Disclosure Requirements for the New York Stock Exchange

by Erika Johansen

Companies that wish to trade on the New York Stock Exchange must comply with all disclosure requirements of the Securities and Exchange Commission. Most of these requirements come from two pieces of legislation: the Securities Act of 1933 and Securities Exchange Act of 1934. Those with questions about specific disclosure requirements should seek legal counsel.

SEC Registration

The Securities Act demands that any company whose stocks are traded on a national stock exchange (which includes the NYSE) must register with the Securities and Exchange Commission. The SEC registration document is Form S-1 for most companies, and Form S-3 for securities issuers who have already been reporting for a year and own over $75 million in assets. For small businesses (those with annual revenues of less than $25 million), the registration documents are Forms SB-1 and SB-2. Typically, the company must also distribute the first part of the registration statement to investors in the form of a prospectus.

Disclosure of Finances

Even after registering with the SEC, a company must still make routine disclosure of its current financial condition. The company must submit two forms regularly to the SEC. Form 10-Q is required every financial quarter; it must contain financials (although these financials need not have been audited) that comply with accepted accounting principles. Form 10-K is required annually, and contains full financial disclosure; the information in the 10-K must be audited and include mandatory disclosure of any information that's reasonably expected to affect the firm's finances. A third form, 8-K, is not required regularly, but must be submitted within four days of any event that would be "material" to the company's finances. Events that trigger an 8-K submission might include, for instance, changes in management, financial restatements or a change in the company's accountants.

SOX Certification

The Sarbanes-Oxley Act of 2002 ("SOX") created more rigorous reporting and disclosure requirements. SOX requires that companies submit an 8-K immediately, as soon as information is available. SOX also requires that all disclosure documents submitted to the SEC be certified by either the company's Chief Executive Officer (CEO) or Chief Financial Officer (CFO). When the CEO or CFO sign the documents, they effectively make themselves responsible for the accuracy of the documents.

Disclosure Violations

Section 12 of the Securities Act and Section 10 of the Securities Exchange Act stipulate various penalties for violations of disclosure requirements. The SEC has the power to embargo, or prevent trading on any exchange, in any stock that fails to register. Inaccuracies in disclosure can carry more serious penalties: anything from civil liability to criminal penalties if a court finds actual fraud or deliberate misrepresentation.


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