Monthly Archives: April 2003

April 11, 2003

The NYSE has posted

The NYSE has posted amendments to its corporate governance listing standards dated April 4th at Coming on the heels of recent amendments proposed in March regarding director independence, this set of amendments reflect the audit committee requirements of Section 301 of Sarbanes-Oxley and also clarifies certain disclosure obligations. It also revises the effective dates of some standards and discusses the applicability of specific corporate governance listing standards to foreign private issuers.

Yesterday, the SEC posted the adopting release on audit committee requirements/prohibitions at

The SEC also posted a technical corrections release regarding acceleration of periodic report deadlines at

Next week, I will be on vacation (Spring Break 2003!) and Alan Dye will be your blogger. Alan has been feverishly wrapping up a new 6th edition of the Romeo & Dye Forms and Filings Handbook – updated for all the Section 16 rulemaking that has taken place these past few months.

April 10, 2003

Over 50 companies have already

Over 50 companies have already filed 8-Ks under Item 12 (but technically under Item 9 per the SEC as Edgar is not ready for Item 12s) to provide their earnings releases or to submit investor presentations that contain non-gaap measures. For subscribers, we have created a Regulation G/Earnings Release Portal which includes links to dozens of these filings – and we will continue to update the portal daily with new ones. See

We have also posted an interview with Mike Halloran and Elisa Lowy of Pillsbury Winthrop on splitting the Chair and CEO – see

The SEC is about a week behind in posting comment letters on the controversial “noisy withdrawal” reproposal for which the deadline passed on Monday – many comment letters have been filed including one signed by 77 law firms.

April 9, 2003

On the’s “Comparing the

On the’s “Comparing the Section 16 Filers” webcast yesterday, the SEC staff indicated that its web-based system will go live on either April 24th or 25th. This means that filers then will be able to make Section 16 filings only by either using the SEC’s website, using a service provider that has brought its product up to speed or by filing on paper (ie – there won’t be parallel systems – so filing by “normal” Edgar won’t work). The webcast is archived on and a transcript will be available early next week.

The SEC staff also explained how their website will have limitations (e.g. there is no “save” feature – so you can’t input some data and turn to something else for a significant amount of time before filing. You must basically input data and file all in one session).

For those seeking a filer, we recommend that you try the Romeo & Dye Section 16 Filer. It can be used free by anyone – including law firms – until September 30th (and then its only $195 for subscribers thru the end of 2004). It is simple and practical, with a new recordkeeping functionality (and compliant with the SEC’s new system). You can download and try the Romeo & Dye Filer at

Senator Levin has tacked an amendment on a bill – which is likely to pass – which would give fining authority to the SEC without having to go to court. The SEC unsuccessfully tried to get this authority in the Sarbanes-Oxley Act. See the related Washington Post article at

April 8, 2003

In the absence of DOL

In the absence of DOL or SEC guidance, the debate rages – with differing opinions from different lawyers – about whether a 906 certificate is required for 11-Ks. Not that it is necessarily persuasive, but the 11-Ks filed so far don’t appear to contain certificates (although they could have been submitted supplementally as the SEC’s directive to file them as exhibits just came recently).

The ABA Task Force on Corporate Responsibility (chaired by James Cheek) issued its Final Report on March 31st. It is not yet available on the ABA’s website.

For subscribers, today is the “Comparing the Section 16 Filers” programs – featuring key SEC staffers to describe the SEC’s new filing system – and 12 service providers to explain how they can add value. See more at

April 7, 2003

On Friday, the Delaware Supreme

On Friday, the Delaware Supreme Court – in a rare 3-2 decision – finally issued its opinion in the Omnicare vs. NCS Healthcare case. Although the dissenters (including Chief Judge Norman Veasey) argue that the holding should apply only to the case’s facts, the M&A bar has been shaken because the case loosely stands for the proposition that lock-ups with majority shareholders can’t be absolute (e.g. not combined with fiduciary outs, etc.).

