November 30, 2004

45-Day Internal Controls Implementation Delay for Smaller Accelerated Filers

Today, the SEC issued an exemptive order to grant certain accelerated filers an additional 45 days to include their 404 report (and the related auditor attestation). The exemptive order applies to an accelerated filer that has a fiscal year ending between and including November 15, 2004 and February 28, 2005, and that had a public equity float of less than $700 million at the end of its second fiscal quarter in 2004.

The PCAOB also met today to adopt a temporary rule, subject to SEC approval, that would permit the delayed filing of the auditor's attestation consistent with the SEC's exemptive order.

Securities Act Reform Practice Area

In preparation for tomorrow's webcast - "The Overhaul: '33 Act Reform" - we have developed a Securities Act Reform Practice Area devoted to the '33 Act reform proposal - including a Table of Contents from Shearman & Sterling that helps navigate the 389-page proposing release. In the Practice Area, we also have posted the 97-page copy of the release from the Federal Register.

The New SEC Phone Book is Here!

We have just posted the new edition of the "SEC Phone Directory" - not available anywhere else on the Web! The "SEC Phone Directory" is available from home page under the "SEC Rules/Guidance" button.

Moody's Ratings of Internal Control Disclosures

In the wake of SEC Chief Accountant's Donald Nicolaisen's speech in early October about internal controls - during which the Chief Accountant noted that Moody's would be analyzing internal control disclosures - a number of members have asked me about how Moody's intends to divide material weaknesses into two degrees of severity.

The first category - "Category A" - of material weaknesses concern control problems with specific transaction-level processes such as tax accrual, bad-debt reserves, and impairment charges. These require attention, but external auditors can effectively "audit around" them and still deliver an unqualified opinion of the financial statements.

The second category - "Category B" - of material weaknesses, however, cannot be circumvented by auditors because they represent "company level" control problems, such as ineffective control environments, audit committees, and financial reporting processes, encompassing everything from a lax code of conduct, to feeble fraud-prevention guidelines, to poor attempts at assigning executive responsibility.

Moody's does not intend to publicize the categorization of internal control disclosures for any particular company. However, Moody's has made clear the process it will be using (which is described in this Special Comment in our Internal Controls Practice Area) - and if a company's rating is adjusted due to material weakness disclosures, the rationale for the downgrade would be disclosed at that time.

November 29, 2004

PCAOB to Meet on Internal Controls

In a vaguely worded announcement, the PCAOB will meet tomorrow morning on internal controls. My guess is they will vote on delaying implementation for smaller companies - a topic covered in a feature article in Saturday's Washington Post.

8-K Trends: Part I

With last Tuesday's release of FAQs by the SEC Staff, it might be a good time to take stock in how many 8-Ks are being filed. The SEC predicted each company would, on average, file an additional five 8-Ks per year – resulting in 59,000 additional 8-K filings from the nearly 12,000 companies that file them, which prediction is about double the rate of filings before the new rules were adopted. Notably, the SEC originally estimated that the new rules would cause two new 8-Ks per year in the proposing release – but bumped this number up substantially in the adopting release.

But the SEC probably didn't bump up their estimate enough. I don't have actual statistics - but I have looked at quite a few companies that appear to be averaging the filing of an 8-K per week. And it doesn't appear to depend on the size of the company - plenty of smaller companies are filing 8-Ks at this clip. For example, look at this filing stream for the Williams Companies - I count 14 8-Ks filed since August 23rd. Of course, many companies are not filing at this rate and actual stats might prove closer to the SEC's final estimate.

The New Obstruction of Justice

Here is a rehash of an interesting blog from Bruce Carton of the Securities Litigation Watch: Prosecutors requested a fall 2005 trial date yesterday for Sanjay Kumar, former CEO of Computer Associates International, who is charged with obstruction of justice, conspiracy and lying to law enforcement officers in a multibillion-dollar financial fraud. The obstruction of justice charge is particularly notable, and perhaps novel, because it relates to statements Kumar made not to any government official but rather to the company's outside counsel (Wachtell Lipton), which was conducting an internal investigation of the matter.

According to paragraph 53 of the indictment filed against Kumar:

"Shortly after being retained in February 2002, the Company’s Law Firm met with the defendant SANJAY KUMAR and other CA executives in order to inquire into their knowledge of the practices that were the subject of the Government Investigations. During these meetings, KUMAR and others did not disclose, falsely denied and otherwise concealed the existence of the 35-day month practice. Moreover, KUMAR and others concocted and presented to the Company’s Law Firm an assortment of false justifications, the purpose of which was to support their false denials of the 35-day month practice. KUMAR and others knew, and in fact intended, that the Company’s Law Firm would present these false justifications to the United States Attorney’s Office, the SEC and the FBI so as to obstruct and impeded the Government Investigations."

