Monthly Archives: January 2003

January 31, 2003

Reflecting the slow deal market,

Reflecting the slow deal market, after a failed attempt to merge with Morgan Lewis and a defection by many top partners, it appears that Brobeck, Phleger & Harrison is close to disbanding.

January 30, 2003

At a conference in San

At a conference in San Diego today, Marty Dunn, Corp Fin Deputy Director, revealed that the staff already has received over 450 requests for no-action relief regarding shareholder proposals – which equals the near record amount received during all of last proxy season. At this rate – because February and March are very heavy months to process these requests – it appears that the staff might process more than 50% more than they have at any other time.

The SEC has posted the adopting release regarding attorney conduct – along with a second release seeking additional comments on the proposed noisy withdrawal provisions and an alternative approach.The adopting release is at – and the proposing release is at

January 29, 2003

In connection with the audit

In connection with the audit of Xerox, the SEC has filed fraud charges against KPMG – and four partners of KPMG – in a NY federal district court – see

The SEC has posted the final rules on auditor independence implementing SOX 208, 201-204 and 206 at

Later today, we will post our “Sarbanes Oxley Scorecard” on the home page of – to facilitate your ability to access each proposing and adopting release. In addition, we will post a checklist of disclosure items to consider for this year’s 10-K early next week as part of the February E-Minders.

January 28, 2003

In the Division of Corporation

In the Division of Corporation Finance, Shelley Parratt has been promoted to Deputy Director (Operations) – and Marty Dunn’s title changes a little to Deputy Director (Legal). This is the first time in memory that Corp Fin has had dual deputy directors.

Paula Dubberly has been promoted to Associate Director (Legal) – my former and wonderful boss – leaving the Chief Counsel slot open. Congrats to both!!!

January 27, 2003

Tommorrow, former CSX chair John

Tommorrow, former CSX chair John Snow – and President Bush’s nominee for Treasurer – faces a potential challenging confirmation hearing in the Senate. Mr. Snow also co-chaired The Conference Board’s Commission regarding corporate governance reform that issued its final report a few weeks ago.

In response to subscriber demand, we have posted a sample whistleblowing policy – courtesy of Sharon Hendricks and Venture Law Group – on

January 24, 2003

Another crazy week…we are busying

Another crazy week…we are busying posting hordes of law firm memos in our Sarbanes-Oxley portal and that should continue unabated for the next few weeks.

In addition, today we launched a new site – The new site is for subscribers and has hundreds of FAQs on governance topics as well as a host of other governance related materials. We will be conducting webcast programs and interviews with experts over the coming year. See the new site at

January 23, 2003

The SEC’s press release on

The SEC’s press release on the Investment Company Amendments and the Investment Adviser Amendments adopted at its meeting today is now available at

January 23, 2003

This is a guest blog

This is a guest blog by Mike Holliday

The final rules on conditions for use of non-GAAP financial measures, and insider trades during pension fund blackout periods are now available on the SEC’s website.

Non-GAAP is at

Insider trading is at

The following are quick notes from the SEC’s meeting today, and are subject to the actual wording of the adopting Releases and final rules.

A. Standards of Professional Conduct for Attorneys, Sarbanes-Oxley Section 307. Certain changes in the proposed rules were discussed at the meeting. The definition of appearing and practicing before the Commission to be subject to the rules was modified. The rules will not apply to attorneys who are licensed to practice law but are not providing legal services to issuers. Most foreign attorneys who are not admitted in the US and do not advise clients on U.S. law would not be subject to the rules. Non-US attorneys who provide legal advice on US law without consulting with US counsel would be subject to the rules if their activities constitute appearing and practicing before the Commission. It will be necessary to check the adopting Release and final rules to see exactly how this treatment of foreign attorneys is worded.

To be covered by the rules, the attorney must be providing legal services to the issuer and have an attorney/client relationship with the issuer. In addition, the attorney would have to have notice that a document the attorney is preparing or assisting in preparing will be filed with or submitted to the SEC. Again, it will be necessary to check the actual language.

