The Practical Corporate & Securities Law Blog

By Broc Romanek

Go to TheCorporateCounsel.net

 
The Google Dutch Auction

One of the more fascinating stories of the year is Google's decision to forego traditional distribution methods for its IPO and utilize a Dutch Auction process instead. Learn more about Dutch Auctions from my interview with Maria Gabriela Bianchini on Google's Dutch Auction.

PCAOB Adopts Document Retention and Non-US Review Standards

At yesterday's meeting, the PCAOB adopted Auditing Standard No. 3 that require auditors to retain their records for seven years - and in sufficient detail so that an experienced auditor with no previous connection to the engagement could read them and understand clearly what work had been performed, who performed the work and why the auditor reached its conclusions.

In addition, the PCAOB adopted rules that call for the PCAOB to take into account the rigor and independence of non-US oversight groups when deciding how to review the work of non-US accountants who have audit clients with stock trading in U.S. markets. To date, 103 foreign audit firms in 42 countries have registered with the PCAOB, with nearly 250 more in the pipeline.

Executive Compensation Trends

You will soon be getting an earful from us on executive compensation in the next issue of The Corporate Counsel. But if you can't wait, I suggest you check out this IOMA webinar being held next Tuesday featuring Dick Wagner, an experienced compensation consultant who isn't afraid to speak his mind.

Dick just joined an executive compensation task force that I have been helping set up in connection with our October 20th major compensation conference. More about that later...
posted by broc at 9:32 AM

 
302 CEO/CFO Certifications in Amended Filings

It looks like Corp Fin's position on 302 certifications for amended filings has evolved a bit. Now, if an amended filing contains an amendment to the Reg. S-K Item 307 & 308 disclosure about the company's evaluation of disclosure controls and procedures and internal controls for financial reporting (and accordingly, the paragraph 4 certifications regarding controls and procedures are made), the CEO/CFO must also make the paragraph 5 certifications. In other words, paragraphs 4 and 5 go together when it comes to amended filings.

We have added a decision tree for 302 certifications in amended filings to our "CEO/CFO Certifications" Practice Area.

SEC Cleaning House Re: '34 Act Filers?

Yesterday, 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 SEC also temporarily suspended trading in the securities of 26 of these companies).

This really is not newsworthy, except that it's the first time that the SEC has brought this type of action. Even though the SEC appropriately is going after these shell companies to prevent market manipulation, I couldn't help but think how this will help reduce Corp Fin's review burden under Section 408 of Sarbanes-Oxley (i.e. each '34 Act filer must be reviewed once every 3 years), even though 31 companies is merely a drop in the bucket...


posted by broc at 7:08 AM

 
More Auditor Independence Woes for E&Y

Yesterday, Korn/Ferry International filed an 8-K reporting that it has been advised that the SEC staff is conducting an informal inquiry into independence issues arising out of payments made by Ernst & Young, the company's auditors, to a company affiliated with a former director of the company for marketing services.

The Wall Street Journal reports today that Best Buy and TeleTech Holdings also are subject to the same SEC inquiry, as the same consultant sits on their boards and also use E&Y as their auditor (but these two companies have not yet filed a 8-K regarding the investigation). The WSJ points out the major difference between this inquiry and the recent PeopleSoft one (which led to E&Y being barred from obtaining new public clients for 6 months) - this new investigation involves only $377,000 for the director's marketing consulting; the PeopleSoft matter involved $500 million.

Apparently the provision on auditor independence that the Staff is looking at is Rule 2-01(c)(3) of Regulation S-X. Rule 2-01(c) sets forth a non-exclusive specification of circumstances inconsistent with auditor independence:

"3. Business relationships. An accountant is not independent if, at any point during the audit and professional engagement period, the accounting firm or any covered person in the firm has any direct or material indirect business relationship with an audit client, or with persons associated with the audit client in a decision-making capacity, such as an audit client's officers, directors, or substantial stockholders. The relationships described in this paragraph do not include a relationship in which the accounting firm or covered person in the firm provides professional services to an audit client or is a consumer in the ordinary course of business."

According to the 8-K, E&Y conducted an internal review and confirmed its independence to Korn/Ferry - and based on that confirmation and its current knowledge, Korn/Ferry believes that E&Y's independence was not impaired. Thanks to eagle eye Mike Holliday for helping out on this one!

Disclosure about SalesForce.com's IPO Cooling Off Period

On May 25th, I blogged about how SalesForce.com's IPO was delayed due to gun-jumping concerns. The company has filed an amended S-1 with a risk factor related to this potential gun-jumping and we have added it to our laundry list of "Risk Factors Regarding Gun-Jumping" in our "Disclosure Samples & Analysis" Practice Area. So far, the cooling off period appears to be nearly 4 weeks and counting...but some of this period might be attributed to the company's own timetable for going to market.

No EDGAR on Friday

Out of respect for President Reagan, the SEC will be closed this Friday - and EDGAR will not be accepting filings.


posted by broc at 7:21 AM

 
More on the Berlin-Bremen Exchange

Dan Mahoney of Rogers & Theobald LLP reports that he has had success getting his clients delisted from the Berlin-Bremen Exchange after sending a communcation to Julia Hädicke at Berliner Freiverkehr. Her contact information is: (Aktien) AG - Kurfürstendamm 119 - 10711 Berlin / Phone: +49-30-890 21 143 - / Fax: +49-30-890 21 198 / email - jhaedicke@freiverkehr.de.

To find out if a company has been delisted - go to Yahoo-Finance and enter the company's ticker symbol and then ".be" after it, the listing on the Berlin-Bremen Exchange will come up. It will show whether they were dropped or not. Some are simply pending, so they display all zeroes.

Dan notes that the Berlin-Bremen Exchange is the same as the so-called "Unofficial Regulated Market", which is one of the three organized and regulated markets of the German exchanges (the other two are the Official ("Amtlicher Markt") and the Regulated ("Geregelter Markt") Markets). The Berlin-Bremen Exchange listing process is simple as an authorized broker merely needs to file an application for a permit with the administration of the exchange for trading the stocks.

For trading on this exchange, there are fewer requirements (egs. there are no annual fees and no publication and, of course, no consent requirement by the company) - because the stocks are already listed on other exchanges that have more extensive review criteria.
posted by broc at 5:32 AM