Broc Romanek is Editor of CorporateAffairs.tv, TheCorporateCounsel.net, CompensationStandards.com & DealLawyers.com. He also serves as Editor for these print newsletters: Deal Lawyers; Compensation Standards & the Corporate Governance Advisor. He is Commissioner of TheCorporateCounsel.net's "Blue Justice League" & curator of its "Deal Cube Museum."
The SEC has scheduled an open Commission meeting next Wednesday, 5/28 at 10 am to adopt internal control report rules under Section 404 of Sarbanes-Oxley.
Hopefully, the uncertainty surrounding the possible need for CEO/CFO certifications for Form 11-Ks will soon be over. We understand that the SEC staff is in conversations with the DOL staff on this issue.
Since the SEC’s request for comments a few weeks back, we now have a company that has offered shareholders access to the ballot as part of a recent settlement of a Milberg Weiss shareholder suit (Bill Lerach and Bob Monks teamed up on this one). According to a press release, the settlement with Hanover Compressor involves two new independent director positions to the board to be nominated by shareholders holding more than 1% of outstanding shares. The settlement also includes a number of other governance restrictions, such as shareholder approval for new executive option plans and repricing of stock options and rotation of the independent auditors every 5 years. See the related Business Week article at http://www.businessweek.com/bwdaily/dnflash/may2003/nf20030514_3438_db002.htm.
Don’t forget that last week – May 6th – was the effective date for companies to pre-approve audit and non-audit services. So if a company has not yet adopted a pre-approval policy, any non-audit services must be approved by the audit committee (or the audit committee chair if that delegation has been granted) – although contracts for certain non-audit services in place before May 6th can continue for 12 months under specified conditions.
The odd thing about Section 201 of Sarbanes-Oxley – and the related rulemaking – is that its unclear what will be the consequences if a company uses non-audit services from its auditor without the appropriate pre-approval…
On Section16.net today, we are holding a webcast program entitled “Section 16 Filers: Users’ Perspective – Practice Tips and Lessons Learned from the Trenches.” Hear from panelists that have been test-driving the various filer products – as well as Alan Dye on the latest SEC developments – at http://www.section16.net/webcast0503/.
As reported by the Washington Post, former SEC Chair Harvey Pitt has started a corporate governance/crisis management/regulatory advice consultancy called “Kalorama Partners” – but he will not “appear before the SEC.” See http://www.washingtonpost.com/wp-dyn/articles/A47110-2003May12.html.
The SEC staff has done some housecleaning and issued Staff Accounting Bulletin 103 “Update of Codification of Staff Accounting
Bulletins.” The purpose of this SAB is to comprehensively update the existing SAB codification – as a result, the SEC will now feel sufficient comfort to post the entire SAB codification on its website. See http://www.sec.gov/interps/account/sab103.htm.
Yesterday, the SEC issued its adopting release regarding mandatory Edgar for Section 16 reports – see http://www.sec.gov/rules/final/33-8230.htm. The SEC’s system is working fine now, including compatability with third-party services.
Based on comments from Alan Beller, Director, Division of Corporation Finance yesterday at an ABA conference, it appears likely that the staff will issue Regulation G FAQs at some point – timing still uncertain. As for certain issues (e.g. S-8 and post-effective amendment transitional issues), the FAQs may well have answers that differ from what has been issued by the staff to date (or they may not).
Today was the first day for the SEC’s new Section 16 website going “live” – and it was not a pleasant one. The SEC’s site was down for a few hours – and the SEC disabled LIVE submissions of reduced-content XML filings. This means that no third-party software will
work at the present time. The SEC staff has indicated that it will do date adjustments on any filings that are impacted. More to come.
In anticipation of next Monday’s “going live” for Section 16 e-filing, the SEC staff released some FAQs yesterday. Some of these FAQs are not necessarily consistent with past practice in filing out Section 16 forms – so it is good reading. See http://www.sec.gov/divisions/corpfin/sec16faq.htm.
SEC chair William Donaldson sent a stern letter to Morgan Stanley’s chair regarding comments made that downplayed Morgan Stanley’s role in the behavior that led to the global settlement reached this past Monday. A related article is at http://www.washingtonpost.com/wp-dyn/articles/A2769-2003May1.html. If you want a copy of Donaldson’s letter, send an email to broc.romanek@thecorporatecounsel.net.
Yesterday, the SEC announced that starting this Monday, May 5th, its Section 16 Edgar site goes live! This means that on Monday, you will only be able to file via paper or the SEC’s site (which still has some problems) – or a third party service that complies with the SEC’s new specifications. The Romeo & Dye Section 16 Filer does comply with the new specs – so we urge you to try it (its free through end of September for anyone – and then only $195 thru end of 2004 for Section16.net subscribers) – download it at http://www.section16.net/Filer/index.htm.
On our fantastic “Regulation G Unplugged” webcast yesterday, it was mentioned that it was uncertain whether the SEC staff will issue any FAQs on Regulation G anytime soon – as it appears that there is disagreement among SEC staff members about what guidance should be provided. It was pointed out that various staff members might be providing conflicting guidance already. An audio archive of the webcast is available at http://www.greatgovernance.com/members/AudioCenter.html (a transcript will be posted next week).
In an ironic twist regarding the lack of transparency of financial disclosures, the AICPA – which has copyrighted its auditing standards over the years (ie. copyrighted part of GAAP) – has been is a spat with the PCAOB over the Board’s potential use of the AICPA standards. Because the AICPA makes so much money selling their standards, they don’t want them to be freely available. In other words, there has been limited transparency of what the auditing standards have been – and the PCAOB wants to change that. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A62485-2003Apr30.html.
This lack of transparency is one reason why we will soon be launching AccountingDisclosure.com – this site will provide “easy to understand and find” accounting guidance for lawyers.
In a bizarre development, on April 11th, Senator Biden included an extensive “legislative history” of Sarbanes-Oxley in the Congressional Record. His submission includes views that are inconsistent with some current practices, such as the the prevailing view that Section 906 does not cover Forms 8-K and 6-K. We have posted this “legislative history” at http://www.thecorporatecounsel.net/member/Sarbanes/LegislativeHistory.htm.
Yesterday, Sens. Barbara Boxer (D-Calif.) and John Ensign (R-Nev.) introduced a bill in the Senate that would delay enforcement of an upcoming FASB proposal that would require companies to treat stock options as expenses. The bill would direct the SEC to enhance financial disclosures of stock options – and then study the issue for 3 years before enforcing any new rules. A similar bill was introduced in the House last month.
