November 26, 2002

In reaction to the SEC's attorney responsibility standards proposal, former SEC Commissioner Ed Fleischman and other notable lawyers have sent a letter to the Commission criticizing six decisions made by the Commission in its proposal. See the 11/25 letter at

November 25, 2002

After nearly a year of speculation, the SEC's Division of Enforcement has announced the settlement of 3 Regulation FD actions - and issued one report of investigation. See the SEC's "bare bones" press release at The related litigation releases are at:





November 23, 2002

The SEC has posted its proposed rules regarding Auditor Independence at and Attorney Responsibility at

November 20, 2002

Yesterday, the SEC proposed rules on auditor independence - see the press release at

Rumor has it that the SEC will post its proposing release on attorney responsiblity standards sometime soon - maybe even later today.

November 19, 2002

Not sure what was changed - but the SEC staff revised the "Sarbanes-Oxley" FAQs on November 14th - see

November 15, 2002

Yesterday, the deadline for many 10-Qs, the SEC's EDGAR filing system experienced unprecedented delays - and many companies missed the filing deadline. As a result, the SEC's Office of EDGAR & Information Analysis in the Division of Corporation Finance granted a global date adjustments for these 10-Q filings. This means that the SEC staff will automatically adjust the filing receipt date for all Form 10-Q and 10-QSB filings received on Friday, Nov. 15, 2002 back to Thursday, Nov. 14, 2002. It is understood that the EDGAR system problems have now been corrected and filings are being accepted as usual. See the SEC's press release at

For all other filings, the SEC staff likely will decide whether to adjust dates on a case-by-case basis, depending upon the facts as presented by the filer.

November 14, 2002

Deputy Chief Accountant Jackson Day has been named Acting Chief Accountant at the SEC - see the SEC's statement regarding this at

The Public Company Accounting Oversight Board held its 1st meeting behind closed doors - they considered whether the existing accounting profession standards should remain in effect and could not reach an agreement. See

November 12, 2002

William Webster has resigned as Chair of the new Public Company Accounting Oversight Board. His resignation letter is available at

November 11, 2002

Tucked away on the "Division of Corporation Finance" page, the SEC just posted FAQs related to Sarbanes-Oxley at

November 9, 2002

Chairman Pitt lashed out at critics - including former Chairman Levitt - in his first public statements since his resignation - see

In addition, SEC Chief Accountant Bob Herdman resigned - see

The SEC has begun posting no-action and interpretive letters on its web site! They go back as far as early 2002 - and are divided by subject matter, alphabetically, and chronologically. They are at

The SEC has posted its proposed rules on pension blackout periods and Regulation BTR at

November 7, 2002

General Electric launched a new Corporate Governance web page, its at

Heated discussion with Division Director Alan Beller today at PLI conference in New York. We will posting comprehensive notes soon.

The first 10-Qs to be filed this quarter are getting interesting - look at Intel's internal controls disclosure in its Form 10-Q...

November 6, 2002

Despite Chairman Pitt's resignation last night, the Chair is staying on in transition mode - and presided over this morning's open meeting. At the open meeting, the SEC proposed rules regarding attorney responsibility standards - and the SEC must adopt rules by January 26th pursuant to Section 307 of the Sarbanes-Oxley Act.

These proposed rules should prove to be quite controversial (as noted in our november ezine in the section regarding the ABA's Professional Responsibility Task Force hearings). It was noted that the proposing release will be approximately 120 pages long - and that the Office of Economic Analysis didn't have sufficient time to get a real grasp about the costs of the proposal (such as malpractice insurance rates). Commissioner Goldschmid noted that he generally had reservations about the proposals - but did not specify what are his reservations.

As proposed, Rule 205 would require "up-the-ladder" reporting - and many terms in the proposal are broadly defined. For example, the terms "appearing and practicing before the SEC" and "in the representation of the issuer" are broader than they appear on their face.

The scope of the rule also is quite broad as it would apply to all attorneys - defined as "any person qualified to practice law in any jurisdiction." This means the rule would apply regardless if a person was formally in the legal department (e.g. someone who received a legal degree but serving as a business development officer would have to comply). The proposed rule would apply to both in-house attorneys and outside counsel. Finally, the rule would apply to non-US attorneys - including lawyers who are not licensed to practice in the US.

Among the other issues likely to be controversial include the "noisy withdrawal" process (whereby a "reporting attorney" reports "out" to the SEC in certain circumstances); the impact on the attorney-client privilege and attorney-client relationships in general; the concept of a "QLCC" (qualified legal compliance committee); and the fact that reporting attorneys would have to report violations that are "about to occur." I'm sure there are more pricky issues - and they will be identified once the proposing release is available for review. The related press release is at

November 5, 2002

The SEC has posted its proposing release regarding rules on use of non-GAAP financial measures, including amendments to S-K for use of such measures in SEC filings and amendments to 8-K to require filing of certain press releases and ammouncements of earnings. Comments are due 30 days after publication in the federal register. These proposed rules would implement Sarbanes-
Oxley 401(b). The release is at

The SEC has posted its proposed rules regarding off-balance sheet disclosure in MD&A at

November 4, 2002

Not too many people expect Chairman Pitt to hold his job too long after tommorrow's elections. Not sure what will happen to the other senior staffers that joined the SEC at Pitt's is another article about the most recent Accounting Oversight Board incident -

The SEC has announced a series of hearings regarding the credit rating agencies and their roles in the markets - see

November 1, 2002

In a truly remarkable turn of events, the just-appointed head of the Public Company Accounting Oversight Board, William Webster, has come under fire for serving as the chair of an audit committee of a company that is undergoing an investigation for fraud. Chairman Webster resigned from his directorship in July. Part of the allegations include complaints from the company's independent auditor about inadequate internal controls - and a dispute over whether (and when) the audit committee was told about them.

Even more remarkable is that SEC Chairman Pitt was aware of this issue - but is reported to have not shared this information with any of the other SEC commissioners before they voted last friday to appoint the Oversight Board. As a result, Chairman Pitt has asked the SEC's inspector general to conduct an investigation into Chairman Pitt's own actions. Even this has come under fire, as Senator Paul Sarbanes (D-Md.), the head of the Senate Banking Committee, has noted that the inspector general reports to Chairman Pitt.

Senator Sarbanes has repeated his call for Chairman Pitt to resign and has asked Chairman Webster to reconsider his own appointment. In addition, Senator Sarbanes will conduct hearings into the process by which the Oversight Board was selected. At last friday's open Commission meeting, Commissioner Harvey Goldschmid voted against all five appointees because of his displeasure over the process. For example, he had not received the names of the potential appointees - nor had a chance to vet their credentials - until shortly before the meeting was held to vote on the nominees.

See the Washington Post article about this new development at