Is It OK to Be Late? Who Is Asking for 10-Q Filing Delays
This is a guest post from Nick Mazing, Director of Research for Sentieo.
As COVID-19 took off in the U.S. in March, the Securities and Exchange Commission (SEC) proactively provided regulatory relief, opening a path for public companies to submit some filings late.
Now it's time to see what happened.
Given the negative perceptions that can be associated with filing delays, I was curious to see how widely this new option would be used—and what we could learn across public companies after SEC Release No. 34-88465.
Using the AI-driven Document Search function in Sentieo (a Workiva partner) in mid-June, we searched filings to find out how many directly referred to the SEC relief. We also looked at breakdowns by document types, sectors, and market capitalization.
What we uncovered in SEC filings
The SEC had said companies seeking relief due to COVID-19 should mention its order in doing so. So, I ran a search for "34-88465," the SEC Release No. and found around 1,200 individual filings referencing the number. Of those, more than 700 were 8-Ks, and about 300 were 10-Qs, 10-Ks, or variations of these two forms, like 10-Q/As.
The sector with the most filings referencing the release number was Consumer Discretionary. Within Consumer Discretionary, Restaurants were the top “mentioners” of the release number, followed by the Internet and Direct Marketing segment, and Apparel Retail.
Companies citing the relief definitely skewed toward smaller market capitalization, with delays clustered in filers with market capitalization below $1 billion. We saw only 16 documents in companies with market cap in the $5 billion to $10 billion range, 10 in the $10 billion to $50 billion range, one in the $50 billion to $100 billion range, and zero above a $100 billion market cap.
While companies started adding pandemic-related risk factors in their filings in February and March, we saw companies expanding them in the filings citing SEC Release No. 34-88465.
Why companies sought relief
Among larger filers taking advantage of the relief, we saw one specific challenging reporting situation: a merger that had just closed, compounded by stay-at-home orders. However, quite often, we saw that simply access to offices was cited as the main problem causing the delays.
One company wrote that it needed more time to process financial information and prepare disclosures after various government orders led to office closures, staffing limitations, and a shift to remote work.
Regardless, hundreds of companies are still filing on time, even under trying circumstances. Some SEC reporting teams have been able to use cloud solutions to produce 10-Qs, add XBRL® tags, and file from home.
For SEC reporting directors, this could be just the proof you need to show teammates in investor relations, internal reporting, and the executive team how valuable it can be to use a cloud platform to collect and update data, collaborate, and get signoffs and approvals, even when no one can get to the office.
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