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SEC testimony is an eye-opener for
investors Year 2000: Trouble ahead, say some By Thom Calandra, CBS MarketWatch
SAN FRANCISCO (CBS.MW) -- The Securities & Exchange Commission is shedding light on publicly held companies and their frantic race to conquer Year 2000 testing hurdles. The problem is that the SEC's analysis of the Year 2000 millennium bug has received scant attention. Instead, this week and last, the financial press has looked at Wall Street's early tests, led by the Securities Industry Association in New York, and Year 2000 issues that could dog the U.S. Army. Hancock Rothert & Bunshoft, a California law firm, says one analysis by the SEC should send shivers down the spines of stock market investors. "The Year 2000 remediation effort is lagging," says Peter J. Whalen, a partner at the law firm, whose Web site, http://www.2000law.com, is one of the better repositories of data and news on the looming computer bug that could wreak havoc with corporate networks on Jan. 1, 2000. Fellow partner Vito C. Peraino points out that SEC testimony by commissioner Laura Unger in June was an eye-opener. "An astonishing 73 percent of companies have not begun their code remediation," says Peraino. The last time we touched base with Peraino and Whalen, they were suggesting that if anything could puncture the high-flying U.S. stock market, it was the prospect of a worldwide recession, sparked by a pesky Year 2000 bug. To be sure, lawyers have a vested interest in whipping up the Year 2000 waters. Their livelihood depends on the flood of millennium lawsuits that are expected from shareholders and consumers. Peraino points out that the SEC's most recent analysis is based only on disclosures of stock-market-traded companies that mentioned the Year 2000 dilemma in their reports. "An amazing 30 percent of publicly traded companies' annual reports did not mention the phrase Year 2000," he said. The reports in question were those filed after January 1998. The SEC reviewed disclosure statements of 1,023 publicly traded companies. There are more than 9,000 publicly traded companies in U.S. stock markets. Unger, in her testimony before Congress, said SEC Commissioner Arthur Levitt this year will mail a letter to chief executive officers, reminding them of the significance of Year 2000 issues. Peraino, in the best tradition of his legal profession, sees darkness ahead. "It is possible that a significant number of companies chose not to disclose because their Year 2000 efforts are at ground zero," he says. Potential legal fallout: mutual fund managers might be called to task for holding stocks of companies that decline to disclose their efforts to revise computer code. Unger's testimony on Year 2000 issues can be found on the Web at http://www.sec.gov/news/home2000.htm. For those with a brighter view of corporate America's handling of the millennium bug, Unger's report conceded the number of companies "mentioning Year 2000 issues has increased dramatically." It's just that most companies are not following the SEC's latest legal guidance on Year 2000 disclosure to shareholders and customers. Stay tuned, like for another 17 months. TV show: See Thom
Calandra on KPIX-TV Channel 5 each day from 5:30 a.m. to
7:45 a.m. PT in San Francisco.Your eye on the market. Please scan our CBS
stock lists, including
our Channel 5 MarketWatch
stock list, which is crammed with Silicon Valley companies.
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