December 22, 2003

SEC Issues MD&A Interpretive Guidance

Late Friday, the SEC issued an interpretive release on MD&A – something the staff had been promising for the past month or so.

Most of the guidance in the release has been well known for some time, as much of it had been either provided in the Fortune 500 report, in prior rulemakings or mentioned at conferences by senior staffers. Some of the recommendations that are relatively new include the recommended use of:

introductory overview – includes most important matters on which senior management focuses in evaluating financial condition and operating performance and provides context for the discussion and analysis of the financial statements (and does not duplicate disclosure that follows).

clear headings – use more to assist investors to follow flow of MD&A.

“layered” approach – present information in manner that emphasizes, within the universe of material information that is disclosed, information and analysis that is most important.

There is much more guidance and reading this release is a “must” before drafting MD&A. Fortunately, our recent webcast – “The New MD&A” – focused heavily on the process of conducting due diligence before drafting, so the transcript remains very relevant.

Personal note – In its discussion of the history of the SEC providing MD&A guidance, the release skips over the interpretive guidance given in the Y2K context. I guess that year of my life – I was the primary staff draftsperson of the Y2K interpetive release – was all just a dream (or nightmare?).

Shareholder Access Comment Deadline

Today is the deadline for comments on the shareholder access proposal and it appears that this one will now hold the record for most comments on a proposal – with well over 10,000 comment letters submitted so far! The prior record was last year’s proposal on disclosure of mutual fund policies and voting records.

For members, we have posted an interview with Ned Young of Hale & Dorr on Shareholder Access and Possible Changes in Control.