May 17, 2007

Big Week: SEC Open Commission Meeting and More

In addition to hosting two more proxy process roundtables next week, the SEC will hold an open Commission meeting next Wednesday with lots of Corp Fin stuff going on, including whether to:

1. adopt interpretive guidance for management regarding its evaluation and assessment of internal control over financial reporting

2. adopt rule changes that would make it clear that an evaluation that complies with the Commission’s interpretive guidance would satisfy the annual management evaluation required by those rules.

3. adopt rule changes to require the expression of a single opinion directly on the effectiveness of internal control over financial reporting by the auditor in its attestation report.

4. make rule proposals addressing the registration and disclosure requirements for smaller companies, as well as private offerings, including:

– increase the number of companies eligible for the scaled disclosure and reporting requirements for smaller reporting companies;

– expand the eligibility requirements of Form S-3 and Form F-3 to permit registration of primary offerings by companies with a public float of less than $75 million, subject to restrictions on the amount of securities sold in any one-year period;

– create exemptions from the registration requirements of the ’34 Act for grants of compensatory employee stock options by non-reporting companies;

– create a new Regulation D exemption for offers and sales of securities to a newly defined subset of “accredited investors,” as well as to propose revisions to the Regulation D definition of “accredited investor,” disqualification provisions, and integration safe harbor and to provide interpretive guidance regarding integration;

– make revisions to Form D and mandate electronic filing of Form D; and

– amend Rule 144 to revise the holding period for the resale of restricted securities, simplify compliance for non-affiliates, revise the Form 144 filing thresholds, and codify certain staff interpretations, as well as to propose amendments to Rule 145.

5. adopt rules to implement provisions of the Credit Rating Agency Reform Act of 2006

And according to this Washington Post article, the House Financial Services Committee hearing with the five SEC Commissioners testifying on whether they are too soft on business is likely to be held during the week of June 25th.

Next Thursday: PCAOB to Act on Internal Controls

Next Thursday, the PCAOB will vote on a new standard – Auditing Standard No. 5 – that will supersede the Board’s existing internal controls standard, Auditing Standard No. 2. The PCAOB also will vote on two recommendations to amend the Board’s rules on the frequency of inspections – to remove the requirement that the Board regularly inspect each registered public accounting firm that plays a “substantial role” in audits but does not issue audit reports and whether to keep Rule 4003(d) in place beyond the June 30, 2007, tentative sunset date. Neither amendment would affect the annual inspection cycle for firms that audit more than 100 issuers.

Internal Controls Costs Down; Auditor Fees Unchanged

Yesterday, FEI published a summary of survey results showing that internal control costs for accelerated filers dropped 23% from 2005 to 2006 (and 35% since 2004, which was the first year of implementing Section 404). Audit fees were essentially unchanged between ’05 and ’06. This article notes that audit fees could drop by 10% under new AS #5.

Posted: May-June issue of Deal Lawyers print newsletter

We have just sent our May-June issue of our new newsletter – Deal Lawyers – to the printer. Join the many others that have discovered how Deal Lawyers provides the same rewarding experience as reading The Corporate Counsel.

To illustrate this point, we have posted the May-June issue of the Deal Lawyers print newsletter for you to check out. This issue includes pieces on:

– Wake Up and Smell the E-proxy Coffee: Changes Ahead for Online Solicitations
– Lessons Learned: A Practical Look at the Caremark Trilogy
– Understanding the Real Meaning of Deal Certainty: Debunking a Few Myths and Suggesting a Few Solutions
– What’s in a Choice of Law Clause?
– Unauthorized Management Buyout Proposals: It’s Time to Reevaluate Corporate Policies

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