SEC Staff Flexible on Slimmer Filings in Acquisitions, Listings

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By Steve Burkholder

Companies shouldn’t hesitate to ask securities regulators whether they can file less than a full set of past financial statements as they try to list their stocks or dispose of a product line, an SEC staff accountant signaled.

Mark Kronforst, chief accountant of the Securities and Exchange Commission’s Division of Corporation Finance, told a conference audience June 8 about the new flexible attitude—rare in commission guidance, he suggested—regarding a 1933 Securities Act rule governing the form and content of financial statements.

Rule 3-13 of Regulation S-X allows for the possibility of a waiver from having to file certain financial statements under circumstances that won’t harm investors and still convey useful information.

The unblessed exclusion of the information contained in a full, three-year set of audited financial statements can sometimes mean the difference between a deal and no deal—and has been known to discourage prospective suitors in acquisitions, one investor advocate and former regulator told Bloomberg BNA June 9.

The omission of such information can carry a bad connotation, said the investor advocate, who requested anonymity because he isn’t familiar with the latest apparent development in SEC staff thinking on the financial reporting rule.

“I just want to make sure that you understand that these rules are in place,” Kronforst said of the waiver-granting authority granted to the SEC staff by the commission.

“Please come talk to us,” said Kronforst, who spoke at a University of Southern California accounting conference.

“Historically, we’ve granted waivers in the vast majority of the cases,” said the SEC staff accountant. “I would say, though, that the requests seem to have stagnated in terms of variety and volume, and it’s unclear to us why that is.”

SEC Staff Attitude Praised

The understated message by the SEC staff on the financial reporting flexibility was welcomed by a prominent securities lawyer who once served as director of the Division of Corporation Finance. “It’s clear the message here is don’t be afraid to ask,” John White, a partner with Cravath, Swaine & Moore LLP, in Washington, said during a panel discussion at the USC event.

And a Big Four firm partner attested to the receptiveness of the SEC staff on the topic.

“The staff is very open to have this dialogue,” said John May, a partner for SEC services at PricewaterhouseCoopers LLP.

To contact the reporter on this story: Steve Burkholder, in Los Angeles, at

To contact the editor responsible for this story: Phyllis Diamond at

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