Release No. 34-16162

September 6, 1979

Timely Reporting-Proposed Amendment of Rule and Form and Proposed New Rule

ACTION: Proposed rulemaking.

SUMMARY: The Commission proposes the amendment of Rule 12b-25 and its related form which would eliminate the extension of time to furnish information procedure and, in lieu thereof, institute a system requiring notification of a registrants or a reporting persons inability to timely file reports or portions thereof with the Commission. Concurrently with this proposal, the Commission proposes for comment a new Rule 12b-26 which would require that an issuer identify on the cover page of periodic reports any required material omitted from such a report.

DATES: Comments should be submitted on or before November 9, 1979.

ADDRESSES: Comments should be submitted in triplicate to George A. Fitzsimmons, Secretary, Securities and Exchange Commission, 500 North Capitol Street, Washington, D.C. 20549. Comment letters should refer to File No. S7-798.

All comments received will be available for public inspection and copying in the Commissions Public Reference Room, 1100 L Street, N.W., Washington, D.C. 20549.

FOR FURTHER INFORMATION CONTACT: Bruce Mendelsohn (202) 272-2589, Division of Corporation Finance, 500 North Capitol Street, Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission today proposed an amendment to Rule 12b-25 and its related form. In lieu of the present extension procedure in Rule 12b-25, the Commission proposed for comment a new procedure which would require notification when an issuer or reporting person is unable to file on a timely basis any report or portion thereof required by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") 15 U.S.C. 78a et seq. as amended by Pub. L. No. 94-29 (June 4, 1975). A new Rule 12b-26 which would require prominent disclosure on the cover pages of periodic reports if a required portion of such a report is omitted is also proposed for public comment.

Elimination of the Extension of Time to Furnish Information Procedures ¹

Presently, Rule 12b-25 sets forth the circumstances under which a registrant may apply for an extension of time to furnish information to the Commission required by Section 13 or 15(d) under the Exchange Act. Present Form 12b-25, upon which the application is made, contains specific questions designed to aid the registrant in applying for an extension of time. Under this rule, the application is deemed granted unless denied by the Commission within 15 days after receipt. In practice, the Division of Corporation Finance, by delegated authority, has granted such extensions only in the most compelling and unexpected of circumstances and only where an issuer has demonstrated that the granting of the request is appropriate in the public interest and consistent with the protection of investors.

The Commission is inclined to believe that the purposes of the Exchange Act "to insure the maintenance of fair and honest markets in securities transactions..." ² may be better served without an extension procedure. In this regard, it may not be in the public interest to excuse non-timely reporting through the application process embodied in Rule 12b-25. It is the Commissions position that required reports should always be filed when due.

Moreover, it would appear that an extension of time to file confers little, if any, substantive benefit upon the requesting party. In this regard, the Commission questions whether the present procedure is any longer warranted. Indeed, the elimination of the extension procedure would result in the most limited consequences to registrants and investors. Furthermore, an inordinate amount of staff time is being spent processing these applications.

By eliminating the review requirement for extension of time requests, the Commission would anticipate being able to place increased emphasis on the review of all Exchange Act filings. In this manner, the Commission will attempt to implement one of the recommendations of the Advisory Committee on Corporate Disclosure which noted that a substantive review of periodic reports consistent with the quality of information sought in registration statements is essential to the end product of a high quality disclosure document. ³

Although the proposed amendment makes a change from present practice which may be perceived as being less advantageous to registrants, the Commission believes that the limited benefits from the extension procedure are outweighted by the obstacles it may cause to informed markets and by the burden imposed on the Commission.

Proposed Notification Procedure

Concurrent with the elimination of the extension procedure embodied in Rule 12b-25, the Commission proposes the adoption of a new notification procedure under the Rule. The new procedure would require that, no later than one business day after the end of the specified period when the report is due, the registrant or reporting person file with the Commission a notification on the proposed revised Form 12b-25 which identifies the report or portion thereof in question and gives reasons why the filing cannot be made on time. The proposed amended rule relates to reports required to be filed pursuant to Section 13 or 15(d) of the Exchange Act. ⁴ The Commission notes that the proposed system would only require a notification and thus would not necessitate any responsive staff action.

It should be emphasized that the proposed notification procedure will provide issuers with a public forum in which to address the facts and circumstances relevant to their particular situations.

Effects of the Proposals

It should be emphasized that the proposals, if adopted, would eliminate extensions for the filing of required reports. ⁵ Moreover, the proposed notification procedure should be taken as neither an invitation for non-timely reporting nor an acquiescence of the Commission to any non-timely filing.

