July 29, 2004

Whatever Happened to that California Shareholder Access Bill?

I had blogged way back when about a California bill introduced by Judy Chu that went beyond what the controversial SEC proposal. After significant pushback from all quarters - including CalPERS - legislator Chu introduced a resolution in support of the SEC rules, which won overwhelming support in both branches of the Legislature.

At that time, Chu also agreed to amend her bill to require that companies provide a process in which shareholders could merely "recommend" candidates for election as directors and that they file the process with the secretary of state. In June, the bill went through yet another round of tweaking in the California Senate Judiciary Committee, which eliminated the "recommend" clause and turned it into simply a disclosure bill. This disclosure bill would require publicly traded companies to file a copy of their corporate election procedures - or those portions of the company's articles of incorporation and bylaws that related to nominating and electing directors - with the secretary of state.

The bill will be heard by the Senate Appropriations Committee on August 2nd. Now only the state Department of Corporations remains opposed to the bill because it believes the issue should be addressed by the SEC.

Crying in My Spilt Milk

As I head off for a vacation next week, I need to get my "moving da office" woes off my chest...no Internet access for two weeks...cross-talk from a radio station on my phone...losing my wallet in a cab...I need a vacation. Julie Hoffman will be blogging next week for your entertainment.

July 28, 2004

Developments on Contingent Convertible Bond Accounting Treatment

The FASB has released a draft abstract of a Tentative Conclusion of the Emerging Issues Task Force (EITF) that contingently convertible bonds should be included in calculating diluted earnings per share regardless of whether the contingent feature has been met.

As an example of contingently convertible debt, the debt might provide that it is not convertible into common shares until the stock price has exceeded some percentage threshold for some specified time period (e.g., 20% above the conversion price for a 30-day period). Presently, most issuers exclude the potential dilutive effect until the market price contingency is met. The FASB staff has reported that more than $100 billion in contingently convertible debt has been issued, with more than $90 billion currently outstanding.

In addition to contingently convertible debt, the Task Force is inviting comments on whether other instruments with similar contingencies should be included. Comments are due on September 3, 2004. If the Task Force reaches a decision, this guidance will require FASB Board ratification before it becomes effective.

The proposed effective date would be reporting periods ending after December 15, 2004, and prior period EPS amounts presented for comparative purposes would have to be restated. Thanks to roving reporter Mike Holliday for this heads-up!

Calling All Accountants!

According to a GAO report issued yesterday, the SEC faces ongoing challenges filling many of its newly created positions, particularly accountants, due to competition from the private sector. In 2004, Corp Fin received funding for 175 new accountants and attorneys, but Corp Fin had filled only about 30% of its vacancies through the first half of the year.

The report also noted that in 2003, Corp Fin reviewed only 23% of all reporting issuers, falling short of its goal of 33% (mandated by SOX Section 408). Ultimately, the report made no recommendations.

July 27, 2004

Hear From the Experts on Impact of Option Expensing on ESPPs!

Don't forget tomorrow’s NASPP webcast – “Employee Stock Purchase Plans and Expensing: What Now?” - during which Renee Deming of Heller, Ehrman, White & McAuliffe; Paula Todd of Towers Perrin and Ellie Kehmeier of Deloitte & Touche will discuss the potential impact of the FASB’s option expensing proposal on ESPPs and what alternatives you should consider now. New course materials were posted today - a powerpoint in a PDF file that you should print off before the program.

An audio archive and transcript will be posted following the live webcast. The non-member fee for this special webcast is $495. If you wish to access this valuable program without paying this fee, you may simply take advantage of a no-risk trial.

Increase in O&D Bars

In addition to disclosing a range of $108 to $135 for its IPO, Google disclosed yesterday (in its Amendment No. 4 to the S-1) that the SEC staff intends to seek a civil injunction against David Drummond, Google’s VP of Corporate Development, Secretary and General Counsel, alleging violations of federal securities laws.

The Staff’s action arises out of Drummond’s prior employment as CFO of SmartForce, and involves certain disclosure and accounting issues relating to SmartForce’s financial statements. SmartForce’s successor had discovered “several accounting issues” in SmartForce’s past financial statements and, earlier this year, agreed to pay more than $30 million to settle class-action lawsuits related to the accounting problems.

The SEC also instituted O&D proceedings yesterday in D.C. federal court against Capital One Financial Corp.’s former CFO, David Willey. The SEC suit alleges that Willey made $3 million in profits on the material, nonpublic information that the Federal Reserve Board was considering downgrading the company in 2002.

