Current Issues and Rulemaking Projects
Quarterly Update
Division of Corporation Finance
September 30, 2001
This is the third quarterly update to our Current Issues and Rulemaking Projects outline. Issuance of the first quarterly update dated March 31, 2001 reflected a new approach by the Division of Corporation Finance. Previously, the Division revised the entire outline periodically by adding new material and deleting dated sections. The users of the outline expressed concern regarding the increasing size of the outline, difficulties in focusing on new material and the loss of deleted sections that continued to include useful, if no longer new, material. In response to these concerns, the Division will leave the most recent version of the complete outline (November 14, 2000) on the Commission's web site and will publish quarterly updates throughout the year. Those quarterly updates will then be combined with updates from the fourth quarter to comprise an annual update to the outline.
The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any of its employees. This outline was prepared by members of the staff of the Division of Corporation Finance and does not necessarily reflect the views of the Commission, the Commissioners or other members of the staff.
Table of Contents
- Division Organization and Employment Opportunities
- Mergers & Acquisitions
No updates
- Electronic Filing and Technology
Mandated Electronic Filing for Foreign Issuers
(See Section V. "Internationalization of the Securities Markets" below)
- Small Business Issues
Small Business Initiatives
The 20th Annual Government-Business Forum on Small Business Capital Formation
- Internationalization of the Securities Markets
Mandated Electronic Filing for Foreign Issuers
- Other Pending Rulemaking and Recent Rule Adoptions
No updates
- Staff Legal Bulletins for Division of Corporation Finance
Addendum to Staff Legal Bulletin No. 1 — Confidential Treatment Requests
Staff Legal Bulletin No. 14 — Exchange Act Rule 14a-8
- Current Disclosure, Legal and Processing Issues
No updates
- Accounting Issues
Pooling-of-Interests Accounting
Auditor Independence
Please also see "Current Accounting and Disclosure Issues in the Division of Corporation Finance," available on our web site at www.sec.gov/divisions/corpfin.shtml.
- Significant No-Action and Interpretive Letters — June 30, 2001 through September 30, 2001
No updates
- Special Relief Actions Taken in the Wake of the September 11, 2001 Terrorist Attacks
Emergency Order
Calculation of Average Weekly Trading Volume under Securities Act Rule 144 and Termination of an Exchange Act Rule 10b5-1 Trading Plan
Assistance to the Airline and Insurance Industries in Accessing the U.S. Capital Markets
Administrative Relief Regarding Price Ranges in Initial Public Offerings
The Division's organizational structure follows:
Division Director — David B. H. Martin (202) 942-2800
Deputy Director — Michael McAlevey (202) 942-2810
Senior Counsel to the Director — Anita Klein (202) 942-2980
Operations
Principal Associate Director (Disclosure Operations) — Shelley Parratt (202) 942-2830
Associate Director (Disclosure Operations) — James Daly (202) 942-2881
Associate Director (Disclosure Operations) — William L. Tolbert, Jr. (202) 942-2891
Senior Special Counsel (Regulatory Policy) — James Budge (202) 942-2800
Office of EDGAR and Information Analysis — Herbert Scholl, Chief (202) 942-2930
Disclosure Support
Associate Director (Legal) — Martin P. Dunn (202) 942-2890
Office of Chief Counsel — Paula Dubberly, Chief (202) 942-2900
Office of Rulemaking — Elizabeth Murphy, Chief (202) 942-2910
Associate Director (Regulatory Policy) — Mauri Osheroff (202) 942-2840
Senior Special Counsel (Regulatory Policy) — Mark W. Green (202) 942-2840
Office of Mergers and Acquisitions — Dennis O. Garris, Chief (202) 942-2920
Office of International Corporate Finance — Paul Dudek, Chief (202) 942-2990
Office of Small Business Policy — Richard Wulff, Chief (202) 942-2950
Associate Director (Chief Accountant) — Robert Bayless (202) 942-2850
Assistant Directors
Health Care and Insurance — Jeffrey P. Riedler (202) 942-1840
Consumer Products — Christopher Owings (202) 942-1900
Computers and Office Equipment — Barbara Jacobs (202) 942-1800
Natural Resources — Roger Schwall (202) 942-1870
Structured Finance, Transportation and Leisure — Max Webb (202) 942-1850
Manufacturing and Construction — Steven Duvall (202) 942-1950
Financial Services — Todd Schiffman (202) 942-1760
Real Estate and Business Services — Karen Garnett (202) 942-1960
Small Business — John Reynolds (202) 942-2950
Electronics and Machinery — Peggy Fisher (202) 942-1880
Telecommunications — Barry Summer (202) 942-1990
Division Employment Opportunities for Accountants and Attorneys
Accountants
The Division has about 110 staff accountants with specialized expertise in the various industry offices. The Division provides a fast-paced, challenging work environment for accounting professionals. Our staff works on hot IPOs and current and emerging accounting issues. We influence accounting standards and practices and interact with the top professionals in the securities industry.
