The top brass of hundreds of America's biggest companies swore by their financial results on Wednesday under a government order meant to reassure investors, but a handful of mid-sized companies, many in the troubled energy trading sector, came up short.
As Treasury Secretary Paul O'Neill called business honesty "the new patriotism," personal oaths from chief executives and chief financial officers flooded the US Securities and Exchange Commission, along with a few results restatements.
As the filings poured in, stocks soared, pushing the Standard & Poor's 500 index up 4 percent to its highest level in a month as reassurances of the accuracy of past results eased investor fears of corporate skulduggery.
The Dow Jones industrial average closed up 260 points, or 3 percent, at 8,743.31 points.
Of the 942 companies covered by the SEC's unprecedented, one-time order requiring CEO and CFO certifications of results, 695 companies had to comply by the close of business on Wednesday. Another 247 companies will file later.
Ninety minutes after the SEC's 5:30pm EDT cut-off, officers of 629 of the 695 companies due to certify on Wednesday had done so, according to a Reuters analysis of SEC Web site data, the online Edgar-Online financial filing service, a private investor data service and company reports.
Several companies' filing status remained unclear. Although markets were expected to punish companies not in compliance on Thursday, investors were seen taking comfort from Wednesday's high compliance rate, especially among larger corporations.
"It soothes investors's fears a little bit -- until the next debacle comes," said Keith Janecek, vice president of trading at Legg Mason Wood Walker.
The SEC was sending investors anxious to check on companies whose stock they own to Edgar (http://www.edgar-online.com).
President George W. Bush, speaking in Milwaukee, noted the SEC deadline and said: "By far the vast majority of those who run corporate America are good, honorable people ... We're not going to let the few ruin the reputations of the many."
Imposed on June 27 amid a wave of multibillion-dollar accounting scandals ranging from Enron Corp to WorldCom Inc, the commission's order was followed a month later by a raft of business law reforms from Congress.
The massive reform package -- drafted by Senator Paul Sarbanes and Representative Michael Oxley -- will make CEO and CFO certifications routine for all 14,000 companies policed by the SEC, not just the 942 large-cap firms targeted by the one-time order. The SEC on Wednesday cut the number of target companies to 942 from 947 to reflect mergers and other changes.
The Sarbanes-Oxley bill, signed into law by Bush on July 30, contains two certification sections. Section 906 took effect immediately; Section 302 takes effect later this month.
But the two are closely linked and lawyers were struggling to advise clients on how to handle them. To be on the safe side, some firms were advising clients to start certifying all results on Wednesday, although penalties for failing to comply immediately with Sarbanes-Oxley were not entirely clear.
"We're definitely in a transition stage," said David Martin, head of the securities practice at law firm Covington & Burling and former SEC corporation finance division director. "Until the SEC and (Department of Justice) have said more about Sarbanes-Oxley 906, people are flying blind on this."
The troubled energy trading sector had difficulty dealing with the SEC certification order and Sarbanes-Oxley.
Officers of Dynegy Inc told the SEC they could not certify the energy trader's past results, but did certify their most recent quarterly results under the new law.
Conversely, energy company Nicor Inc said officers could not certify interim results under Sarbanes-Oxley, but could certify past results under the SEC order.
Enron did certify its results for the period since Dec. 2, 2001.
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