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.
At today’s open Commission meeting, the SEC adopted final rules on mandatory Edgar filing of Section 16 reports. Although not much was said at the meeting, we do know that the rules will be effective June 30th (no more paper after that!), the temporary hardship exemption is being eliminated for Section 16 reports, the filing deadline is being extended from 5:30 pm to 10 pm EST (but just for Section 16 reports; not other types of filings), and there will be a one-year temporary relief period for making Item 405 disclosures in the proxy statement for filings that are only one day late. See the SEC’s press release at http://www.sec.gov/news/press/2003-51.htm.
In addition, the SEC adopted amendments to Regulation 13B2 that implement Section 303 of Sarbanes-Oxley Act. The new rules prohibit officers and directors of an issuer, and persons acting under the direction of an officer or director, from coercing, manipulating, misleading, or fraudulently influencing the auditor of the issuer’s financial statements if that person knew or should have known that such action could render the financial statements materially misleading.
Over the objections of some commentators, the SEC decided to keep a “negligence” standard as proposed – although it modified the language to the more traditonal negligence language of “knows or should have known.” The SEC did not adopt an “intent” standard even though commentators argued that was more consistent with Section 303 of Sarbanes-Oxley (which had language that arguably was an intent standard – “for the purpose of”).
Chairman Donaldson has announced his primary leadership team – none of whom have overwhelming experience with the securities laws. Laura Cox has been named Managing Executive for External Affairs, to deal with legislative and public affairs. She currently serves as Deputy Assistant Secretary for Banking and Finance in the Office of Legislative Affairs at the Treasury Department. Prior to joining the Treasury, Cox was Vice President for Strategic Policy Communications, Government and Regulatory Affairs at Instinet Corporation.
Peter Derby has been named Managing Executive for Operations, to assist the Chairman with the increase in the SEC’s operational effectiveness and responsiveness while considering administrative, operational and management issues as the Commission grows. He had served as an elected member of the Board of Trustees of the Village of Irvington-on-Hudson, New York, since 2002. Derby spent a decade in Russia, where he participated in the founding of DialogBank, the first private Russian bank to receive an international banking license.
Patrick Von Bargen has been named Managing Executive for Policy and Staff, to handle the promulgation and enforcement of policies, regulations, rules and procedures. He will be Chairman Donaldson’s primary liaison with the other Commissioners’ offices and conduct the management of the Chairman’s personal office. Prior to this, he was Executive Director of the National Center for Regional Innovation and Competitiveness and Vice President of the Council on Competitiveness, a public policy organization of major CEO’s, university presidents and labor leaders. He had served as Chief of Staff for United States Senator Jeff Bingaman (D-NM) from 1989 to 1999.
Yesterday, the PCAOB voted to require foreign auditors who audit companies that sell securities in the US to register with it (the SEC still must approve these rules before they become effective). This was a controversial action after intense lobbying by overseas regulators, who argued that accountants should abide by rules set by their own countries and noted conflicts with their country’s privacy laws. The PCOAB still must address the controversial issue of whether foreign auditors will be subject to the Board’s inspections and discipline.
In response to the 40 comment letters received, the PCAOB agreed to give foreign auditors an additional 6months to register – until April 2004. It also agreed that foreign auditors would not have to provide certain kinds of information if they include copies of the conflicting privacy law, legal opinions on the issue, and a certification that they tried and failed to get waivers to provide the information in question.
In addition, the PCAOB adopted a $68 million 2003 budget, announcing that it would hire as many as 200 accountants and support staffers by the end of the year and would open a New York office. Companies will receive invoices for support fees based on this budget sometime in May.
The SEC has delayed the timetable for its new Section 16 website to go “live.” It was supposed to occur over the weekend – but is now delayed to an undetermined date. See the SEC’s notice at http://www.sec.gov/info/edgar/ednews/rel85delay.htm.
The SEC’s open meeting tommorrow has been pushed back from 10 am to 1 pm.
