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How Busyness Influences SEC Compliance Activities: Evidence from the Filing Review Process and Comment Letters

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  • Katherine A. Gunny
  • Judith M. Hermis

Abstract

The SEC reviews firm filings and issues comment letters on those filings. These comment letters play an important role in the assessment of firm value. These activities are seasonally compressed because over 70 percent of registrants have a December fiscal year‐end. Research in other settings finds that busyness leads to negative outcomes. We examine how busyness impacts the frequency, scope, and timeliness of comment letters. We find that the SEC issues fewer comment letters when busy, focuses its limited resources on the most severe cases of disclosure noncompliance, and extends the amount of time between receiving a firm's filing and issuing a comment letter. Despite this, we find no evidence that the SEC misses more serious compliance issues when busy. Our results have implications for policymakers responsible for allocating resources to the SEC. En quoi l'affairement influe sur les activités de la SEC visant le respect des obligations en matière de conformité : données tirées du processus d'examen des déclarations et des lettres de commentaires La SEC procède à l'examen des déclarations des sociétés et publie des lettres de commentaires sur ces déclarations. Ces lettres de commentaires jouent un rôle important dans l'estimation de la valeur d'une entreprise. L'intensité de ces activités de la SEC varie selon la saison, compte tenu du fait que l'exercice de plus de 70 pour cent des sociétés inscrites se termine en décembre. Des recherches menées dans d'autres contextes indiquent que l'affairement conduit à des résultats négatifs. Les auteures se demandent en quoi l'affairement influe sur la fréquence, la portée et la rapidité de publication des lettres de commentaires. Elles constatent que la SEC, lorsqu'elle se trouve en période d'effervescence, publie moins de lettres de commentaires, concentre les ressources limitées dont elle dispose sur les cas les plus graves de non‐conformité des déclarations et allonge le délai qui s'écoule entre la réception de la déclaration d'une société et la publication de la lettre de commentaires. En dépit de ces observations, les auteures ne relèvent aucune donnée qui démontrerait que la SEC omet des problèmes de conformité plus sérieux lorsqu'elle est affairée. Ces résultats intéresseront les responsables de l'élaboration des politiques chargés de l'affectation des ressources à la SEC.

Suggested Citation

  • Katherine A. Gunny & Judith M. Hermis, 2020. "How Busyness Influences SEC Compliance Activities: Evidence from the Filing Review Process and Comment Letters," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 7-32, March.
    • Handle: RePEc:wly:coacre:v:37:y:2020:i:1:p:7-32
    DOI: 10.1111/1911-3846.12507
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    References listed on IDEAS

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