Federal securities laws mandate that publicly traded companies must provide certain information. These disclosures may occur periodically or as specific events occur. A public company with a class of securities registered under the Securities Exchange Act of 1934 must file reports with the Securities and Exchange Commission. The underlying basis of the reporting requirements is to keep shareholders and the markets informed on a regular basis in a transparent manner. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. The required reports include an annual Form 10-K, quarterly Form 10Q’s and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements.
A reporting company also has record-keeping requirements, must implement internal accounting controls and is subject to the Sarbanes-Oxley Act of 2002, including the CEO/CFO certifications requirements, prohibition on officer and director loans, and independent auditor requirements. Under the CEO/CFO certification requirement, the CEO and CFO must personally certify the content of the reports filed with the SEC and the procedures established by the issuer to report disclosures and prepare financial statements.
Timing and Format Disclosures
Fully functioning capital markets rely on full, timely, and accurate information. The provision of such information through a consistent reporting system raises investor confidence, which ultimately strengthens the capital markets.
CFA Institute Viewpoint
Quarterly Reporting
- Position: All companies with any type of securities listed on regulated markets should have to publish financial information quarterly.
- Rationale: Timely and accurate financial information is the lifeblood of financial markets. Quarterly reporting of financial information creates a more level playing field for access to financial information between insiders and outside investors and shareowners, and ultimately promotes greater investor confidence and improved capital allocation.
Continuous Disclosures
- Position: Issuers should have to make timely and periodic disclosures about company activities on a continuous basis in a single evergreen document that documents the reasons for the update, the nature and timing of the event, and provide links to previous periodic filings.
- Rationale: This disclosure format enables investors to assess various investment options with more ease and assurance that the review captures all relevant and current information available.
Disclosure Format
- Position: Regulators should provide a prescribed or standardized format for financial reporting.
- Rationale: A standardized format permits investors to easily compare and analyze the financial performance and condition of several different companies within the same industry and/or across industries and to assess operating results, financial condition, and business, financial, and liquidity risks across companies.
Interim Financial Statements Detail
- Position: Interim financial statements should provide the same degree of detail and transparency as provided in annual reports.
- Rationale: Investors need this information to enable them to make informed investments decisions throughout the year.
Financial Report Filing Deadlines
Position: All issuers of securities should have 45 days or less to submit interim financial reports to relevant regulators, and no more than 60 days for annual financial reports.
Rationale: Such deadlines should be adopted because:
- They are used and feasible in many important markets
- Longer deadlines could put issuers and investors in a market at a competitive disadvantage to markets with shorter deadlines
- Advances in information technology make shorter deadlines feasible
- Advances in investment technology increase the need for more immediacy and transparency of relevant price-sensitive information
Timing of Dissemination of Financial Reports
- Position: Companies that have shares listed on public exchanges should have to make their periodic financial statements available in all dissemination venues at the same time.
- Rationale: Improved timeliness of information will enhance investor confidence, and close the gap between the perception of sufficient information and actual access to full reports.