Four former executives of the company, including its chief financial officer and general counsel, have reportedly already pleaded guilty to the charge of obstructing justice by lying to the lawyers from Wachtell. According to this article in the National Post, this new form of obstruction was the subject of discussion recently by defense attorneys John Keker and Theodore Wells, Jr. at PLI's Securities Institute conference:

"You better understand how broad these obstruction statutes are -- and how risky for both you and your clients," Mr. Keker told the audience of securities lawyers.

He pointed to the case against Computer Associates International, in which the three executives -- including the general counsel -- pleaded guilty to obstruction of justice for lying to their own lawyers at Wachtell Lipton Rosen & Katz, who were conducting an internal investigation.

Government prosecutors said the general counsel hid some information and gave incorrect information to Wachtell, even though he knew the findings were being passed along to the government.

"What's really scary here is some prosecutors are now taking the position that if an employee makes a false statement to the outside lawyer doing the internal investigation, that can constitute obstruction based on the theory that the outside lawyer is doing the investigation with the purpose of giving that information to the government," said Mr. Wells, who, like Mr. Keker, is consistently ranked as one of America's leading white-collar defence lawyers.

"So now we've moved from a situation where you're not supposed to make false statements to government agents, which at least people understand, to a world where if you make a false statement to the lawyer from Skadden Arps or Cravath, that in and of itself may constitute an act of obstruction."

November 23, 2004

SEC Staff Issues 8-K FAQs

The SEC Staff has issued the long-awaited 8-K FAQs! There are 30 FAQs - plus an interesting introduction about the purpose of the 8-K rules and a warning to ensure that companies have implemented appropriate disclosure controls and procedures to handle the new rules.

PCAOB Issues More Internal Control FAQs

Yesterday, the PCAOB issued FAQs 30-36 to assist in the implementation of PCAOB Auditing Standard No. 2. Among the topics addressed in the new FAQs are audits of multi-national companies that involve the work of more than one auditor; audits of federally insured financial institutions; the timing of auditors' communications to management and audit committees regarding material weaknesses or significant deficiencies in internal control; evaluations of deficiencies in information technology general controls; and the ability of outside auditors to use internal auditors to provide direct assistance in the audit of internal control over financial reporting.

Amendment of California's Corporation Disclosure Act

The original California Corporate Disclosure Act was adopted in the aftermath of Sarbanes-Oxley and required public companies doing business in California to file various corporate data with the California Secretary of State's office. The intent of the Act was to provide people with access to key public information without having to scour voluminous SEC filings. Unfortunately, the original Act's disclosure requirements exceeded those required by the SEC and required the expenditure of additional resources by companies complying with the Act.

Governor Schwarzenegger recently approved a law amending California's Corporation Disclosure Act. Regrettably, this Act continues to diverge from SEC disclosure requirements in some material respects and California remains the only state in the nation to impose such a duplicative and burdensome filing requirement upon its businesses - and the Act still applies both to public companies incorporated in California and to companies that are simply qualified to do business in California. Learn how the Act has changed in my interview with Jason Slater on Changes to California's Corporate Disclosure Act.

And Even More Notes from the PLI Securities Law Institute

Here is our last batch of notes from PLI's Securities Law Institute from the "SEC Review Developments" and "Follow-Up On Recent Disclosure Initiatives" panels.

November 22, 2004

Latest SEC Thinking on Internal Controls

On Saturday, at a panel from the ABA's Committee of Federal Regulation of Securities' Fall Meeting, Corp Fin Director Alan Beller stated that the SEC Staff is considering taking action regarding the ability of accelerated filers to comply with the internal controls deadline - and is thinking of whether a category of smaller accelerated filers should be given more time.

Alan expressed the view that to the extent that a company has financials that the company stands behind - but the company cannot complete its 404 report timely to include in the 10-K - he would prefer that the company file the 10-K without the 404 report and auditor's attestation, so at least there is the 10-K information available to investors (but the 10-K would nonetheless be considered deficient). Alan stated that SEC Staff is considering whether such a company would be deemed deficient in its filing obligations for purposes of Form S-3 eligibility. We should hear relatively shortly from the SEC Staff whether they will take such action.

