Author Archives: Broc Romanek

Late last week, one member asked: “How about some commentary about the likelihood and timing of Section 404 relief for smaller issuers?” One thing immediately sprung to mind – was I being followed to my regular poker game? This is a 20-year old game that my Dad also plays in, so it’s not part of the latest poker craze. So I suppose that is enough to qualify me as some sort of oddsmaker – so here goes nothing:

Based on the latest resolution from the SEC’s Advisory Committee on Smaller Public Companies – which recommends that 404 compliance for non-accelerated filers should be delayed until mid-2007 – I would say it is fairly likely that the SEC will push back the 404 compliance date for small business issuers.

The odds are enhanced even more given that new SEC Chair Cox recognizes that some counterbalancing of SOX-related directives is now necessary (as it nearly always is after broad reforms) and that COSO might miss its target date to issue internal control standards applicable to small businesses. To put some numbers on it for Vegas purposes – let’s call it 3-to-1 in favor of a delay happening.

Majority Voting: Two More Companies Amend Their Governance Guidelines

Following up on the three items that I blogged about Friday regarding majority vote governance guidelines, two additional companies have recently adopted similar policies to Pfizer and Office Depot. ADP amended their bylaws rather than its corporate governance guidelines – and Circuit City’s standard is along the lines of Office Depot’s version (which I call a “quasi-majority vote” standard for the reasons that I set forth on Friday).

– Circuit City’s corporate governance guideline: “Any Director nominee in an uncontested election for whom greater than 50% of the outstanding shares are ‘withheld’ from his or her election shall tender his or her resignation for consideration by the Nominating and Governance Committee. The Nominating and Governance Committee shall recommend to the Board the action to be taken with respect to such resignation.” Here is the related press release.

– ADP’s bylaw amendment: “The directors shall be elected by the vote of the majority of the shares represented in person or by proxy at any meeting for the election of directors at which a quorum is present, provided that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting.” Here is the related Form 8-K.

Forget About Moving that Cheese

Went to a dinner party yesterday and saw one of my old law school friends who works in-house at a local public company. He just came back from a week-long strategic retreat for the company’s managers over on the West Coast. In the leadership training arena these days, apparently “moving my cheese” is “out” and “teachable point of views” are “in.”

Call me a naysayer but I think those retreats tend to be a waste of company resources – like falling backwards into the arms of my colleagues is going to turn a company around. Puh-leese. And in some cases, it can actually backfire. Last one I went to helped me realize that maybe it wasn’t such a bad idea to get a new job. Hmmm, so maybe they are a good idea after all!

As noted in this press release, the Walt Disney Co. announced yesterday that they have amended their corporate governance guidelines to provide that any director who receives a “withhold” vote representing a majority of the votes cast for his or her election would be required to submit a letter of resignation to the Board’s Governance and Nominating Committee, which in turn would recommend to the full Board whether the resignation should be accepted.

Are There Different Flavors of Majority Vote Governance Guidelines?

Note that Disney’s standard parallels the “Pfizer” guidelines (ie. based on a majority of votes cast); whereas Office Depot’s standard requires a withhold or against from “a majority of the Company’s shares.” That sounds like it means a majority of outstanding shares would need to withhold, which is a higher standard – and arguably not even a “majority vote” standard because a majority of those voting could withhold and yet not trigger the guideline.

If Office Depot sticks with that type of standard, I wonder if they are going to add an “against” box to their proxy card? For some insight on the ramifications of such an action, continue reading below…

Analyzing the Majority Vote Proposals

Keith Bishop provides some interesting analysis of the outstanding majority vote proposals in this text interview, including addressing many practical (and legal) impediments, such as:

– How does failure to execute a proxy interplay with withholding votes?

– Is the majority vote concept permissible under California law?

– What is the signficance and ramifications of including an “against” box on the proxy card?

– How does cumulative voting play into all of this?

So far, I hear that the ABA Task Force has received 27 comment letters on its discussion paper. Comments were requested by August 15th but I know they are still dribbling in – so keep them coming!

I am busy working with the three panels for our special webcast series on the ’33 Act reform – and pretty excited about how they are being structured (along the lines of a chronological walk-through of a new deal, broken out by type of issuer).

