May 30, 2003

We are hearing that the SEC staff will soon be issuing the long-awaited Regulation G FAQs (yes, i know we have heard that before) - we will post as soon as they are available.

Congrats to Amy Starr and Consuelo Hitchcock, who were named as Senior Special Counsels to advise Director Alan Beller. David Lynn returns to Corp Fin to become Chief Counsel (the big stud) - and Brian Breheny leaves Clifford Chance to become head of the Office of Mergers & Acquisitions.

For subscribers, we have posted an interview with Patrick Devine of Perkins Coie on Audit Committees and Whistleblowing at

May 29, 2003

The SEC is seeking to bar Ernst & Young from taking any new public company clients for 6 months due to alleged breaches of independence. See the Washington Post article at

For subscribers, we have announced a June 24th "Nuts and Bolts" webcast on how to make Section 16 electronic filings - see

For subscribers, we have posted a survey of the critical accounting estimate disclosures made by the Fortune 100 - courtesy of Linda Quinn, Ottilie Jarmel and Claire Horgan of Shearman & Sterling - at

May 28, 2003

At yesterday's open Commission meeting, the biggest surprise was the SEC's acknowledgement of the massive workload required for internal control attestations - the SEC moved back the effective date of the Section 404 internal control report from this fall to the middle of next year. "Accelerated filers" will file their first report for fiscal years ending after June 15, 2004 - all others can wait until their fiscal years ending after April 15, 2005.

Here are some significant components of the final rules under Section 404 of Sarbanes-Oxley:

- clarification that quarterly report unnecessary; rather, only material changes to internal controls needs to be disclosed quarterly
- the definition of "internal control over financial reporting" is not defined by referring to defintion under AU Section 319 - rather, the definition relies on the one in the COSO Report - and the SEC has built the COSO definition into the rules. In addition, the definition includes language from Section 103 of Sarbanes-Oxley (i.e. the specific assertions about internal control matters that registered
public accounting firms must make) - and includes the component of internal control over the safeguarding of assets.
- foreign private issuers and financial institutions that are under other regulatory internal control regimes will be "accommodated" by the SEC - but will not be exempted from the new rules

The SEC adopted the CEO/CFO certification proposal substantially as proposed.The SEC's press release on these actions is at

For subscribers, we have provided 3 new disclosure analyses: which companies have adopted QLCCs; how companies are disclosing their pre-approval of non audit service policies; and which companies have suspended/terminated split dollar arrangements. These analyses are in our "Disclosure" Practice Area at

May 27, 2003

The SEC has moved its open Commission meeting on internal control reports - and CEO/CFO certification placement - from Wednesday at 10 am to today at 2 pm.

Last Wednesday, Representative Richard Baker introduced a bill (H.R. 2179) that would enhance SEC authority by letting the SEC assess higher fines, obtain bank records and serve subpoenas. In addition, the bill would force states to channel money from securities settlements to the SEC's Fair Fund (one of the reasons for the bill is because NY has not yet given investors any funds from the historic Wall Street settlement reached a few weeks ago).

The bill was referred to the House Financial Services subcommittee. The bill would supersede laws in several laws, including FL and TX, that allow defendants to keep their homes regardless of legal findings against them. Rep. Baker said that he drafted the bill with help from the SEC.

The bill would increase fines to as much as $2 million, up from the current $600,000 maximum. The bill would also let people, such as attorneys, give information to the SEC about company activities without having to give it to other parties, such as those involved in a lawsuit against the company. The text of the proposed legislation is at

May 22, 2003

In a closely watched vote, Intel shareholders narrowly missed approving a shareholder proposal at Intel regarding expensing stock options - 48% of shareholders voted in favor of the proposal yesterday.

In the wake of fierce criticism, Siebel reversed course in the span of one day - and decided not to hold its annual stockholders meeting on the Web only. See the Mercury News article at

May 21, 2003

Today is our webcast on "Shareholder Access to the Ballot" - it is expected that the 6 panelists, with differing perspectives and viewpoints, will provide useful information in shaping this important debate - see

The AMEX has updated its corporate governance proposals at

The NYSE has issued a Governance White Paper at

May 20, 2003

The SEC has scheduled an open Commission meeting next Wednesday, 5/28 at 10 am to adopt internal control report rules under Section 404 of Sarbanes-Oxley.

In addition, the SEC has issued the adopting release for its final rules on improper influence of auditors at

For subscribers, we have posted the transcript regarding "Section 16: Users' Perspective" at

For subscribers, we have posted an interview with Kerry Moynihan on "Changing Director Recruitment Strategies" at

May 19, 2003

Hopefully, the uncertainty surrounding the possible need for CEO/CFO certifications for Form 11-Ks will soon be over. We understand that the SEC staff is in conversations with the DOL staff on this issue.

