The Practical Corporate & Securities Law Blog

By Broc Romanek

Go to TheCorporateCounsel.net

 
At today's open Commission meeting, the SEC adopted final rules on mandatory Edgar filing of Section 16 reports. Although not much was said at the meeting, we do know that the rules will be effective June 30th (no more paper after that!), the temporary hardship exemption is being eliminated for Section 16 reports, the filing deadline is being extended from 5:30 pm to 10 pm EST (but just for Section 16 reports; not other types of filings), and there will be a one-year temporary relief period for making Item 405 disclosures in the proxy statement for filings that are only one day late. See the SEC's press release at http://www.sec.gov/news/press/2003-51.htm.

In addition, the SEC adopted amendments to Regulation 13B2 that implement Section 303 of Sarbanes-Oxley Act. The new rules prohibit officers and directors of an issuer, and persons acting under the direction of an officer or director, from coercing, manipulating, misleading, or fraudulently influencing the auditor of the issuer's financial statements if that person knew or should have known that such action could render the financial statements materially misleading.

Over the objections of some commentators, the SEC decided to keep a "negligence" standard as proposed - although it modified the language to the more traditonal negligence language of "knows or should have known." The SEC did not adopt an "intent" standard even though commentators argued that was more consistent with Section 303 of Sarbanes-Oxley (which had language that arguably was an intent standard - "for the purpose of").

Chairman Donaldson has announced his primary leadership team - none of whom have overwhelming experience with the securities laws. Laura Cox has been named Managing Executive for External Affairs, to deal with legislative and public affairs. She currently serves as Deputy Assistant Secretary for Banking and Finance in the Office of Legislative Affairs at the Treasury Department. Prior to joining the Treasury, Cox was Vice President for Strategic Policy Communications, Government and Regulatory Affairs at Instinet Corporation.

Peter Derby has been named Managing Executive for Operations, to assist the Chairman with the increase in the SEC's operational effectiveness and responsiveness while considering administrative, operational and management issues as the Commission grows. He had served as an elected member of the Board of Trustees of the Village of Irvington-on-Hudson, New York, since 2002. Derby spent a decade in Russia, where he participated in the founding of DialogBank, the first private Russian bank to receive an international banking license.

Patrick Von Bargen has been named Managing Executive for Policy and Staff, to handle the promulgation and enforcement of policies, regulations, rules and procedures. He will be Chairman Donaldson's primary liaison with the other Commissioners' offices and conduct the management of the Chairman's personal office. Prior to this, he was Executive Director of the National Center for Regional Innovation and Competitiveness and Vice President of the Council on Competitiveness, a public policy organization of major CEO's, university presidents and labor leaders. He had served as Chief of Staff for United States Senator Jeff Bingaman (D-NM) from 1989 to 1999.



posted by broc at 3:02 PM

 
Yesterday, the PCAOB voted to require foreign auditors who audit companies that sell securities in the US to register with it (the SEC still must approve these rules before they become effective). This was a controversial action after intense lobbying by overseas regulators, who argued that accountants should abide by rules set by their own countries and noted conflicts with their country's privacy laws. The PCOAB still must address the controversial issue of whether foreign auditors will be subject to the Board's inspections and discipline.

In response to the 40 comment letters received, the PCAOB agreed to give foreign auditors an additional 6months to register - until April 2004. It also agreed that foreign auditors would not have to provide certain kinds of information if they include copies of the conflicting privacy law, legal opinions on the issue, and a certification that they tried and failed to get waivers to provide the information in question.

In addition, the PCAOB adopted a $68 million 2003 budget, announcing that it would hire as many as 200 accountants and support staffers by the end of the year and would open a New York office. Companies will receive invoices for support fees based on this budget sometime in May.

For TheCorporateCounsel.net subscribers, one of our finest features is the Rule 144 Q&A Forum with Bob Barron, where Bob and Jesse Brill can answer your Rule 144 questions - see http://www.thecorporatecounsel.net/member/QA2/message.asp?BoardID=1654.

posted by broc at 8:20 AM

 
The SEC has delayed the timetable for its new Section 16 website to go "live." It was supposed to occur over the weekend - but is now delayed to an undetermined date. See the SEC's notice at http://www.sec.gov/info/edgar/ednews/rel85delay.htm.

The SEC's open meeting tommorrow has been pushed back from 10 am to 1 pm.

Yesterday, FASB unanimously endorsed the expensing of stock options - now it has to determine how to value them, which it hopes to do sometime next year. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A17602-2003Apr22.html.

For TheCorporateCounsel.net subscribers, we have posted a more recent version of the SEC Telephone Directory (September 2002 edition) at http://www.thecorporatecounsel.net/member/SEC/SEC2002PhoneBook.pdf.
posted by broc at 9:54 AM

 
Everyone is still waiting to see if the SEC staff issues interpretative guidance on Regulation G (and how far it goes beyond addressing transitional issues). We are hearing that the staff still intends to issue guidance - but they have been saying that for a few weeks. In our "Regulation G/Earnings Portal," we have links to over 100 Item 12 8-Ks - see http://www.thecorporatecounsel.net/member/FAQ/RegulationG/index.htm#2.

The PCAOB is holding a meeting tommorrow to adopt rules regarding registration of foreign audit firms - and on Thursday, it makes its case to the SEC for it to be recognized as an official body. At that point, its interim auditing standards would be effective (and displace all existing standards).

For TheCorporateCounsel.net, we have posted an interview with Andrew Humphrey of Faegre & Benson on the impact of SOX on private companies - see http://www.thecorporatecounsel.net/member/InsideTrack/04_21_03_Humphrey.htm.
posted by broc at 10:48 AM