SEC Finally Blesses NYSE/Nasdaq Governance Standards
Late yesterday, the SEC posted an approval order for the NYSE and Nasdaq governance listing standards that have been kicking around for more than a year.
Under the transition rules of these new standards, companies will be expected to begin complying with these new listing standards as of the earlier of their first annual meeting after January 15, 2004 or October 31, 2004, except as otherwise provided in the case of foreign private issuers, small business issuers, and initial public offerings.
Personal anecdote - I will be attending the annual PLI Securities Law Institute in NYC for the remainder of the week, with limited Web access, so you might not see a blog til Monday. We will be posting some notes from the conference then.
More on Financial Expert Determinations
My blog on Monday regarding how boards should determine audit committee members evoked a strong response from the community. Not disagreements - but additional commentary.
Brink Dickerson of Troutman Sanders notes that he has not been happy with the "self assessment" approach saying: "We tried it a couple of times, but in at least two instances it has yielded directors who say they are qualified and who then have to be gently told that they are not. It annoyed the both CEOs who were impacted, but fortunately the outside counsel was not blamed.
It has worked better when we have interviewed the purported financial expert candidates on behalf of the board. In several cases we have tasked an associate to call up the board member, run through the criteria, and generated a brief memo (two to three pages, at most) to the board describing the criteria and his/her conclusions so that the board has a nice summary to rely upon.
Since the associate is not intimately familiar with the members' background -- and we have intentionally picked associates who are not -- he/she can apologize at the beginning of the call for being ignorant and then ask a bunch of "dumb" questions. It is a lot harder for the general counsel or someone at the client to do that. All in, it seems to be about two hours of work, and so far has generated happy clients."
Shareholder Communications with Directors
In the near future, the SEC intends to adopt its proposal that would require companies to disclose various aspects of how its directors communicate with shareholders - the SEC intends to have companies make this disclosure in the upcoming proxy season.
In one of our more informative interviews, learn from Rich Koppes - who has dealt with this topic both as a shareholder (former GC of CalPERS) and as a director - what companies might consider doing and the ramifications of establishing more communication between these two corporate behemoths in Rich Koppes on Directors Meeting with Shareholders.
PCAOB Issues Briefing Paper on Non U.S. Auditors
Last week, the PCAOB issued a briefing paper that describes the broad parameters of its approach to the oversight of non-U.S. accounting firms, a controversial topic that I have blogged about several times. This briefing paper describes the PCAOB's plans for oversight of non-U.S. registered public accounting firms, based on cooperation with appropriate non-U.S. auditor oversight authorities, including:
- A framework to permit varying degrees of reliance on a firm’s home country system of inspections, based on a sliding scale (i.e. the more independent and robust a home country system, the higher the reliance on that system).
- A modification to the PCAOB’s registration form to permit, where applicable, the inclusion of certain information about a non-U.S. firm’s home country oversight system, in order to facilitate coordination between the PCAOB and non-U.S. oversight systems.
- A 90-day extension of the April 2004 deadline for non-U.S. firm registration to allow sufficient time for the PCAOB to have final rules in place in this area, as well as permit non-U.S. firms a reasonable amount of time to understand and prepare for registration.