# At The Money: Finding the Hidden Alpha in SEC filings

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 3 Dec 2025, 16 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/3e06264e-e3b6-4049-95ee-b3a8015848a3/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Is there Alpha to be found hidden in SEC filings? Management does seem to hide lots of bad news by just barely complying with the law. Recent indicators are this is getting worse. Michelle Leder is a researcher covering Corporate SEC-filings; she founded the research service “Footnoted” focusing on uncovering material information hidden in corporate SEC filings. She's the author of the book, financial “Fine Print, Uncovering A Company's True Value.” Each week, “At the Money” discusses an important topic in money management. From portfolio construction to taxes and cutting down on fees, join Barry Ritholtz to learn the best ways to put your money to work. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Honesty is that a
[0:13] Speaker 1: lonely world. Every one is so untrue? Ah, have you
[0:24] Speaker 1: ever wondered what management berries in their SEC filings? Do
[0:29] Speaker 1: they faithfully follow their obligations to their shareholders or do
[0:34] Speaker 1: they see how much they could get away with either
[0:37] Speaker 1: not disclosing or hiding. To help us unpack all of
[0:41] Speaker 1: this and what it might mean for your portfolio, let's
[0:45] Speaker 1: speak to Michelle Leader. She is an SEC filings wonk
[0:49] Speaker 1: and specialist and founder of the research service Footnoted, focusing
[0:54] Speaker 1: on uncovering material information hidden in corporate SEC filings. She's
[1:01] Speaker 1: also the author of the book Financial fine Print, Uncovering
[1:05] Speaker 1: a Company's True Value. So Michelle, let's just start out
[1:09] Speaker 1: with a basic definition. What is disclosure? What are the
[1:14] Speaker 1: rules that the SEC requires all companies to provide to
[1:19] Speaker 1: their investors?
[1:21] Speaker 2: Believe it or not, A lot of the main rules,
[1:23] Speaker 2: or the framework, if you will, it dates back to
[1:26] Speaker 2: nineteen thirty three. Think about that for a minute. That's
[1:29] Speaker 2: the basic framework, if you will. Like the foundation of
[1:32] Speaker 2: the house dates back to twenty you know, nineteen thirty three,
[1:35] Speaker 2: which is kind of amazing. It's ninety two years ago,
[1:37] Speaker 2: and think about how much has changed in the markets.
[1:40] Speaker 2: There's the Internet, for example, and you don't have to
[1:43] Speaker 2: call your broker and say buy me some pork bellies
[1:46] Speaker 2: or whatever. It's really kind of amazing that the primary
[1:49] Speaker 2: framework dates back on over ninety years. Of course it's
[1:54] Speaker 2: been updated, you know, over the years, but this is
[1:57] Speaker 2: sort of the foundation of the house. This is what
[2:00] Speaker 2: companies and their attorneys go back to time and time again.
[2:02] Speaker 2: They'll talk about the nineteen thirty three Act, which of
[2:05] Speaker 2: course came after nineteen twenty nine and the Great Depression,
[2:10] Speaker 2: so and that was what started the SEC.
[2:13] Speaker 1: So let's talk a little bit about the various filings.
[2:16] Speaker 1: Most of us are familiar with the quarterlies, the ten ques,
[2:20] Speaker 1: but there are also eight k's and ten k's and
[2:24] Speaker 1: merger proxies. Tell us the broad documents that every company
[2:29] Speaker 1: is either required to file with the SEC, or when
[2:33] Speaker 1: a specific event happens, is triggered and then has to
[2:37] Speaker 1: do a filing.
[2:38] Speaker 2: Yeah, so at a bare minimum, publicly traded companies have
[2:41] Speaker 2: to file three ten q's a year. That's the quarterly
[2:44] Speaker 2: report and one ten K and that's the annual report.
[2:48] Speaker 2: And then you know eight k's are filed on an
[2:52] Speaker 2: as needed basis, and those are often thought of as
[2:55] Speaker 2: material events, but it's also earnings releases or you know,
[3:00] Speaker 2: maybe a press release. I think a lot of people
[3:03] Speaker 2: think that press releases are equivalent to a k's and
[3:07] Speaker 2: that's actually not true. Companies will often put out a
[3:10] Speaker 2: press release and maybe they'll attach it to an AK,
[3:13] Speaker 2: maybe they won't, but you know, there's a difference between them.