For subscribers, we have posted the Omnicare opinion at

April 3, 2003

After Alan Beller spoke on

After Alan Beller spoke on Friday at the ABA Spring Meeting, it remains unclear if Section 906 CEO/CFO certifications are required for Form 11-Ks. Alan merely noted that the staff has not taken a position (which makes sense as it is a DOL matter). Note that Section 302 certifications are not required for Form 11-Ks as the SEC made clear in its adopting release last summer. However, that release did not address 906 certifications (as again, it is a DOL matter).

Before the House Financial Services Committee, in a hearing yesterday, the SEC was criticized for lax oversight of the credit rating industry. See the Washington Post article at

For subscribers, we have posted an interview with Ken Blackman and Michael Levitt of Fried Frank on Earnings Releases and Announcements at

April 2, 2003

The SEC staff has issued

The SEC staff has issued no-action relief – and the precise form of CEO/CFO certifications – for two classes of asset-backed issuers: auto lease securitizations and resecuritizations. The no-action letters are and

Yesterday, at Chairman Donaldson’s 1st open Commission meeting, the SEC adopted rules regarding audit committee requirements and delisting standards. For the most part, the adopted rules are the same as the proposed rules. The following provides a snapshot certain aspects of the new rules regarding “independence” [thanks to Mike Holliday] – more details are in the SEC’s press release available below:

– Advisory and consulting fees – The new rules do not contain a de minimus amount exception.

– Safe harbor – The adopted safe harbor keeps the proposed ownership test at 10% (so that a person who is not an executive officer or 10% owner will not be an “affiliated person”). The final rules will indicate that failure to meet the safe harbor terms will not create an presumption that the person is affiliated, which will be subject to a facts and circumstances test.

– Outside director of company and subsidiary – The final rules contain the exemption that a director otherwise independent to both companies would be permitted to be on the audit committee of a listed company as well as an affiliate. There was no discussion as to whether any change was made to the proposal that the exemption applies to a consolidated, majority-owned subsidiary.

– IPO exemption – The proposed exemption was expanded to require at least one independent member on the audit committee at the time of listing, a majority of independent members within 90 days, and all independent members within a full year.

Companies must be in compliance with the new rules by their 1st annual meeting after January 15, 2004 (or by October 31, 2004 at the latest). Foreign issuers and small business issuers would have until July 31, 2005. As adopted, the transition period is about 6-7 months longer than the proposed period. This will be helpful for March 31, June 30 and September 30 fiscal year-end companies. However, because it does not add a complete annual cycle to the proposal, it will not really provide any additional lead time for calendar year fiscal year companies.

The SEC’s press release is at

April 1, 2003

Yesterday, the PCAOB held its

Yesterday, the PCAOB held its roundtable on foreign auditors and made its case for the outstanding proposal to require foreign firms auditing U.S.-traded companies to register with it (all of the SEC Commissioners attend to show their support). This has created quite a bit of controversy overseas.

As reported by the Washington Post, this meeting follows the SEC’s recent warning to British accountants that disclaimers of liability that they were slapping on audit opinions better not show up on U.S. financial statements. Here are other tidbits from the roundtable:

– David Wright, director of financial markets for the European Commission, argued that the PCAOB should wait one year before making foreign auditors register to give European countries time to work out conflicts between their laws and US laws. The PCAOB disagreed.

– The PCAOB plans to initially focus on about 6 key areas – with more than 1,200 pages of audit standards.

– The AICPA has tried to hold on to a role in the writing of audit standards. The PCAOB responded by informing the AICPA that Congress had given them control over audit standards and that the oversight board would not be required to follow the AICPA’s recommendations.

– The PCAOB is also replacing a widely criticized oversight system, in which accounting firms reviewed each other’s work. The board is hiring accountants — the number may grow to 100 by next year and is developing a code of conduct to prevent potential conflicts of interest by inspectors hired from Big Four firms. The new team is to start inspecting the Big Four this summer and smaller firms next year.

– Inspectors will operate differently as the new inspection team will examine audits under litigation – cases now exempt from the peer-review process. The board will also examine quality-control issues, such as how lead audit partners are paid, whether accounting firms have the right “tone at the top,” and whether audit work is sufficiently independent from tax and other services the firms offer.

The Washington Post article is at