Legal Definitions - periodic reports

Periodic reports are regular financial and operational updates that certain companies are legally required to submit to the Securities and Exchange Commission (SEC). The SEC is a U.S. government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. These reports ensure that investors and the public have access to timely and important information about a company's performance, financial health, and significant events.

Companies become subject to these reporting requirements primarily under three circumstances:

• When their shares are listed and traded on a national stock exchange, like the New York Stock Exchange or Nasdaq.
• When they reach a certain size, typically having a large number of shareholders (more than 2,000) and a significant amount of assets (over $10 million).
• When they have offered their securities for sale to the public for the first time through an initial public offering (IPO).

Once a company is subject to these rules, it must file various types of reports, including:

• An annual report (Form 10-K), providing a comprehensive overview of the company's business and financial condition for the entire year.
• Quarterly reports (Form 10-Q), offering a less detailed but still significant update on the company's financial performance and operations for each quarter.
• Current reports (Form 8-K), filed whenever a major event occurs that investors should know about immediately, such as a change in leadership, a significant acquisition, or bankruptcy.

Examples of Periodic Reports in Action:

• Example 1: A Company's Initial Public Offering (IPO)

  Imagine "Innovate Robotics Inc.," a tech startup, successfully conducts an Initial Public Offering (IPO) to raise capital for expansion. By selling its shares to the public for the first time, Innovate Robotics Inc. becomes a public company. This action legally obligates it to file periodic reports with the SEC. This ensures that all new and existing investors receive regular updates on its financial performance (via 10-K and 10-Q) and any major business developments (via 8-K), allowing them to make informed investment decisions.

• Example 2: A Long-Established Publicly Traded Company

  "Global Logistics Corp." has been a publicly traded company for decades, with its stock actively bought and sold on the New York Stock Exchange (NYSE). Because Global Logistics Corp.'s shares are traded on a national securities exchange, it is continuously required to file periodic reports. This ongoing obligation provides transparency to the millions of investors who buy and sell its stock daily, ensuring they have access to current information about the company's operations, risks, and financial results.

• Example 3: A Large Private Company Reaching Reporting Thresholds

  "Family Foods Co." is a large, privately held food distributor that has grown significantly over the years. It now has over 2,500 employees who own company stock through an employee stock ownership plan, and its total assets exceed $50 million. Even though Family Foods Co. never conducted a traditional IPO or listed on an exchange, its substantial number of shareholders and large asset base trigger the SEC's periodic reporting requirements. This rule ensures that companies with a broad base of investors, even if not publicly traded on an exchange, provide similar levels of transparency as publicly listed companies, protecting the interests of its many employee-shareholders.