Comment letters: too late to be much use at Shufflemaster…
Back in May 2005, the SEC began releasing comment letters on its site. But three years later, the system still doesn’t quite work because the only time they become available on the SEC site is after whatever issue the SEC is concerned about has already been resolved.
I thought about this while reading the revised 10K that Shufflemaster (SHFL) filed late yesterday. In the explanatory note, the company notes that it is revising a number of its footnotes in response to an SEC comment letter on the 10K, as well as on the company’s first quarter Q and proxy statements.
But here’s the problem. The original 10K was filed on Jan. 18. The 10Q was filed on Jan. 31 and the proxy on Feb. 15. While it’s not clear when the company received the comment letters, Shufflemaster stock has fallen steadily since the beginning of the year — a whopping 63% year-to-date.
And the only way investors know about these comment letters is because Shufflemaster chose to disclose them. They’re not yet available on the SEC site, which means it’s still considered to be an open issue. And even my friends at Disclosure Insight, which made a name for itself by finding these letters in advance via Freedom of Information Act requests, don’t have any details on Shufflemaster’s letters.
So while having access to the comment letters after the fact is better than not having access at all, it still seems like too little too late to be of much help. I’m betting there’s some Shufflemaster investors who would agree with me on this one.
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July 10th, 2008 at 11:00 am
It doesn’t mean that it’s still an open issue — the SEC releases correspondence approximately 45 days after all comments are cleared (there may be several go arounds). In defense of this policy, often the SEC’s comments are off point (for example, the examiner is asking a question to see if there is more there, or may simply have misunderstood certain disclosure), or the issuer is able to convince the SEC to change its position. If that letter sat out there for 2 weeks while the issuer crafted its response, the market may actually be more confused by the situation. I think the delay is appropriate. Perhaps there is no reason to wait 45 days, but I think the correspondence should all be released after the comment process is resolved.
July 10th, 2008 at 11:10 am
Thanks, Alex, for your perspective. I guess the thing that’s confusing to me (and I’m guessing lots of other people too) is how on the SEC’s site, the letters (and responses) all get posted at the same time, even though they appear on the site chronologically. And, in this particular case, there’s no evidence of the comment letters on the SEC site so the only way we know about them is because Shufflemaster chose to disclose them in the amended filings.
I agree that you don’t necessarily want open comment letters floating around since it could be much ado about nothing, but there needs to be a better system in place.
July 11th, 2008 at 9:07 am
Here is a link to the SEC’s policy on releasing comment letters: http://www.sec.gov/answers/edgarletters.htm
Here’s the initial press release, which discusses the 45 day policy: http://www.sec.gov/news/press/2004-89.htm
I agree that it is confusing — you could look for filings one day, and find nothing, and then the next day you go back and there are comment letters from 2-3 months earlier. If a company has a number of filings in the interim, it might not even be on the first page of filings. I imagine you could set up an RSS feed for all correspondence filings (the SEC now allows RSS feeds), but I don’t know if that would overwhelm you. I assume you could set up the RSS feed for any individual company.
Interestingly, many companies don’t include the correspondence on their website listings of filings — under my reading, they are not required to do so (it’s not a “filing”). So, investors may not see the letters if they don’t go to the SEC’s EDGAR site (and then look back 2 months).
Keep up the excellent blogging — you have found an excellent niche.