October 14, 2004

FASB Delays Option Expensing By 6 Months

As loosely predicted in Monday’s blog, yesterday the FASB voted to delay implementing option expensing by 6 months – so now it will become effective for public companies with fiscal periods beginning after June 15, 2005. The effective date for non-public companies, proposed in the exposure draft to be a year after the date for public companies, remains to be determined. The FASB also agreed to allow for modified retrospective application going back to the beginning of the fiscal year for companies that wish to implement the rule early.

The FASB said that the principal reason for the delay was its awareness of companies struggling to implement internal controls under Section 404 – and the FASB also said it is still on track to issue its final statement by year’s end. If you need a crash course in what options expensing means for you – at next week’s NASPP Annual Conference, there will be 9 panels covering expensing.

SEC Proposes Reg M Amendments

At an open meeting held yesterday, the SEC proposed amendments to Regulation M that seek to create greater transparency in the syndicate book-building process and syndicate activity in the after-market, by prohibiting several practices that, in the view of the SEC’s staff, “artificially stimulate demand” for IPO stocks.

Most of the proposed changes will affect all distributions of securities, not just IPOs. The SEC is proposing to prohibit quid pro quo and tying agreements by prohibiting underwriters from conditioning an allocation of securities on the investor purchasing the distribution securities in the aftermarket, purchasing securities in another offering, or paying higher-than-usual commissions on other transactions – but the proposal is not intended to interfere with the underwriter’s freedom to allocate shares to its best customers and legitimate book-building.

More details are in the SEC’s press release on the topic – and in the firm memos that we have begun posting in Section A.16 of of our Sarbanes-Oxley Law Firm Memos.

Deferred Compensation Legislation Memos

We have been posting them in droves – see Section E.29 of our Sarbanes-Oxley Law Firm Memos.