A staff accountant's responsibilities include examining financial statements in public filings and finding solutions to the most difficult and controversial accounting issues. A minimum of three years' experience in a public accounting firm or public company dealing with SEC reporting is required. If you want to experience a unique learning opportunity and explore the depth and breadth of accounting theory, principles, and practices, call (202) 942-2960 for information on employment opportunities in the Division.
Attorneys
The Division has about 130 attorneys who process filings and draft and interpret regulations. Every year, we recruit top law school graduates, and from time to time have positions for lateral applicants with solid legal skills and experience. Applicants should demonstrate an ability to accept major responsibilities. We prefer applicants who have had experience in securities transactions involving public companies. It is also helpful, but not necessary, if applicants have accounting and/or business training.
Responsibilities include analyzing and commenting on disclosure documents in public offerings, including those relating to mergers and acquisitions. The positions involve working directly with companies, their executives, underwriters and investment banking firms, outside counsel and outside accountants. The work involves innovative financing and business structures. Interested persons should send resumes to Division of Corporation Finance, U.S. Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
No updates.
Mandated Electronic Filing for Foreign Issuers
(See Section V. "Internationalization of the Securities Markets" below)
Small Business Initiatives
The 20th Annual Government-Business Forum on Small Business Capital Formation was held in Washington D.C. on September 6-7, 2001. This platform for small business is the only governmental-sponsored national gathering for small business, which offers annually the opportunity for small businesses to let government officials know how laws, rules and regulations are affecting their ability to raise capital. The next Government-Business Forum will be in September of 2002.
Mandated Electronic Filing for Foreign Issuers
On September 28, 2001, the Commission proposed for public comment rule and form amendments that would require foreign private issuers and foreign governments to file electronically their securities documents through the Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system (Release No. 33-8016). Currently, the Commission's rules only permit, but do not require, foreign issuers to file their securities documents on EDGAR. By mandating the electronic filing of foreign issuers' securities documents on EDGAR, the Commission seeks to achieve the same investor benefits and the same efficiencies in information transmission, dissemination, retrieval and analysis realized since it mandated EDGAR filing for domestic issuers.
Mandated EDGAR filing benefits investors by making available to the public information contained in Commission filings soon after the Commission has received them. Filers benefit from electronic filing requirements since the electronic format facilitates research and data analysis, thereby fostering increased market exposure for their securities. Filers also benefit from the speedy and secure delivery afforded by EDGAR filing as well as from the efficiencies achieved in the Commission's review and processing of their filings.
