December 22, 2005

SEC Posts Adopting Release for Accelerated Filer Definitions and Deadlines

Yesterday, the SEC posted the adopting release relating to the new accelerated filer definitions and deadlines.

The SEC found good cause to forego the normal 30-day waiting period for these new rules – and thus accelerated the effectiveness of them. If I understand Section III.D of the release correctly, all calendar year-end 10-Ks will need to include the check box to indicate whether the company is – or is not – a large accelerated filer (ie. LAF), even though the deadline for LAFs is the same 75-day period as it is for accelerated filers during ’06.

In addition, the SEC applied the new exit test retroactively so that accelerated filers can exit this year based on their Q2 ’05 float. This is noteworthy for some issuers that can take advantage and exit now, since I believe they can then skip the hassle of obtaining a 404 attestation until ’07 (even if they filed their 404 attestation for their last fiscal year).

Going Dark and Going Private Transcript is Up!

We have posted the transcript for the popular webcast: “Going Private and Going Dark.”

Contest Winner for Unclassified Category of Issuers!

Regarding my earlier blog on the lack of classification for a narrow group of issuers – the winner is “INECs,” which stands for “issuers, not elsewhere classified.” The winning member is now driving around town in a ’73 Beetle with our logo on the car doors…

Ode To A Fraud: A Humorous Take On SOX

From Scott Cohen of Compliance Week:

‘Twas the night before Christmas and most of the hires
were back in their houses, in front of their fires.
All toasty inside as Northeasterlies blew,
naïve of my plan, yes, they hadn’t a clue.

And as the lights sparkled and as their kids knelt
to open their toys (or their Hanukkah gelt)
and gifts were exchanged—here a train, there a jewel—
and meals were devoured with dribble and drool,
I sat in my office, cast under a pall,
and patiently waited and watched the snow fall.
The lights had been dimmed and computers were down,
the hallways were barren—there wasn’t a sound.

Except for old Jasperhams, typically juiced,
who handled recycling the reams we produced,
had chosen that moment to tidy about.
I gently persuaded him: Get the hell out.

So through empty hallways as I did maraud,
I knew that the time had arrived for my fraud!
How perfect an eve of deceiving, I beamed,
a night for my swindle, my racket, my scheme!

Constructed in summer and fostered in fall,
‘Twas daring, audacious … the nerve and the gall!
A plan based on timing, by my own admission,
advanced by the exodus from the Commission.

Yes, SEC veterans, bailing, they flew,
On Goldschmid! On Cutler! On Donaldson, too!
With turnover rampant, and chaos set in,
at last my deception, my scam, could begin!

My goal was pure evil, a dastardly deed,
a scandalous racket inspired by greed.
‘Twas really quite simple, but one that still shocks:
to undermine every provision of SOX.

Yes Sarbanes and Oxley, so feeble and dense,
who doled legislation that lacked common sense;
the thoughtless decrees that you morons inscribed
would soon in their whole be defaced and defiled!

I started out slowly, with SOX 301:
by snipping the lines on the phones, oh, what fun!
Thus blowers of whistles had no tool to sort
our audit committee their whining report.

I then took my pen to our corporate code
of suitable conduct (good God, what a load!),
deleted decrees that the board said: “Obey,”
and wrote down, “Just do what you want, it’s okay!”

Then freed of restrictions I rolled up my sleeves
and tackled more regulatory pet peeves.
For certification of SOX 302,
I crossed out my named and signed, “Winnie the Pooh.”

Pro forma financials all settled with GAAP,
I quickly unwound and made tricky to map.
For “plain English” filings (which I cannot speak)
I crafted disclosures in Yiddish and Greek.

“Good God, this is simple!” I cried of my prank
(I guess that it’s my MBA I should thank!).
So SOX 404, let us dent you as well:
I’ll simply erase key controls from Excel.

I then found some insider rules to evade:
A pension fund blackout within which to trade.
The “two-business day” rule was next to ignore:
I waited a fortnight to file my Form 4.

For bookkeeping rules that are overly stringent,
(off-balance sheet deals and arrangements contingent)
I structured some entities, all of them fake,
ensuring transparency now was opaque.

And measures impacting resources and risk
were moved from my hard drive to some floppy disk
unreadable by any modern machine:
derivative instruments … ne’er to be seen!

Now SOX 407 was easy to shirk,
I breached that directive without any work:
Our “financial expert” knows nothing, dear Cox,
his audit skills can’t fill a cereal box!

And then my attention did finally turn
to those who created my awful heartburn:
My trusted accountants, my partners, my friends,
whose counsel and leadership gave me the bends.

So SOX 303: You be damned, I decreed!
and swiftly began to coerce and mislead,
manipulate, obfuscate (hey, it’s a waltz!)
let’s bribe, threat, and document things rude and false!

To frame my dear auditor, this was quite grand:
I gave him some non-audit work that was banned.
‘Cause, hey, how much profit must they really earn?
Why, I oughtta give them a “going concern.”

And wanting my auditor’s fall guaranteed,
the rules of the dreaded PCAOB
must be disobeyed (they are way too damn stringent):
more tax shelters, please, and commissions contingent!

And last on my list: Why my lawyers, I’ll call!
Confess everything, force a noisy withdrawal,
then phone all our analysts, give them a plea
of non-public facts that defy Reg. FD.

And looking back over the rules I had breached,
I smiled to myself … I had finally reached
the goal to which my Christmas Eve had aspired:
Defying the rules that old Sarbox required.

Oh relish this moment, ye governance punks,
Like feisty Nell Minow and Bob A.G. Monks,
and Yerger and those who prod corporates with wit,
like Lally, Anne Simpson and Millstein and Pitt.

And governance “raters” who think you’re so blessed,
like proxy advisors (that’s you, ISS),
Glass Lewis and Moody’s, get back in your den,
I’ve just undermined the whole ICGN!

And as I strolled, grinning, outside in the lot,
I never did grasp the one thing I’d forgot:
That back in the office, and this was quite sloppy,
I’d dropped on the floor my diskette that was floppy.

And Jasperhams, damn you, old man! How you dare
conspired to capture my disk unaware,
and transfer to counsel a thorough report
that caused all the lawsuits that led to the court.

And though I claimed innocence (how I did plead!)
the jury said, “guilty,” the judge then agreed,
and though I had fainted and mustered some tears,
the sentencing judge gave me two hundred years.

And that’s why this winter—this cold, cold wet day—
I’m not on my yacht with my Klee and Monet,
but stuck in a cell wearing dirty striped shorts,
with Ebbers, Kozlowsi, Lay, Rigas and Swartz.

And thus, my dear friends, lies a lesson of risk:
That bastards like Jasperhams may find your disk.
So trust me: the law is a thing you can’t duck.
So Sarbanes and Oxley: I guess I’m the schmuck.