WASHINGTON – The Securities and Exchange Commission Wednesday voted 5-0 to require some companies to file financial reports faster, but pushed back implementation of the new schedule for large companies to early 2007 when most 2006 annual reports come out.
Under the new rule, large companies with market capitalizations above $700 million will have to issue their annual reports within 60 days after their fiscal year-end dates, shortened from an interim 75-day deadline.
But they will not have to meet the new deadline until they file reports for fiscal years ending on or after Dec. 15, 2006, the SEC said.
Before the SEC in 2002 started considering accelerated filing schedules, all companies faced deadlines of 90 days for annual reports and 45 days for quarterly reports.
In an effort to get financial data to shareholders more quickly, the deadlines have been shortened for some companies in a gradual phasing-in process and left alone for others, depending on their size.
Under the new rule just adopted, mid-sized companies -- those with $75 million to $700 million in market cap -- will keep the interim 75-day deadline for annual reports that is now in place.
Both large and mid-sized companies must file quarterly reports within 40 days after quarter-end dates under the new rule, compared with 45 days under the traditional rules.
Very small companies with market caps under $75 million will continue to have 90 days to file annual reports and 45 days for quarterlies, the SEC said.
Separately, the commission also voted 5-0 to propose making it easier for foreign companies to check out of its so-called regulatory "roach motel."
The proposal would address a long-standing complaint from some non-U.S. companies about difficulties in escaping the agency's oversight even after walking away from Wall Street.
An existing rule requires foreign companies to obey SEC reporting rules as long as they have as few as 300 U.S.-resident shareholders, even if they have delisted from U.S. exchanges.
Officials call it the "roach motel" rule because companies can check into the SEC registration system, but it is hard for them to exit with such a low shareholder-count threshold.
The SEC's proposed revision would ease the deregistration process for non-U.S. companies.
For stock issuers, deregistration would be allowed if a company has met SEC filing requirements for two years, has not sold stock in the United States for 12 months and has been listed on its home country exchange for two years.
Large companies would also have to show that their stock's average U.S. daily trading volume is less than 5 percent of the volume in their home market and that U.S. residents hold less than 10 percent of worldwide float.
Other technical tests would apply to some stock issuers and to debt issuers, the SEC said, regarding the proposal it put out for public comment with a final SEC vote expected later.
Finally, the SEC proposed a rule to limit attempts to stretch a standard pricing rule to rein in fat payouts to corporate executives in tender offers.
The "best price rule" states that all shareholders in a tender offer, such as a corporate acquisition, must get the same price per share for their holdings in the target company. The rule prevents some shareholders getting more for their holdings than others.
But SEC Chairman Christopher Cox said at an SEC open meeting that the rule has become subject to "conflicting judicial interpretations."
To clear this up, the SEC has proposed amendments saying the rule applies only to payments related to the purchase of securities in a tender offer and not to payments for employment compensation, severance or other benefits to employees or directors of the target company.