April 20, 2009

The Impact of XBRL: Cover Page Changes to Forms 10-Q and 10-K

With the effective date of the SEC’s XBRL rules coming up for larger companies fairly soon, it’s time to bone up on their impact. Lawyers are mistaken if they don’t think XBRL will impact their practice. Not only are there new liability standards to learn, but XBRL will change how they conduct due diligence and deal with internal control issues. Even more fundamental – there might be a change in the workflow process of how disclosure documents get drafted.

All lawyers should tune into our webcast on Thursday – “XBRL: What Lawyers Need to Know” – to hear John Huber and Dave Lynn go over these types of issues; this program will not be a re-hash of the SEC’s new rules. In addition, I’ve asked Clarity Systems to give a short demo tailored to lawyers during the webcast, so you can see the potential changes in document production workflow for yourself (ie. it will not be a demo about how to set XBRL up, rather it will cover how it looks when it’s up and operating; course materials for the demo will be posted on Wednesday).

At a minimum, lawyers need to be aware of the new rules because they impact the cover pages of Forms 10-Q and 10-K. Effective April 13th, the SEC added a new box to the cover page of those forms regarding compliance with the XBRL rules (the purpose of the statement is so third parties can determine whether Rule 144 is available). Thanks to Amy Seidel of Faegre & Benson, we have updated the Form 10-Q cover page – which is in a Word file – posted in our “Form 10-Q” Practice Area (as well as the 10-K cover page in our “Form 10-K” Practice Area).

What should you do with the box now since the rules won’t impact filings until June? Tune into the webcast to learn how to deal with this – or read the chain of answers in #4743 of our “Q&A Forum” if you want to learn about how to deal with this issue now…

Recently, the SEC published this “Small Entity Compliance Guide” on XBRL. It’s just a summary of the new rules, akin to a law firm memo – we have plenty of those posted in our “XBRL” Practice Area.


I recently received this note from a member: I’m finding that it is a Sisyphean task to try to keep up with all of the exchange name changes. The most recent change in appellation occurred on April 13th, when the NYSE Alternext US LLC changed its name to the “NYSE Amex LLC.”

You may recall that the NYSE Alternext US LLC was christened only last Fall, when the SEC approved the acquisition of the American Stock Exchange by NYSE Euronext. Apparently, the NYSE has now decided that – for “branding” purposes – it is a good idea to retain the AMEX moniker. Another recent, albeit less drastic name change, was the change last April from “Pink Sheets LLC” to “Pink OTC Markets Inc.” That change reflected the change from a limited liability company to a corporation.

Noisy Withdrawals: Factor in Stanford Bust?

From Linda DeMelis: Although details are still somewhat murky, the SEC’s recent enforcement action against Allen Stanford may have been triggered by the withdrawal from representation of one of Stanford’s attorneys (as noted in this article). In a Memorandum of Law accompanying the complaint, the SEC cited the withdrawal, together with the attorney’s statement that he and his law firm disaffirmed all prior written and oral representations with respect to Stanford, as a basis for emergency action. The SEC did not mention the attorney by name, but he was later identified.

As this article points out, prior to Sarbanes-Oxley, attorneys in this situation often had to deal with a confused, and sometimes contradictory, morass of state laws and bar regulations covering attorney-client confidentiality. As part of its rulemaking after passage of Sarbanes-Oxley, the SEC proposed the option of a “noisy withdrawal,” where the attorney would notify the SEC of a withdrawal from representation. The “noisy withdrawal” proposal generated some controversy when it was proposed – and it was never adopted. But just such a withdrawal might have been the “tipping point” for the SEC’s enforcement action in this case.

– Broc Romanek