I am also very excited to announce a new webcast for October 3rd – “Internal Controls Update: The Big 4 Speak” – featuring a former SEC Corp Fin Director and the top 404 expert from each of the Big 4 accounting firms. This panel will analyze the current developments affecting Year Two of 404:

– John Huber, Partner, Latham & Watkins LLP
– Craig Crawford, Partner-in-Charge of the Audit Group of the Department of Professional Practice, KPMG LLP
– George Tucker, Partner and Director of International Auditing Standards, Ernst & Young LLP
– Garrett Stauffer, Senior Partner and Leader of US Corporate Governance Practice, PricewaterhouseCoopers LLP
– Steve Wagner, Partner and Leader of the US Center for Corporate Governance, Deloitte & Touche LLP

Now is the time to upgrade your license for TheCorporateCounsel.net to allow others in your company – such as your CFO and controller – to listen to the latest guidance on both the ’33 Act reform and Section 404 at the reduced rates available in our “Rest of 2005” no-risk trial.

Fleshing Out the Board Evaluation Process

Lately, I have been having some interesting emails and conversations with members on how to approach the board evaluation process, particularly the role – if any – of outside counsel. In this podcast, Andy Tebbe of King & Spalding explains how to tweak the board evaluation process to make them more effective, including:

– Why are companies doing board evaluations?
– What types of questions should be asked on an evaluation?
– Do you have any recommendations for how to make the process go more smoothly?
– How many of your clients seek your help to compile board evaluation results and is their any typical profile of them?
– What is typical board evaluation process that uses third party to compile (oral, written, combo)?
– Does the attorney-client privilege apply?
– What do you recommend that your clients do with the findings? Destroy or document?

ABA’s New Resolution on Attorney-Client Privilege

During the recent ABA Annual Meeting, the ABA’s House of Delegates passed a fairly strongly worded resolution opposing government pressure on the attorney-client privilege – the resolution was adopted in the form of this ABA Task Force on Attorney Client Privilege Recommendation No. 111, which I also have copied below (and here is a professor’s commentary on this new resolution):

RESOLVED, that the American Bar Association strongly supports the preservation of the attorney-client privilege and work product doctrine as essential to maintaining the confidential relationship between client and attorney required to encourage clients to discuss their legal matters fully and candidly with their counsel so as to (1) promote compliance with law through effective counseling, (2) ensure effective advocacy for the client, (3) ensure access to justice and (4) promote the proper and efficient functioning of the American adversary system of justice; and

FURTHER RESOLVED, that the American Bar Association opposes policies, practices and procedures of governmental bodies that have the effect of eroding the attorney-client privilege and work product doctrine and favors policies, practices and procedures that recognize the value of those protections.

FURTHER RESOLVED, that the American Bar Association opposes the routine practice by government officials of seeking to obtain a waiver of the attorney client privilege or work product doctrine through the granting or denial of any benefit or advantage.

Following up on a blog from a few weeks back, one member responded to my concerns by intimating that companies perhaps should not bother to ask for PCAOB inspection reports unless the inspection was not “routine.” I think the problem with that selective approach is that auditors – and their clients – do not know when a PCAOB inspection is routine since it uses non-public criteria to guide its inspectors in pulling client files for review. And some of the PCAOB’s non-public criteria are risk-based (but not all of the criteria, so having your file pulled doesn’t necessarily mean that the company has been identified as risky either).

Since hindsight can always come back to haunt you, I think it’s better for the audit committee to be safe than sorry and be aware of when regulators are sniffing around – just like it is now standard practice for the audit committee to be notified when the SEC issues any comments that impacts the company’s accounting practices. I also would think the independent auditor would rather not be on the hook for determining when an inspection is routine, particularly since they are so skittish these days.

Karl Barnickol of Blackwell Sanders (always the voice of reason) weighs in on another aspect of the PCAOB’s process — disciplining the auditors after an inspection – as follows: “Seems to me that an audit committee should want to know if their auditor is in hot water with the PCAOB as part of their decision-making process on retaining an auditor.

Whether it is in fact a legal duty only time will tell, but not asking strikes me as risky if something goes wrong down the road. For example, if your auditor was KPMG, wouldn’t you want an update on the possible DOJ/SEC action against KPMG before you decided to engage them for another year. What if they turn out to be the next Arthur Andersen? As a practical matter, since larger companies probably can’t use any firm outside the Final Four – and since all 4 seem to be in trouble with the regulators to a greater or lesser degree all the time – enforcement information may not be all that helpful to the decision, but having considered the question makes a better record for the audit committee.

