The Practical Corporate & Securities Law Blog

By Broc Romanek

Go to TheCorporateCounsel.net

 
Gearing up for its official recognition as an oversight entity, the PCAOB has been very busy. On Friday, it adopted final rules for funding, including the support fees that companies will pay (http://www.pcaobus.org/pcaob1/Rules/Release2003-003.pdf) - and it proposed rules regarding setting auditing standards (http://www.pcaobus.org/pcaob1/Rules/Release2003-005.pdf). In the meantime, the Oversight Board has established some interim auditing standards based on existing standards (http://www.pcaobus.org/pcaob1/Rules/Release2003-006.pdf).

In addition, the PCAOB has hired long-time investor advocate, Douglas Carmichael, as Chief Auditor. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A48432-2003Apr17.html.

This Thursday, the SEC is having an open Commission meeting to consider final rules under Section 303 of Sarbanes-Oxley regarding improper influence of auditors - and under Section 403 regarding mandatory Edgar filing of Section 16 reports.
posted by broc at 9:35 AM

 
Anyone who has filed a 1933 Act registration statement in the past year or two knows that the staff has been reviewing and commenting on Exhibit 5 opinions. The ABA Federal Regulation of Securities Committee established a task force last year to review Exhibit 5 opinion practice and attempt to work with the staff to develop practices and forms of opinion that satisfy the staff and don't give heartburn to opining counsel. We hear that the dialogue between the staff and the ABA is proceeding productively. When the ABA report is finalized, we'll post it here.

As we posted on April 9, Senator Carl Levin attached an amendment to a Senate bill (relating to charitable giving) seeking to give the SEC fining authority. That bill passed the Senate by a vote of 95 to 5, and would allow the SEC to impose fines on lawyers who advise public companies in connection with filings that violate the federal securities laws. Critics of the bill say it will chill communications between lawyers and their public company clients and make lawyers more conservative in advising companies regarding their disclosure obligations.
posted by broc at 12:31 PM

 
The search appears to be over. The Commission announced today that William J. McDonough is its nominee to become the new Chairperson of the five-member Public Company Accounting Oversight Board. (The Commission said it will not "formally" appoint McDonough until a thorough background check has been performed.) McDonough chas been the president of the Federal Reserve Bank of New York since 1993, but will resign that position to assume his position as chairperson of the PCAOB. The Commission's press release announcing McDonough's nomination is available at http://www.sec.gov/news/press/2003-48.htm.
posted by broc at 11:52 PM

 
The Commission declined today to review the staff's position that a registrant may exclude from its proxy statement a shareholder proposal seeking to allow any beneficial owner of 3% or more of the outstanding stock to propose a board nominee for inclusion in the registrant's proxy statement. The American Federation of State, County and Municipal Employees had requested that the Commission reverse the staff's position (expressed in a no-action letter to Citigroup) that such a proposal relates to an election of directors and therefore is excludable under Rule 14a-8(i)(8). At the same time, the Commission asked the staff for a report on all rules and intepretations relating to the election of directors and recommendations for improving shareholder participation. The report is to be based on the input of all interested constituencies, and is due July 15. The Commission's press release is available at http://www.sec.gov/news/press/2003-46.htm.

This is a hot governance topic, and at least one Commissioner has expressed sympathy for AFSCME's position in recent speeches.

If shareholder proponents win the right to include alternative nominees in the registrant's proxy statement, the nature of election contests will change dramatically. So, expect this issue to receive major shareholder and media attention.
posted by broc at 9:09 PM