A lot of folks have been asking whether a September 30 fiscal year end company can voluntarily chose to comply with the new executive compensation/related-party disclosure rules for its upcoming proxy statement. The SEC Staff has been answering that question with: “Yes, so long as the proxy statement is filed on or after November 7th (which is the date the new rules become effective) – and as long as the proxy statement complies with all of the new rules (meaning Items 402, 404 and 407, etc.). Of course, this begs the question of who would want to be the first guinea pig anyways…
State of Corporate Law Reform
Between legal challenges to the authority of Sarbanes-Oxley and lobbying efforts to reform the Act, pressure has never been greater to make some changes. Earlier this week, SEC Chairman Cox testified that he agrees that some changes to Section 404 may be in order, but he doesn’t believe those changes should be legislated. PCAOB Chair Mark Olsen testified similarly. Here is all the opening statements and testimonies from this week’s House hearing. And here is a final report from the Financial Services Forum from a roundtable conducted on America’s competitiveness a few months ago.
In this podcast, Cindie Jamison and Kathy Schrock of Tatum LLC provide some insight into the latest developments in the long-standing efforts to reform Sarbanes-Oxley and how the reform is impacting the capital markets, including:
– Have non-US companies continued to list elsewhere? If so, why?
– What can be done to streamline the US registration and listing process to minimize obstacles and reduce negative perceptions?
– What’s next and where is it going? And how is it going to get there?
Nasdaq Amends Cure Period for Independent Director/Audit Committee Compliance
Last week, the SEC approved amendments to Nasdaq Rules 4350(c)(1) and 4350(d)(4)(B) that modify the cure period for companies that fail to comply with the majority independent board requirement, either because a vacancy arises on the board or because a director ceases to be independent for reasons outside their reasonable control – as well as for when there is a failure to comply with the audit committee composition requirement because a vacancy arises on the audit committee. The prior rules provided that the cure period lasted until the earlier of the next annual shareholders’ meeting or one year from the event that caused non-compliance, sometimes resulting in a company having only a short period to recruit a new director.
The amended rule provides more time for companies to recruit – so that a company will now always have at least 180 days from the non-compliance event to regain compliance. Note that the SEC’s release states that the amended rules don’t allow an audit committee member who ceases to be independent to remain on the committee beyond the period contemplated in SEC Rule 10A-3(a)(3) and Nasdaq Rule 4350(d)(4)(A)(i.e. earlier of the next annual shareholders meeting or one year from the non-compliance event).