Capital Markets

Tale of Two Delinquent Filers

NYSE rule gets nod from the SEC giving the Big Board more discretion over delisting procedures.
Stephen TaubFebruary 2, 2006

Two Big Board-listed companies, that are a year late in filing their 2004 financial results, recently made significant announcements that underscore a new policy approved by the Securities and Exchange Commission.

Earlier this week, BearingPoint Inc., formerly known as KPMG Consulting, finally filed its 2004 financial statements and Form 10-K with the SEC. “We are pleased to close the books on 2004 following the painstaking review of almost five years of financial results,” said Harry You, BearingPoint’s chief executive officer.

The filing enables the consultancy to avert a possible delisting by the New York Stock Exchange. You also said that the consultancy will soon file its amended 2004 quarterly reports and 2005 financial statements.

The NYSE took a different tack with Fannie Mae, however. Officials at the NYSE decided not to delist the nation’s largest mortgage company, even though the lender has not yet filed its 2004 annual report, which was due March 16, 2005.

Fannie Mae officials acknowledged that NYSE’s listing standards state that if a company has not filed its annual report within a year of the report’s due date, the rules generally require the start of suspension and delisting procedures. However, those rules just got a little more flexible.

The SEC recently approved a NYSE proposal that gives the exchange discretion in initiating suspension and delisting proceedings in certain circumstances. The amended standards require the NYSE to reevaluate its decision to continue listing such companies once every three months and, if the NYSE affirms its decision, to allow trading to continue. The NYSE also must advise the SEC of such reaffirmation, as well as publish the reaffirmation on the NYSE’s website, Fannie explained in its filing.

In determining whether to allow trading to continue, the NYSE will consider, among other things, Fannie Mae’s financial health and compliance with the NYSE’s qualitative and quantitative listing standards, said the company’s filing. The NYSE will also focus on whether there is a reasonable expectation that the company will be able to resume timely filings in the future.

In addition, the Fannie Mae listing is subject to quarterly reviews by the NYSE, as well as ongoing monitoring of the company’s progress related to restating its financial results and filing its quarterly reports with the SEC.

“If the NYSE does not affirm its decision to allow trading to continue in any quarterly review, Fannie Mae’s listed securities would become subject to NYSE trading suspension and delisting proceedings,” the lender conceded in the filing. According to the documents, the mortgage company is engaged in regular discussions with the NYSE staff regarding the status of the restatement and continued listing through completion of the restatement.