I have to say that while my firm is having some success getting commitments in our client’s engagement letters to notify the company if its file is pulled in an inspection, to provide cc’s of the correspondence, and to give the company a chance to talk to the PCAOB, getting engagement letter commitments about enforcement actions is another matter. That doesn’t bother me quite so much since the Audit Committee will always have an opportunity to ask the engagement partner directly about enforcement actions before they make the engagement decision for the next year.”

Sample Disclosures: Remediation of Material Weaknesses

In our “Internal Controls” Practice Area, we have posted samples of disclosures from companies that have remediated material weaknesses.

The Google IPO: A Year Later

The Wired GC blog captures a blurb from Monday’s San Francisco Chronicle about Google’s IPO filings with the SEC. Apparently, the Chronicle reporter conducted an extensive FOIA request to obtain Google’s comment letters and responses (most of that correspondence transpired before the start date of the SEC’s comment letter database) – and the reporter wasn’t amused by the Tandy language requested by the SEC. It’s not hard to imagine how the Tandy letter concept could be confusing to someone not “in the know,” eh?

Many members are asking about the recent decisions in France and Germany regarding whistleblower hotlines. In France, the French Data Protection Authority (aka “CNIL”) has rendered two decisions prohibiting a subsidiary and division of two US companies – McDonalds and Exide Technologies – from implementing anonymous reporting systems. These systems were developed in compliance with Rule 10A-3, which the SEC adopted to comply with Section 301 of Sarbanes Oxley. The CNIL believes these hotlines violate French privacy law due to the anonymous nature of the accusers permitted by the hotlines.

Meanwhile, a German authority has struck down Wal-Mart’s code of ethics, but not based on any kind of substantive rationale – rather, it appears to be due to a procedural snafu that turned on the failure of the company to consult with the German Works Council before implementing their code of ethics in Germany.

We have posted a number of law firm memos analyzing these overseas problems in our “Whistleblowers” Practice Area – and Tom White and Carrie Wofford of Wilmer Cutler Pickering Hale and Dorr have graciously provided copies of the two French CNIL opinions, including informal translations of them into English.

A number of groups, such as the Privacy Matters Committee of the World Law Group, have approached the French and German authorities – as well as the SEC and the NYSE – but right now, these issues are still lurking as there has not been any further word from any of these regulators. More inevitably to come…

New Form 144 Posted

One of our more popular sample documents is a Word version of Form 144. We have posted a new one that reflects changes in the form that the SEC has made (the SEC might have made these form changes a while ago; let me know if you ever see any outdated content on the site).

Speaking of Rule 144, don’t forget that we have a “Rule 144 Q&A Forum,” where members post Rule 144 questions – and long-time practitioners Bob Barron and Jesse Brill endeavor to provide some guidance. You can access this Forum on TheCorporateCounsel.net home page from the tool bar at the top.

Doing M&A Inhouse

Some of the younger lawyers out there might wonder if they could land a job in-house that would allow them to do M&A. In this DealLawyers.com podcast, George Villasana, Senior Counsel – Corporate Law of AutoNation (who has also worked in two different law firms and at the SEC), describes what it’s like to do M&A in-house, including:

– What types of M&A activities he undertakes?
– What is his daily life like?
– How he found his job?
– How being in-house compares to being in a firm?
– How being in-house compares to working at the SEC?

Below is an excerpt from this transcript of an interview held last Wednesday with new SEC Chair Chris Cox on the PBS’ “Nightly Business Reports”:

DHUE: Runaway executive pay has long been criticized. Is that something that the agency is going to take out?

COX: Executive compensation is much in the news and there have been some very notorious cases of apparent excess. It should be, of course, in the main up to shareholders to discipline that kind of activity, but in order for shareholders to do that, they`ve got to have good information. I think you can look in the near future to the SEC for some improved rules on disclosure to make sure that, for example, shareholders can have one number, that the different kinds of executive compensation add up to a number that`s comparable executive to executive and company to company and at the same time that this information is provided in a timely way before rather than after the fact.

DHUE: Shareholder activists have also tried to rein in executive pay through the proxy process. Do shareholders need greater access to the proxy so they can be the watchdog on corporate management?

COX: Of course investors and particular equity owners own the company and it`s very much in shareholder interests to discipline executive compensation and make sure it`s in line with the market, making sure they`re getting full value and also to make sure that everything else about the company is running well and with a view to doing well and good at the same time. Shareholders, I think, will find it increasingly easy going forward to look after their interests because technology is making it possible for information to move so much more quickly. We can have better analysis, more cheaply in the hands of investors more quickly than ever before. And the SEC is going to look at every possible way of making sure that our disclosure requirements are up to date and providing investors what they truly need.

