1.10 SEC Reporting

Question 1

What is the SEC created by?

Answer 1

Securities Exchange Act of 1934

Question 2

What is the purpose of the SEC?

Answer 2

• to regulate securities trading

- enforce securities legislation

Question 3

What is the basic purpose of the securities laws?

Answer 3

• prevent fraud & misrepresentation

- require full and fair disclosure so investors can evaluate investments

Question 4

Under what act is disclosure made BEFORE the initial issuance of securities by registering with the SEC and providing a prospectus to potential investors?

Answer 4

Securities Act of 1933

Question 5

How are disclosures made in the Securities Act of 1934?

Answer 5

disclosures are made about subsequent trading of securities by filing periodic reports for the public to review

Question 6

Identify the 6 SEC regulations

Answer 6

1 - Regulation S-X

2 - Regulation S-K

3 - Regulation S-B

4 - Regulation S-T

5 - Financial Reporting Releases (FRRs)

6 - Staff Accounting Bulletins (SABs)

Question 7

What does Regulation S-X apply to?

Answer 7

• reporting of interim and annual financial statements, including notes and schedules.

Question 8

What does Regulation S-K provide or cover?

Answer 8

• provides disclosure standards, including many that are non-financial
• covers certain aspects of corporate annual reports to shareholders

Question 9

What does Regulation S-B apply to?

Answer 9

• small business issuers and non-accelerated filers

- reduces disclosure requirements for smaller companies

Question 10

What does Regulation S-T govern?

Answer 10

• the types of documents the SEC requires to be filed electronically

Question 11

What are Financial Reporting Releases (FRRs)?

Answer 11

• announce accounting and auditing matters of general interest

Question 12

What are Staff Accounting Bulletins?

Answer 12

• interpretations to be followed by the SEC staff in administering disclosure requirements

Question 13

What is the Integrated Disclosure System?

Answer 13

• system adopted by the SEC to avoid overlapping of disclosures required by the 1933 and 1934 Acts

Question 14

Identify the aspects of the Integrated Disclosure System

Answer 14

• Financial statements are standardized
• A basic information package is common to most filings
• elements of the annual shareholders’ report may be incorporated by reference in the annual SEC report (Form 10-K)

Question 15

Identify the 4 categories of issuers recognized under the SEC’s integrated disclosure system

Answer 15

1 - non reporting issuer

2 - unseasoned issuer

3 - seasoned issuer

4 - well-known seasoned issuer

Question 16

Define a non-reporting issuer

Answer 16

• one who need not file reports under the 1934 act

Question 17

What form must a non-reporting issuer use?

Answer 17

Form S-1

Question 18

Define an unseasoned issuer

Answer 18

• issuer has reported for at least 3 consecutive years under the 1934 act

Question 19

What forms must an unseasoned issuer use?

Answer 19

• Form S-1 but provides less detailed information and may include some information by reference to other 1934 act reports

Question 20

Define a seasoned issuer

Answer 20

• issuer has filed for at least 1 year

- has a market capitalization of at least $75 million

Question 21

What form must a seasoned issuer use?

Answer 21

• Form S-3 to report even less detail and may include even more information by reference

Question 22

Define a well-known seasoned issuer

Answer 22

• issuer has filed for at least 1 year
• has a worldwide market capitalization held by non-affiliates of at least $700 million or
• has issued for cash in a registered offering at least $1 billion of debt or preferred stock in the past 3 years

Question 23

What form must a well-known seasoned issuer use

Answer 23

Form S-3

Question 24

Annual Standardized Financial Statements must be audited by a firm that is registered with what organization?

Answer 24

Public Company Accounting Oversight Board (PCAOB)

Question 25

Identify the statements that must be included in the audited financial statements

Answer 25

- Balance sheets for the 2 most recent fiscal year ends | - Statements of income, cash flows, and changes in equity for the 3 most recent fiscal years

Question 26

Identify the requirements of the accountant certifying the financial statements

Answer 26

- must be independent of the management of the filer - not required to be a CPA - must be registered with a state

Question 27

Identify the contents of the basic information package (BIP) | HINT: 11

Answer 27

1 - financial statements 2 - financial trends & selected financial info for preceding 5 years 3 - management's discussion & analysis (MD&A) 4 - dividends & market prices of common stock 5 - description of business 6 - locations & descriptions of physical properties 7 - pending litigation (principal parties, allegations & relief sought) 8 - mgmt & general data for each director & officer 9 - compensation of the 5 highest-paid directors & officers 10 - security holdings of directors, officers, & those owning 5%+ of security 11 - matters submitted to shareholders for approval

Question 28

What matters are discussed in the MD&A

Answer 28

- liquidity - capital resources - results of operations - effects of tax legislation - effect of changing prices - entity's outlook & the significant effects of known trends, events and uncertainties

Question 29

Registration Under the 1934 Act: Identify the securities that are required to be registered under the 1934 Act:

Answer 29

- Securities listed on a national exchange - Equity securities of companies that have total gross assets > $10 million and a class of equity securities with 2,000 shareholders or 500 shareholders who are not accredited investors

Question 30

Registration Under the 1934 Act: What companies are required to register under the 1934 Act?

Answer 30

All regulated, publicly held companies must register with the SEC

Question 31

Periodic Reporting: Identify the reports an issuer must periodically file with the SEC

Answer 31

- Form 10-K (annual report) - Form 10-Q (quarterly report) - Form 8-K (current report) - Form 20-F (annual report for foreign issuers)

Question 32

Periodic Reporting: When is Form 10-K required to be filed?

Answer 32

- 60 days of the last day of the fiscal year by large accelerated filers - 75 days by accelerated filers - 90 days by non-accelerated filers

Question 33

Periodic Reporting: Define a large accelerated filer

Answer 33

- $700 million or more in publicly held stocks, i.e., shares held by the public and not insiders

Question 34

Periodic Reporting: Define an accelerated filer

Answer 34

- $75 million to $700 million in publicly held stocks, i.e., shares held by the public and not insiders

Question 35

Periodic Reporting: Define a non-accelerated filer

Answer 35

- < $75 million in publicly held stocks, i.e., shares held by the public and not insiders

Question 36

Periodic Reporting: When Form 10-K is presented with the basic information package it must be certified by an independent accountant and signed by who?

Answer 36

- Principal executive, financial, and accounting officers | - Majority of the board of directors

Question 37

Periodic Reporting: What is Form 10-Q and when is it required to be filed?

Answer 37

- quarterly report of operations and financial condition - 40 days of the last day of the 1st three fiscal quarters by large accelerated filers & accelerated filers - 45 days for non-accelerated filers - required to be filed for the 1st three quarters by all entities required to file Form 10-K

Question 38

Periodic Reporting: Is audited financial information required to be presented for Form 10-Q reporting?

Answer 38

No - but must be reviewed by an independent accountant

Question 39

Periodic Reporting: What is Form 8-K and when is it required to be filed?

Answer 39

- current report to disclose material events | - must be filed within 4 business days after the material event occurs

Question 40

Periodic Reporting: Provide examples of material events that would require the filing of Form 8-K: HINT: 5

Answer 40

- change in control of the registrant - Acquisition or disposition of a significant amount of assets not in the ordinary course of business - Bankruptcy or receivership - Resignation of a director - A change in the registrant’s certifying accountant

Question 41

Periodic Reporting: What is Form 20-F and who is required to file it?

Answer 41

- annual report to the SEC filed by foreign private issuers | - similar to Form 10-K

Question 42

Periodic Reporting: How are the financial statements prepared in Form 20-F?

Answer 42

in accordance with U.S. GAAP or IFRS