- IT Meets SEC
- April 30, 2003 | Author: Paul H. Arne
- Law Firm: Morris, Manning & Martin, LLP - Atlanta Office
Most information technology professionals have never had the pleasure of working on disclosures required by the Securities and Exchange Commission (SEC). Thanks to the Year 2000 Problem, that may change. And soon.
Normally, the SEC requires public companies to report financial performance on a quarterly and annual basis. The objective of this reporting is to make reliable information available so that the investing public can make informed decisions whether to buy, hold or sell stock. Certain events, such as going public or a merger, also require disclosures to the SEC.
While much of this information is financial in nature, a company must also disclose additional information to keep the historical financial disclosures from being misleading about future performance. For example, a probable future event that would affect financial performance should be disclosed. The Year 2000 Problem could be such a potential future event. To date, some companies have started to make disclosures of this problem, but most have not.
New SEC Guidelines
In January, the SEC issued new guidelines about Year 2000 disclosures. In part, these guidelines state:
- If a company has not made an assessment of its Year 2000 issues or has not determined whether it has Year 2000 issues, that fact must be disclosed.
- A company's Year 2000 Problem must be disclosed as if tomorrow was the change of century. In other words, no planned remediation efforts or contingency plans can be used to temper the company's analysis of what might happen.
- A company must disclose its plan to address the Year 2000 Problem, including general business issues, operational issues, and supplier and customer relationships.
New Role of IT
Where do you think a company will get the information that it must disclose? Obviously, senior IT management and Year 2000 project managers will need to be involved in these disclosures. For probably the first time, IT professionals will be involved in securities disclosures.
Since you may be called on to provide this information, it is very important to remember that your company may be sued by its shareholders or the SEC if the information you provide is incorrect or incomplete. At the same time, public disclosures of your company's Year 2000 Problem runs the risk of causing a sell-off of your company's stock. Faced with these options, we suggest that you do the following:
- Don't overstate the situation
- Don't understate the situation
- Be specific and accurate with what you tell senior management
The Year 2000 Problem is full of surprises. As an IT professional, you probably weren't told that securities disclosures was a part of your job description. Y2K strikes again.