As Enforcement Director Stephen Cutler noted in his speech to the D.C. Bar in February, the SEC is making more frequent use of its Officer and Director bar powers. In fiscal year 2003, the SEC sought 170 O&D bars, compared to only 38 in fiscal year 2000.

SEC Continues to Clean House

On June 9, we blogged that the SEC instituted two separate public administrative proceedings against 31 companies to determine whether to revoke the registration of their securities under the '34 Act. The Staff continues to clean house, as evidenced by the recent proceedings with EVTC, Inc. (7/26), Spiegel Inc. (7/23), Ocumed Group, Inc. (7/7), Pinnacle Business Management (7/6) and IDT Venture Group, Inc. (6/25), to name a few.

None of these cases appears to be newsworthy in and of itself; although the consistency with which these types of cases are brought is interesting. This is especially true given Corp Fin's review burden under Section 408 of Sarbanes-Oxley (i.e. each '34 Act filer must be reviewed once every 3 years).

-Submitted by Julie Hoffman

July 26, 2004

Spotlight on Environmental Disclosure

On July 14, the GAO issued a report on environmental disclosure in SEC filings. The report addresses (1) market participants’ views on how well the SEC has defined the requirements for environmental disclosure, (2) the extent to which companies are disclosing such information in their SEC filings, (3) the adequacy of the SEC’s efforts to monitor and enforce compliance with disclosure requirements, and (4) suggestions for increasing and improving environmental disclosure.

As you might expect, the GAO found that market participants vigorously disagree about whether the SEC’s existing disclosure requirements are adequate. Also, the GAO was unable to determine the extent to which companies are disclosing environmental information without access to companies’ records because no disclosure on environmental issues could mean that a company does not have existing or potential environmental liabilities, has determined that such liabilities are not material, or is not adequately complying with disclosure requirements. Consequently, the GAO couldn’t determine the adequacy of the SEC's efforts to monitor and enforce compliance with environmental disclosure requirements without more information.

Ultimately, the GAO recommended that the SEC “take steps to improve the tracking and transparency of information related to its reviews of companies’ filings” by increasing the amount of information available within the SEC and to the public on the results of the SEC’s filing reviews (e.g., public availability of comment letters) and by improving the level of coordination between the SEC and EPA.

Introducing XBRL

The SEC announced last week that it is pursuing a rulemaking project to permit public companies to file financial reports using XBRL technology, which tags data for easier online searches. Unlike HTML (hypertext mark-up language), XBRL (extensible business reporting language) allows for ready comparisons and analysis of financial results.

The relatively new XBRL software reportedly makes it easier for companies to prepare quarterly and annual financial reports because it creates a single document that is able to be converted to different formats, reducing duplication, inefficiencies and errors.

Last summer, the FDIC, Federal Reserve and the OCC launched a project to create a shared data repository of Call Reports (a quarterly financial statement filing made by banks) that would be submitted via the Internet in XBRL. It is expected that banks will file their 3rd quarter 2004 Call Reports via the new system.

This year, TSX Group, Inc. (listed on the Toronto Stock Exchange) became the first public company to publish annual financial results in XBRL. To learn how to view those financial statements, click here. To learn more about XBRL, click here.

-Submitted by Julie Hoffman

July 22, 2004

CT Requests for Responses to SEC Comment Letters

As happened last year when LivEdgar added responses to SEC comment letters to its database, there is an upsurge in interest about how to request confidential treatment for a company's responses. Learn more in this interview with Burt Arrington on Confidential Treatment Requests for Responses to SEC Comment Letters or in the hordes of law firm memos on this topic in our "Confidential Treatment Requests" Practice Area.

Alan Beller, Director of Corp Fin, recently noted that the volume of blanket Rule 83 requests did not significantly rise after the LivEdgar development - and that he hoped it would not rise when comment letters begin to be publicly available. If it does, he noted that the SEC would conduct rulemaking to more closely align the availability of Rule 83 relief with its intended purpose. This is the same warning that he gave last year, which seemed to have worked given that Rule 83 wasn't widely abused.

Greenspan on Hedge Fund Proposal

Federal Reserve Chairman Alan Greenspan gave his semiannual testimony on monetary policy to Senate Banking Committee on Tuesday. During his testimony, he stated his opposition to the SEC’s recent proposal to register hedge fund advisers with the agency.

