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Yesterday, Corp Fin issued 25 FAQs that flesh out the ’33 Act reform. According to a Cleary Gottlieb alert, highlights of the FAQs include:

– If an underwriter agrees not to use a free writing prospectus without the consent of the issuer, the issuer’s consent, in and of itself, will not constitute authorization or approval of the free writing prospectus for purposes of determining whether it is an “issuer free writing prospectus.” However, if the issuer’s actions amount to “adoption of or entanglement with” the free writing prospectus—a determination that will turn on the particular facts and circumstances of the situation—the issuer will be considered to have approved or authorized the free writing prospectus.

– Item 10(e) of Regulation S-K, which restricts the use of non-GAAP information in documents required to be filed with the SEC, does not apply to free writing prospectuses, unless they are included in, or incorporated by reference into, a registration statement or included in an Exchange Act filing. Regulation G, which restricts the use of non-GAAP information in public disclosures by issuers required to file Exchange Act reports, does apply to free writing prospectuses used by such issuers.

– Canadian issuers filing annual reports on Form 40-F under the Multi-Jurisdictional Disclosure System cannot qualify as “well-known seasoned issuers.”

– Convictions of an issuer or a subsidiary in a non-U.S. court of certain felonies or misdemeanors, such as larceny, robbery and the making of false reports, will result in ineligibility of the issuer under the definition of “ineligible issuer.”

– Notice that a sale was made pursuant to a registration statement, which is required by Rule 173 when a final prospectus is not delivered, may be made within two business days following the date of settlement.

I’m sure we will continue to see guidance from the SEC Staff as the reform is so broad in scope and there will be so many unanswered questions as we deal with the new rules in practice – such as how will confidential treatment requests relating to automatically effective shelfs be processed?

’33 Act Reform: Now Effective!

Remember that the ’33 Act reform rules become effective today! There are lots of resources in our “Securities Act Reform” Practice Area, including notes from the recent ABA Fall Meeting regarding the NASD’s positions in the WSKI shelf context. There also are numerous law firm memos on what companies should do with their outstanding shelfs, including this new memo from Cleary Gottlieb.

As for what new changes should be made to 10-K and 10-Q filings, look at the law firm memos called “proxy season checklists” posted in our “Proxy Season” Practice Area.

SEC General Counsel to Leave

Just as I was reading this Washington Post article about all the vacancies at the SEC’s top levels, I received an email that the SEC’s General Counsel, Giovanni Prezioso, announced he is leaving at the end of the year to return to the private sector (destination unknown yet). Here is the SEC’s press release.

By the way, the Post article provides a pretty nice overview of what is happening at the SEC these days, including a handful of quasi-inside scoop (eg. Commissioners are socializing outside the building! News at 11!).

PCAOB Issues Report on Initial Implementation of AS No. 2

Yesterday, the PCAOB issued a 19-page report discussing issues identified in the course of its monitoring of the implementation of Auditing Standard No. 2, the internal controls guidance from the PCAOB.

No real surprises here – the PCAOB found that both auditors and issuers faced enormous challenges in the 1st year of implementation, including strains on available resources; a shortage of staff with prior training and experience in designing, evaluating, and testing controls; and the limited timeframe that issuers and auditors had to implement Section 404.

The PCAOB gave a warning shot as it said that its monitoring (mainly conducted through the inspection process) revealed that some audits performed under these difficult circumstances were not as effective or efficient as AS No. 2 intends and as the PCAOB expects they can be in the future. In its report, the PCAOB identified specific areas in which auditors should become more effective and efficient “by obtaining sufficient evidence for an opinion in a manner that appropriately conserves time and other resources.”