Monthly Archives: July 2003

July 31, 2003

For subscribers, we have

For subscribers, we have posted the transcript of yesterday’s “50 Nuggets” webcast at Please give me feedback/pushback on any of the nuggets and whether you liked format of program – I hope to update the transcript with tidbits as i get feedback from the community.

Yesterday, SEC chairman Donaldson gave a one-year anniversary of SOX speech at Nothing much new was said – but some of the Q&A was interesting, particularly the focus on the media on getting some of the former Enron execs in jail (for which the SEC has no authority).

You got the sense that his tenure might ultimately be judged on whether these alleged fraudsters at Enron and other scandal-ridden companies go to the “pokey.” And the answer to the shareholder access question indicated that it was quite likely that the SEC will adopt rules quickly in this area.

July 30, 2003

Today is our practical webcast

Today is our practical webcast – “50 Nuggets in 50 Minutes” – which includes a special session with Alan Dye on the recent Section 16 e-filing changes at

We also have posted the August Eminders at – which includes more notes from last week’s ABA webcast on “reporting up.” We are holding a webcast on August 13th regarding “Designing Reporting-Up and Complaint Procedures” – see

Yesterday, the House Financial Services committee released a 1-year anniversary SOX report – see

Yikes, the SEC is moving fast as promised on shareholder access. It has scheduled an open meeting for next Wednesday, August 6th, to consider proposing rules regarding disclosure of nominating committee activities and board/shareholder communications (but note that the proposed SRO corporate governance listing standards have languished for nearly a year, go figure). See

July 29, 2003

Happy birthday Sarbanes-Oxley! The SEC

Happy birthday Sarbanes-Oxley! The SEC got a nice birthday present regarding third-party liability when JP Morgan and Citigroup settled for big $$$ for their involvement in the Enron scandal. See

The SEC’s General Counsel, Giovanni Prezioso, has released a letter he sent to the State Bar of Washington regarding the attorney conduct rules at Washington’s State Bar has proposed a rule that would conflict with the SEC’s new Rule 205. Part 205.3(d)(2) provides that “an attorney appearing and practicing before the Commission in the representation of an issuer may reveal to the Commission, without the issuer’s consent, confidential information related
to the representation to the extent the attorney reasonably believes necessary…” to prevent certain specified harm. The State Bar’s proposal would prohibit Washington lawyers from disclosing confidential information to the Commission that Rule 205 would permit them to disclose.

It should be noted that the ethical rules of most – if not all – states prohibit the revelations allowed under Rule 205 unless a higher threshold is met. There has been a debate as to whether the permissive provision adopted by the SEC would preempt the prohibition set forth in the ethical rules of the various states. In this letter, the SEC’s General Counsel is taking the position that Rule 205 would preempt state law under the supremacy clause – and that a state bar can’t discipline an attorney, appearing and practicing before the Commission, who in good faith, reveals to the Commission without the issuer’s consent, confidential information related to the representation to the extent the attorney reasonably believes it is necessary to achieve one of the objectives of Part 205.3(d)(2).

Importantly, the SEC’s General Counsel does not address whether a state bar could discipline an attorney who in good faith believes such a revelation is necessary if the bar later finds that the belief was not reasonable. Thanks to Ken Winer for his help deciphering the GC’s letter!

For members, we have launched our “Blog City,” which consists of five different sets of practitioners – with varying areas of expertise – blogging for your enjoyment. I like to think that the paper analogy to this new concept is the use of columnists in your daily paper – so find a blogger or two that matches your particular interests and personality today at

We also have posted two interviews: one with LaDawn Naegle and Randy Wong on how to file CEO/CFO certifications this quarter at – and the other with Caroline Gottshaulk on how SOX impacts voluntary filers at

July 28, 2003

Effective today, the SEC has

Effective today, the SEC has tweaked Edgar so that CEO/CFO certifications must be filed as Exhibits 31 (for Section 301 certs) and 32 (for 906 certs) – rather than under “signatures” and as exhibit 99. In addition, earnings releases and blackout period information must now be filed under the 8-K items that were originally intended (ie. the SEC’s interim fix of using Item 9 is no longer in effect).