Since the SEC's request for comments a few weeks back, we now have a company that has offered shareholders access to the ballot as part of a recent settlement of a Milberg Weiss shareholder suit (Bill Lerach and Bob Monks teamed up on this one). According to a press release, the settlement with Hanover Compressor involves two new independent director positions to the board to be nominated by shareholders holding more than 1% of outstanding shares. The settlement also includes a number of other governance restrictions, such as shareholder approval for new executive option plans and repricing of stock options and rotation of the independent auditors every 5 years. See the related Business Week article at

May 14, 2003

Don't forget that last week - May 6th - was the effective date for companies to pre-approve audit and non-audit services. So if a company has not yet adopted a pre-approval policy, any non-audit services must be approved by the audit committee (or the audit committee chair if that delegation has been granted) - although contracts for certain non-audit services in place before May 6th can continue for 12 months under specified conditions.

The odd thing about Section 201 of Sarbanes-Oxley - and the related rulemaking - is that its unclear what will be the consequences if a company uses non-audit services from its auditor without the appropriate pre-approval...

On today, we are holding a webcast program entitled "Section 16 Filers: Users' Perspective - Practice Tips and Lessons Learned from the Trenches." Hear from panelists that have been test-driving the various filer products - as well as Alan Dye on the latest SEC developments - at

May 13, 2003

As reported by the Washington Post, former SEC Chair Harvey Pitt has started a corporate governance/crisis management/regulatory advice consultancy called "Kalorama Partners" - but he will not "appear before the SEC." See

The SEC staff has done some housecleaning and issued Staff Accounting Bulletin 103 "Update of Codification of Staff Accounting
Bulletins." The purpose of this SAB is to comprehensively update the existing SAB codification - as a result, the SEC will now feel sufficient comfort to post the entire SAB codification on its website. See

May 8, 2003

Yesterday, the SEC issued its adopting release regarding mandatory Edgar for Section 16 reports - see The SEC's system is working fine now, including compatability with third-party services.

The PCAOB has issued its final rules on audit firm registration at

For subscribers, we have posted an interview with Sharon Hendricks of The Venture Law Group on Whistleblower Procedures for Audit Committees at

May 7, 2003

Based on comments from Alan Beller, Director, Division of Corporation Finance yesterday at an ABA conference, it appears likely that the staff will issue Regulation G FAQs at some point - timing still uncertain. As for certain issues (e.g. S-8 and post-effective amendment transitional issues), the FAQs may well have answers that differ from what has been issued by the staff to date (or they may not).

For subscribers, we have posted a transcript of our "Regulation G Unplugged" program at

May 5, 2003

Today was the first day for the SEC's new Section 16 website going "live" - and it was not a pleasant one. The SEC's site was down for a few hours - and the SEC disabled LIVE submissions of reduced-content XML filings. This means that no third-party software will
work at the present time. The SEC staff has indicated that it will do date adjustments on any filings that are impacted. More to come.

The SEC now is formally soliciting comments for its "corporate democracy" initiative - comments are due June 13th. See

For subscribers, we have posted an interview with Jim Darazsdi on modifying corp. governance practices at

May 2, 2003

In anticipation of next Monday's "going live" for Section 16 e-filing, the SEC staff released some FAQs yesterday. Some of these FAQs are not necessarily consistent with past practice in filing out Section 16 forms - so it is good reading. See

SEC chair William Donaldson sent a stern letter to Morgan Stanley's chair regarding comments made that downplayed Morgan Stanley's role in the behavior that led to the global settlement reached this past Monday. A related article is at If you want a copy of Donaldson's letter, send an email to

For subscribers, we have posted an excellent interview with John Jenkins regarding the impact of Sarbanes-Oxley on small companies at

May 1, 2003

Yesterday, the SEC announced that starting this Monday, May 5th, its Section 16 Edgar site goes live! This means that on Monday, you will only be able to file via paper or the SEC's site (which still has some problems) - or a third party service that complies with the SEC's new specifications. The Romeo & Dye Section 16 Filer does comply with the new specs - so we urge you to try it (its free through end of September for anyone - and then only $195 thru end of 2004 for subscribers) - download it at

On our fantastic "Regulation G Unplugged" webcast yesterday, it was mentioned that it was uncertain whether the SEC staff will issue any FAQs on Regulation G anytime soon - as it appears that there is disagreement among SEC staff members about what guidance should be provided. It was pointed out that various staff members might be providing conflicting guidance already. An audio archive of the webcast is available at (a transcript will be posted next week).

In an ironic twist regarding the lack of transparency of financial disclosures, the AICPA - which has copyrighted its auditing standards over the years (ie. copyrighted part of GAAP) - has been is a spat with the PCAOB over the Board's potential use of the AICPA standards. Because the AICPA makes so much money selling their standards, they don't want them to be freely available. In other words, there has been limited transparency of what the auditing standards have been - and the PCAOB wants to change that. See the related Washington Post article at

This lack of transparency is one reason why we will soon be launching - this site will provide "easy to understand and find" accounting guidance for lawyers.