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SEC/CORPORATE
SEC Will Not Appeal Proxy Access Ruling
The SEC has confirmed that it will not seek a rehearing or Supreme Court review of the decision by the U.S. Court of Appeals in Washington, D.C. to vacate Rule 14a-11, which would have required that public companies include shareholders' director nominees in their proxy materials under certain circumstances. The SEC adopted amendments to Rule 14a-8 at the same time that it adopted Rule 14a-11, which amendments require companies to include in their proxy materials shareholder proposals that would amend a company's governing documents regarding director nomination procedures or disclosures related to such nominations.
These amendments were not challenged in the litigation, although the SEC voluntarily stayed the effective date of these amendments at the time it stayed the effective date of Rule 14a-11. The SEC's stay order provides that the stay of the effective date of the amendments to Rule 14a-8 and related rules will expire without further SEC action when the court's decision is finalized, which is expected to be September 13, 2011.
The effectiveness of the amendments to Rule 14a-8 leaves the door open for companies and their shareholders to establish proxy access standards on a company-by-company basis, rather than according to a specified standard such as that contained in Rule 14a-11.
http://www.sec.gov/news/press/2011/2011-179.htm
SEC Seeks Public Comment on Review of Existing Regulations
The SEC announced on September 6, 2011, that it will seek public comment on a plan to conduct retrospective reviews of its existing regulations. Its decision is a result of an Executive Order issued on July 11,2011, by President Obama. The order recommended that independent regulatory agencies consider how they might best analyze rules that may be outmoded, ineffective or excessively burdensome, and modify, streamline or repeal them. It also recommended analysis of regulations that might need to be strengthened or modernized, which may entail new rulemaking. Because today's financial markets are dynamic and fast-moving, the SEC stated that the regulations affecting the markets and their participants must be reviewed over time and revised as necessary so that regulations continue to fulfill the SEC's mission. The SEC is seeking public comment on the process it should use to conduct retrospective reviews, such as how often rules should be reviewed, the factors that should be considered, and ways to improve public participation in the rulemaking process. Public comments are due by October 6, 2011.
http://www.sec.gov/news/press/2011/2011-178.htm
SEC Adopts Rules to Suspend Duty to File Asset-Backed Reports Under Section 15(d) of the Exchange Act
Section 942(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") eliminated the automatic suspension of the duty to file under Section 15(d) of the Exchange Act for asset-backed securities issuers; it also granted the SEC the authority to issue rules providing for the suspension or termination of such duty.
Before the enactment of the Dodd-Frank Act, Section 15(d) of the Exchange Act provided that for issuers without a class of securities registered under the Exchange Act the duty to file ongoing reports is automatically suspended as to any fiscal year, other than the fiscal year within which the registration statement for the securities became effective, if the securities of each class to which the registration statement relates are held of record by fewer than 300 persons.
On August 17, 2011, pursuant to Section 942(a) of the Dodd-Frank Act, the SEC adopted final rules to provide certain thresholds for suspension of the reporting obligations for asset-backed securities issuers.
The final rules, as adopted, provide that the duty to file annual and other reports under Section 15(d) is suspended in either of these instances:
- as to any semi-annual fiscal period, if, at the beginning of the semi-annual fiscal period, other than a period in the last fiscal year within which the registration statement became effective or, for shelf offerings, a takedown occurred, there are no asset-backed securities of such class that were sold in a registered transaction held by non-affiliates of the depositor and a certification on Form 15 has been filed
- when there are no asset-backed securities of such class that were sold in a registered transaction, immediately upon the filing with the SEC of a certification on Form 15 if the issuer has filed all required reports for the most recent three fiscal years
http://sec.gov/rules/final/2011/34-65148.pdf
SEC Amends Form ID
Due to the increase in the number and type of people that use the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system to submit filings, on September 1, 2011, the SEC amended the Form ID to include additional applicant types in order to facilitate processing of the form. The new applicant types include:
- people who currently file on EDGAR but who are not separately listed on Form ID
- people who currently file forms with the Commission on paper but who may be required to file on EDGAR in the future
- people who will be required to meet certain new filing obligations under the Securities Exchange Act of 1934, including provisions added by the Dodd-Frank Act
New applicant types and definitions being added to the Form ID include "large trader," "clearing agency," municipal advisor," and "nationally recognized statistical rating organization." These amendments will allow the Form ID to be assigned for processing based on the type of applicant, including by routing Form ID filings to the appropriate internal office or division.
http://www.sec.gov/rules/final/2011/33-9256.pdf
ACCOUNTING
Public Company Accounting Oversight Board to Host Roundtable on the Auditor's Reporting Model
The Public Company Accounting Oversight Board (the PCAOB) is hosting a public roundtable on September 15, 2011, to discuss its concept release on possible changes to the auditor's reporting model.
The PCAOB issued the concept release to seek public comment on potential changes to the auditor's reporting model based on concerns of investors and other financial statement users. The objective of the concept release is to discuss several alternatives for changing the auditor's reporting model that could increase its transparency and relevance to financial statement users, while not compromising audit quality. The alternatives described in the concept release for changing the auditor's report include:
- a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the company's financial statements (an "Auditor's Discussion and Analysis")
- required and expanded use of emphasis paragraphs in the auditor's report
- auditor reporting on information outside the financial statements
- clarification of language in the auditor's report
The PCAOB noted in the release that auditors, as a result of the performance of required audit procedures, often have significant information regarding a company's financial statements and the audit of these financial statements that is not currently reported in the auditor's report to the financial statement users. Such information could be useful to investors and other financial statement users.
Comments on the concept release are due by September 30, 2011. The public meeting will be held in Washington, D.C. and is open to the public; it will also be available via Webcast on the PCAOB website. Additional information is available on the PCAOB website.
The editors would like to thank the following contributors for their assistance with this issue of Securities & Financial News to Note:
Patrick C. Emans
Nicole M. Maron
Carrie J. Eisnaugle
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