Looks like Chairman Cox might be in favor of tally sheet use! We continue to post new sample tally sheets in the “Tallying Up Total Compensation” Practice Area of CompensationStandards.com. In addition, our “2nd Annual Executive Compensation Conference” includes a session entitled “How to Devise the Appropriate Tally Sheets” featuring Mike Kesner, who is head of Deloitte’s Exec Comp Practice and Pearl Meyer, who is the Chair of the firm that bears her name.

M&A Accounting Issues

On DealLawyers.com, the last leg of the popular M&A Boot Camp is available – Howard Dicker of Weil Gotshal does a great job parsing through accounting issues, both basic and those that relate to M&A.

It’s not too late to catch the entire 5-part series of the “M&A Boot Camp,” as all five are now up and available! If you are not a member, try a no-risk trial and take advantage of our half-price “Rest of 2005” rate – believe it or not, a license for a single user is only $100 and there are similar reduced rates for offices with more than one user! Among the many other resources, you can catch the upcoming webcast on September 21st – “Winning Strategies in Auctions” – featuring David Katz of Wachtell Lipton and Eileen Nugent of Skadden Arps.

Bueller? Anyone?

As a fan of the movie “Ferris Bueller’s Day Off” – I grew up in Chicago and attended Lane Tech HS before moving to Bethesda in 10th grade – I was taken aback to see a column blurb entitled “Bueller? Anyone?” in Friday’s WSJ (scroll down halfway through the column). Kudos to the WSJ for a light moment!

The article describes how a roll call of director nominees at a recent annual shareholders’ meeting semi-paralleled the movie’s sarcastic take on high school roll calls. I always thought I was cool because I answered “Yo” in response to the teacher’s call of my name – did I mention I never went on dates? That was a classic scene from the movie – here is a web site that provides a script, etc. from the movie…

In late July, the FASB offered an advance preview of its project that will sort out the wide variety of financial instruments available in the market – which also will determine where these instruments belong on the balance sheet – by issuing a “milestone draft” that summarizes the FASB’s findings so far.

This is a comprehensive project that will define the differences for accounting purposes between liabilities, equities and assets. While the definitions of each used to be clear-cut in the accounting rules, the lines have blurred with the proliferation of complicated financial instruments – in many cases, new instruments hold characteristics consistent with more than one category on the balance sheet.

FASB Chair Bob Herz Lays Out Global Conceptual Framework

Earlier this week, FASB Chair Bob Herz addressed the 2005 Annual Meeting of the American Accounting Association and laid out an outline of the global conceptual framework that will help set international accounting standards – see this outline in a PowerPoint from Chair Herz. This global project is a joint effort with the IASB – in order to have common standards, it is necessary to have a common framework to base the standards on. The framework has not been revisited for several decades and is being looked at relative to creating consistency in when to use fair value vs. historical cost, and to address relevance vs. reliability, etc.

How to Handle Data Security Breaches

There has been a lot of press – and legislative activity – lately regarding companies that have had data stolen, particularly personal information of their customers. Obviously, this can have serious liability implications for companies.

In this podcast, Ben Wright, a well-recognized Internet lawyer, explains how companies can protect themselves in the face of growing breaches in security that lead to data theft, including:

– What has led to the rash of announced security breaches?

– What type of reactions are legislators having to these publicized
breaches?

– How many of these breaches do you think go unannounced?

– What risks do companies face if they do not announce a breach?

– What type of policy changes can companies make to help protect themselves
from breaches?

A phenomenal number of members asked questions in the wake of Mike Melbinger’s blog two days ago on the FASB’s position on option grant dates. To clarify, the FASB’s position only applies under FAS 123(R), so it will not become relevant until a company makes its first grants after it adopts 123(R) and there should be no direct tax impact from the FASB’s actions. This article from the WSJ yesterday explains how the FASB’s grant date position emanates from overlooked language in 123(R).

I asked NASPP Executive Director Barbara Baksa for her views on what companies might do now – here is Barbara’s insight on the two alternatives posed in Mike’s blog (and two new alternatives):

“I believe alternative #2 could be problematic under 409A, but we don’t know for certain yet as the IRS and Treasury are still developing their interpretations. The grant date for tax purposes most likely will still be the date the board approved the grant. Thus, if the market value declines before the option price is set, you’ll have a discounted stock option under 409A. I think a discounted option under 409A is probably a much worse result than the differential in fair value. Also, this alternative creates a lot of administrative work without really accomplishing much. For these reasons (and more in this NASPP alert), I don’t expect #2 to be popular.