Greenspan said that the proposal will not accomplish its goal of detecting fraud merely through registration with the SEC and periodic examination of the adviser by the SEC. “Fraud is almost always uncovered through complaints of counterparties or by accident,” he said. Further, Greenspan fears that the proposal will create restrictions that will cause many hedge funds to leave the industry, “to the significant detriment of our economy.”

More on Options Expensing

Also on Tuesday, the House of Representatives passed the Stock Option Accounting Reform Act (H.R. 3574) by a vote of 312-111. As we have previously blogged, the bill would mandate that stock options be counted as an expense on company balance sheets when they are issued to the CEO and the other four highest paid company officers, but not counted as an expense when they are issued to other employees. The bill also says that when a company is calculating the expense of the options issued to the top five, it shall assume that stock prices do not fluctuate. Small business issuers would be exempt.

Next up for the bill is consideration by the Senate.

July 21, 2004

Help with Your Form 10-Q Preparation

I've had a number of members ask to see the useful 10-Q checklist from Wilmer Cutler Hale & Dorr that we had posted on the home page a few months back. It is contained in our new "Form 10-Q" Practice Area, along with other useful resources (including a link to our "Stock Repurchase" Practice Area which includes Item 703 guidance.

Tally Up Sheets Now Available!

One common question I have received: "Why do you keep emphasizing the need for compensation committees to tally up compensation packages before they approve any additional component or approve the annual pay package? That is such common sense, they must be doing that."

I agree it is a matter of common sense. But that is a question to pose to the compensation committee(s) that you advise. In speaking to many directors now, it doesn't appear that the use of tally up sheets is common at all. In fact, we struggled to find a sample for several months - despite access to a remarkable (and large) Task Force comprised of the country's top compensation consultants and lawyers (note that some Task Force members didn't want to share their proprietary tally up formulas).

We thank Mike Kesner, who is head of Deloitte's Executive Compensation practice, for sharing two sample tally up sheets in the change-of-control context. Recall Fred Cook's advice from his practice pointer that I blogged about a few weeks back: compensation committees are urged to prepare tally up's in five different termination scenarios.

Mike's samples address one of those scenarios - and they illustrate that preparing a tally up is not as simple as it would appear. Mike's samples are in the "How to Calculate and Tally-Up Hidden Benefits" section of CompensationStandards.com.

Hedge Fund Proposal and Dissents Available

The SEC has posted the hedge fund proposing release - and the dissents from Commissioners Glassman and Atkins - that was approved last week.

July 20, 2004

JCEB Notes with SEC Posted!

One challenging aspect of practicing securities law is that there are so many different sources of SEC guidance. The most authoritative are those adopted by Commissioners, including rules and regulations as well as interpretive and adopting releases. Then, there are nearly a half-dozen sources of informal guidance from the SEC Staff, such as no-action letters, staff legal bulletins, FAQs and the Telephone Interpretation Manual.

Probably the least authoritative source of guidance are those informal conversations that each of us have with the SEC Staff, including those conducted in a group. Each Spring, the ABA's Joint Committee on Employee Benefits (known as the "JCEB") meets with a number of federal agencies in an attempt to obtain interpretive guidance on various issues, including a meeting with Corp Fin Staff. These meetings can be quite productive and have provided great insight on the latest Corp Fin thinking on a variety of insider-compliance issues.

We are excited to be able to post reports - going back to 1997 - of the JCEB meetings with the SEC staff, with a big thanks to Gloria Nusbacher of Hughes Hubbard & Reed LLP, who acted as Reporter for such meetings. This notes are posted in "Practice Areas," as well as our home page.

Of course, these reports come with a number of disclaimers and should be read with those in mind (e.gs. the responses reflect the unofficial, individual views of the SEC Staff as of the time of the discussion, and do not necessarily represent the position of the SEC or other Staff members - and the views of the SEC Staff change over time and you should not necessarily rely on the positions reflected in these reports.)

NASD Issues Shelf Offering Proposal

The NASD has proposed rule changes to amend the its rules regarding the filing requirements and regulation of shelf offerings by investment bankers. This is the first activity in this area since the September 2001 proposal in NASD Notice to Members 01-59. The NASD states that significant revisions have been made since that proposal. It is expected that the SEC will put these proposed rule changes out for public comment.

Although the rules directly affect NASD members, companies have an interest to insure that the rules would not delay shelf offerings and their ability to take advantage of market opportunities.

Know The Cost Of Golden Parachute Gross-Up Provisions

As a nice follow-up to the NY Times article I blogged about yesterday, we have posted a practice pointer by Linda Griffey of O'Melveny & Myers to CompensationStandards.com about "Know The Cost Of Golden Parachute Gross-Up Provisions."