[3:16] Speaker 2: Companies will often disclose something in an AK that they
[3:20] Speaker 2: never intend to put a press release out on.
[3:22] Speaker 1: That's really interesting and to that point, I love this
[3:26] Speaker 1: quote of yours. Companies know they have to disclose bad news,
[3:30] Speaker 1: but they also know they don't have to post it
[3:33] Speaker 1: on a billboard. Explain what are their obligations, what do
[3:38] Speaker 1: they have to say and when?
[3:40] Speaker 2: In general, if something is the definition is basically something
[3:44] Speaker 2: that a reasonable investor would want to know, and that's
[3:47] Speaker 2: what triggers an eight K. A lot of people think
[3:50] Speaker 2: that that, you know, the shorthand is like something material,
[3:53] Speaker 2: but you know, materiality is in the eye of the beholder.
[3:57] Speaker 2: You know, something that might be material to me may
[3:59] Speaker 2: not material to you. And there's a lot of judgment calls.
[4:03] Speaker 2: There's no real like tests. I mean, of course, like
[4:06] Speaker 2: you know, if the CEO resigns, then he you know,
[4:08] Speaker 2: obsconds with like you know, five hundred million dollars. That's
[4:11] Speaker 2: a pretty easy test. But you know, you don't see
[4:14] Speaker 2: a lot of those, right, There's something a lot less
[4:16] Speaker 2: you know, significant, and then there's a discussion of like, well,
[4:19] Speaker 2: do we need to disclose this do we not? And
[4:21] Speaker 2: I've seen it, quite frankly, all over the map. I
[4:24] Speaker 2: mean I've seen companies, for example, you know, the most
[4:26] Speaker 2: minor enforcement thing that a company can do is get
[4:30] Speaker 2: a comment letter from the SEC. And that's basically like, hey,
[4:33] Speaker 2: we noticed this thing, can you explain it a little
[4:35] Speaker 2: bit more? And then the more serious thing is a
[4:38] Speaker 2: weld notice, And I've seen companies like for example, which
[4:41] Speaker 2: is you know, pretty serious. It's it's it involves providing
[4:43] Speaker 2: much more detailed information, attorneys are involved, blah blah blah.
[4:46] Speaker 2: And you know, I've seen some companies not disclose a
[4:49] Speaker 2: weld notice, and I've seen some companies disclose a comment letter.
[4:52] Speaker 2: So it really can be all over the map. And
[4:55] Speaker 2: that's what makes it a little bit confusing and a
[4:57] Speaker 2: little bit you know, hard to figure out. You can't
[4:59] Speaker 2: always if this happens, we have to disclose. Sometimes there's
[5:03] Speaker 2: a lot of wiggle room in.
[5:04] Speaker 1: There for people are just curious. The comment letters tend
[5:08] Speaker 1: to be pretty minor. A WELLS notice typically get sent
[5:13] Speaker 1: to a firm when the SEC has concluded an investigation
[5:18] Speaker 1: and is planning on bringing an enforcement and action. I
[5:22] Speaker 1: would imagine that's fairly material all the time. Am I wrong?
[5:26] Speaker 2: You would think? But I've seen companies wait instead of like,
[5:29] Speaker 2: you know, instead of putting out an AK that they've
[5:31] Speaker 2: received a WELLS notice, they'll say that they you know,
[5:35] Speaker 2: they'll wait until the queue to disclose that. And you know,
[5:37] Speaker 2: of course the queue is all focused on the earnings.
[5:40] Speaker 2: So it's like, you know, buried in there somewhere, usually
[5:43] Speaker 2: in their legal disclosure or maybe a risk factor, you know,
[5:47] Speaker 2: other tricky things that companies will do all of a sudden.
[5:50] Speaker 2: I've seen this over and over again, Like instead of
[5:52] Speaker 2: US subpoena, they'll say subpoenas, they'll suddenly make something plural.
[5:57] Speaker 2: They won't put out a press release and say, oh, hey,
[5:59] Speaker 2: by the way, we out another subpoena. And you know,
[6:02] Speaker 2: companies play these kind of tricks. I mean, they do
[6:04] Speaker 2: subtle changes, and it's really up to you as the
[6:08] Speaker 2: investor to catch them.
[6:10] Speaker 1: So what are some of the more common tricks you
[6:12] Speaker 1: see that management uses to technically comply with the law
[6:18] Speaker 1: and disclose material bad news to investors while at the
[6:23] Speaker 1: same time trying to minimize attention to that.
