The Senate leader on the Year 2000 technology problem praised federal regulators who said late yesterday they are clamping down on public companies which fail to give a complete picture of their efforts to solve expected computer glitches.
Stricter guidelines by the Securities and Exchange Commission were unanimously approved yesterday in response to congressional criticism that many companies so far have provided inadequate information.
Sen. Bob Bennett (R-Utah), chairman of the Senate Committee on the Year 2000 Technology Problem, said he is encouraged by the action and warned legislative action may follow the rulings if companies don't fall in line.
"Hopefully, now that the SEC has ratcheted up the standards of scrutiny and accountability, U.S. corporations will decide to be forthcoming with their Y2K efforts," he added.
The new guidelines, which the SEC can legally enforce, specifically call for disclosure of the risks companies face and their contingency plans, while earlier guidelines did not do so.
"We believe that full and fair disclosure includes the company's state of readiness, the costs, and risks involved in adequately addressing this issue and the company's contingency plans to handle the likely worst-case scenarios," said SEC chairman Arthur Levitt.
The guidelines also now include municipal securities issues and provide examples of disclosure for different types of issuers, including general obligation, revenue, and conduit bonds.
A lot of the information disclosed by companies in the regulatory documents on preparation for 2000 tends to be forward-looking in nature.
Some companies have been reluctant to speculate in forward-looking statements that they are going to be compliant with Y2K requirements for fear they are going to be sued, the agency said.
"We have taken prudent steps to clarify that existing safe harbors for forward-looking statements apply so companies can honestly address uncertainties and future events to the Year 2000," Levitt added.
Safe harbors provide protection from private class-action lawsuits in federal court.
Earlier guidelines did not include the commission's interpretation of some of the circumstances under which the safe harbor statement required in corporate filings with the commission would be covered.
"I look forward to reviewing the disclosures made as a result of this new interpretive release, and I hope they will show that the release has in fact improved the quality of corporate disclosures," said Bennett. "If this does not end up to be the case, we will rely on the SEC to take enforcement action where necessary while we consider renewed legislative action to mandate compliance."
The problem, often called the millennium bug, is rooted in the way dates are recorded and computed. For the past several decades, systems have typically used two digits to represent the year, in order to conserve memory. With this two-digit format, however, the year 2000 is indistinguishable from 1900, or 2001 from 1901.
The interpretive release becomes effective immediately upon publication in the Federal Register, which is tentatively scheduled for next week.
Reuters contributed to this report.