More PLI Notes

Speaking of internal controls, we have posted notes from PLI's Securities Law Institute from the internal controls panel as well as the popular Q&A Picnic with Alan Beller.

Reporting Up and Shopping Around for Legal Advice

Our February e-minders described an example of reporting up at TV Azteca (because the company's Chair didn't want to disclose one of his related party transactions) - yesterday, Pat McGheehan wrote a column in the NY Times with many more details, illustrating how TV Azteca continued to shop around for the specific legal advice that they desired.

[Personal note- took the kids to SpongeBob Squarepants this weekend; took a pass on "Seed of Chucky." On the NBA brawl, I agree completely with Michael Wilbon's column.]

November 18, 2004

Phase-In; Phase-Out

Yesterday, the SEC adopted its proposed release to postpone the final phase-in period for acceleration of periodic report deadlines that apply to "accelerated filers." Under the amended rules, the deadline for accelerated filers will remain at 75 days after year end for annual reports and at 40 days after quarter end for quarterly reports. The accelerated filing phase-in will resume for reports filed for fiscal years ending on or after Dec. 15, 2005, when an accelerated filer will have to file its annual report within 60 days after year end and file its quarterly reports within 35 days after quarter end.

The SEC said that the primary purpose of the postponement is to allow additional time and opportunity for accelerated filers and their auditors to focus their efforts on complying with new requirements regarding internal control over financial reporting that were mandated by Section 404 of SOX.

The PCAOB is Making Its List

At its meeting with its Standing Advisory Group yesterday, the PCAOB revealed an ambitious agenda for developing auditing standards in 2005.

The topics include:

• Auditor independence and tax services.
• Detection of and reporting on financial fraud.
• The relative authority of auditing guidance in the Board’s interim auditing standards.
• Communications with audit committees.
• Engagement quality review, also known as concurring or second partner review.
• Auditing related-party transactions.
• Consistency of application of generally accepted accounting principles.
• Use of confirmations in an audit.
• Auditing fair value measurements and disclosures.
• Elements of quality control for registered firms.
• Assessing audit risk.

The Staff of the PCAOB acknowledged that it may not be possible to address all of the above issues in 2005, so it may need to focus on the topics with the highest priority.

-Posted by Julie Hoffman

November 17, 2004

Notes from PLI Securities Law Institute

We have posted notes from three panels - New 8-K Rules, MD&A, Accounting Disclosures and Issues - from last week's PLI conference. More to come.

Job Descriptions - Chief Compliance Officer

Many companies are in the process of hiring a chief compliance officer - so we have posted a number of CCO job descriptions, available from our Sample Document Library or Compliance Training Practice Area.

Understanding The Corporate Library

To get a better understanding for how The Corporate Library administers its governance ratings, here is an interview with Paul Hodgson on Role of Compensation on Governance Ratings.

November 16, 2004

Analysis of Auditor Engagement Letters

I have posted 12 questions that audit committees should consider asking themselves when they negotiate this year's engagement letter with their independent auditor - as well as analysis of some of the new provisions that auditors are sticking in their letters (all of this resides in our "Audit Committees" Practice Area).

More important now than in the past, audit committees should attempt to negotiate these letters as auditors are attempting to pass off as much potential liability as possible. As indicated in the analysis, some audit committees are finding success in pushing back in certain areas. If you have had a different experience with your auditor than what is described in this analysis, please let me know.

More Sample 404 Management Reports

In our Internal Controls Practice Area, we continue to post additional samples of 404 Management Reports - both with material weaknesses identified and without.

Why Would the SEC Deny the Withdrawal of a Registration Statement?

Proving that you learn something new each day, I couldn't figure out why the SEC would bring this enforcement action to deny withdrawal of a registration statement. I presumed that even if a company withdrew and there had been fraud, the SEC could still act because they have jurisdiction if the fraud has occurred - or is likely - to reoccur.

But I learned that the SEC takes action to deny withdrawal once in a blue moon - because if the company withdraws before they sell anything, the SEC apparently loses jurisdiction (although don't ask me how - got this answer from an old timer and I would think 10b-5 and Section 5 could help against a fraudulent offer). Gotta get those fraudulent red herrings!

