecessary regulation. The objective in rulemaking is to define regulatory requirements on a cost- effective basis. We provide general interpretive and accounting advice through interpretive releases, staff legal bulletins, staff accounting bulletins, no-action and interpretive letters, our current issues outline, and responses to telephone inquiries.
Integration Safe Harbors for Abandoned Offerings
On January 26, 2001, the Commission adopted new Securities Act Rule 155 to provide safe harbors from integration for a registered offering following an abandoned private offering or a private offering following an abandoned registered offering.^96
Option Exchange Offers
On March 21, 2001, pursuant to delegated authority from the Commission, the Division issued an exemptive order addressing employee stock option exchange offers.^100 The exemptive order permits issuers to make these exchange offers without the need to comply with the rules requiring tender offers to be extended to all security holders of a class at the same price. The order contains conditions designed to assure that this relief is given only in the context of compensatory offers and that adequate disclosure is provided to employees.
Electronic Signatures in Global and National Commerce Act
On June 14, 2001, the Commission issued an interpretive release providing guidance on the application of the Electronic Signatures in Global and National Commerce Act (E-SIGN) to SEC recordkeeping requirements under the Securities Act, Exchange Act and Regulation S-T.^101 The release provides that, because E- SIGN is not applicable to authentication documents that are generated principally for governmental purposes, issuers should continue to retain paper copies of these documents. The release also provides that the other identified records may be retained in electronic form, as long as the method selected for retention provides the same assurances of accuracy and accessibility as are provided by paper retention.
Special Relief Actions Taken in the Wake of the September 11, 2001 Terrorist Attacks
On September 14, 2001, the Commission issued an emergency order pursuant to Exchange Act section 12(k)(2) to respond to market developments.^102 The order covered several matters, including registrant repurchases of securities under Exchange Act rule 10b-18 and the profit recovery provisions of section 16(b) of the Exchange Act. The Commission also issued an interpretive release expressing our views on how to calculate the average
weekly reported volume of trading in securities under Securities Act rule 144.^103 Furthermore, on September 28, 2001, the Commission issued a press release outlining a series of administrative actions taken to provide temporary emergency relief from regulatory burdens to companies in the airline and insurance industries, and to help these companies quickly access the U.S. capital markets.
Conferences
SEC/NASAA Conference Under Section 19(c) of the Securities Act
The SEC conducted the 18th annual federal/state uniformity conference in April 2001 in Washington, D.C. Approximately 60 Commission officials met with approximately 60 representatives of the North American Securities Administrators Association, Inc. to discuss methods of achieving greater uniformity in federal and state securities matters. After the conference, a final report summarizing the discussions was prepared and distributed to interested persons and participants.
SEC Government-Business Forum on Small Business Capital Formation
The SEC conducted the 20th annual Government-Business Forum on Small Business Capital Formation in Washington, D.C. in September 2001. This platform for small business is the only government-sponsored national gathering for small business, which offers annually the opportunity for small businesses to let government officials know how the laws, rules, and regulations are affecting their ability to raise capital.
