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Although the perils involved in real-time financial reporting stack up as formidable, few companies are up to tackling them, compliance experts say.
Even as it spawns new risks for their corporations, the pressures imposed by real-time reporting under the dictates of Section 409 of the Sarbanes-Oxley Act can add to the legal liabilities of finance chiefs and their bosses.
Under that section, companies must disclose the facts about financially significant events "on a rapid and current basis." At the same time, as part of the Section 302 certification of financials by CFOs and CEOs, the executives must attest that they've installed adequate disclosure controls. But if the company files an 8-K late, "is that a sign that their disclosure controls are ineffective?" asks Spirgel. Tardiness might make investors question a company's competence in getting material information up to the C- suite swiftly enough he explains — and lawsuits against officers and directors as well as the company itself might follow. (See "The Reality of Real-Time Reporting" for full coverage of the effects of the new Sarbox 409 rules. The rules go into effect August 23.)
Yet while the risks of Section 409 could be formidable, few companies are up to...