UK and US regulators have moved swiftly to indicate they are considering what actions to take against companies which fail to hit reporting deadlines because of difficulties related to the spread of coronavirus
Sir Jon Thompson, chief executive of the Financial Reporting Council (FRC), said it was ‘plausible’ there could be requests for delays in filing company results because of illness or unavailability of audit staff.
Earlier this week Deloitte said it had a member of staff who had been exposed to coronavirus as a result of travel to Asia and who had become ill. The firm sent some staff home during a deep clean of part of its offices.
With many UK-listed companies heading towards year end, some of which will have international operations in countries including China, there is the possibility of disruption to audits.
Thompson said: ‘We have not had any requests yet to delay signing but it's a dynamic situation and we just need to keep it under review.
‘We have to be realistic because the companies listed on the London stock market are very widespread. If we get an application, we would deal with it in an appropriate way, and would be sympathetic to the situation.’
For its part, the Financial Conduct Authority (FCA) has put out a statement saying it is working closely with the financial services sector to ensure it is responding effectively to the Covid-19 outbreak. This is in conjunction with the Bank of England and the Treasury.
The FCA stated: ‘We expect all firms to have contingency plans in place to deal with major events. Alongside the Bank we are actively reviewing the contingency plans of a wide range of firms.
This includes assessments of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to serve and support their customers.
‘We expect firms to take all reasonable steps to meet their regulatory obligations. For example, we would expect firms to be able to enter orders and transactions promptly into the relevant systems, use recorded lines when trading and give staff access to the compliance support they need.
‘If firms are able to meet these standards and undertake these activities from backup sites or with staff working from home, we have no objection to this.
‘We are discussing with firms and trade associations any particular issues they may have and are working with them to resolve these.
‘We want to understand the pressures they are facing and will be continuing our active dialogue with firms, institutions and industry bodies in the coming days and weeks. We will keep our guidance under review as necessary.’
In the US, the Securities and Exchange Commission (SEC) said it is providing conditional regulatory relief for certain publicly traded company filing obligations under the federal securities laws, for those US companies located in the affected areas, as well as companies with operations in those regions.
This gives publicly traded companies with an additional 45 days to file certain disclosure reports that would otherwise have been due between 1 March and 30 April.
Among other conditions, companies must convey through a current report a summary of why the relief is needed in their particular circumstances.
The SEC says it may extend the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant.
Jay Clayton, SEC chairman, said: ‘The health and safety of all participants in our markets is of paramount importance.
‘While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within required timeframes.’
Clayton went on to remind companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments.
‘How companies plan and respond to the events as they unfold can be material to an investment decision, and I urge companies to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements,’ he said.
