Report Suggests SEC Comment Letter Disclosure Period to be Shortened
A new study by the American Accounting Association (“AAA”) is reporting complications with the current Securities and Exchange Commission (“SEC”) policy of waiting up to 20 business days of making comment letters public based on registrant filing reviews. Per the AAA’s report, it was determined insider sales are 70 percent above the normal rate five business days before revenue recognition-related comment letters by the SEC are publicly disclosed. This is notable because revenue recognition is one of the most critical accounting issues discussed in comment letters and are likely to concern investors.
As noted by the report, the SEC’s current policy of delaying comment letter disclosures reflects what many in the investment industry believe is a practice benefitting corporate insiders. In response, the AAA suggests the SEC to trim the 20-day timeframe, increase the access of comment letters online, and advise corporate boards to carry out insider-sale blackout periods during the review process.
For the news release on the report, visit the AAA website.