[6:27] Speaker 2: Yeah, I mean probably the number one thing, you know,
[6:29] Speaker 2: I see is like companies waiting until late on a
[6:32] Speaker 2: Friday or the Wednesday before Thanksgiving with some reason they
[6:36] Speaker 2: can choose when they want to disclose. The rule is
[6:38] Speaker 2: actually you have to disclose within four business days, but
[6:41] Speaker 2: of course, with holidays and other things that can often
[6:45] Speaker 2: be you know, stretched. It's not as if, like, you know,
[6:47] Speaker 2: the CFO suddenly resigns and you've got to disclose it
[6:50] Speaker 2: that minute. I've seen companies wait four days to disclose that,
[6:54] Speaker 2: you know, and that's following the letter.
[6:55] Speaker 1: Of the law.
[6:56] Speaker 2: Now, I would think that if the CFO suddenly resigns
[6:59] Speaker 2: from the company, as an investor, you want to know
[7:01] Speaker 2: about that right away.
[7:02] Speaker 1: Yeah, So the Friday night data dump after four o'clock
[7:06] Speaker 1: but before the SEC closes at five point thirty is legal,
[7:10] Speaker 1: but sounds a little sketchy. How often do you find
[7:14] Speaker 1: these sorts of things are disclosing information that ultimately affects
[7:21] Speaker 1: the stocks price.
[7:22] Speaker 2: I would say, you know, pretty often, although it's not
[7:25] Speaker 2: an instantaneous thing. You know, a lot of what I
[7:28] Speaker 2: do is I see an early warning sign. You know,
[7:32] Speaker 2: here I'm out in LA and I often think about
[7:34] Speaker 2: it as going to the dermatologist and saying, hey, I
[7:36] Speaker 2: see this mole on my upper arm. Is that cancer?
[7:40] Speaker 2: Or do I not have to worry about it? You know,
[7:42] Speaker 2: that's the type of thing I think. It's like it's
[7:44] Speaker 2: an early warning sign that there could be a potential problem.
[7:48] Speaker 2: But you know, rarely I would say, do you find
[7:50] Speaker 2: like what I would call like what someone might call
[7:52] Speaker 2: a smoking gun. It's not like, you know, like, oh,
[7:55] Speaker 2: the CEO embezzled, you know, five hundred million dollars whatever,
[7:59] Speaker 2: and we're filing for bankruptcy, you know, Monday morning type
[8:03] Speaker 2: of thing.
[8:04] Speaker 1: Tell us about the non disclosure disclosure. I love that phrase.
[8:08] Speaker 2: Companies know that they have to disclose stuff, and you
[8:12] Speaker 2: know what they often do is they'll give you the
[8:14] Speaker 2: bare minimum of fact. And that's what they do. So
[8:16] Speaker 2: they might say, like, for example, you know, director Alan
[8:19] Speaker 2: Smith resigned on a Friday, but they don't tell you that.
[8:22] Speaker 2: You know, oh, maybe he was a member of the
[8:24] Speaker 2: audit committee, or maybe he was the former CEO of
[8:27] Speaker 2: the company, or maybe he was chairman of the audit committee,
[8:30] Speaker 2: or you know, any number of other information, and that
[8:33] Speaker 2: requires you to go to another filing, the proxy statement
[8:36] Speaker 2: really to figure out was he a longtime director? Had
[8:39] Speaker 2: he only served on the board for three months? You know,
[8:42] Speaker 2: all of these things are you know, information that companies have,
[8:46] Speaker 2: but they're not providing it to their investors. So that's like,
[8:49] Speaker 2: that's what I would call non disclosure disclosure. It's like
[8:51] Speaker 2: they're giving you the bare minimum but not giving you
[8:54] Speaker 2: anything more.
[8:55] Speaker 1: So let's talk about some metadata red flags something else,
[8:59] Speaker 1: a phrase I've picked up from you. I've read discussions
[9:03] Speaker 1: about repeated amendments of various filings or reports that are
[9:08] Speaker 1: consistently late. How much of this is just, Hey, the
[9:13] Speaker 1: world is complex and sometimes these things don't happen on time.
[9:16] Speaker 1: And how much of this is potentially predictive of real
[9:21] Speaker 1: problems at the company.
