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

Posted: 20 Jun 2019

See all articles by Katherine Gunny

Katherine Gunny

University of Colorado at Denver

Judith Hermis

Naval Postgraduate School

Multiple version iconThere are 2 versions of this paper

Date Written: February 19, 2019

Abstract

The U.S. Securities and Exchange Commission (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, the SEC 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.

Keywords: Comment Letters, SEC, compliance, filing review process, workload compression, busyness

Suggested Citation

Gunny, Katherine and Hermis, Judith, How Busyness Influences SEC Compliance Activities: Evidence From the Filing Review Process and Comment Letters (February 19, 2019). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3403747

Katherine Gunny (Contact Author)

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Judith Hermis

Naval Postgraduate School ( email )

555 Dyer Road
Monterey, CA 93943
United States

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