Failure by public companies to observe the periodic reporting requirements presents an obstacle to the maintenance of fair and informed trading markets in the securities of publicly-held companies. The applicability of various rules and the availability of certain disclosure forms under the Securities Act of 1933 is predicated upon full compliance with the periodic reporting requirements. For example, the use of Form S-7 or S-16 for registration of certain public offerings of securities depends in part upon a company having filed timely reports pursuant to Sections 13 or 15(d) of the Exchange Act for at least the twelve calendar months preceding the filing of the registration statement. Section 15c2-11 under the Exchange Act requires a dealer to have certain information concerning an issuer before its securities may be quoted by that dealer. Rule 144 under the 1933 Act requires the filing of all Exchange Act reports required to be filed for the 12 months immediately preceding a sale. Indeed, with respect to Rule 144, an effect of the filing of the notification form pursuant to the proposed amended Rule 12b-25 may be to give notice that compliance with Rule 144(c)(1) would not be possible until the subject report is filed (assuming all other required reports had been filed). ⁶

The Commission would also like to point out that failure to file a timely notification form pursuant to the proposed rule would create an additional violation of the reporting requirements.

Proposed Rule 12b-26

The Commission is also proposing for comment a new Rule 12b-26 which would require registrants to prominently disclose on the cover pages of periodic reports filed pursuant to Sections 13 or 15(d) any required portion omitted from those reports. It is believed that this requirement will assist the investing public and the Commission in the review of Exchange Act reports.

Specific Inquiries

The Commission solicits comment as to whether amended Rule 12b-25 should provide an automatic extension of the applicable filing requirement upon the filing of a revised Form 12b-25 and, if so, what period would be appropriate for the automatic extension.

The Commission also solicits comment as to whether the amendment of Rule 12b-25 and its related form and the concurrent adoption of the proposed Rule 12b-26 would have an adverse effect on competition or would impose a burden on competition which is neither necessary nor appropriate in furthering the purposes of the Exchange Act. Comments on this inquiry will be considered by the Commission is complying with its responsibilities under Section 23(a)(2) of the Exchange Act.

Text of Proposed New and Amended Rules and Form

Chapter II of Title 17 of the Code of Federal Regulations is proposed to be amended as follows:

PART 240-GENERAL RULES AND REGULATIONS SECURITIES EXCHANGE ACT OF 1934

1. By revising §240.12b-25 to read as follows:

§240.12b-25 Notification of inability to timely file periodic reports.

(a) If any report or portion thereof required by sections 13 or 15(d) of the Securities Exchange Act of 1934 is not filed within the time period prescribed for filing, the registrant or reporting person, no later than one business day after the due date for such report, shall file with the Commission a notification on Form 12b-25 reporting the inability to timely file the report and indicating the reasons therefor. This paragraph also relates to portions of reports omitted pursuant to Rule 12b-21, 17 CFR 240.12b-21.

(b) If a notification filed pursuant to paragraph (a) of this section related to a portion or portions of a periodic report filed pursuant to sections 13(a) or 15(d), the registrant shall include, on the upper right corner of the amendment to the report (required to be filed on Form 8) which includes the previously omitted information, the following statement:

"The following items were the subject of a notification on Form 12b-25 and are included herein: (List Item Numbers)"

Instruction. The statement required by paragraph (b) is intended to facilitate notification to the Commission and the public that previously omitted portions which were the subject of a Form 12b-25 have been filed. If the statement does not appear on the amendment to the periodic report (Form 8), the registrant runs the risk of being perceived as continuing to be late with respect to such material.

(c) The provisions of this section shall not apply to amendment in accordance with Instruction 3(b) of Instructions as to Financial Statements of Form 10-K.

(d) The provisions of this section shall not apply to reports required to be filed by an investment company registered under the Investment Company Act of 1940 12 U.S.C. 80a et seq. pursuant to the provisions of that Act or the rules adopted thereunder, notwithstanding the fact that such reports are also required to be filed by the Securities Exchange Act of 1934 or the rules adopted thereunder.

Note: The disclosures required in reports filed with the Commission are essential to the preservation of full, fair and informed securities markets. Therefore, it is of critical importance that such reports be furnished within the time they are required to be filed under the Commissions rules, and nothing in this section should be construed to mean that the Commission has authorized or approved any non-timely reporting.

2. By adding §240.12b-26 to read as follows:

§240.12b-26. Cover page disclosure when a required portion has been omitted from a periodic report filed pursuant to sections 13(a) or 15(d).

If a required portion of a periodic report filed pursuant to sections 13(a) or 15(d) has been omitted for any reason other than that it is inapplicable under the circumstances, the registrant shall prominently indicate the nature of the omitted portion on both the cover page of such periodic report and in that section of the report where the omitted information normally would have appeared.

PART 249-FORMS, SECURITIES EXCHANGE ACT OF 1934

3. By revising Instruction 4 to Item 7(a) of Form 8-K to read as follows:

249.308 Form 8-K, for current reports.

* * * * *

Item 7. Financial Statements and Exhibits.