[9:23] Speaker 2: Well, I would say anytime a company can't get its
[9:25] Speaker 2: ten K or ten Q in on time, that's a
[9:28] Speaker 2: potential problem. If that happens repeatedly. You know, that's pattern recognition, right,
[9:33] Speaker 2: Like if it goes on for a quarter for you know,
[9:35] Speaker 2: several quarters or you know longer, that's you know, a
[9:38] Speaker 2: potential problem, right companies know, you know, for the most part,
[9:42] Speaker 2: they have to get their cues in forty days after
[9:44] Speaker 2: the close of the quarter, and so you know, if
[9:47] Speaker 2: they don't. Those companies that don't get their filings their
[9:49] Speaker 2: ten q's in on time, if they're on a September quarter,
[9:52] Speaker 2: that's an indication of a potential issue. You know, if
[9:54] Speaker 2: it's the third time they haven't been able to get
[9:57] Speaker 2: their ten q in on time, you know, and of
[9:59] Speaker 2: course there's accept and maybe the company is going through
[10:01] Speaker 2: a big merger, right, Like you know when you saw like,
[10:04] Speaker 2: for example, like the Albertson's Kroger thing, you know, a
[10:07] Speaker 2: couple of years ago, you know, there was like problems
[10:10] Speaker 2: there because like you know, it was like they were
[10:11] Speaker 2: trying to merge the company and there was all this
[10:13] Speaker 2: regulatory stuff and you know, so like if you can
[10:16] Speaker 2: easily explain elate filing, Okay, you know I wouldn't say
[10:19] Speaker 2: that every single time a late filing is a problem,
[10:22] Speaker 2: but I would say more often than not it.
[10:24] Speaker 1: Is, so your website is called footnoted. Tell us an
[10:29] Speaker 1: example of what looked like a minor footnote in a
[10:32] Speaker 1: company filing or disclosure that you spotted that later turned
[10:38] Speaker 1: out to be a really big story.
[10:40] Speaker 2: Well, I think, you know, there's a couple of examples.
[10:42] Speaker 2: One is like zoetis the major animal pharmaceutical company. You know,
[10:47] Speaker 2: I started looking into them earlier, well late last year,
[10:50] Speaker 2: I would say, the towards the tail end of twenty
[10:53] Speaker 2: twenty four, and I put out some research to my
[10:56] Speaker 2: clients back in February of this year. At the time.
[10:59] Speaker 2: You know, I think they were underplaying there the dangers
[11:03] Speaker 2: associated with one of their so called blockbuster drugs, this
[11:06] Speaker 2: drug called Thebrella.
[11:07] Speaker 1: If I recall, their drug was causing seizures and deaths
[11:11] Speaker 1: on in dogs that had no previous history of that
[11:16] Speaker 1: they literally should not have been released to the veterinary community.
[11:21] Speaker 1: Give us another example that that a footnote turned out
[11:25] Speaker 1: to be a big story.
[11:27] Speaker 2: Yeah. Well, back in you know, in twenty and twenty two,
[11:31] Speaker 2: you know, Nicola had like a what I would call
[11:34] Speaker 2: a seemingly minor disclosure. It was about a sudden resignation,
[11:38] Speaker 2: you know, by an executive, not the CEO or CFO,
[11:41] Speaker 2: just another you know, like another person who was a
[11:43] Speaker 2: named executive that's a formal term, which is usually the
[11:47] Speaker 2: five top executive of the company. Suddenly, you know, and
[11:50] Speaker 2: it seemed kind of unimportant, but then it turned out
[11:52] Speaker 2: to be an early sign of like basically rats abandoning
[11:55] Speaker 2: the ship. And of course we all know Nicola want
[11:57] Speaker 2: them filing for bankruptcy, and so it's kind of like
[12:00] Speaker 2: following those breadcrumbs and trying to figure out what's really
[12:03] Speaker 2: going on at the company. You know, what are they disclosing,
[12:06] Speaker 2: what are they trying to tell investors? How can i
[12:08] Speaker 2: you know, try to figure out what's going on.
[12:11] Speaker 1: How do you separate what's really a material red flag
[12:15] Speaker 1: and something that might actually be tradeable to adjust the
[12:19] Speaker 1: normal CYA language that's in every legal document of corporation produces.
