(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

SEC Proposes Accelerated Corporate Disclosure Rules

Seeking to improve the timeliness of corporate reporting, the SEC unanimously approved a proposal to require accelerated filings of Forms 10-K and 10-Q and to require Form 8-K disclosure of many insider transactions now reported on Forms 3, 4 and 5. The accelerated filing rules will have a 30-day comment period, while a 60-day comment period will apply to the insider transaction disclosure proposals. SEC Chairman Harvey L. Pitt also indicated that the SEC will consider additional changes in the future to required reporting under Exchange Act Section 16.

By adding to the matters subject to current reporting on Form 8-K, the Commission is attempting to deal with delays in current Exchange Act reporting highlighted by the Enron collapse. According to the staff, under present rules, some transactions need not be disclosed for more than 400 days. Because of the significant changes contained in the insider disclosure proposal, the SEC believed that a 60-day comment period was appropriate.

As proposed, Form 8-K disclosure would be required for 1) transactions in company equity securities by directors and executive officers, 2) management's arrangements for the purchase and sale of company equity securities intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1 and 3) loans to a director or executive officer made or guaranteed by the company collateralized by the borrower's company equity securities.

Additional measures subject to Form 8-K disclosure include 1) information that may reflect the management view of the company's performance or prospects, 2) shifts in the alignment between the economic interest of the shareholders and management, 3) transactions that "sever the link" between executive compensation and the performance of the company's stock and 4) financial arrangements "not generally available to shareholders" that may have the effect of increasing management compensation.

In general, transactions in excess of $100,000 would require reporting within two business days. Most other reports would be due by the close of the second business day of the following week, although reporting on transactions and loans of less than $10,000 could be deferred.

Periodic Reporting Changes

The Commission also unanimously approved a proposal to accelerate Form 10-Q and 10-K reporting and to have EDGAR documents available immediately instead of after 24 hours. Under the proposal, quarterly Form 10-Qs would be due 30 days after the quarter ends instead of the current 45 days. Annual Form 10-Ks would be due 60 days after the fiscal year ends instead of the current 90 days. Smaller companies would be exempt from the new timeframe and only domestic companies would be covered. The SEC's proposal would exempt smaller companies by only covering companies with a public float of at least $75 million. The staff advised the Commission, however, that it expects to receive comments supporting a higher threshold.

Companies subject to accelerated filings would have to indicate in their annual reports how investors can access company filings, such as through the SEC's Web site and through company Web sites. As proposed, companies without Web sites that contain their Form 10-Qs, Form 10-Ks and Form 8-Ks would need to explain why they do not provide information through the Web.

Securities Futures Definitions

The SEC also adopted amendments to the definition of "equity security" in rules under both the Securities Act and the Exchange Act to include security futures. The amendments will conform the definitions to the statutory changes made by the Commodity Futures Modernization Act with respect to security futures. The SEC approved a final rule with a delayed effective date and will accept comments during the interval. Because these amendments conformed existing rules to a statute, the Commission believed that a final rule was appropriate without engaging in the usual proposal and comment process.

¨ The adopting and proposing releases will be published in a forthcoming REPORT.