Yesterday, FASB chief Bob Herz testified before Congress on expensing options – and expressed his view that he would resist political pressure in his efforts towards mandating expensing. See the related Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A42477-2003Mar4.html.
Thanks to Mike Holliday – our roving friend and reporter – the following are some of the actions taken by the Public Company Accounting Oversight Board at its meeting today:
1. Approved putting out for comment proposed registration rules and forms for public auditing firms to register. Comments due by 5 p.m. on March 31st. After the comment period, the PCAOB has to approve the rules and forms and submit to the SEC, which will put out the rules for comment. The PCAOB time schedule is to send the rules and forms to the SEC by mid-April, with applications from auditing firms due to be filed by early September and firms registered by the end of October.
2. The PCAOB plans to put out proposals for allocation, assessment and collection of fees from issuers next week, with final rules to the SEC by mid-April. They plan to be able to send bills to issuers in mid-to-late spring.
3. The PCAOB plans to adopt transitional standards on auditing, quality control and independence in mid-April, and to announce standard setting procedures in April.
4. Non-US auditing firms – including non-US firms that play a substantial part in preparing audit reports even if the firm does not issue the report – are not exempt from the registration process.
5. The PCAOB plans to hold a roundtable the week of March 17, they mentioned Friday, March 21, to consider registration of non-US auditing firms and how the PCAOB should exercise its authority over non-US firms. They want to invite participation by US and non- US auditing firms, investors and financial regulatory authorities. There will be a separate release on this with a list of questions attached.
Although most of this regulation directly affects the auditing firms and not public companies, there are a few issues for companies to follow – in addition to the fees public companies will have to pay. The PCAOB will be collecting data, particularly in audit firm investigations, that may include some public company client information.
Also, SOX 105 specifically authorizes the Board to establish rules to request testimony of, and production of any document in the possession of, any other person including any client of an auditing firm, and to seek issuance by the SEC of a subpoena to require the testimony of or production of any document in the possession of any person including any client, with relevancy and materiality standards. Public companies will have an interest in how their confidential and proprietary information will be protected.
More than 100 companies with 12/31 year-ends filed their Form 10-Ks (and some 10-KSBs) within 60 days – meeting what will be the new deadline two years hence.
From these and other filings, for TheCorporateCounsel.net subscribers, we have excerpted sample disclosures related to loans under Section 402 and changes in accountants. We also have sample disclosures regarding audit committee financial experts. These are posted at http://www.thecorporatecounsel.net/member/Disclosure/.
The Public Company Accounting Oversight Board hired away George Diacont from the Nasdaq to be head of registration and inspections. George used to work at the SEC. The Oversight Board has a much anticipated meeting today at 12:30 est – tackling registration of foreign auditng firms among other issues. You can hear the webcast at http://www.connectlive.com/events/pcaob/.
At “SEC Speaks,” no real bombshells were dropped. However, the SEC staff did note that there is some possibility that the upcoming final rules on broker uninstructed votes could still be applied to this proxy season. But the staff did not indicate when the final rules would be adopted – so the likelihood of this appears relatively limited to us. Notes from SEC Speaks will be posted on TheCorporateCounsel.net within a few days.
The Sunday edition of the NY Times included an article on a recent Indiana University study on the impact of CEO Certifications on corporate earnings – we have posted a copy of that survey at http://www.thecorporatecounsel.net/member/alerts/03_03_03_CEO.pdf.
Just in time for Friday’s “SEC Speaks” program (affectionately known as “SEC Spleaks” by alumni), Corp Fin has released a summary of significant issues addressed in its review of 10-Ks of the Fortune 500 companies. The Summary states that comment letters have been sent to more than 350 companies – and that the Staff is continuing to work with many companies as they respond to comments. This Summary is at http://www.sec.gov/divisions/corpfin/fortune500rep.htm.
The Summary is an objective, factual summary that concentrates on what the SEC staff sees as common deficiencies – staffers already are saying that they anticipate a similar review of “large” – but not necessarily the Fortune 500 – companies for next year, focusing on the same type of issues (i.e. revenue recognition, restructuring charges, liquidity) – as well as compliance with the new rules.
Following up on issues identified in its January 24th report to Congress on the state of the credit rating industry, the SEC approved a 4th credit rating agency yesterday. Canada’s Dominion Bond Rating Service now joins Moody’s, S&P and Fitch to rate debt in the US.
As noted in the SEC’s January 24th report, a lack of competition might be hurting the ability of investors to get the most timely and accurate ratings from these agencies. In about a month, the SEC expects to issue a concept release on the possible restructuring of how the credit rating industry is regulated. The SEC’s Jan. 24th report is at http://www.sec.gov/news/studies/credratingreport0103.pdf.
For TheCorporateCounsel.net subscribers, we have posted sample disclosures regarding corporate goverance in the proxy statement and how companies disclose SEC enforcement actions in our “Disclosure” practice area at http://www.thecorporatecounsel.net/member/Disclosure/.
As will be covered more completely in the upcoming issue of E-Minders, a union proponent has filed an appeal with the Commission over the exclusion of a shareholder proposal.The proposal would require Citigroup to include board nominees on its proxy card if such persons were nominated by shareholders that owned at least 3% of the company’s stock. Unlike the typical shareholder proposal, the Citigroup proposal would be binding as it seeks to amend the company’s by-laws.
For TheCorporateCounsel.net subscribers, we have posted an interview with Bruce Mendelsohn on MD&A – see http://www.thecorporatecounsel.net/member/InsideTrack/02_21_03_Mendelsohn.htm.
The NASPP just started conducting an online survey regarding cashless exercises after Section 402 of Sarbanes-Oxley. The early results are interesting…for example:
– Our company currently allows same-day-sale exercises by insiders.(Total responses: n=311)
n=183 (58.84%) Yes
n=121 (38.91%) No
– Does your company allow insiders to use the broker(s) designated by the company?(Total responses: n=238)
n=143 (60.08%) Yes
n=22 (9.24%) No
n=73 (30.67%) We don’t have a designated broker
– Did you discontinue cashless exercises after the adoption of Section 402 of Sarbanes-Oxley?(Total responses: n=189)
n=121 (64.02%) Yes
n=69 (36.51%) No