The proposal in the release would amend Regulation S-T, the Commission's rules governing electronic filing, to eliminate the foreign issuer exception from mandated EDGAR filing for most Securities Act and Exchange Act documents. The proposed amendments would require the electronic filing of
- foreign private issuers' Securities Act registration statements and reports;
- foreign governments' Securities Act registration statements and Exchange Act registration statements and reports;
- Multijurisdictional Disclosure System forms filed by Canadian issuers;
- statements of beneficial ownership on Schedules 13D and 13G and tender offer schedules that pertain to the securities of a foreign issuer, whether filed by a foreign or domestic person;
- Form CB, the form used for cross-border rights offers, exchange offers and business combinations that are exempt from the tender offer rules or Securities Act registration, if the filer or the subject company is an Exchange Act reporting company; and
- most Trust Indenture Act forms.
The proposed amendments would further
- permit, but not require, a foreign issuer to file a Form 6-K electronically if the sole purpose of the Form 6-K is to submit the foreign issuer's attached annual report to security holders;
- permit, but not require, supranational entities, such as the World Bank, to file their reports electronically;
- continue to require documents submitted under Exchange Act Rule 12g3-2(b) to be in paper only;
- eliminate the option that currently exists for paper filers to provide an English language summary of a foreign language exhibit instead of a complete English translation; and
- provide a transition period of four months from the date of the adopting release before the amendments would become effective.
Comments on the proposals should be submitted by December 3, 2001.
No updates.
Addendum to Staff Legal Bulletin No. 1 (CF) — Confidential Treatment Requests
On July 11, 2001, the Division republished Staff Legal Bulletin No.1, with an addendum. The bulletin deals with processing of confidential treatment requests filed in connection with filings under the Securities Act and the Exchange Act. The addendum gives guidance on two issues. First, it specifies that requests for confidential treatment of the application itself and supporting documentation must be made under Securities Act Rule 406 or Exchange Act Rule 24b-2, whichever is appropriate for the underlying exhibit. Second, the addendum describes the lengths of time we will consider granting extension for confidential treatment of exhibits whose original grants are about to expire.
Staff Legal Bulletin No. 14 (CF) — Rule 14a-8
Staff Legal Bulletin No. 14 relates to Rule 14a-8 under the Exchange Act. The Division structured the legal bulletin with three overriding purposes in mind, namely, to explain the Division's role in the Rule 14a-8 no-action process, to provide guidance on a variety of Rule 14a-8 issues, and to suggest ways to facilitate the Division's review of Rule 14a-8 no-action requests. The legal bulletin addresses procedural matters that are common to shareholders and companies alike and provides a consolidated restatement of many of the Division's current practices.
No updates.
Pooling-of-Interests Accounting
Following the tragic events of September 11, 2001, the Commission took temporary action in a series of emergency orders and interpretive releases to respond to market developments.
On September 14, 2001, the Commission issued an emergency order pursuant to Section 12(k)(2) of the Exchange Act with respect to several different matters, including a registrant's repurchase of its own securities under Exchange Act Rule 10b-18 (see Section XI below). One aspect of the order affects the Commission's accounting rules. In connection with registrant repurchases, the Commission ordered that, notwithstanding the current accounting literature, acquisitions by registrants of their own equity securities during the period from September 17, 2001 until September 21, 2001 will not affect the availability of pooling-of-interests accounting. (See Release No. 34-44791.)
On September 21, 2001, the emergency order was extended until September 28, 2001. (See Release No. 34-44827.) On September 28, 2001, similar relief was granted from October 1, 2001 until October 12, 2001 under Section 36(a)(1) of the Exchange Act. (See Release No. 34-44874.)
Auditor Independence
On September 14, 2001, the Commission also issued Release No. 33-8004. This interpretive release expresses the Commission's view that, for purposes of Rule 2-01 of Regulation S-X (which addresses auditors' independence from their audit client), an accounting firm with audit clients that had offices in and around the World Trade Center may assist these clients in recovering their records and systems destroyed in the events of September 11, 2001, without impairing the firm's independence from these clients. (See Release No. 33-8004.)
For further information, see Commission Press Releases Nos. 2001-91, 2001-97 and 2001-106.
No updates.
