The SEC has posted its proposing release regarding rules on use of non-GAAP financial measures, including amendments to S-K for use of such measures in SEC filings and amendments to 8-K to require filing of certain press releases and ammouncements of earnings. Comments are due 30 days after publication in the federal register. These proposed rules would implement Sarbanes-
Oxley 401(b). The release is at http://www.sec.gov/rules/proposed/33-8145.htm.

The SEC has posted its proposed rules regarding off-balance sheet disclosure in MD&A at http://www.sec.gov/rules/proposed/33-8144.htm.

Not too many people expect Chairman Pitt to hold his job too long after tommorrow’s elections. Not sure what will happen to the other senior staffers that joined the SEC at Pitt’s request…here is another article about the most recent Accounting Oversight Board incident – http://www.washingtonpost.com/wp-dyn/articles/A59279-2002Nov2.html.

The SEC has announced a series of hearings regarding the credit rating agencies and their roles in the markets – see http://www.sec.gov/news/press/2002-157.htm.

In a truly remarkable turn of events, the just-appointed head of the Public Company Accounting Oversight Board, William Webster, has come under fire for serving as the chair of an audit committee of a company that is undergoing an investigation for fraud. Chairman Webster resigned from his directorship in July. Part of the allegations include complaints from the company’s independent auditor about inadequate internal controls – and a dispute over whether (and when) the audit committee was told about them.

Even more remarkable is that SEC Chairman Pitt was aware of this issue – but is reported to have not shared this information with any of the other SEC commissioners before they voted last friday to appoint the Oversight Board. As a result, Chairman Pitt has asked the SEC’s inspector general to conduct an investigation into Chairman Pitt’s own actions. Even this has come under fire, as Senator Paul Sarbanes (D-Md.), the head of the Senate Banking Committee, has noted that the inspector general reports to Chairman Pitt.

Senator Sarbanes has repeated his call for Chairman Pitt to resign and has asked Chairman Webster to reconsider his own appointment. In addition, Senator Sarbanes will conduct hearings into the process by which the Oversight Board was selected. At last friday’s open Commission meeting, Commissioner Harvey Goldschmid voted against all five appointees because of his displeasure over the process. For example, he had not received the names of the potential appointees – nor had a chance to vet their credentials – until shortly before the meeting was held to vote on the nominees.

See the Washington Post article about this new development at http://www.washingtonpost.com/wp-dyn/articles/A49150-2002Oct31.html.

Notes from today’s open meeting at the SEC (regarding proposed rules on pro forma information, “real-time” disclosure, off-balance sheet disclosure and pension blackout trading restrictions) are part of the November ezine, which was just posted at http://www.realcorporatelawyer.com/Ezine/EZineNovember2002.htm.

The SEC has moved its open Commission meeting relating to consideration of proposed rules under Section 307 of Sarbanes-Oxley regarding attorney standards of professional responsibility from 10/31 to next Wednesday, November 6th.

On October 25th, at one of the SEC’s most contentious open meetings in recent memory, the Commission appointed the five members of the new Public Company Accounting Standards Board. Under Sarbanes-Oxley, the SEC was required to establish this board by October 28th.

In a 3-2 vote, the Republican majority on the Commission selected former FBI and CIA director William Webster to chair the new board, with a term until 2007. The SEC’s two Democratic Commissoners, Harvey Goldschmid and Roel Campos, claimed that Mr. Webster lacks the expertise to oversee the accounting industry. This followed earlier accusations by others that the accounting lobby effectively blocked former TIAA-CREF chairman John Biggs from being selected as chair.

The other board members appointed were:

• Daniel Goelzer, a partner at Baker & McKenzie who previously spent seven years as general counsel at the SEC (term expires 2006).
• Kayla Gillan, former general counsel of the California Public Employees’ Retirement system (term expires 2005).
• Willis Gradison Jr., a former Republican congressman who is Senior Public Policy Counselor at Patton Boggs (term expires 2004).
• Charles Niemeier, the SEC’s Chief Accountant in the Division of Enforcement and co-chairman of its financial-fraud task force. Mr. Niemeier previously worked at Williams & Connolly (term expires 2003).

Commissioner Goldschmid voted against all five board members to protest the selection process and said that as far as he knew none of the five board members approved yesterday was properly vetted – and that he was not told their names until the morning before the meeting. Commissioner Campos dissented only to the choice of Chairman Webster.

After the SEC’s appointments, according to the Washington Post, Senate Banking Committee Chairman, Paul S. Sarbanes (D-Md.) declared that “the country would be best served if Mr. Pitt stepped down.” Others in the Democratic congressional leadership and Sen. John McCain (R-Ariz.) had already recommended that Chairman Pitt resign or be fired.

The October 26th Washington Post article regarding the meeting is at http://www.washingtonpost.com/wp-dyn/articles/A19572-2002Oct25.html. The related SEC press release is at http://www.sec.gov/news/press/2002-153.htm.

A last minute open Commission meeting has been scheduled for today at 2:30 pm EDT – so that the Commission can vote on the members of the Public Company Accounting Oversight Board. Under Sarbanes-Oxley, the Commission is charged with selecting this board by Monday.

According to the Washington Post, Commissioner Goldschmid requested the open meeting (as opposed to the Commission voting behind closed doors). The Post reports that there likely will be a division along political party lines in selecting the chair – with the 3 republicans voting for William Webster, a former FBI and CIA director – and the 2 democrats voting for John Biggs, former TIAA-CREF chair. Controversy still swirls around this issue. See more at http://www.washingtonpost.com/wp-dyn/articles/A14064-2002Oct24.html.

The SEC has announced it will have 2 open commission meetings next week – one on 10/30 and one on 10/31- proposing rules under Sections 401(b)(pro forma information), 401(a) (MD&A), 306(a)(pension blackout periods) and 307(standards of professional conduct for attorneys) of the Sarbanes-Oxley Act. See the SEC’s Digest at http://www.sec.gov/news/digest/10-23.txt.

The SEC has posted its two proposal releases relating to last week’s open Commission meeting regarding internal control reports, definintion of “financial experts” and improper influence on auditors – the are at http://www.sec.gov/rules/proposed/33-8138.htm and http://www.sec.gov/rules/proposed/34-46685.htm.

In addition, the Department of Labor has issued proposed rules on pension blackout periods at http://www.dol.gov/opa/media/press/pwba/PWBA2002605.htm.

The Nasdaq has finally issued a summary of its new proposed corporate governance listing standards at: http://www.nasdaq.com/about/Corp_Gov_Summary101002.pdf