Author Archives: Broc Romanek

In a radio address over the weekend, President Bush promised that the SEC’s budget would be significantly raised next year – to over $840 million.

However, the SEC has not been appropriated the additional money for this year’s budget that was approved by Congress last summer. This stalling has drained the existing SEC staff and has kept many potential staffers on hold for several months. Its unclear if this logjam will ever break.

The members of the new Public Company Accounting Oversight Board are getting paid industry rates (or even better for some members no doubt, such as the Acting Chair who was working for the SEC before). Each of the four members will receive $452,000 per year – and the chair will earn $556,000 annually. With a budget of nearly $45 million, the Board intends to hire 200 staffers this year and 70 more next year. See a related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A35261-2003Jan9.html.

Today, the Conference Board’s Blue Ribbon Commission published its final corporate governance recommendations – including 3 alternative models for the board of directors. See http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=2048.

Yesterday, the US Sentencing Commission released its new sentencing guidelines – they take effect January 24th. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A30177-2003Jan8.html.

The SEC designated Charles Niemeier to be the Acting Chairman of the Public Company Accounting Oversight Board – moving over from acting as the Chief Accountant in the Division of Enforcement and co-chairman of the SEC’s Financial Fraud Task Force.

Also today, the SEC held an open meeting and proposed a rule that would direct the SROs to prohibit the listing of any security if the issuer does not comply with the audit committee requirements established by Section 301 of Sarbanes-Oxley. Under the proposed rule, an issuer would not be prohibited from having a security listed so long as:

– each member of the audit committee was independent according to specified criteria in Sarbames-Oxley

– the audit committee was directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor

– the audit committee had procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters – including procedures for the confidential, anonymous submission by employees regarding questionable accounting or auditing matters.

– the audit committee had the authority to engage independent counsel and other advisors, as necessary; and

– the issuer provided appropriate funding for the audit committee.

The proposed rule would apply to both domestic and foreign listed issuers – but the SEC will note in the proposing release that it seeks specific comment on certain areas due to known conflicts with laws of other countries (e.gs. allowing non-management employees to serve as audit committee members, allowing shareholders to select or ratify the selection of auditors, allowing alternative structures such as boards of auditors to perform auditor oversight functions where such structures are provided for under local law; and addressing the issue of foreign government shareholder representation on audit committees).

The proposed rule would also require disclosure regarding the identification of the audit committee in annual reports and audit committee independence. The proposing release is at http://www.sec.gov/rules/proposed/34-47137.htm.

The comment period is 30 days (and rules must be adopted by late April) – and the transition period is proposed as no later than the 1st anniversary of the final rule. If you listen to the archived webcast, the discussion of this rule starts at minute 26. Much of the discussion is about independence standards for non-listed companies (as proposed, they would have to pick a standard from an SRO of their choice) and application to non-US companies (discussed above). The archive is at http://www.sec.gov/news/openmeetings.shtml.

The SEC will be holding another open meeting next Wednesday, 1/15, at 10 am to adopt rules regarding pro formas and filing of earnings releases; black-out pension funds; code of ethics for senior officers; “financial experts” on audit committees; and internal control reports – as well as analyst independence.

Fresh start for a new year – I am now the Editor of TheCorporateCounsel.net. This is the location of my new blog – and I promise to include more practical information than i have provided in the past.

If you would like to contact me – broc.romanek@thecorporatecounsel.net or 703.237.9222. This contact info is always in the “About Us” section of TheCorporateCounsel.net.

The SEC is holding an open meeting on Wednesday, January 8th to direct the SROS to prohibit the listing of any security of an issuer that is not in compliance with the audit committee requirements established by the Section 301 of the Sarbanes-Oxley Act of 2002. These requirements relate to: the independence of audit committee members; the audit committee’s responsibility to select and oversee the issuer’s independent accountant; procedures for handling complaints regarding the issuer’s accounting practices; the authority of the audit committee to engage advisors; and funding for the independent auditor and any outside advisors engaged by the audit committee.

Fresh start for a new year – I am moving on effective January 1st to be editor of TheCorporateCounsel.net. So this blog will move over to that site on that date – and i will endeavor to include more practical information than i have provided in the past.

If you would like to contact me – broc.romanek@thecorporatecounsel.net or 703.237.9222.

This morning, the SEC proposed rules that would mandate electronic EDGAR filing for all Section 16 reports. It also would require companies to post their Section 16 reports on their web sites (and links to the reports as filed would satisfy this requirement).

At this point, the SEC is vague about when this proposal would be adopted – but it is shooting for Spring 2003 – which is before the Sarbanes-Oxley deadline of July 30th. The SEC envisions a “filer friendly” Web template system – although it will give the specs to third parties in the hope that they will develop even a friendlier system.

As proposed, the SEC’s Web template system would allow exhibits to be attached – however, the only exhibit likely would be a power of attorney as the SEC will encourage more important information to be included in the “footnote” section.

Next Wednesday, the SEC is holding an open meeting to consider mandating electronic filing of all Section 16 reports. Despite SEC encouragement, most companies still file their reports in paper – despite the tight new 2 day deadline. See the SEC’s open meeting announcement at http://www.sec.gov/news/digest/12-12.txt.

Yesterday, on appeal, the Commission reversed the SEC staff’s mid-July position taken in a no-action letter allowing National Semiconductor Corporation to exclude a shareholder proposal regarding the board establishing a policy and practice of expensing the costs of future stock options issued to executives (2002 SEC No-Act. Lexis 651 (July 19, 2002)). The staff’s response had indicated that this proposal was excludable as “ordinary business” under Rule 14a-8(i)(7) – because it was a “choice of accounting methods.” This staff response was consistent with six other requests filed during the past year.

Below the relevant paragraph from the SEC’s appeal letter:

“After further consideration of the issues by the Division, as directed by the Commission, the Division does not concur in National Semiconductor’s view that the United Brotherhood of Carpenters Pension Fund’s proposal relates to ordinary business matters and, in the future, we will not treat shareholder proposals requesting the expensing of stock options as relating to ordinary business matters. The Division notes, however, that National Semiconductor relied in good faith on the Division’s position with respect to the proxy materials in connection with its 2002 annual meeting of shareholders, which was held on October 18, 2002.” National Semiconductor (Recon.) (avail. Dec. 6, 2002).

As a result of the overturn on appeal, over a hundred proposals recently submitted to companies on option expensing will have to be placed on the ballot for a shareholder vote. See more @ the original staff position at http://www.realcorporatelawyer.com/Ezine/EZineOctober2002.htm#StockOptions

It has been reported that William Donaldson, co-founder of Donaldson Lufkin & Jenrettre and former Chairman and CEO of
the NYSE will be named Chairman of the SEC later today…more to come…