Emergency Order
Following the tragic events of September 11, 2001, the Commission issued an emergency order pursuant to Section 12(k)(2) of the Exchange Act on September 14, 2001, taking temporary action to respond to market developments. Section 12(k)(2) grants the Commission the authority, in the event of certain major market disturbances, to issue summarily orders to alter, supplement, suspend or impose requirements or restrictions with respect to matters or actions subject to the regulation of the Commission. The Commission relied on Section 12(k)(2) to take temporary action with respect to several different matters, including registrant repurchases of securities under Exchange Act Rule 10b-18 and the profit recovery provisions of Section 16(b) of the Exchange Act and the rules adopted under it. (See Release No. 34-44791.)
Registrant Repurchases Relief
The Commission ordered that an issuer, or an affiliated purchaser of an issuer, would not be deemed to have violated Section 9(a)(2) of the Exchange Act or Exchange Act Rule 10b-5 in connection with an Exchange Act Rule 10b-18 purchase of or bid for its own securities made during the period from September 17, 2001 until September 21, 2001 that did not strictly comply with the time or volume restrictions of Exchange Act Rule 10b-18.
Exchange Act Section 16 Relief
The Commission ordered that, notwithstanding the profit recovery provisions of Section 16(b) and the rules adopted under it, any purchase during the period from September 17, 2001 until September 21, 2001 by a person subject to Section 16 shall be exempt from the operation of Section 16(b) with respect to any sale by that person during the preceding six months, and accordingly shall not be matched with such sale. The purchase continues to be reportable on Form 4 under Section 16(a) of the Exchange Act. The Form 4 should use transaction code "J" and describe the transaction in a footnote, making specific reference to the emergency order.
On September 21, 2001, the emergency order was extended until September 28, 2001. (See Release No. 34-44827.)
On September 28, 2001, the Commission issued an exemptive order pursuant to Section 36(a)(1) of the Exchange Act temporarily easing some of the conditions of Exchange Act Rule 10b-18 for issuers repurchasing their own securities during the period from October 1, 2001 through October 12, 2001. First, issuers whose equity securities trade at sufficiently high volumes (meeting an average daily trading volume and public float test) may effect purchases up to 10 minutes before the scheduled close of trading on the primary market for such security. An issuer's purchase may not constitute the opening transaction. Second, the volume condition for issuer repurchasers has been eased to allow purchases of 100% of trading volume. (See Release No. 34-44874.)
For further information, see Commission Press Releases Nos. 2001-91, 2001-97 and 2001-106.
Calculation of Average Weekly Trading Volume under Securities Act Rule 144 and Termination of an Exchange Act Rule 10b5-1 Trading Plan
On September 21, 2001, the Commission issued Release No. 33-8005A. This interpretive release expresses the Commission's view on how to calculate the average weekly reported volume of trading in securities under Securities Act Rule 144(e), and also expresses the Commission's view regarding termination of an Exchange Act Rule 10b5-1 trading plan during the period between September 11, 2001 and September 28, 2001.
Because the markets were open for only one day during the week beginning on September 10, 2001, law firms and registrants asked how to calculate the average weekly reported volume of trading in an issuer's securities for purposes of Rule 144 under the Securities Act. Rule 144(e) prescribes that the average weekly trading volume for a class of securities will be calculated using the average weekly reported volume of trading in such securities on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the dates outlined in Rule 144(e). The Commission determined that the week of September 10, 2001 does not provide a representative trading volume, and so should be excluded from the calculation of the average weekly reported volume of trading in an issuer's securities under Rule 144(e) during a four calendar week period. Instead, an additional prior week should be included, for a total of four calendar weeks.
