TheCorporateCounsel.net

September 16, 2005

FASB to Issue Relief on Option Grant Date Issue

At next Wednesday’s open Commission meeting, the SEC will consider pushing back the 404 deadline so that companies that are not accelerated filers then can wait to comply with the internal control over financial reporting requirements until their first fiscal year ending on or after July 15, 2007. Not sure how I missed that item for yesterday’s blog. Must be working too hard…

During our October 3rd webcast – “Internal Controls Update: The Big 4 Speak” – there will be discussion about what non-accelerated filers should still be doing in the 404 area despite the pushback of the internal controls deadline.

FASB to Issue Guidance on Option Grant Date Issue

On Wednesday, the FASB met to discuss providing further guidance on the determination of grant dates under FAS 123(R). The FASB decided to treat the date the board approves an award as the grant date, provided that:

• employees are not able to negotiate the terms of their grants after the board has approved them, and

• the terms of the grants are communicated to employees within a reasonable period of time. The determination of what is considered a reasonable period of time depends on the circumstances of the grant (e.g., the size of the company, number of grant recipients, and other considerations)

The FASB staff has proposed a FASB Staff Position, subject to a 15-day comment period. The FASB’s intention is to issue the final FSP in time for companies that are required to adopt FAS 123(R) on July 1, 2005 to rely on it in their first quarter financial statements.

Listen to the audio archive of the FASB meeting (see agenda item #4) and read the Board Meeting Handout (see pages 12-13). More information on this issue, along the NASPP comment letter and memos from leading practitioners, is included in the NASPP’s full analysis of this development.

Evelyn Y. Davis Update: Fourth Time A Charm?

According to this article, Evelyn Y. Davis, 76, recently got married to someone 26 years her junior. For those of us that have dealt with Evelyn, here’s wishing her the best on her fourth marriage (and maybe now she will be too busy to push her shareholder proponent agenda).

Here is an excerpt from the article: “He sent me three fan letters,” said Davis in a phone interview Thursday from her home in Washington’s Watergate building. “I was very reluctant to meet him at first, because I get so many fan letters from all over the country, and I never answer them. But what caught my eye was that he was in my neighborhood.” For more on Evelyn, here is an interview with her from a few years back.

SEC Formalizes Hurricane Relief

Yesterday, the SEC issued an exemptive order that provides an array of relief for companies directly impacted by Hurricane Katrina, including relief related to periodic reporting deadlines, proxy delivery obligations and S-3 eligibility, among other items.

What’s In Your Press Release?

From Lyle Robert’s “The 10b-5 Daily Blog“: The content of the disclosure that led to a stock price drop continues to be the focal point of post-Dura loss causation analyses. In Sekuk Global Enterprises v. KVH Industries, Inc., 2005 WL 1924202 (D.R.I. Aug. 11, 2005), the plaintiffs claimed that the company engaged in improper accounting practices related to the sales of a key product. The plaintiffs’ alleged losses occurred after the company issued a press release announcing reduced quarterly revenue based on lower than expected sales.

In their motion to dismiss, the defendants argued that “the press release and the resulting drop in the price of KVH common stock fails to establish loss caustion because the press release does not attribute the declining revenue to the sales of the [key product].” The court found, however, that the key product was a possible contributor to the lower than expected sales, even if it was not expressly discussed in the press release. Accordingly, the plaintiffs adequately plead loss causation.

Holding: Motion to dismiss denied (except for the claims based on a limited number of inactionable statements).