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December 3, 2009

SEC Approves NYSE Amendments to Corporate Governance Requirements

Right before Thanksgiving, the SEC approved the NYSE’s amendments to its corporate governance requirements contained in Section 303A of the NYSE Listed Company Manual. The amendments are effective January 1, 2010. We’ll be posting memos analyzing these new requirements in our “NYSE Guidance” Practice Area.

As noted by Mayer Brown, the rule changes include:

- Eliminating NYSE requirements that are similar to existing SEC requirements that are contained in Item 407 of Regulation S-K, and incorporating the applicable requirements of Item 407 into Section 303A of the NYSE Listed Company Manual. For example, replacing the reference to disclosure of categorical standards for independence with a reference to the disclosure requirements of Item 407(a) of Regulation S-K (which requires a description by specific category or type of transactions, relationships or arrangements that were considered in making an independence determination);

- Permitting more extensive use of a company’s web site, as opposed to a proxy statement or an annual report, to disclose, among other matters, the director chosen to preside at executive sessions and the method for interested parties to communicate directly with the presiding director or the non-management or independent directors as a group;

- Eliminating the requirement for a listed company to state in its proxy statement or annual report that corporate governance documents posted on its web site are available in print to any shareholder who requests them;

- Eliminating the requirement for a listed company to disclose in its annual report that its chief executive officer filed the certification regarding compliance with the NYSE’s corporate governance listing standards and that the company filed the chief executive officer and chief financial officer certifications required by the SEC;

- Requiring the chief executive officer to notify the NYSE in writing after any executive officer becomes aware of any non-compliance with NYSE corporate governance listing standards, even if not material;

- Allowing a listed company to hold regular executive sessions of independent directors as an alternative to executive sessions of non-management directors;

- Clarifying that a company must disclose a method for all interested parties, not just shareholders, to communicate their concerns to the presiding director or to the non-management or independent directors as a group;

- Requiring disclosure of a board’s determination, if applicable, that an audit committee member’s service on more than three public company audit committees would not impair that director’s ability to serve on the listed company’s audit committee, even if the company does not limit audit committee members to serving on three or fewer public company audit committees;

- Permitting disclosures to be incorporated by reference into a company’s proxy statement or annual report from another document filed with the SEC, if permitted by SEC rules; and

- Modifying transition periods for newly listed companies.

Getting Your Website Ready for XBRL

In this podcast, Diane Mueller of Just Systems explains how to get your investor relations’ website ready for XBRL, including:

- Which companies need to post their filings in XBRL filings on their IR web pages? And when?
- How exactly will companies need to display these XBRL filings on their IR web pages?
- Are there any examples of companies that have done this already?
- What should companies be doing to prepare for these new requirements?

Recently, the “XBRL Business Information Exchange Blog” noted that Citigroup had filed a model XBRL document.

The California Attorney General’s Pursuit of the Credit Rating Agencies

Last Monday, the SEC adopted rules regarding credit rating agencies – and proposed some rules too. Related to my blog on the Ohio Attorney General’s suit against the credit rating agencies, Keith Bishop of Allen Matkins sent me this information:

Back in September, the California Attorney General announced an investigation into the rating agencies “role in fueling the financial crisis.” The California AG asked the rating agencies to supply information to address the following questions:

- Whether the rating agencies failed to conduct adequate due diligence in the rating process;
- Whether the rating agencies gave high ratings to particular securities when they knew or had reason to know that high ratings were not warranted;
- Whether the rating agencies failed to comply with their own codes of conduct in rating certain securities;
- Whether the rating agencies profited from giving inaccurate ratings to particular securities;
- Whether the rating agencies made fraudulent representations concerning the quality or independence of their ratings;
- Whether the rating agencies compromised their standards and safeguards for profits;
- Whether the rating agencies’ statistical models captured the risk inherent in subprime and other risky assets and, if not, what was the rating agencies’ response; and
- Whether the rating agencies conspired with the companies whose products they rated to the detriment of investors.

Also, the California Office of Administrative Law has accepted my petition for a determination that CalPERS failed to comply with the California Administrative Procedure Act when it adopted guidelines for disclosure of placement agent arrangements. This triggers a public comment period that expires on January 11, 2010. If comments are submitted, copies must be sent simultaneously to CalPERS and me (as the petitioner). The commenter must certify to the OAL that it has sent these copies. Of course, I encourage those who have an interest in the subject to submit copies.

- Broc Romanek