WASHINGTON -- How ready are America's companies for the year 2000 and how much are they spending to upgrade their computer systems?
It's very hard to tell, a top securities regulator says.
A check of financial reports that publicly traded companies must submit to the Securities and Exchange Commission shows that "many companies are still not complying" with Year 2000 disclosure requirements, SEC Chief Accountant Lynn Turner said Tuesday.
He said more than half the companies in an unspecified sample failed to disclose how much it is costing them to get their computer systems ready for the millennial change, while close to half didn't describe their contingency plans in case the systems fail.
The market watchdog agency is alerting investors to examine the Year 2000 disclosures of companies that interest them, Turner said at a conference organized by the District of Columbia Bar association.
If he were the chief financial officer of a corporation that wasn't adequately prepared and things went wrong after Jan. 1, Turner quipped, "I'd be hung out there like a cold piece of meat in storage."
Since last summer, the SEC has been nudging companies to provide more details so investors can be better informed. The agency issued guidelines on how publicly traded corporations as well as mutual fund companies and brokerage firms should make the required disclosures of Year 2000 costs and risks.
Known as Y2K, the Year 2000 problem reflects programming in many older computers that recognizes just the last two digits of a year in reading a date. Machines that haven't been upgraded are likely to interpret Jan. 1, 2000, as Jan. 1, 1900. That could cause massive computer failures, lost data, or broken connections with clients.
As all sectors of government and the economy come to grips with the Year 2000 problem, some observers have warned that costs to companies of getting ready could punch a hole in their profits and hurt stock prices on Wall Street.
SEC Chairman Arthur Levitt has warned that if investors don't have sufficient information regarding a company's readiness, confidence could be seriously undermined and "panic and overreaction" could ripple through the economy.
SEC officials also have said they will take enforcement action against companies that make materially false and misleading statements about Year 2000 readiness.
Asked about possible action against companies that fail to adequately disclose their readiness, Turner said he hoped that could be largely avoided by having the SEC ask the companies to voluntarily revise their reports with fuller information.
In recent months the SEC:
-- Charged 37 relatively small brokerage firms with failing to fully disclose their Year 2000 computer readiness, in the federal government's first major enforcement action related to the problem.
Many of the firms have agreed to settle the charges by promising to refrain from such violations in the future, being censured and paying civil fines ranging from $5,000 to $25,000, depending on their size. In settling the charges, the firms neither admitted nor denied wrongdoing.
-- Accused nine stock-transfer agents of failing to adequately disclose their computer readiness for the millennial date change. Five of the agent companies settled the charges and four contested them.
Transfer agents, which sometimes are banks or trust companies, are responsible for keeping records of shareholders of corporations and for issuing or canceling stock certificates when shares are bought and sold.
The SEC said failure of transfer agents to anticipate and fix Year 2000 computer problems could seriously disrupt corporations' dividend payments and other transactions with their shareholders.