Modifications to the final rule will insure that issuers can direct counsel to conduct internal investigations and defend them in litigation without compromising the attorney/client relationship.

The rules have an objective standard. The meeting discussion referred to using the concept of “credible evidence” of a violation; a prudent and competent attorney under the circumstances; and a reasonable likelihood standard that a material violation has occurred, is ongoing or is about to occur.

The requirement for the attorney to document the report of evidence of a material violation and the response has been eliminated. Also, the rules adopted do not include the proposed “noisy withdrawal” provision. The Commission is extending the comment period on that issue for 60 days, and then will consider the proposal. The proposal has not been eliminated but will be considered at a later time after the extended comment period.

B. Disclosure of Mutual Fund Proxy Voting Policies and Procedures and how the Fund Voted on Specific Issues. The proposals were adopted with modifications to reduce the costs of the new requirements.

C. Requirement for Registered Investment Advisers to Adopt and Disclose to Clients Proxy Voting Policies and Procedures and how the Adviser Addresses Conflicts of Interest. The rules do not require public disclosure of how the adviser voted, but to tell clients how they can obtain the actual voting record from the adviser.

January 23, 2003

This is a guest blog

This is a guest blog by Mike Holliday.

The SEC at an open meeting on Wednesday, January 22, 2003, adopted new rules in the following four areas, and issued four separate press releases describing the new rules in general terms.

A. Registered Management Investment Companies. The rule would implement the certification requirements of Section 302 of Sarbanes-Oxley for registered management investment companies, and will require disclosure controls and procedures. The Commission also adopted rules to implement Sections 406 and 407 of Sarbanes-Oxley for registered investment management companies requiring disclosure regarding the Code of Ethics for the principal executive officer and senior financial officers, and whether there is a financial expert on the audit committee. The SEC said that these two disclosure requirements were similar to those adopted last week for operating companies.

The SEC’s related press release on investment company rules is at

B. Strengthening Auditor Independence. The SEC adopted rules to implement Section 201 of Sarbanes-Oxley. The rules cover prohibited non-audit services, audit partner rotation, one-year period before an audit engagement team member may accept certain positions with an issuer, compensation based on procuring engagements other than audit, review or attest services, reports to the audit committee, pre-approval of services and disclosure regarding services provided by and fees paid to the auditor. The related press release covers most of the descriptions of the new rules at the meeting. Rotation will be required after 7 consecutive years for the lead and concurring partners on the engagement team, and after 5 years for certain other partners that play a key role in the audit. There was discussion at the meeting that there are some circumstances where providing certain tax services involving advocacy would impair independence. It will be necessary to check the adopting Release and final rules on this point to see exacatly how this is worded.

The related SEC press release on auditor independence rules is at

C. Disclosure of Off-Balance Sheet Arrangements and Aggregate Contractual Obligations.The proposed definition of off-balance sheet arrangements has been modified and will define certain categories by reference to recent FASB interpretations No. 45 on guarantees and No. 46 on consolidation of variable interest entities.The proposed disclosure threshold has been changed to the existing “reasonably likely” standard. There will be some more flexible, principle-based disclosure required. In addition, the proposed disclosure of “Contingent Liabilities or Commitments” has been eliminated. The SEC will continue to consider that possible area of disclosure.

The SEC press release on the off-balance sheet arrangements and contractual obligations rules is at

D. Retention of Records Relevant to Audits and Reviews. The proposed rule would have required retention for 5 years. The rule as adopted will require retention for 7 years.

The SEC’s press release on rules for retention of records by auditors is at

January 20, 2003

The SEC has added a

The SEC has added a second open Commission meeting this week – on Thursday, January 23rd – and has moved consideration of the final attorney responsibility standards and mutual fund voting disclosure framework from Wednesday’s meeting to this second date. See

As for what the SEC will do with their final attorney responsibility standards, it is still anybody’s guess at this point – as we continue to hear vastly different rumors.