July 19, 2004

CompensationStandards.com in the News!

If you didn't see the Sunday edition of the NY Times Business section, Gretchen Morgenson's article about "No Wonder CEOs Love Those Mergers" included a few quotes from Jesse Brill about the need for compensation committees to tally up all the compensation that a CEO is entitled to receive, both annually and in the event of a triggering event (like a merger).

In addition, Gretchen gave a shout out to the May-June edition of The Corporate Counsel and mentioned CompensationStandards.com!

An IDS Development

Today, American Seafoods Corp filed Amendment No. 7 to Form S-1 for its IDS offering. This could wind up being the first IDS that the SEC Staff declares effective since the first one late last year - there are another dozen and a half still in the queue - and thus could serve as a model after it goes effective for what other IDS issuers need to disclose.

We are adding this amended S-1 to our "Income Deposit Securities" Practice Area.

July 15, 2004

The True Impact of the Recent Supreme Court Case on New Sentencing Guidelines

Yesterday's Wall Street Journal had a great article on how last month's US Supreme Court case has wreaked havoc on the ability to judges to sentence in federal courts. But the article missed one important point - that the Supreme Court case really doesn't change the fact that the new sentencing guidelines impose vastly different compliance criteria on companies.

In other words, it is still important to learn the lessons to be imparted in next Wednesday's webcast - "How the New Sentencing Guidelines Impact You." To get up-to-speed before the program, you can check out an excellent article we just posted by one of the panelists, Jeff Kaplan, in our "Compliance Training" Practice Area (which also contains links to a number of law firm memos on the topic at the bottom of that page).

Sample Procedures for Filtering Third-Party Communications to Directors

If you are working on documenting written processes for collecting, reviewing, sorting, "filtering" and summarizing communications from third parties to independent directors - in their capacity as audit committee members and otherwise - you can check out two new documents that we have posted in our "Sample Document" Library.

Both in Word files, we have posted "Internal Process for Handling Communications to the Audit Committee" and "Internal Process for Handling Communications to Directors (Non- Audit Committee)."

Compensation Surveys Are Biased

The Working Draft of the September-October issue of The Corporate Counsel (which is posted on CompensationStandards.com) includes an excellent piece from veteran consultant Fred Cook on the 12 different types of bias that is present in benchmarking conducted by most compensation consultants. This piece is also posted on CompensationStandards.com as a practice pointer called "Compensation Surveys Are Biased" under "Surveys and Benchmarking—What is Wrong."

July 14, 2004

Our "Berlin-Bremen Exchange" Practice Area

I still continue to receive quite a bit of correspondence on the issue of delisting from the Berlin-Bremen Exchange. So we have created a "Berlin-Bremen Exchange" Practice Area, that includes two sample delisting responses from the exchange that explains the Exchange's side of the story (including an explanation of why they believe there is no such thing as "delisting" for them).

Marching Towards a Paperless World

On Monday, the SEC announced that it has approved a rule change of the NYSE that eliminates the requirement for listed companies to make a paper filing of any Form 8-K or Form 6-K (but only if the Form 6-K was electronically submitted to the SEC via EDGAR). Listed companies are still required to continue to provide hard copies of materials to support a listing application as well as copies of proxy materials. This rule change is effective as of July 8th.

Cost of Deferred Compensation

On CompensationStandardsConference.com,we have posted an excellent practice point by Yale Tauber and Donald Levy on how to best understand the "Cost of Deferred Compensation."

July 13, 2004

Disclosure of Voting Results in 10-Qs

At last week's ASCS conference, Marty Dunn, Deputy Director of Corp Fin, indicated that some companies didn't appear to be properly disclosing their voting results as required under Item 4 of Form 10-Q. Item 4 doesn't prescribe a specific format for disclosure of voting results.

Here are a few examples of companies that we thought appeared to get it right. Last year, Eastman Kodak's 2nd quarter 10-Q disclosed how votes were cast for a staggered board. This year, Walt Disney's 2nd quarter 10-Q has a nice chart to reveal the voting at its controversial annual meeting. Pfizer also has a nice chart in its 2nd quarter 10-Q.

New "Income Deposit Securities" Practice Area

We have created a new "Income Deposit Securities" Practice Area, including links to the 19 registration statements that have been filed registering Income Deposit Securities, Enhanced Income Securities and Enhanced Yield Securities. I believe only one of these registration statements have been declared effective by the SEC Staff so far.

