Securities Act Release No. 5092

Securities Exchange Act Release No. 8995

Investment Company Act Release No. 6209

October 15, 1970

SEC Comment on Timely Disclosure of Material Corporate Developments.

The Securities and Exchange Commission today reiterated the need for publicly held companies to make prompt and accurate disclosure of information, both favorable and unfavorable, to security holders and the investing public. Companies subject to the reporting requirements of the Securities Exchange Act of 1934 are, at the present time, generally required to file annual reports within 120 days after the end of their fiscal years, semi-annual reports within 45 days after the end of the 6-month period and current reports within 10 days after the end of the month in which a reportable event has occurred. Somewhat similar requirements are imposed by the Investment Company Act of 1940 on companies registered under that Act. In this regard, the Commission has noted that certain reporting companies from time to time have been delinquent in filing periodic reports under the Securities Exchange Act and the Investment Company Act. The Commission emphasized its concern about such delinquent filings, and hereby reminds reporting companies of their obligations to file reports on a timely basis as required by the Commission's rules.

Notwithstanding the fact that a company complies with such reporting requirements, it still has an obligation to make full and prompt announcements of material facts regarding the company's financial condition. The responsibility for making such announcement rests, and properly so, with the management of the company. They are intimately aware of the factors affecting the operations of the business. Management of non-investment companies are cognizant of factors affecting profits and losses, such as curtailment of operations, decline of orders, or cost overruns on major contracts. They are also cognizant of liquidity problems such as a decreased inflow of collections from sales to customers, the availability or lack of availability of credit from suppliers, banks, and other financial institutions, and the inability to meet maturing obligations when they fall due. Management of registered investment companies are similarly aware of factors affecting the operations of the businesses of such companies such as changes in important personnel of the company or its investment adviser, insolvency of such an adviser or the investment company's principal underwriter, or inability of an investment adviser to meet an expense guarantee or make a performance fee refund to the company.

 Not only must material facts affecting the company's operations be reported; they must also be reported promptly. Corporate releases which disclose personnel changes, the receipt of new contracts, orders and other favorable developments but do not even suggest existing adverse corporate developments do not serve the public needs and may violate the antifraud provisions of the Securities Exchange Act of 1934, and in the case of a registered investment company or other issuer making a continuous offering of its shares may also violate the Securities Act of 1933 if the prospectus is not appropriately updated.

The policy of prompt corporate disclosure of material business events is embodied in the rules and directives of the major exchanges . It should be noted that unless adequate and accurate information is available, a company may not be able to purchase its own securities or make acquisitions using its securities, and its insiders may not be able to trade its securities without running a serious risk of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Corporate managements are urged to review their policies with respect to corporate disclosure and endeavor to set up procedures which will insure that prompt disclosure be made of material corporate developments, both favorable and unfavorable, so that investor confidence can be maintained in an orderly and effective securities market.

By the Commission.