US economy

SEC urges thorough coronavirus disclosures by US companies


The US Securities and Exchange Commission has urged corporate America to be as fulsome as possible in disclosing the impact of the coronavirus during earnings season, not just for the good of investors, but for the country as a whole.

In a statement on Wednesday, Jay Clayton, the SEC chairman, and Bill Hinman, the securities regulator’s head of corporation finance, told companies information about their resource needs and future outlook was crucial to the fight against coronavirus.

“Broad and extensive co-ordination across workers, firms, investors and governmental officials will be critical to successfully emerge from this fight. The exchange of forward-looking information is essential to that co-ordination,” Mr Clayton and Mr Hinman said.

The officials suggested detailed disclosures could help Americans stay in, or return, to work more quickly.

“If the owner of an industrial laundry business becomes comfortable that the hotel industry is soon to pursue a credible plan for increasing activity, the laundry business may be less likely to furlough (or may plan to rehire) employees,” they said as an example.

The call came as US companies prepared to disclose quarterly earnings following the dramatic economic impact of the coronavirus and the social distancing measures governments have imposed to combat the pandemic.

Mr Clayton and Mr Hinman said that information about the preceding quarter was now less important than detailed information about what businesses are planning and expecting in the coming months, even if those predictions were necessarily uncertain.

They pointed to information about “current liquidity positions and expected financial resource needs”, as well as the effect of corporate actions to protect worker and customer health, as key areas for disclosure.

In addition, they asked companies to make disclosures about “the nature, amounts and effects” of any government stimulus money they have received or may receive.

“This quarter, earnings statements and calls will not be routine. In many cases, historical information may be substantially less relevant,” they said, urging companies to disclose as much as possible about potential future performance and to avoid “generic, or boilerplate, disclosures”.

Companies that did heed that call would not be penalised by the SEC if their predictions proved inaccurate, they added.

“Given the uncertainty in our current business environment, we would not expect to second guess good faith attempts to provide investors and other market participants appropriately framed forward-looking information,” they said.



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