AIMR Releases Comments on SEC's Proposals to Modernize the Securities Act of 1933
AIMR Supports SEC's Revamping of Public Offering System
Charlottesville,VA, July 1999 − In recent correspondence to U.S. Securities and Exchange Commission Secretary (SEC) Jonathan Katz, the Association for Investment Management and Research (AIMR) specified its position on the Aircraft Carrier Proposal, the SEC's recent plan to modernize the regulatory structure for offerings under the Securities Act of 1933. AIMR recognizes the limitations of the existing public offering system, and believes that the Aircraft Carrier initiatives will, as a whole, measurably improve the quality and timeliness of the information provided to market participants.
AIMR is a nonprofit organization dedicated to raising the professional, educational and ethical standards of investment management and research practitioners around the globe. As part of an ongoing advocacy effort for members and charterholders, the AIMR Task Force on Capital Formation was formed in 1995 to work with the SEC in its effort to revamp the registration system.
Discussing the organization's reaction to the SEC proposal, AIMR President and Chief Executive Officer Thomas A. Bowman, CFA, said, "AIMR strongly supports the SEC's efforts to modernize the Securities Act of 1933. As an organization, we support broad and timely disclosure that is fair to all parties involved in the investment process. We believe that now is indeed a good time to make improvements on the public offering system."
In its letter to the SEC, AIMR expressed full support of the regulatory body's stated goal of enhancing the level and reliability of the disclosure provided to investors in the secondary markets on an ongoing basis --not just at the time of an offering -- through the Aircraft Carrier Proposal.
AIMR believes that under the SEC proposal, market analysts and market participants would be provided with information on a basis designed to offset the occurrence of selective disclosure. Information would be disseminated to the market on a "real time" basis, with the ultimate goal of creating a "level playing field" among market participants, through continually provided, updated information.
The organization acknowledged that the range and number of problems resulting from delays in the current public offering process and the costs of maintaining the transaction-based system is a clear-cut indication that a new approach is necessary. Additionally, AIMR recommended the following to the SEC:
- The minimum float requirement should be increased significantly, in light of the rapid movement toward 24-hour trading.
- All issuers (both domestic and foreign) should be required to provide the same information within the same filing deadlines. Further, the number of years of financial reporting by an issuer and the absence or presence of pending regulatory issues involving these reports, should be the chief criteria for determining "Form B" (allowing expedited access to the capital markets) eligibility.
- The lag-time between when filed periodic reports with the SEC are available on the regulator's web site and their availability through subscription data-retrieval services should be eliminated. Until that time gap is addressed, AIMR suggests that alternative sources for free information (such as EDGAR) be provided to the public on the SEC's web site, possibly under "Other Sites to Visit."
- As the SEC is contemplating a continuous disclosure system, AIMR urges the SEC to require issuers to provide electronic hyperlinks to documents containing the information that is being incorporated, so that investors can immediately access the referenced information. The SEC should also require issuers to provide their web site and e-mail addresses to help investors obtain relevant information on a timely basis.
- AIMR strongly supports the inclusion of risk (and uncertainty) factors into Form-10K and that any material changes in these factors should be reported quarterly in Form 10-Q. Some risk factors that should be disclosed include: nature of the enterprise's operations (major products and markets, and importance of operating units to overall enterprise); current vulnerability due to certain concentrations in geographic areas, products or services, raw material, etc, and the use of estimates in the preparation of the entity's financial statements and their significance.
The Association for Investment Management and Research is a global, nonprofit organization of more than 37,000 investment professionals from 70 countries worldwide. Almost 40 percent of the candidates entering the CFA program are located outside of the U.S. and Canada. Through its headquarters in Charlottesville, Virginia, and more than 80 affiliated societies and chapters throughout the world, AIMR provides global leadership in investment education, professional standards, and advocacy programs. For more information on AIMR and its programs and services, call 800-247-8132 or 804-980-3668 or visit the AIMR Web site at www.cfainstitute.org.