Business Journalism Professors 2014: Securities and Exchange Commission Filings by Jimmy Gentry


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Jimmy Gentry presents "Securities and Exchange Commission Filings" during the Reynolds Center for Business Journalism's annual Business Journalism Week, Jan. 4, 2014. Gentry is the Clyde M. Reed Teaching Professor at the University of Kansas' School of Journalism and Mass Communications.

The annual event features two concurrent seminars, Business Journalism Professors and Strictly Financials for journalists.

For more information about business journalism training, please visit

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Business Journalism Professors 2014: Securities and Exchange Commission Filings by Jimmy Gentry

  1. 1. Securities and Exchange Commission Filings Business Journalism Professors Jan. 4, 2014 1
  2. 2. Donald W. Reynolds National Center For Business Journalism At Arizona State University Strictly Financials 2
  3. 3. n  n  n  n  n  James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass Communications University of Kansas Strictly Financials 3
  4. 4. Securities and Exchange Commission n  n  n  n  Created in wake of Crash of 1929 to restore faith in markets Securities Act of 1933 Securities Exchange Act of 1934 Justice Brandeis’ role Strictly Financials 4
  5. 5. SEC Role n  n  n  n  Protect investors through disclosure of certain information Maintain a fair, orderly and efficient trading market, i.e. prevent misrepresentation Maintain investor confidence Facilitate capital formation Strictly Financials 5
  6. 6. SEC Philosophy n  All investors should have access to certain basic information about an investment before buying it and as long as they hold it. Strictly Financials 6
  7. 7. Who Files n  Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. Strictly Financials 7
  8. 8. Accessing SEC Documents n, other financial sites Company websites n  SEC: n  n  n  SEC Filings and Forms (EDGAR) n EDGAR: Electronic Data Gathering, Analysis and Retrieval System Strictly Financials 8
  9. 9. Key SEC Documents n  n  n  n  n  n  n  10-K 8-K 10-Q Proxy statement Prospectus Form 13-D Form 4 Strictly Financials 9
  10. 10. Form 10-K or Annual Report n  n  n  Historically, had been filed within 90 days after end of company fiscal year Today, 60, 75 or 90 days after fiscal year ends, depending on company’s public float Extensive financial data, including income statement, balance sheet and statement of cash flows Strictly Financials 10
  11. 11. Form 10-K (cont.) n  n  n  n  n  Extensive company information MD&A or Management Discussion and Analysis Auditor’s report Financial statements Extensive footnotes Strictly Financials 11
  12. 12. Form 8-K or Current Update n  n  n  n  “Material events” Since August 2004, companies have four business days to file SEC posts them almost instantly upon receipt Number of filings more than doubled since rule change but has slowed Strictly Financials 12
  13. 13. Form 8-K (cont.) n  n  n  n  n  n  Change in company auditor and why Bankruptcy-protection filing Expanded disclosure involving director or officer resignation or appointments Restatement of financial results Key litigation Termination of material agreements Strictly Financials 13
  14. 14. Form 8-K (cont.) n  n  n  n  n  n  Notice of de-listing by a stock exchange Significant costs of leaving a biz New off-books deals involving significant debt Changes in company bylaws Changes in company fiscal year Strictly Financials 14
  15. 15. Form 10-Q or Quarterly Update n  n  n  n  n  n  n  Activities for the quarter (1, 2, 3) Legal proceedings Defaults Labor negotiations Discussion of “seasonality” MD&A Site of incorporation Strictly Financials 15
  16. 16. Form 10-Q (cont.) n  n  n  Many companies file 8-K with earnings release “Material facts” must be in the 10-Q that might not be included in the 10-K Key point: Unaudited Strictly Financials 16
  17. 17. Form 14 or Proxy Statement n  n  n  n  n  n  Information regarding upcoming annual meeting Matters to be voted on at meeting Executive compensation Information on board members Shareholder proposals Major shareholders Strictly Financials 17
  18. 18. Form S-1 or Registration Statement n  n  n  n  n  n  Also called prospectus Going public or selling new shares Financing, use of proceeds “Risk factors” Part I and Part II “Red herring” Strictly Financials 18
  19. 19. Form S-1 (cont.) n  Look at exhibits, which may include the CEO’s employment contract or a list of the company’s real estate around the world Strictly Financials 19
  20. 20. Form13-D n  n  Must be filed by any outside investor who buys 5 percent or more of a public company’s stock Information on investors, even if are private partnerships of individuals Strictly Financials 20
  21. 21. Form 4 n  Announces changes in holdings of directors and officers (even if hold no stock), and shareholders owning 10 percent or more of the company’s stock Strictly Financials 21
  22. 22. Comment Letters n  n  SEC posting online comment letters that it sends to public companies and mutual funds about their annual reports, public offerings and other filings Makes it easier for investors and company rivals to understand the weaknesses of the disclosures and what financial issues are of concern to regulators Strictly Financials 22
  23. 23. Why A Private Company Files With SEC n  If a private company has any debt that trades on an exchange. Even if a public company is bought by a private equity group and taken private, the obligation to file with the SEC continues if the debt remains under previous conditions. Strictly Financials 23
  24. 24. Why A Private Company Files With SEC n  If the debt was issued on a registration statement and is held by more than 500 holders of record, even if it is not traded on an exchange. Obligation continues until the number of shareholders of record falls below 300. Strictly Financials 24
  25. 25. Why A Private Company Files With SEC n  If a company sold bonds or notes as part of a contract sale and the buyer said the company must file with the SEC until the bonds are retired. Most common reason. Strictly Financials 25
  26. 26. SEC Commissioners n  n  n  n  n  Mary Jo White, D, Chairman Daniel M. Gallagher, R, Commissioner Michael S. Piwowar, R, Commissioner Luis A. Aguilar, D, Commissioner Kara M. Stein, D, Commissioner Strictly Financials 26
  27. 27. SEC Commissioners (cont.) n  n  n  Serve five-year terms Appointed by the president No more than three from the same political party Strictly Financials 27
  28. 28. SEC Commissioners (cont.) n  n  n  n  Interpret federal securities laws Amend existing rules Propose new rules to address changing market conditions Enforce rules and laws Strictly Financials 28
  29. 29. SEC Challenges n  n  n  n  n  Approximately 15,000+ public companies Before 2004, SEC had about 3,100 employees, small by federal standards Went through a period of flat budgets, with a 10 percent reduction of employees and cut of more than 50 percent in new technology investments Requested $1.67 for fiscal 2014, roughly a 26 percent increase Has approximately 4,100 employees Strictly Financials 29
  30. 30. SEC Challenges (cont.) n  n  n  n  Republicans generally oppose increases although SEC is “deficit neutral,” meaning that costs are offset by fees it levies Discussion of making it self-funded with control of its own budget Has twice the turnover of the average government agency 2 1/2 years is average employment of an SEC attorney Strictly Financials 30
  31. 31. SEC Challenges (cont.) n  n  n  For three years before Enron’s bankruptcy, the SEC did not review its filings Market meltdown of 2008 Bernard Madoff Strictly Financials 31
  32. 32. SEC Revolving Door n  n  n  n  n  Old but telling: In summer 2004, Enforcement division manager to partner in major law firm (white-collar defense) Regional director to partner in major law firm (white-collar defense) Deputy director, investment management, to major bank (compliance) Associate director to major law firm (securities practice) Strictly Financials 32
  33. 33. SEC Uncertain Future n  n  n  n  XBRL – eXtensible Business Reporting Language Frustration with its performance Legislative self-righteousness Various proposals for restructuring oversight Strictly Financials 33