Few firms ready for SEC deadline
Companies must swear to accuracy of financial results
By Michael Schroeder
THE WALL STREET JOURNAL
msnbc.com
WASHINGTON, Aug. 7 — With a week to go, barely more than 5% of America’s biggest companies have complied with a government order to swear to the accuracy of their financial results.
IN LATE June, the Securities and Exchange Commission ordered the top executive and finance officers of 947 large firms, with at least $1.2 billion in annual revenue, to swear under oath that their financial reports are accurate. If the executives aren’t able to attest to their annual and quarterly reports’ accuracy, they must file a statement explaining why. The deadline for most corporations is a week from Wednesday, Aug. 14.
Investors are on the lookout to see if disclosures — or lack of them — may signal a fresh batch of company accounting problems. The push for having CEOs and chief financial officers attest personally to the accuracy of their results has stemmed directly from the crisis of confidence in corporate responsibility amid scandals from Enron Corp. to WorldCom Inc.
So far, only 48 companies have submitted their documents, with hundreds more expected in the next several days. About 80%, or 745, of the executive certifications for the latest quarterly results are due by 5 p.m. EST on Aug. 14. That deadline is based on corporations that file their financial results on a calendar-year basis. Most of the remaining 200 that report on a fiscal year will be due by Sept. 28, according to Bear, Stearns & Co.
Last week, the SEC started to publicize on its Web site the CEOs and finance chiefs who have — and haven’t — complied. On its Web site — at www.sec.gov — under the headline “CEO, CFO certifications,” the agency has a list of the nearly 1,000 companies that must comply. The page already has registered almost 153,500 hits.
The top executives must file with the SEC paper copies of documents that say “to the best of my knowledge” their financial reports are accurate. The documents are scanned, and available on the SEC Web site a day or two later.
The SEC staff later examines the statements and sorts them into two categories: those that certify the financial results are accurate and complete, using the language requested by the SEC; and those that can’t certify their results or don’t use the format the agency prescribes. The SEC then updates its Web site with a check mark indicating each company’s category of compliance. The evaluation process may take a few weeks after the expected flood of documents arrives over the next several days. But readers can look at the documents to reach their own conclusions.
In addition, the SEC staff urged corporations to post the statements on their own Web sites to reach a broad number of investors.
Separately, recently signed accounting legislation requires executives from all 15,000 public firms to vouch for quarterly and annual reports in the future. The SEC already has proposed rules for putting that process in place.
Many investors will be most interested in company executives who fail to certify financial results or those who explain in a letter to the SEC why their reports may be inaccurate. The explanations could point up accounting problems. Some certifications also may trigger earnings restatements as top executives work to meet filing deadlines.
While the SEC hasn’t received any requests for certification-filing extensions, companies have the option of making a separate filing to notify the SEC that they can’t meet their quarterly — or annual — report deadline, according to Christi Harlan, a SEC spokeswoman. A company will get an extension without question if it files for one within a day after the deadline passes. But the extension isn’t long: Companies get only five more business days to file a quarterly report and the certification or 15 business days for an annual report.
Failure to meet the certification-filing deadline altogether is another matter. “A company could face all the options available to the SEC — from cease-and-desist orders and fines to criminal referrals, depending on the circumstances,” Ms. Harlan said.
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