13 Aug SEC Comments to 10-K and 10-Q Filings Steadily Declining

Audit Analytics has done a fascinating review of the Securities and Exchange Commission’s penchant for issuing comment letters after reviewing public companies’ quarterly and annual filings on Forms 10-K and 10-Q (like the one Apple got above). The Sarbanes-Oxley Act of 2002 mandated the SEC conduct this review at least every three years for every company. The news flash: the number of comment letters issued after the reviews has steadily gone down in the last 5 years. In fact, it appears to have cut more than in half.

Why is that? Are public companies doing a better job of putting things in to satisfy the SEC? Is the SEC spending more time on IPOs and other registrations? The report says it might be some of both, but of course we don’t really know. It also noted that the average number of comment letters and time to complete the comment process have also both declined markedly in the same period.

Does this matter? Years ago a project called “Aircraft Carrier” sought to reform many aspects of securities regulation, including periodic reporting. The idea (which was never adopted) was to move more to the concept of a “company” registration rather than registering specific offerings. The regular review of periodic reports would, of course, be key to ensuring investor protection were we to move that way. This is why I have advocated expanding the availability of short form registration on Form S-3 to all SEC reporting companies. As we know, a bill in Congress to allow this has passed the House Financial Services Committee. This would be a huge help to smaller companies as they seek to raise capital, with investors fully protected with clear and accurate periodic reports.