November 15, 2004

The SEC Speaks at PLI

During last week's PLI Securities Institute, members of the SEC Staff gave an update on the status of some pressing matters, including:

- Corp Fin Associate Director Paula Dubberly indicated that written guidance on the new 8-K rules would be forthcoming shortly, possibly this week

- Corp Fin Director Alan Beller said that the SEC would act on its outstanding proposal to delay the accelerated filer deadline for periodic reports "sooner rather than later"

- Alan closed his Picnic Q&A by strongly urging the audience to read his speech about compensation disclosures that he delivered at our 10/20 conference (in fact, Eliot Spitzer wrapped up his keynote speech by admonishing investors for not taking a stronger stance in the comp area)

- Chief Accountant Donald Nicolaisen vaguely addressed the potential to delay the 404 deadline further by noting the SEC might consider something in a few weeks (but wasn't clear what was being considered and definitely didn't promise anything)

During the course of this week, we will be posting more detailed notes from this conference on

Deferred Compensation: Ten Things You Need to Do By Year-End!

On Wednesday, the NASPP is holding a webcast - "Deferred Compensation Legislation: Ten Things You Need to Do By Year-End!" - that is critical for anyone that has any type of deferred compensation arrangements as the window of opportunity to take action in the wake of the new JOBS Act is dwindling.

More on the 8-K Rules

I recently spoke at the ASCS Chicago Annual Chapter meeting and heard a great panel of in-house lawyers providing 8-K tips - and they have reprised their tips in this interview!

November 10, 2004

PLI Conference in NYC

Julie Hoffman and I will be manning our booth in NYC over the rest of the week at PLI's annual securities law institute. Come on by and say hello!

By the way, here are some quotes from me in the context of the SEC's proposal to have the SROs improve their own governance.

Survey on Code of Ethics for Directors

We have posted a Quick Survey on codes of ethics for directors, regarding whether companies have a separate code for directors - and why - and more.

Here are the final results from our past survey on earnings releases and 10-Qs.

The Launch of

We have launched a new site for M&A practitioners - The key resources on this new site will be a series of regular webcasts - as well as practical contributions from a highly regarded advisory board.

The first webcast deals with the "Impact of Internal Controls on M&A" - featuring the SEC's Deputy Chief Accountant Andy Bailey, John Huber of Latham & Watkins, Teri Iannaconi of KPMG, and Mary Korby and Gil Friedlander of Weil Gotshal. We also have a "30 Nuggets" webcast scheduled with some of the sharpest and wittest M&A legal minds in the biz.

Learn more about what is on the site at Ten Good Reasons to Try Try a no-risk trial and take advantage of the low introductory rates.

November 9, 2004

Wild Proxy Season Transcript is Up!

We have posted the transcript from last week's webcast, "Another Wild Proxy Season? Forecast for 2005."

Shareholder Proposals for Shareholder Access

With the SEC's shareholder access proposal stalled, a coalition of CalPERS, NY State Common Retirement Fund, AFSCME and Illinois State Board of Investment have submitted shareholder proposals to Walt Disney and Halliburton to give shareholders the right to nominate up to two directors. Last year, AFSCME submitted a similar proposal to Marsh & McLennan, but the proposal was withdrawn after the company appointed a former federal prosecutor to its board.

The Disney shareholder proposal asks if the company would become subject to the shareholder right of access included in the SEC’s proposed proxy access Rule 14a-11, which would allow shareholder groups that have held more than 5% of Disney’s outstanding common shares for more than two years to nominate up to a specified number of candidates who are independent from both the nominating shareholder and from Disney for election to the board. In the case of Disney, the rule would allow a shareholder to nominate up to 2 directors because Disney’s board currently has 11 members.

It should be noted that the shareholder proposal at Disney could be withdrawn as the company asked for names of potential independent directors to be added to the board - and is now considering the candidates submitted by the coalition.

Free Email Alerts for New Cases

There is a new free weekly service - Federal Filings Alert - that reports on new cases filed in U.S. district courts in selected areas of the law including antitrust, copyright, equal employment, products liability - but unfortunately not in corporate & securities.

November 8, 2004

QLCC Survey

In our "Qualified Legal Compliance Committees" Practice Area, we have posted a survey from Skadden Arps regarding QLCCs. The survey canvassed the disclosure of nearly 7,000 companies and found that 2% have established a QLCC (plus other factoids listed in the survey).

Pay Madness Even in Montana

This article from the Billings Gazette describes how employees at Blue Cross Blue Shield in Montana are ashamed to work there because the CEO gets paid so much.

This illustrates what is at the heart of executive compensation - it sets the tone for a company's culture. If a CEO is receiving all types of lavish perks, how can anyone be surprised when rank and file employees make inappropriate decisions when a gray issue arises? For most of us, our behavior is principally driven by our environment - and in today's society, the bling is king.