For subscribers, we have posted a Word file of the new 302 certification at

Also, the SEC has commenced a 6-month trial to allow same-day Edgar filings to be received at 6 am EST – 2 hours earlier than the 8 am official start time. See

This SEC press release is curiously silent about the changes to the Section 16 e-filing system that are supposed to take effect today (as noted in this SEC final release from last week adopting updated Edgar Manual 8.6 –

Based on what we know, we expect the SEC’s changes to not fix all the snags that currently exist. As a result, we have added a session to this Wednesday’s webcast where Alan Dye will explain these traps and offer possible solutions – join us Wednesday for “50 Nuggets in 50 Minutes” at

Last Friday, the SEC released a study encouraging the adoption of a “principles-based” accounting system – see

July 25, 2003

On yesterday’s ABA webcast on

On yesterday’s ABA webcast on “Reporting Up,” there was an interesting discussion on when in-house counsel can be considered the “supervisor” of outside counsel. Richard Humes, Associate General Counsel of the SEC (speaking on behalf of himself and not the Commission) expressed the view that this scenario could exist in certain circumstances.

In other words, if an in-house lawyer is acting as “supervisory attorney,” within the meaning of Rule 205.4, for all outside securities lawyers who are appearing and practicing before the Commission in the representation of the issuer, and one of those outside securities lawyers reports evidence of a material violation to the inhouse attorney, that outside lawyer is then relieved of any further Rule 205 obligations with respect to that evidence. [I will blog more after I listen to the program again – and note that more complete notes from this webcast will be in the upcoming August Eminders.]

This interpretation of Rule 205 could be quite problematic in practice – and create some unwieldly results as companies might be pressed to engage in active review of their outside counsel’s reporting up policies. Of course, it is unreasonable for both companies and their outside counsel to be negotiating policies on a “one-off” basis. And I can’t imagine how a mid-level in-house lawyer who has asked a senior partner in a firm to review his or her work would intuitively view themselves the “supervisor” of that partner. More to come…

For subscribers, we have launched a “Shareholder Access Portal” at

July 24, 2003

As my blogging software gave

As my blogging software gave me fits this week, I pondered “what if you blog and no one can hear you” – or as Don McLean put it “the day the blogging died.” Anyways, I am back in the saddle…

On July 28, 2003, EDGAR Release 8.6 will take effect. A list of the changes set forth in the Release is listed below. The two worth noting are:

1. Form 8-K will now permit the filing of Items 10, 11, 12 and 13. As you may recall, the SEC issued interpretive guidance indicating that issuers should file all earnings releases required to be filed under Item 12 under Item 9 until the EDGAR system was updated. Accordingly, all Item 12 filings (earnings releases and other releases of results of operations for completed fiscal periods) made on or after July 28, 2003 can be filed as Exhibit 12.

2. The EDGAR system will now recognize Exhibit 31 (302 certifications) and Exhibit 32 (906 certifications). Accordingly, for all 10-Ks and 10-Qs filed on or after July 28, 2003, the CEO/CFO certifications can be filed as Exhibits 31 and 32 (as opposed to filing to the 302 certifications after the “Signatures” section and filing the 906 certifications as Exhibit 99).

Note: Although the effective date will technically be the date of publication in the Federal Register, which should occur on or about July 28th (the final rules adopting Release 8.6 were just released yesterday), I think companies are safe implementing these changes on July 28th. Thanks to Amy Seidel of Faegre & Bensen!

For subscribers, we have posted an interview with Bob Schifellite of ADP on Proxy Season Results at

July 23, 2003

Rumor has it that the

Rumor has it that the SEC’s July 28th changes to the Section 16 e-filing system will not fix all the glitches. However, it is likely that the changes will start allowing CEO/CFO certifications to be filed under the new proper items. In other words, the EDGAR system will be reprogrammed to permit filing of 8-K Items 10, 11, 12 and 13. If correct, this will have a big effect on those making earnings announcements and filing second quarter 10-Qs.

For subscribers, we have added two more sample reporting up policies to our “Attorney Responsibility Portal” at

July 22, 2003

Corporate Counsel magazine (not affiliated

Corporate Counsel magazine (not affiliated with our publications) has released its annual GC compensation survey that reveals that inhouse lawyer salaries are going up. Here are profiles of Top 10 inhouse lawyers that get paid the most –

July 21, 2003

The PCAOB has set a

The PCAOB has set a date by which audit firms must register on a Form 1 – October 22nd. See more at

In addition, the PCAOB has released a 12-page briefing paper for its upcoming July 29th roundtable on internal controls at The briefing paper lays out the status of the various internal control issues – and lists the discussion questions to be addressed at the roundtable.

July 16, 2003

One surprising note in the

One surprising note in the aftermath of Corp Fin’s shareholder access report is the apparent speed by which the Commission appears ready to act – a proposal on the disclosure component sometime in August and a proposal on shareholder access to the ballot in September. See the Washington Post interview with SEC chair Donaldson at Obviously, the magnitude of the shareholder access proposal should persuade the Commission to allow a lengthy comment period after its proposing release is issued.

For subscribers, we have posted a list of 20 insider trading policies at