New Heads Up discusses SEC action on window dressing

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26 Sep 2010

On September 17, 2010, the SEC unanimously approved a proposed rule, Short-Term Borrowings Disclosure, to address temporary declines in short-term borrowings – usually around a period-end – commonly referred to as "window dressing." In part, the measures in the proposed rule result from (1) liquidity issues caused by certain transactions involving repurchase agreements known as "Repo 105" transactions; (2) SEC inquiries earlier this year of registrants to understand the types, extent of use, and accounting for repurchase agreements and other similar transactions; and (3) the SEC's conclusion that there was insufficient disclosure related to these types of transactions and other similar arrangements.

The proposed rule would require registrants to disclose more information about their short-term borrowing arrangements and therefore help investors better understand a registrant's financings during a period as well as at period-end. The enhanced disclosures aim to improve transparency and give investors the information they need to understand how registrants finance their operations.

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