Six Degrees of Jack Nicholson

Don't ask, but in a prior life I liked to tell people that Jack Nicholson was my uncle. Uncle Jack stories were a big hit. Here is one from the family album.


November 5, 2004

Alan Beller's Compensation Disclosure Speech Is Up!

Yesterday, the SEC posted Alan Beller's outstanding speech from our October 20th conference - and if you are involved with proxy disclosures, it is must reading. On, the video archive of Alan delivering the speech is still available, as well as the Q&A afterwards that flushes out some of Alan's comments.

Right now, we are offering a special catch-up offer to those that missed the conference - this offer includes access to for 2005 at a special reduced rate. This offer expires on December 15th.

SEC Slams Wachovia for Merger Proxy Disclosure Violations

Yesterday, the SEC's Enforcement Division settled an action with Wachovia in connection with its 2001 merger with First Union. The SEC alleged that Wachovia failed to disclose - in quarterly reports and a joint proxy statement-prospectus - that it had purchased $500 million of First Union stock during the period when there were competing bids for the target.

In levying a $37 million penalty - which is pretty hefty for a disclosure violation - the SEC singled out Wachovia's lack of cooperation during the SEC's investigation.

SEC Approves NYSE's Revised Governance Standards

Yesterday, the SEC approved the NYSE's revised proposed changes to its governance listing standards. Among other modifications, the amended standards change the independence 'bright-line' standard that addresses a director's relationship with the listed company's auditor. The look-back provision was modified to impact only individuals who actually worked on the company's audit while employed by the audit firm - but the standard will now disqualify any director who has an immediate family member who is a current partner at the audit firm. Previously, a director was disqualified only if the immediate family member was with the audit firm in a "professional capacity."

Since there may be directors who were independent under the previous
standard - but will not be independent under the revised standard - the
rule provides a transition period: companies will have until their first annual meeting after June 30, 2005 to remedy any independence issue resulting from this change. If a director's independence status changes, the company must file an Interim Written Affirmation promptly - utilizing the transition period will not mean that a company is out of compliance, but the company must indicate reliance on the transition period on Exhibit A or E, as appropriate.

We have begun posting law firm memos related to these changes in Section D.13 of our Sarbanes-Oxley Law Firm Memos.

November 4, 2004

'33 Act Proposing Release Available

Late yesterday, the SEC posted the hefty proposing release for '33 Act Reform. Comment period ends 75 days after the release is published in the Federal Register (so the deadline likely will be sometime in mid-January).

Responding to Audit Inquiry Letters

As the nature of the auditor-issuer relationship evolves under the pressures of a new regulatory environment, there has been much discussion about what audit responses should look like - see this interview with Dean Hanley on Responding to Audit Inquiry Letters to learn more.

The Sale of Personal Intangible Assets

I've been trying to go light on compensation issues to give you - and me - a break from the madness, but I can't help myself as I got riled up guest-teaching at Georgetown's LLM corporate governance class last night. This past Sunday, Gretchen Morgenson wrote a column in the NY Times about how Audiovox sold some assets this summer, at which time their board revised the definition of "change of control" under an LTIP so that the asset sale would constitute a triggering event and pay two executives a million or two apiece. Here is the section of the proxy statement describing this action.

But the crazy thing is that the company also paid $16 million to one of these executives (who jumped over to the acquiror of the assets) in exchange for his "personally held intangibles," which apparently consists of his personal contact information, personal and business relationships, "personal know-how" and trade names/patentable assets. Here is a filed copy of the Personally Held Intangibles Purchase Agreement.

I agree with Gretchen; I just don't understand how all of these intangibles can accrue to an executive - who got paid quite nicely by the company while he acquired these intangibles - rather than the company. Are we all just independent contractors for the firm we work for? Someone please take me off the ledge and explain the way of the world to me...

November 3, 2004

No Chaperone is Necessary!

Just reading over the FAQs that Market Reg issued yesterday about the Global Research Settlement - and can't help but chuckle over the answers that address situations where a chaperone might be necessary. And you wonder why investors have lost confidence in our markets.

For example, FAQ 28 deals with "Can both Research and Investment Banking personnel participate in social and athletic events organized in connection with a conference?" and the answer gets into influencing of seating arrangements.

Friendly Advice on Nasdaq Staff Reviews

Over the past year or so, I have occasionally blogged when the Nasdaq has updated its PDF of formal interpretative letters (the Nasdaq keeps all of their interpretative letters combined into one PDF - an awkward format). The Nasdaq will issue a letter to issuers for a fee of at least $2,000. In August this year, Nasdaq posted a large number of helpful new interpretative letters that address a number of director independence and shareholder approval issues.

