Everyone is still waiting to see if the SEC staff issues interpretative guidance on Regulation G (and how far it goes beyond addressing transitional issues). We are hearing that the staff still intends to issue guidance – but they have been saying that for a few weeks. In our “Regulation G/Earnings Portal,” we have links to over 100 Item 12 8-Ks – see http://www.thecorporatecounsel.net/member/FAQ/RegulationG/index.htm#2.
The PCAOB is holding a meeting tommorrow to adopt rules regarding registration of foreign audit firms – and on Thursday, it makes its case to the SEC for it to be recognized as an official body. At that point, its interim auditing standards would be effective (and displace all existing standards).
This Thursday, the SEC is having an open Commission meeting to consider final rules under Section 303 of Sarbanes-Oxley regarding improper influence of auditors – and under Section 403 regarding mandatory Edgar filing of Section 16 reports.
Anyone who has filed a 1933 Act registration statement in the past year or two knows that the staff has been reviewing and commenting on Exhibit 5 opinions. The ABA Federal Regulation of Securities Committee established a task force last year to review Exhibit 5 opinion practice and attempt to work with the staff to develop practices and forms of opinion that satisfy the staff and don’t give heartburn to opining counsel. We hear that the dialogue between the staff and the ABA is proceeding productively. When the ABA report is finalized, we’ll post it here.
As we posted on April 9, Senator Carl Levin attached an amendment to a Senate bill (relating to charitable giving) seeking to give the SEC fining authority. That bill passed the Senate by a vote of 95 to 5, and would allow the SEC to impose fines on lawyers who advise public companies in connection with filings that violate the federal securities laws. Critics of the bill say it will chill communications between lawyers and their public company clients and make lawyers more conservative in advising companies regarding their disclosure obligations.
The search appears to be over. The Commission announced today that William J. McDonough is its nominee to become the new Chairperson of the five-member Public Company Accounting Oversight Board. (The Commission said it will not “formally” appoint McDonough until a thorough background check has been performed.) McDonough chas been the president of the Federal Reserve Bank of New York since 1993, but will resign that position to assume his position as chairperson of the PCAOB. The Commission’s press release announcing McDonough’s nomination is available at http://www.sec.gov/news/press/2003-48.htm.
The Commission declined today to review the staff’s position that a registrant may exclude from its proxy statement a shareholder proposal seeking to allow any beneficial owner of 3% or more of the outstanding stock to propose a board nominee for inclusion in the registrant’s proxy statement. The American Federation of State, County and Municipal Employees had requested that the Commission reverse the staff’s position (expressed in a no-action letter to Citigroup) that such a proposal relates to an election of directors and therefore is excludable under Rule 14a-8(i)(8). At the same time, the Commission asked the staff for a report on all rules and intepretations relating to the election of directors and recommendations for improving shareholder participation. The report is to be based on the input of all interested constituencies, and is due July 15. The Commission’s press release is available at http://www.sec.gov/news/press/2003-46.htm.
This is a hot governance topic, and at least one Commissioner has expressed sympathy for AFSCME’s position in recent speeches.
If shareholder proponents win the right to include alternative nominees in the registrant’s proxy statement, the nature of election contests will change dramatically. So, expect this issue to receive major shareholder and media attention.
The NYSE has posted amendments to its corporate governance listing standards dated April 4th at http://www.nyse.com/pdfs/amend1-04-09-03.pdf. Coming on the heels of recent amendments proposed in March regarding director independence, this set of amendments reflect the audit committee requirements of Section 301 of Sarbanes-Oxley and also clarifies certain disclosure obligations. It also revises the effective dates of some standards and discusses the applicability of specific corporate governance listing standards to foreign private issuers.
Next week, I will be on vacation (Spring Break 2003!) and Alan Dye will be your blogger. Alan has been feverishly wrapping up a new 6th edition of the Romeo & Dye Forms and Filings Handbook – updated for all the Section 16 rulemaking that has taken place these past few months.
Over 50 companies have already filed 8-Ks under Item 12 (but technically under Item 9 per the SEC as Edgar is not ready for Item 12s) to provide their earnings releases or to submit investor presentations that contain non-gaap measures. For TheCorporateCounsel.net subscribers, we have created a Regulation G/Earnings Release Portal which includes links to dozens of these filings – and we will continue to update the portal daily with new ones. See http://www.thecorporatecounsel.net/member/FAQ/RegulationG/index.htm.
The SEC is about a week behind in posting comment letters on the controversial “noisy withdrawal” reproposal for which the deadline passed on Monday – many comment letters have been filed including one signed by 77 law firms.
On the Section16.net’s “Comparing the Section 16 Filers” webcast yesterday, the SEC staff indicated that its web-based system will go live on either April 24th or 25th. This means that filers then will be able to make Section 16 filings only by either using the SEC’s website, using a service provider that has brought its product up to speed or by filing on paper (ie – there won’t be parallel systems – so filing by “normal” Edgar won’t work). The webcast is archived on Section16.net and a transcript will be available early next week.
The SEC staff also explained how their website will have limitations (e.g. there is no “save” feature – so you can’t input some data and turn to something else for a significant amount of time before filing. You must basically input data and file all in one session).
For those seeking a filer, we recommend that you try the Romeo & Dye Section 16 Filer. It can be used free by anyone – including law firms – until September 30th (and then its only $195 for Section16.net subscribers thru the end of 2004). It is simple and practical, with a new recordkeeping functionality (and compliant with the SEC’s new system). You can download and try the Romeo & Dye Filer at http://www.section16.net/Filer/index.htm.
Senator Levin has tacked an amendment on a bill – which is likely to pass – which would give fining authority to the SEC without having to go to court. The SEC unsuccessfully tried to get this authority in the Sarbanes-Oxley Act. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A59981-2003Apr8.html.
In the absence of DOL or SEC guidance, the debate rages – with differing opinions from different lawyers – about whether a 906 certificate is required for 11-Ks. Not that it is necessarily persuasive, but the 11-Ks filed so far don’t appear to contain certificates (although they could have been submitted supplementally as the SEC’s directive to file them as exhibits just came recently).
The ABA Task Force on Corporate Responsibility (chaired by James Cheek) issued its Final Report on March 31st. It is not yet available on the ABA’s website.
For Section16.net subscribers, today is the “Comparing the Section 16 Filers” programs – featuring key SEC staffers to describe the SEC’s new filing system – and 12 service providers to explain how they can add value. See more at http://www.section16.net/webcast0403/.
On Friday, the Delaware Supreme Court – in a rare 3-2 decision – finally issued its opinion in the Omnicare vs. NCS Healthcare case. Although the dissenters (including Chief Judge Norman Veasey) argue that the holding should apply only to the case’s facts, the M&A bar has been shaken because the case loosely stands for the proposition that lock-ups with majority shareholders can’t be absolute (e.g. not combined with fiduciary outs, etc.).
