WSG Article: SEC Proposes to Require Certification of Annual and Quarterly Reports - Haynes and Boone
Haynes and Boone
June 20, 2002 - Dallas, Texas
SEC Proposes to Require Certification of Annual and Quarterly Reports
by William L Boeing
To Our Public Company Clients:
The SEC has issued for comment a proposed rule which would require a company’s principal executive officer and principal financial officer to certify that, to their knowledge, the information contained in the company’s quarterly and annual reports is true in all important respects and that the reports contain all information about the company of which they are aware that they believe is important to a reasonable investor. The SEC also proposes to require public companies to maintain procedures to provide reasonable assurance that the company is able to collect, process and disclose information required in its reports and to review periodically the procedures in place. The SEC release proposing these rules is Securities Exchange Act Release No. 34-46079 and it is available at www.sec.gov.
The SEC has proposed the new certification and procedures rules because it believes that it is important both to the quality of disclosure and investor confidence that senior corporate officials review and evaluate the information contained in their companies’ annual and quarterly reports. The SEC notes that investors depend on the information contained in annual and quarterly reports to present a clear picture of the company’s business and financial condition. The SEC has expressed concern that investor confidence has suffered because of a real or perceived lack of attention to the reports by senior corporate officials.
The SEC believes that requiring companies to maintain procedures for collecting and processing information to be disclosed in reports will help ensure that material information is brought to the attention of management for disclosure in company reports.
Scope of Proposed Certification Requirement
Under the proposed rules, a company’s principal executive officer and principal financial officer each would have to certify in an annual report that:
He or she has read the report;
To his or her knowledge, the information in the report is true in all important respects as of the end of the period covered by the report; and
The report contains all information about the company of which he or she is aware that he or she believes is important to a reasonable investor as of the end of the period covered by the report.
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