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Securities and Exchange Commission Filings
Journalism Professors
Jan. 4, 2012
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Donald W. Reynolds National Center For Business Journalism At Arizona State University
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n James K. Gentry, Ph.D. n Clyde M. Reed Teaching Professor n School of Journalism and Mass Communications n University of Kansas n [email protected]
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Securities and Exchange Commission n Created in wake of Crash of 1929 to
restore faith in markets n Securities Act of 1933 n Securities Exchange Act of 1934 n Justice Brandeis’ role
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SEC Role n Protect investors through disclosure of
certain information n Maintain a fair, orderly and efficient
trading market, i.e. prevent misrepresentation
n Maintain investor confidence n Facilitate capital formation
SEC Philosophy n 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 n 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 n Finance.yahoo, other financial sites n Company websites n SEC: www.sec.gov n SEC Filings and Forms (EDGAR)
n www.sec.gov/edgar.shtml n EDGAR: Electronic Data Gathering, Analysis
and Retrieval System
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Key SEC Documents n 10-K n 8-K n 10-Q n Proxy statement n Prospectus n Form 13-D n Form 4
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Form 10-K or Annual Report n Historically, had been filed within 90
days after end of company fiscal year n Today, 60, 75 or 90 days after fiscal
year ends, depending on company’s public float
n Extensive financial data, including income statement, balance sheet and statement of cash flows
Form 10-K (cont.) n Extensive company information n Auditor’s report n MD&A or Management Discussion and
Analysis n Extensive footnotes
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Form 8-K or Current Update n “Material events” n Since August 2004, companies have
four business days to file n SEC posts them almost instantly upon
receipt n Number of filings more than doubled
since rule change but has slowed
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Form 8-K (cont.) n Change in company auditor and why n Bankruptcy-protection filing n Expanded disclosure involving director
or officer resignation or appointments n Restatement of financial results n Key litigation n Termination of material agreements
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Form 8-K (cont.) n Notice of de-listing by a stock exchange n Significant costs of leaving a biz n New off-books deals involving
significant debt n Changes in company bylaws n Changes in company fiscal year n www.sec.gov/answers/form8k.htm
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Form 10-Q or Quarterly Update n Activities for the quarter (1, 2, 3) n Legal proceedings n Defaults n Labor negotiations n Discussion of “seasonality” n MD&A n Site of incorporation
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Form 10-Q (cont.) n Many companies file 8-K with earnings
release n “Material facts” must be in the 10-Q
that might not be included in the 10-K n Key point: Unaudited
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Form 14 or Proxy Statement n Information regarding upcoming annual
meeting n Matters to be voted on at meeting n Executive compensation n Information on board members n Shareholder proposals n Major shareholders
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Form S-1 or Registration Statement n Also called prospectus n Going public or selling new shares n Financing, use of proceeds n “Risk factors” n Part I and Part II n “Red herring”
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Form S-1 (cont.) n Look at exhibits, which may include the
CEO’s employment contract or a list of the company’s real estate around the world
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Form13-D n Must be filed by any outside investor
who buys 5 percent or more of a public company’s stock
n Information on investors, even if are private partnerships of individuals
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Form 4 n Announces changes in holdings of
directors and officers (even if hold no stock), and shareholders owning 10 percent or more of the company’s stock
Comment Letters n SEC posting online comment letters that it
sends to public companies and mutual funds about their annual reports, public offerings and other filings
n 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 n 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
n 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
n 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 n Elisse Walter, D, Chairman n Daniel Gallagher, R, Commissioner n Troy Paredes, R, Commissioner n Luis Aguilar, D, Commissioner n Unfilled position, D, Commissioner
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SEC Commissioners (cont.) n Serve five-year terms n Appointed by the president n No more than three from the same
political party
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SEC Commissioners (cont.) n Interpret federal securities laws n Amend existing rules n Propose new rules to address changing
market conditions n Enforce rules and laws
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SEC Challenges n Approximately 15,000+ public companies n Before 2004, SEC had about 3,100
employees, small by federal agency standards
n Over last four years has had 3,500 – 3,600 employees and a budget of approximately $900 million
n Because of flat budgets, been 10 percent reduction of employees and cut of more than 50 percent in new technology investments
SEC Challenges (cont.) n Requested $1.03 billion for FY 2010 and $1.2
billion for FY 2011 n Discussion of making it self-funded with
control of its own budget n Has twice the turnover of the average
government agency n 2 1/2 years is average employment of an
SEC attorney
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SEC Challenges (cont.) n For three years before Enron’s
bankruptcy, the SEC did not review its filings
n Market meltdown of 2008 n Bernard Madoff
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SEC Revolving Door n In summer 2004: n Enforcement division manager to partner in
major law firm (white-collar defense) n Regional director to partner in major law firm
(white-collar defense) n Deputy director, investment management, to
major bank (compliance) n Associate director to major law firm
(securities practice)
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SEC Uncertain Future n XBRL – eXtensible Business Reporting
Language n Frustration with its performance n Legislative self-righteousness n Various proposals for restructuring
oversight