Monthly Archives: September 2002

September 27, 2002

In the seemingly neverending saga of how to interpret Section 402 (prohibition on personal loans to insiders) Senators Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, and Susan Collins have sent a letter to Chairman Pitt urging the SEC to “resist any efforts” by lobbyists to weaken section 402. The exact text of the letter is at

September 25, 2002

According to reliable sources, the NYSE filed an amended proposal with the SEC last Friday with respect to shareholder approval of equity compensation plans and discretionary voting of “broker non-votes.” The SEC is expected to release the proposed rule today or tomorrow (with a 21 day comment period) – and then will be on the SEC’s web site.

The other corporate governance listing standards proposals would then be handled separately – and may be a few months away from formal proposal by the SEC (as it seeks harmonization between the NYSE and Nasdaq).

September 24, 2002

Tommorrow, the SEC and the Securities and Exchange Commission Historical Society host an oral histories roundtable – with a group of staffers from the early years of the Division of Enforcement weighing in. This is being held at the SEC’s HQ in DC. So much history is being created now, it will be interesting to compare the two eras…there will be a live webcast available for this at

September 23, 2002

In a speech today before the Council of Institutional Investors, Chairman Pitt noted that he has asked the Division of Corporation Finance to consider eliminating the “ordinary business” exclusion basis from the shareholder proposal rule. This basis – under Rule 14a-8(i)(7) – has been the most controversial basis under a very controversial rule.

This follows recent sentiment expressed by Chairman Pitt regarding the inclusion of a shareholder proposal regarding stock option expensing. Historically, this type of proposal has been excluded by the Corp Fin staff – and an appeal is pending before the Commission on this matter.

This also follows a recent rule petition that requests the SEC to revise the shareholder proposal rule to allow shareholders to elect directors through the proposal process.

Chairman Pitt’s speech before the Council of Institutional Investors is at

September 19, 2002

Yesterday, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) agreed to start eliminating the major differences between their rules. This is the first major step towards the creation of global standards – as the two groups cover companies in the U.S. and nearly 50 other countries.

As part of the goal to reach “convergence,” the groups first will tackle major philosophical differences in their approaches to rule writing (i.e. rules-based in the U.S. versus principles-based elsewhere) – and also will conduct major rulemaking projects together. The tentative goal to have the first set of uniform standards worked out by 2005 (which is the time by which European Union companies are required to adopt IASB standards).

September 18, 2002

Yesterday, Tyco detailed the alleged fraudulent arrangements with its former CEO, CFO and Chief Legal Officer in a Form 8-K filed at

September 17, 2002

Sullivan & Cromwell (in a law firm client memo dated 9/12) has reversed its initial position that cashless exercise programs should be suspended until more guidance was available. Now, S&C believes that all forms of cashless exercise programs are permissible – as well as indemnification advances. As it was last month, the S&C memo may be a harbinger of a sea change in what law firms advise on these topics. This memo is located at

September 16, 2002

The recent struggle on the Worldcom board between court-appointed Richard Breeden and Stiles Kellett – as well as the revelations about General Electric’s payments to Jack Welch – further highlight the need to reform the way that boards work.

See two articles that touch on this topic – one by Nell Minow at – and the other from the Washington Post at http://www.washingtonpost

September 11, 2002

Note that there is some debate – and lack of clarity in the SEC’s adopting release – about whether a company’s traditional “internal controls” (those that relate to financial reporting, as described in the AICPA Codification of Statements on Auditing Standards (AU ยง 319)) has to be evaluated every 90 days. Most practioners are viewing these traditional “internal controls” as a subset of the new “disclosure controls” requirement – and thus evaluation of these traditional “internal controls” would be required each quarter.

As with many of the issues being debated, it is quite possible that this sentiment among practitioners might change – or that the SEC might issue clarifying guidance to the contrary.

September 10, 2002

According to a speech last week by Commissioner Goldschmid, the SEC appears to be headed towards proposing more uniform – and stringent – regulations governing the conduct of analysts. These would supercede the ones adopted by the NYSE and the NASD earlier this year.

The speech is not on the SEC’s web site – but discussed in this Washington Post article –