[12:25] Speaker 2: I think that's a great question, and quite frankly, Barry,
[12:27] Speaker 2: it's kind of tricky, right, Like it's it's there is
[12:30] Speaker 2: a lot of CYA language in the filings, and it
[12:34] Speaker 2: can be problematic. I mean, i'd like to think that,
[12:37] Speaker 2: you know, after twenty years of reading SEC filings pretty
[12:41] Speaker 2: you know, intensely or intensively that. I'm pretty good. My
[12:47] Speaker 2: BS meter is pretty well defined, and I can kind
[12:49] Speaker 2: of tell when something is cya versus something is you know,
[12:53] Speaker 2: more serious. But yeah, I mean, of course there is
[12:56] Speaker 2: a lot of that language. You know, the filings are
[12:59] Speaker 2: ultimately by lawyers. Now, maybe they're written by lawyers, I've
[13:03] Speaker 2: seen a lot more these days. Maybe they're written by
[13:05] Speaker 2: you know, chat ept or whatever AI, whatever AI platform
[13:09] Speaker 2: they want to use to write these filings, But ultimately
[13:11] Speaker 2: it's the lawyers that are signing up, and lawyers are
[13:13] Speaker 2: obviously tend to be risk averse.
[13:16] Speaker 1: Given the ubiquity of of AI these days, How significant
[13:21] Speaker 1: is AI in things like corporate filings and how how
[13:27] Speaker 1: do you use AI to kind of figure out what's
[13:30] Speaker 1: going on with with all these different things?
[13:33] Speaker 2: Well, I think AI is pretty significant in corporate filings.
[13:37] Speaker 2: You're seeing it, you know, more and more, and I've
[13:39] Speaker 2: certainly I think I've read a journal story like, you know,
[13:41] Speaker 2: two or three weeks ago that talked about filings and
[13:44] Speaker 2: quarterly reports and even conference called trans you know, conference call.
[13:49] Speaker 2: You know, scripts are being written by AI and you know,
[13:52] Speaker 2: being used to kind of train executives on how to
[13:55] Speaker 2: answer questions you know, whereas before it used to be
[13:58] Speaker 2: sort of in person and you know, kind of that thing.
[14:00] Speaker 2: So I think like AI is, of course, you know,
[14:02] Speaker 2: becoming much more common in this type of thing. What
[14:06] Speaker 2: I think is you know, interesting. And then of course
[14:08] Speaker 2: there's the tools that are being used to uncover what's
[14:12] Speaker 2: going on in the filings. I do use AI. There's
[14:14] Speaker 2: a tool that I've been using a lot lately. It's
[14:17] Speaker 2: called fin tool, and it's interesting because it's really AI
[14:24] Speaker 2: definitely designed around SEC filings as opposed to a more
[14:27] Speaker 2: generic AI like a chat or like you know, claud
[14:30] Speaker 2: or you know, pick your AI tool of ploice. This
[14:33] Speaker 2: one's strictly focused on SEC filings and financial disclosures, and
[14:37] Speaker 2: I find it to be pretty good. Of course, AI
[14:40] Speaker 2: is not perfect, and so you have to kind of,
[14:43] Speaker 2: you know, figure things out. It's not going to get everything,
[14:45] Speaker 2: but I think, you know, increasingly it's becoming it could
[14:48] Speaker 2: be a helpful tool in trying to detect patterns. So like,
[14:52] Speaker 2: for example, if I wanted to know like how many CFOs,
[14:56] Speaker 2: let's just say company X has had in the past
[14:58] Speaker 2: ten years, you know, in the past, I would have
[15:01] Speaker 2: had to dug through different filings you know, I mean,
[15:03] Speaker 2: you know, Bloomberg would of course have that information on
[15:06] Speaker 2: the terminal, but you know, that's the type of thing
[15:08] Speaker 2: that AI can really help you with things like that,
[15:11] Speaker 2: Like is kind of going through and putting the pieces.
[15:14] Speaker 1: Together really really interesting. So to wrap up, if you're
[15:18] Speaker 1: an active trader, or if you buy speculative stocks, or
[15:23] Speaker 1: even if you have questions about the management of some
[15:26] Speaker 1: of the companies you own, it might be useful to
[15:29] Speaker 1: pay attention to their SEC filings, especially the things they
[15:35] Speaker 1: may not want you to see. Items they're dumping on
[15:37] Speaker 1: a Friday evening or barely meeting the minimum disclosure requirements.
[15:44] Speaker 1: There's a there's gold in them. There are hills if
[15:47] Speaker 1: you know where to look and if you know how
[15:49] Speaker 1: to interpret it. I'm Barry Ridolts. You're listening to Bloomberg's
[15:54] Speaker 1: at the Money, but
[15:57] Speaker 2: From on

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