Consider Whether Definition of "Cause" Should Include Failure to Cooperate With Governmental Investigation

We received ten new practice pointers yesterday from our task force to post on CompensationStandardsConference.com, including this anonymous one on "Consider Whether Definition of "Cause" Should Include Failure to Cooperate With Governmental Investigation."

July 12, 2004

Novel Regulation S No-Action Letter

On April 28th, Corp Fin issued a novel no-action response to europrospectus.com limited on some Regulation S issues. This company intends to make available onine prospectuses and related documents for international securities offerings to subscribers.

According to the letter, the company will run a web-based database service that will post prospectuses before distribution is complete for Reg S/144A offerings by non-US issuers. One of the issues addressed is whether the posting will be deemed a "directed selling effort" under Reg S by the issuer of the security.

The database site is password-protected, has legends and you need to be a member to use it but here's the rub - unlike prior letters like IPO.net, to get a password you don't need to be a QIB or an IAI. Rather, you only need to be a customer (apparently, there is a high membership fee but still no need to be a QIB or IAI, etc.).

My good friend Walter van Dorn of Thatcher Proffitt explains to me that the over-all utility of this response is likely to be limited since the overwhelming majority of international offerings are combined Reg S and Rule 144A offerings - and because the site here does not need to be password-protected to nonQIBs/IAIs (even though no-action was granted based on the interpretation of some pretty arcane Reg S provisions).

Most issuers still will have problems with the necessary '33 Act exemption for the 144A/4(2) component of their offering. So for the vast majority of deals that are combined Reg S/144A offerings, this letter may not be of much practical value.

23 Lessons Learned from Disney

I love "lessons learned" articles because they tend to be so practical - that's why one of my favorite practice pointers on CompensationStandardsConference.com is "23 Lessons Learned from Disney: Director Liability for Excessive Executive Compensation" by Mike Melbinger.

July 8, 2004

Are Companies Required to Disclose Publicly Available Information?

The Wall Street Journal reported last week that the SEC has filed an amicus brief in a Second Circuit Court of Appeals case, arguing that companies and mutual funds are not permitted to omit information not specifically required from disclosure documents and public statements simply because that information is available elsewhere.

In In re Merrill Lynch & Co., Inc. Research Reports Securities Litigation, the plaintiff is a shareholder of Merrill’s Global Technology Fund. Suing under Securities Act Sections 11 and 12(a)(2), the plaintiff contends that Merrill should have disclosed the fact that it performed investment banking services for some of the stocks in the fund and that Merrill’s analysts had written research on certain of the fund’s stocks.

The U.S. District Court for the Southern District of New York dismissed the action in July 2003, holding that Merrill had no obligation to tell investors that its fund owned stocks of companies that had relationships with Merrill because "that information was already public" on the Internet, in the news media and elsewhere.

In its brief, the SEC argued that "[t]he fact that information could be discovered somewhere in the public domain does not mean it can never be materially misleading to omit that information from a disclosure document or other statement."

Stay tuned for the decision.

Chairman Donaldson Recuses Himself

Last week, a company that Chairman Donaldson had served as a director, EasyLink Services Corporation, disclosed in an 8-K filing that it was being investigated by the SEC Staff. According to the filing, the Staff is "reviewing certain transactions accounting for approximately $3 million of revenue generated by its former advertising network business in 2000, a year in which the Company reported $61.2 million in total revenue." Chairman Donaldson served on the audit committee in 2000.

The next day, the Commission issued a press release announcing that "Chairman Donaldson has not participated and will not participate in any matter before the Commission involving EasyLink." Further, the SEC announced that a former Assistant Director of the Division of Enforcement was acting as "Special Advisor" to the four Commissioners.

-Posted by Julie Hoffman

July 7, 2004

More Rumors on Shareholder Access

On May 11 and May 13, Broc blogged about rumors in the mainstream media about where the SEC was heading with its shareholder access proposal. The rumor mill is still working.

On July 1, a New York Times article by Stephen Labaton reported that Chairman Donaldson said that he has been unable to forge an agreement among his deeply divided colleagues. “Right now there is no consensus," he said. "I'm not sure I agree with what anyone else thinks or anyone agrees with what I think.” The Times article reported that the deadlock “all but dooms” the possibility that new rules would be implemented prior to the next proxy season.

The Chairman’s June 20 speech at the Directors College at Standford lends credence to this report, where the Chairman stated that he remains “committed to responsible and constructive change in this area, and will proceed thoughtfully and carefully. [The SEC’s] goal is the right course, rather than a hasty, less thoughtful course. We will not be forced to act in the face of an artificial deadline.”

