SEC Unveils New Financial Reporting Rules

The Securities and Exchange Commission, looking to modernize Wall Street regulations dating to the 1930s and to correct the lack of disclosure that led in part to the collapse of Enron, proposed new rules that would require companies to file their annual and quarterly reports earlier.

The SEC proposals, announced Wednesday, would update Wall Street rules dating back to the early 1930s when Franklin Roosevelt occupied the White House.

Under the SEC proposal, which could take at least four months to enact under the slow-moving regulatory approval process, companies would have to file financial reports more quickly and to be more open in what they reported.

A 1934 law requiring publicly traded companies to file their 10K, or annual report, within 90 days after the end of their fiscal year, would be modified to reduce the delay to 60 days. Companies would also have to file their quarterly statements within 30 days rather than 45 days.

The proposals would also shorten the time that corporate executives have to report their stock purchases and sales. As it stands today, trades must be reported by the tenth day of the month following the month in which the trades occur, representing a delay of up to 40 days.

The collapse of Enron Corp. (ENRNQ.PK) (ENE.N), once the seventh largest U.S. company, has sparked cries for the SEC to revisit corporate disclosure regulations.

Chairman Harvey Pitt said in a statement that while the U.S. financial disclosure system is the best in the world, "investors can be confident in the system as we continue to work to improve it."

In addition, the commission is looking to close a loophole that allows corporate insiders who sell stock back to their company to delay reporting the transactions until 45 days after the end of the fiscal year. Companies would now have to report these deals within days.

The SEC also wants to expand the list of significant events that require the filing of a form known as the 8K. These events would include changes in rating agency decisions and lock-out periods that prevent employees from withdrawing from or making changes to benefit, retirement and stock ownership plans.

Companies currently use an 8K to announce a change in their executive ranks or that they have a filed an earnings press release. They also use 8Ks to say they have a new accounting firm.

Reuters contributed to this report.