New Year’s Resolution for Public Companies: File 10-Qs and 10-Ks on Time
Stock prices drop significantly when companies fail to file Forms 10-Q and 10-K on a timely basis, even when management pledges to meet the extended deadlines afforded by Rule 12b-25, according to a recent study by researchers at New York University and the University of California at Berkeley.
Pursuant to Rule 12b-25, if an SEC registrant cannot file a periodic report (such as a Form 10-Q or 10-K) on time, it must file a Form 12b-25 ”Notification of Late Filing” no later than one business day after the due date for such report, disclosing the inability to file on time and the reason for the delay and representing that such reason could not be eliminated “without unreasonable effort or expense.” Filing a Form 12b-25 automatically extends the applicable filing deadline to the fifth calendar day following the due date for a Form 10-Q or the 15th calendar day following the due date for a Form 10-K.
Rule 12b-25 provides that a periodic report will be deemed to be filed on its due date, thereby avoiding potentially costly regulatory penalties and debt covenant violations, if a Form 12b-25 is filed on a timely basis and the periodic report is actually filed by the extended deadline. However, the key takeaway from the study is that Rule 12b-25 is far from a magic cure-all for companies that may be struggling to meet their SEC filing deadlines.