* * * * *

(a) Financial statements of business acquired

Instructions

Instructions 1 through 3 remain uncharged

4. Filing of Other Financial Information in Certain Cases. The Commission may, upon the written request of the registrant and where consistent with the protection of investors, extend the time for filing the financial statements herein required or permit the omission of one or more of such financial statements or the filing in substitution therefor of appropriate statements of comparable character, if the required audited financial statements are not reasonably available to the registrant, because the obtaining thereof would involve unreasonable effort, expense or practical difficulties. A request for such relief shall be filed as a part of the report. The request, other than a request for an extension of time to file, shall set forth the following information:

* * *

__________________________________

4. By revising §249.322 to read as follows:

§249.322 Form 12b-25. Notification of inability to timely file reports or portions thereof pursuant to sections 13 or 15(d) of the Act.

This form shall be filed pursuant to §240.12b-25 of this chapter by issuers and reporting persons who are unable to timely file periodic reports, or portions thereof required by sections 13 or 5(d) of the Act. The filing shall consist of a signed original and three conformed copies, and shall be filed with the Commission at Washington, D.C. 20459, no later than one business day after the due date for the periodic report in question. Copies of this form may be obtained from the Commission on request.

(See Form 12b-25 on pages 246 and 247)

GENERAL INSTRUCTIONS

1. This Form is required by Rule 12b-25 of the General Rules and Regulations under the Securities Exchange Act of 1934, which states:

Rule 12b-25. Notification of Inability to Timely File Periodic Reports.

(a) If any report or portion thereof required by Sections 13 or 15(d) of the Securities Exchange Act of 1934 is not filed within the time period prescribed for filing, the registrant or reporting person, no later than one business day after the due date for such report, shall file with the Commission a notification on Form 12b-25 reporting the inability to timely file the report and indicating the reasons therefor. This paragraph also relates to portions of reports omitted pursuant to Rule 12b-21, 17 CFR 340.12b-21.

3(b) If a notification filed pursuant to paragraph (a) related to a portion or portions of a periodic report filed pursuant to Sections 13(a) or 15(d), the registrant shall include, on the upper right corner of the amendment to the report (required to be filed on Form 8) which includes the previously omitted information, the following statement:

"The following items were the subject of a notification on Form 12b-25 and are included herein: (List Item Numbers)"

(c) The provisions of this rule shall not apply to those financial statements that are to be filed by amendment in accordance with Instruction 3(b) of Instructions as to Financial Statements of Form 10-K.

(d) The provisions of this rule shall not apply to reports required to be filed by an investment company registered under the Investment Company Act of 1940 12 U.S.C. 80a et seq. pursuant to the provisions of that Act or the rules adopted thereunder, notwithstanding the fact that such reports are also required to be filed by the Securities Exchange Act of 1934 or the rules adopted thereunder.

Instruction. The statement required by paragraph (b) is intended to facilitate notification to the Commission and the public that previously omitted portions which were the subject of a Form 12b-25 have been filed. If the statement does not appear on the amendment to the periodic report (Form 8), the registrant runs the risk of being perceived as continuing to be late with respect to such material.

2. One signed original and three conformed copies of this Form and amendments thereto must be completed and filed with the Securities and Exchange Commission, Washington, D.C. 20549, in accordance with Rule 0-3 of the General Rules and Regulations under the Act. The information contained in or filed with the Form will be made a matter of public record in the Commission files.

3. A manually signed copy of the Form and amendments thereto shall be filed with each national securities exchange on which any class of securities of the registrant is registered.

4. Amendments to the notifications must also be filed on Form 12b-25 but need not restate information that has been correctly furnished. The Form shall be clearly identified as an amended notification.

5. These general instructions are not to be filed with the application. Please detach before mailing the Form.

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Secs. 13, 15(d), 23(a), 48 Stat. 894, 895, 901; sec. 203(a), 49 Stat. 704; secs. 3, 8, 49 Stat. 1377, 1379; Secs. 4, 6, 78 Stat. 569, 570-574; sec. 2, 82 Stat. 454; secs. 1, 2, 84 Stat. 1497; secs. 10, 18, 89 Stat. 119, 155; sec. 308(b), 90 Stat. 57; secs. 202, 203, 204, 91 Stat. 1494, 1498, 1499, 1500; 15 U.S.C. 78m, 78o(d), 78w(a)

The Commission hereby proposes for comment the proposed amendment of Rule 12b-25 and its related form and proposed Rule 12b-26. Rule 12b-26 and the amendments of Rule 12b-25 are proposed pursuant to Sections 13, 15(d) and 23(a) of the Exchange Act.

By the Commission.

²Section 2 of the Securities Exchange Act of 1934, 15 U.S.C. 78b.

³Report of the Advisory Committee on Corporate Disclosure, Chapter XIV, Page 427 (1977).

⁴E.g., Forms 8-K, 10-Q, 10-K, and 13F and Schedules 13D and 13G.

⁵However, as stated in note 1 supra the retention of an extension procedure for certain financial statements required by Form 8-K is being proposed.

⁶However, it should be noted that the proposed amended rule is not meant to create an affirmative obligation to search the Commissions files to ascertain whether a notification was filed.