Suzanne Rothwell of Skadden Arps reminds us that it remains important that - regardless of whether a Nasdaq interpretative letter is on point and indicates that shareholder approval is not required in a situation - Nasdaq companies and their counsel should contact Nasdaq staff for at least an informal review of any situation involving an issuance of securities where it is believed that shareholder approval is unnecessary.

The same advice applies in the case of director independence issues. Since Nasdaq's interpretative letters are entirely fact-specific, any change to the facts (some of which may not be reflected in the the applicable interpretative letter) may change the outcome.

The Passing of Milton Cohen

On October 30th, the legendary Milton Cohen passed away. Mr. Cohen was one of the seminal figures in the history of the SEC, from his start at the Commission in 1935 - just after its founding - to when he became Corp Fin Director in 1942.

He returned in 1961 to head a group that published a 6-volume set, which became the cornerstone for the integrated disclosure system that was eventually adopted. He then published one of the most influential law review pieces ever - “Truth in Securities Revisited” - which set forth the principles that underpin the '33 Act reform that was proposed just last week. The SEC has posted a statement in his honor.

November 2, 2004

Warning Letters Regarding Internal Controls Status

Each of the Big Four auditing firms is in the process of notifying a significant number of their clients that the auditor believes the company is significantly behind schedule on their 404 work, and unless appropriate action is taken promptly, the auditor believes management will not be able to complete its assessment before the reporting deadline, or if completed, management's assessment will likely not be completed in sufficient time for the auditor to complete its assessment.

It appears that two firms are providing warnings orally (and then tracking them internally) and two firms are providing warnings in writing. The most severe warning described above is known as a "red letter" or a "category 3 letter," depending on the firm’s nomenclature. Based on anecdotal evidence, my guess is that 20-30% of companies are receiving red letters.

I hear that a much greater number of companies are receiving a "yellow letter" or "category 2 letter," which still is a warning but less severe than a red letter. (Unfortunately, I have even heard from a few companies that they have been dropped by their Big 4 auditor due to "staffing issues" related to 404; another fallout for smaller companies as a result of Sarbanes-Oxley – see this press release from one company that got dropped.)

For the most part, those companies not receiving notification apparently are deemed to be on "green letter" or "category 1 letter" status - however, at least one of the Big 4 is providing letters to companies with this status. These companies have been determined to be "on track" to complete their 404 work on time.

With so many companies receiving written warnings from their auditor, the question remains – "what do I need to disclose if I receive a letter?" The possible answers - and sample disclosures - are in this new Disclosure about Internal Controls Status page that I have posted in our "Internal Controls Practice Area."

New Competition for ISS and Glass Lewis

As we gear up for tomorrow's webcast - "Another Wild Proxy Season? Forecast for 2005" - featuring Pat McGurn of ISS, Greg Taxin of Glass Lewis and David Drake of Georgeson - you should be aware that a new proxy advice service has been born. (Don't forget to print off the Course Materials before tomorrow's webcast!)

Learn more about PROXY Governance - which is a subsidiary of FolioFn, the company founded by former SEC Commissioner Steve Wallman - in my interview with Jim Melican on a New Kind of Proxy Advisory and Voting Service.

For Small Business Fans Only

Yesterday, the SEC posted a transcript of its Annual Government-Business Forum on Small Business Capital Formation, which was held back in September.

November 1, 2004

8-K Transcript is Up!

We have posted the long-awaited transcript from our webcast, "Reality Bites: More on the New 8-K Rules." All of the information from this webcast is still relevant as there has been no written guidance from the SEC Staff since then.

And the November Eminders is Up!

We have posted our November issue of Eminders!

NYSE Posts Amendments to Its Corporate Governance Standards

In early September, the SEC proposed changes to the NYSE governance listing standards. On Thursday, the NYSE posted an amendment to its standards after receiving comments - including some from members of Congress.

In the revised standards, the NYSE has withdrawn its proposed changes to the definition of immediate family member relating to a a company's auditor that would have been part of the bright line independence test - but it has kept the other proposed changes to the bright line test that focus on specific relationships which would impair the independence of a director, such as individuals who formerly were affiliated with the auditor only if those individuals actually worked on the company's audit.

The SEC still needs to adopt these revised standards before they are applicable to listed companies, which adoption is expected this week. The NYSE is giving companies until their first annual meeting after January 1, 2005 to replace a director who was independent under the existing standards, but isn't under the revised standard.