Yesterday, the SEC issued two releases to grant smaller companies and many foreign private issuers further relief from compliance with Section 404 of Sarbanes-Oxley. This relief reflects the “next steps for Sarbanes-Oxley implementation” announced in May and includes some new initiatives not previously announced. Here is the related press release – and below is a summary of the SEC’s actions:
– Accelerated Foreign Private Issuers Get One More Year – In this adopting release, the SEC extended its Section 404(b) auditor attestation deadline for those foreign private issuers that also are accelerated filers (but not those that are large accelerated filers, who still must meet the earlier deadline of fiscal years ending on or after the July 15th that just passed) to fiscal years ending on or after July 15, 2007. Note that foreign private issuers still have to file their Section 404(a) management reports under the existing deadline of fiscal years ending on or after the July 15th that just passed.
– Proposed Five-Month Deadline Extension for Non-Accelerated Filers – In this proposing release, the SEC proposed to extend the Section 404(a) management report deadline for non-accelerated filers (both US companies and foreign private issuers) to fiscal years ending on or after December 15, 2007 – and would extend the Section 404(b) auditor attestation deadline for non-accelerated filers to fiscal years ending on or after December 15, 2008. If this proposal is not adopted, non-accelerated filers would have to begin filing their Section 404 reports for fiscal years ending on or after July 15, 2007.
The SEC also proposed to deem the Section 404(a) management report included in a non-accelerated filer’s annual report (as well as for foreign private issuers that are accelerated filers (but not large accelerated filers)) during the first year of compliance to be “furnished” rather than “filed” for purposes of Section 18 of the ’34 Act, unless the filer specifically states that the report is to be considered “filed” or incorporates it by reference into another filing.
– Proposed One-Year Relief for New Filers – In this proposing release, the SEC proposed a one-year stay for companies coming off IPOs (as well as those doing registered exchanges or any other first time filers with the SEC, regardless if they are US companies or foreign private issuers), so that they would not have to provide any Section 404 reports (ie. neither a management report nor an auditor attestation) in their first annual report. However, this relief would not be available if a company already had filed at least one Section 404 report.
More on Nasdaq’s Transition as an Exchange
In connection with Nasdaq’s transition to an exchange (see more in this blog), the SEC’s Market Reg and Corp Fin Staff issued this no-action letter that essentially permits companies and third-parties to satisfy, through EDGAR filings, their obligations to provide copies of most ’33 Act and ’34 Act filings to Nasdaq. Thanks to Alan Singer of Morgan Lewis for the heads up!
More on Blue Sky Issues and Nasdaq’s Exchange Transition
Recently, I blogged about possible blue sky issues related to Nasdaq’s transition to an exchange. Showing that I am indeed fallible, I overlooked Footnote 7 in Nasdaq’s amended rule filing which states that “The Nasdaq Global Market, including the Global Select segment, will be the successor to the National National Market. As such, Nasdaq believes that all securities listed on the Global Market, including those on the Global Select Market, will be “covered securities,” as that term is defined in Section 18(b) of the Securities Act of 1933, 15 U.S.C. 77r(b).”
Given that the SEC was silent on this point when it approved Nasdaq’s rule filing, practitioners can take some comfort that the position in this footnote holds some water.
By the way, we are still waiting for the SEC to approve Nasdaq’s rulemaking petition to designate securities listed on the Nasdaq Capital Market (f/k/a Small Cap) as “covered securities.” This rulemaking petition was made in February and I understand that the Nasdaq intends to file some changes to its Capital Market listing standards soon to address comments from the SEC Staff reviewing the petition, so some progress is being made…