There is a third alternative, which is to simply try to minimize the amount of time between when the board approves the grant and when the terms are communicated to employees. Unless the market value moves dramatically during this time period, this isn’t likely to have a significant impact on the option fair value. For these reasons – and more in this NASPP alert – I expect that this third alternative is the approach most companies will take. With the emergence of online grant communication, many companies have already begun tightening up their practices in this area and this will probably just further that trend.

And there is a fourth alternative, which is to communicate the material terms (except for the option price) of the grant to employees in advance. For example, in a new hire situation, I would expect that it isn’t completely uncommon for the material terms of the grant to be included in the employee’s offer letter (the company would probably still have to follow-up with employees to let them know that the grant was approved, but this could be a relatively short and simple communication). For annual grants, the company might communicate the terms in advance or have managers review with employees the grants that will be recommended for them, then just send out a global communication that grants were approved at X price on the date the board approved them.”

More on this is available in the NASPP’s “Option Expensing Portal,” including a number of firm memos and the NASPP alert on this topic.

Office Depot Amends Corporate Governance Guidelines Ala Pfizer

Last week, Office Depot amended their corporate governance guidelines so that any director who receives a majority withheld vote is required to tender their resignation, just like Pfizer did a few weeks ago. Here is an excerpt from the latest ISS Friday Report: “Heeding a 52 percent shareholder vote, Office Depot Inc. announced this week that it had adopted a modified majority standard for director elections. The company joins Pfizer Inc. and more than 20 other U.S. companies that have some form of majority voting.

While Office Depot’s new policy is not, strictly speaking, a majority election standard, the company’s move adds to the growing shift from the plurality system that most U.S. companies use to elect directors. So far this year, a majority of investors in at least 14 U.S. companies, including Dell Inc. and Supervalu Inc., have supported shareholder proposals on the issue.

In another recent development, the American Federation of State, County and Municipal Employees (AFSCME) has submitted the first binding resolutions seeking majority elections. Those proposals were filed at Sysco Corp. and Paychex Inc.

Office Depot’s policy change is also noteworthy because company CEO and Chairman Steve Odland also chairs the Business Roundtable’s corporate governance task force. The BRT is an influential trade association that has urged “careful consideration of the complications any new standard would present.”

Another Blow to SEC’s Mutual Fund Governance Rules

Late yesterday, the US Court of Appeals in DC unanimously granted an emergency motion for a stay pending court review of the latest lawsuit filed by the Chamber of Commerce. This stay puts on hold the SEC’s new mutual fund governance rules that require mutual fund boards to be comprised of 75% independent directors and have independent chairs. As you might recall, the SEC re-adopted these rules on June 29th, just before former SEC Chair Donaldson left office.

These new rules were to take effect January 16, 2006. The Court directed the parties to provide briefs on the issue of whether the SEC had the authority to adopt the rules, in light of the fact that the Court had not yet issued its mandate sending the case back to the SEC. The Chamber of Commerce is asking the Court to order the SEC to put the modified rule out for public comment, which could force the SEC to hold yet a third vote.

Yesterday, Delaware Chancery Court Chancellor William Chandler delivered his long-awaited opinion in the Disney case by holding that the Disney directors didn’t violate their duties by ratifying Eisner’s decision to fire Ovitz in a way that entitled Ovitz to a huge severance package.

More analysis to come soon as there is an interesting discussion on good faith in the opinion. It’s important to remember that Chancellor Chandler was applying existing law to the facts in this case – the standard for personal liability was created last year in this Chancellor Chandler opinion when the case first survived a motion to dismiss.

We have posted a copy of the new 174-page opinion in the “Compensation Litigation Portal” on CompensationStandards.com. In addition, don’t forget that our “2nd Annual Executive Compensation Conference” will open with a panel on director duties featuring Delaware Supreme Court Chief Justice Myron Steele; Delaware Vice Chancellor Stephen Lamb; and Professor Charles Elson, Director of the U. of Delaware Center for Corporate Governance.

Tweaks to D&O Questionnaire for E&Y Independence

My good friend Linda Wackwitz of Quovadx informs me that she has learned that in connection with their settlement, E&Y is now required to scrutinize independence more closely than previously – so E&Y was going to require the Quovadx directors to complete a detailed E&Y independence questionnaire. Instead, Linda convinced E&Y to leverage off of the company’s existing D&O questionnaire by having the company add the following question to it:

“Do you or any member of your immediate family have any business relationships with Ernst & Young LLP or any of its affiliates or have an ownership interest in, or serve as an officer, director, or substantial stockholder of, any company (public or private) that has any business relationships with Ernst & Young LLP or any of its affiliates? If so, please specify the name of the person or entity that has the business relationship, a description of the business relationship, and the dollar amounts involved.”

