WASHINGTON — Federal regulators voted Friday to propose new rules that could make it harder for public companies to disguise their level of debt.
The Securities and Exchange Commission is proposing expanded disclosure requirements in response to companies that temporarily trim their debt at the end of quarters to make their financial statements appear stronger. The practice, especially used by big banks and sometimes called “window dressing,” is legal, but regulators say it can give investors a distorted picture of a bank’s debt and level of risk.
The proposal would require all public companies to report detailed information on their short-term borrowing every quarter. For financial companies, there would be a stricter layer of requirements: The average interest rate paid on the loans would have to be calculated on a daily basis and reported. Financial firms currently are required to disclose their short-term borrowing only once a year.
The SEC commissioners voted 5-0 to propose the new rules and open them to public comment for 60 days. The Associated Press
