Under fire from critics claiming it has dragged its feet on the Year 2000 issue, the Securities and Exchange Commission has intensified its efforts to prod public companies into solving computer glitches expected to arise at the turn of the century, in the process adopting some of the ideas of those same faultfinders.
SEC officials said yesterday they have created a special page on their Website which is devoted to help companies cope with the Year 2000 bug and lists all of the agency's actions on the issue over the past year. The site launch comes on the heels of the SEC's release of the revised formal guidelines spelling out how public companies, investment firms, and others should disclose their efforts and progress in improving their computer systems.
The Year 2000 problem, or the millennium bug, boils down to this: Many computer systems use software which tracks dates with only the last two numbers of the year, such as 97, instead of 1997. When 00 comes up for the year 2000, many computers will view it as 1900 instead, leading to potential failures.
Up until now politicians and financial analysts have criticized the SEC for not doing enough to make public companies give full and accurate disclosure of the progress of their efforts to remedy the problem, the cost of those efforts, and problems and uncertainties associated with the Year 2000 problem.
The latest SEC revisions of the formal guidelines gained praise from one of the SEC's most outspoken critics on the issue, Sen. Bob Bennett (R-Utah). Last year Bennett introduced legislation to require companies to disclose specific information about the Year 2000 readiness of their computer systems and their ability to manage the business risks associated with possible failures after the turn of the century.
According to Bennett, the SEC issued the new revisions to avoid legislative mandate, and the guidelines set forth by the agency mirror his proposed bill.
"The SEC chose to incorporate key components of my legislation in their revised bulletin," Bennett said in a statement responding to the SEC's action. "The information I will receive from reviewing the results of this new bulletin will be very valuable in determining how to proceed with my own legislation."
Bennett, who chairs the Senate Banking Subcommittee on Financial Services and Technology, filed the legislation in November calling for companies to disclose the following information:
Although the SEC revisions don't mirror the legislation word for word, the intent of Bennett's bill is there, the senator said. "So this problem can be dealt with appropriately, I'm personally gratified to see a more public recognition of this problem. As I said upon introduction of my bill, I'm more concerned that we bring about this important change than how we do it."
Bennett wasn't the only one praising the latest SEC action. Chief economist for investment firm Deutsche Morgan Grenfell Dr. Edward Yardeni said he's pleased with the revision. Yardenni spoke at one of Bennett's subcommittee hearings on the Year 2000 company disclosure issue.
"[The SEC] has begun to concede that this issue is different than any other disclosure issue out there. It also comes close to what we called for at those hearings. Mostly it puts the companies on notice that the SEC takes this very seriously. It also takes some of the vagueness out of what the previous guidelines had," Yardeni said.
Yardeni said now that the SEC is requiring more disclosure he is interested to see if there is any "scary stuff the companies have been sitting on." If there is bad news, the disclosures will bring it out sooner rather than later. "Investors in these companies need to know that." Now he expects it to become a greater issue on the stock market than it was before.
Though happy with the SEC actions, Bennett is still pushing his legislation through congress. He also has urged President Clinton to create an office within the Executive Office of the President to address the Year 2000 computer problem.
In related news, the Office of Management and Budget in March is expected to release its fourth report on the status of the government's Year 2000 remediation efforts.
Reuters contributed to this report.