Lessons Learned from WorldCom Mid-Manager Sentencing

Last week, Bruce Carton had the following interesting observations in his Securities Litigation Watch: Betty Vinson, a former WorldCom mid-level accounting manager who pleaded guilty in October 2002 to participating in the financial fraud at the company, was sentenced to five months in prison and five months of house arrest. Although her sentence won’t get even one-thousandth of the press coverage that Martha Stewart’s sentence did, it is far more important in terms of the impact it may have on deterring fraud in the future.

Vinson represents the typical “pawn” in a financial fraud–a lower or mid-level accounting person who by all accounts had no interest and no desire to commit fraud. Nonetheless, the fraud came to her. She was instructed by her boss, former CFO Scott Sullivan, to make improper accounting entries to make WorldCom’s numbers appear better than they really were, supposedly at the ultimate direction of CEO Bernie Ebbers. Vinson testified that “I felt like if I didn’t make the entries, I wouldn’t be working there.”

Vinson was deeply troubled by this instruction and went so far as to draft a letter of resignation in protest. But at this key juncture in her life, she did not quit. Instead, she stayed with the company and made many of the fraudulent accounting entries that enabled the financial fraud at WorldCom. She apparently did so for personal financial reasons and because of the personal appeals from Sullivan “not to jump out of the plane . . . [to] hang in there and help him get through the situation for the third quarter.” Vinson chose to believe Sullivan that this was a “one-time thing” that he would correct.

People placed in the excruciating position that Vinson found herself in need to know that the issue is not merely whether they should quit their job. They need to know that the consequences for participating in and enabling a financial fraud are severe–you may well go to prison as a convicted felon. As Judge Barbara Jones who sentenced her correctly observed,

“Ms. Vinson was among the least culpable members of the conspiracy at WorldCom,” Jones said. Still, she said, “Had Ms. Vinson refused to do what she was asked, it’s possible this conspiracy might have been nipped in the bud.”

Prison time for Betty Vinson was the right outcome, and public companies should be training their employees that prison is a realistic outcome for anyone–not just the ringleaders–who would betray the integrity of the company’s financial reporting.

Following up on a coupla of recent blogs, Mike Melbinger blogged yesterday on CompensationStandards.com as follows: Confirming our worst fears, we are told that during a Friday conference call with the Big 4 accounting firms, the FASB confirmed its view that companies cannot fix the equity grant date at which expensing would begin until the material terms of the award have been communicated to employees.

This dramatic reversal of the accounting rules under APB 25, FAS 123 (and common sense), seemingly made wholly outside the regular review and comment process, means that companies will have to completely revise the way they have made equity awards for the last 50 years or risk negative accounting and tax consequences.

Inasmuch as the exercise price for a stock option (and expense date for other awards) will need to be set as of the date the material terms of the award are communicated to optionee, at this point according to Mike, companies would seem to have a few choices:

1. Prepare option award agreements in advance so that they may be sent to optionees on the same date as approved by the Board (or Compensation Committee), or

2. Have the Board resolution specify an option award date sufficiently in the future to give the plan administrator time to prepare and send the award agreements, with the exercise price for the option award determined only on that future date.

On the NASPP’s site, there is more info on this issue, including this Q&A. More to come on this…

SEC Staff to Issue Transitional Guidance on ’33 Act Reform

Yesterday at the ABA’s Annual Meeting, Corp Fin Director Alan Beller noted that the Staff was putting together transition guidance regarding ’33 Act reform. A number of transition issues remain open, such as how to deal with open shelfs. No timetable was given for the upcoming guidance, but it likely will be well before the December 1st effective date.

PUHCA Repealed!

If you don’t work with utility holding companies, you might not be aware of PUHCA (pronounced “puke-ah”) – this odd moniker relates to legislation enacted in 1935 that regulates holding companies for utilities and was controversial from day one. A small group of folks in the SEC’s Division of Investment Management work primarily on PUHCA issues.

Yesterday, PUHCA was repealed as part of President Bush signing the new energy bill – and replaced with a less onerous Public Utility Holding Company Act of 2005. Learn more in this memo from McGuire Woods.