Buffett Sounds Off on Options Expensing Bill

In an Op-Ed piece in yesterday’s Washington Post, Berkshire Hathaway CEO Warren Buffett warned that the prize for “mathematical lunacy by a legislative body” may be awarded to the U.S. House of Representatives if it passes the Stock Option Accounting Reform Act of 2003 (H.R. 3574). (The current prize for “mathematical lunacy” is apparently held by the Indiana House of Representatives for declaring, in 1897, that pi would equal 3.2 instead of 3.14159).

The Stock Option Accounting Reform bill, which passed the House Financial Services Committee on June 15, mandates that stock options be counted as an expense on company balance sheets when they are issued to the CEO and the other four highest paid company officers, but not counted as an expense when they are issued to other employees. The bill also says that when a company is calculating the expense of the options issued to the top five, it shall assume that stock prices do not fluctuate. The bill would exempt small business issuers.

Buffett urged the House members to kill the bill.

- Posted by Julie Hoffman

July 6, 2004

July E-Minders is Up!

We have posted the July E-Minders. Check it out!

SEC Names Director of Office of Risk Assessment

The SEC has announced the selection of Charles A. Fishkin as the Director of the new Office of Risk Assessment. Mr. Fishkin worked most recently for Fidelity Investments in Boston, where he served as vice president of Firmwide Risk.

Chairman Donaldson announced the creation of the Office of Risk Assessment during Congressional testimony last November to better enable the SEC to anticipate, identify and manage emerging risks and market trends. The new office will analyze risks across the SEC’s divisional boundaries, focusing on early identification of new or resurgent forms of fraudulent, illegal or questionable behavior or products.

Not-So-Quiet "Quiet Period"

Goldman Sachs agreed to pay $2 million to settle administrative proceedings for violations of, among other things, Securities Act Sections 5(b) and 5(c), arising from its work as underwriter in four international public offerings.

According to the Order, certain Goldman traders sent illegal written offers to numerous institutional customers during the "waiting period" (in the form of emails describing the public offerings with headings such as "Why You Should Take A GOOOOOOOD Look at PetroChina"). In connection with one of these four public offerings, a Goldman representative made an additional illegal offer when he spoke to the press before the registration statement was filed with the SEC (during the "pre-filing" period) to explain where the proceeds of the offering would be used.

Goldman voluntarily reported one incident of illegal written offers by the traders to the SEC staff when it discovered that the traders had sent emails to 77 hedge fund and institutional clients in the United States. The SEC’s subsequent investigation into this incident revealed that the same traders had engaged in similar conduct in connection with three previous offerings.

-Posted by Julie Hoffman

July 1, 2004

How Does a Reg FD Violation Equate To a Disclosure Controls Violation?

This is a good question posed by a number of members yesterday in the wake of the SEC's action against Siebel. The issue is that disclosure controls are supposed to be designed so that "information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms."

As Ron Mueller points out, before this action, it could have been argued perhaps that Reg FD does not require an Exchange Act filing in order to comply; but that an 8-K is only a safe harbor and the rule can be satisfied by other methods.

But in Paragraph 22 of the complaint against Siebel, the SEC sets forth its theory - that an 8-K is required under FD, and the rule says it's only not required if disclosure is made through another channel. So the SEC essentially argues that a company needs to have the disclosure controls in place to determine whether there is an FD event that requires disclosure, and determining whether to satisfy the obligation by an 8-K or press release is then only a matter of disclosure implementation.

It seems like a odd first case for disclosure controls, particularly when the SEC is alleging that the FD disclosure was an intentional disclosure. The upshot is that you should ensure that your disclosure controls deal with Reg FD and the fact that you may need to make a disclosure as well as a determination as to the method of dissemination.

FASB May Delay Options Expensing

Yesterday, it was widely reported that FASB Chair Bob Herz was acknowledging that option expensing might be delayed from the beginning of 2005 to 2006 (and the SEC's Chief Accountant was urging the delay). The rationale was that companies had their hands full this year with implementing more stringent internal controls.

Announcing the Arrival of Julie Hoffman!

I'm excited about our latest hire, Julie Hoffman who worked on the aircraft carrier when she was in Corp Fin back in the day - then worked at Latham & Watkins and Squire Sanders.

Julie will be blogging for me next week, when I am mired in Boston at the annual conference for the American Society of Corporate Secretaries. Julie can be reached at julie@thecorporatecounsel.net.