The release also addresses Rule 10b5-1 under the Exchange Act. Rule 10b5-1 generally defines when a purchase or sale constitutes trading on the basis of material nonpublic information. The release expresses the Commission's view that termination of a Rule 10b5-1 trading plan during the period between September 11, 2001 and September 28, 2001, inclusive, does not, by itself, suggest that the plan was not "entered into in good faith and not as part of a plan or scheme to evade" the insider trading rules within the meaning of Rule 10b5-1(c). Accordingly, the availability of the Rule 10b5-1(c) defense for transactions under the written plan would not be affected solely by termination of that plan between September 11, 2001 and September 28, 2001. (See Release No. 33-8005A and Press Release No. 2001-91.)
Assistance to the Airline and Insurance Industries in Accessing the U.S. Capital Markets
On September 28, 2001, the Commission issued a Press Release stating that, in support of the desire of President Bush and Congress to foster the continued vitality of the nation's airline and insurance industries, and to help companies in these industries reach U.S. capital markets expeditiously, it has taken the following administrative steps for airline and insurance companies covered by Congressional legislation in the wake of the September 11 terrorist attacks.
The Commission established separate telephone ((202) 942-2816) and e-mail cfhotline@sec.gov) hotlines for the airline and insurance industries, their underwriters and other advisors. These hotlines will allow companies in these industries to obtain immediate responses to financing and disclosure questions.
The Commission also stated that it wished to help companies in these industries use our short-form registration on Form S-3 to raise capital quickly. It directed the Division of Corporation Finance to take the following short-term actions to enhance the usefulness of short-form registration on Form S-3 for companies in these industries:
- For companies with existing shelf registrations pursuant to Rule 415(a)(1)(x), the staff will permit the extended use of our brief "notice" registration of additional securities under Rule 462(b). Under this extension, the staff will permit use of those procedures — including notice by fax and immediate effectiveness- to register additional securities in an amount up to 20% of the dollar amount of securities originally registered on that shelf registration statement (rather than the amount remaining on that registration statement).
- The Commission directed the Division to permit use of Form S-3 for primary offerings by companies even if they have been late with a required Exchange Act report during the last year, as long as the companies meet all other reporting requirements for Form S-3 registration of primary offerings.
- A requirement to use Form S-3 is that the company's public float be at least $75 million. A number of companies that met this test on September 10, 2001 may no longer. The Commission believes that issuers in the airline and insurance industries that were eligible to use Form S-3 on September 10 should be eligible to use it for the remainder of the year. Accordingly, those issuers may calculate their public float for purposes of Form S-3 on any date between July 1, 2001 and December 31, 2001.
The Commission has directed the Division of Corporation Finance to process Securities Act filings by reporting companies in the airline and insurance industries within not more than five business days of their receipt.
The Commission has instructed the Division of Corporation Finance to continue these administrative steps through the end of 2001.
Any company in these industries or shareholder that was or will be unable to meet a deadline (including those applicable to shareholder proposals) as a result of the events of September 11, 2001 should contact the Division of Corporation Finance at the hotline phone number or e-mail address. If the deadline was or will be met within ten business days of the original due date, the Division will consider the deadline to have been met, in assessing the "timeliness" of the required action.
An internal task force will monitor federal programs regarding airline and insurance companies and will prepare appropriate disclosure guidance for companies affected by these federal programs, after discussion with outside professionals and experts.
The Commission solicits public views on any other relief it can give, consistent with investor interests, and asks that comments be received on the hotline e-mail or telephone address or through the U.S. mail at Office of Chief Counsel, Division of Corporation Finance, U.S. Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549.
Administrative Relief Regarding Price Ranges in Initial Public Offerings
Historically, the staff has not processed amendments to Securities Act registration statements relating to initial public offerings that did not include the bona fide price range required under the Securities Act. Because of the current unusual situation, the staff will process amendments even if they do not include a price range. This temporary relief applies only to firm commitment underwritten initial public offerings. Once a range is included in a filing, the staff may need additional time to review the revised disclosure, and there may be additional comments issued. Of course, a preliminary prospectus that is circulated must include an estimated range. Refer to Instruction 1 to Item 501(b)(3) of Regulation S-K.
In addition, the staff has also agreed that under current market conditions, estimated price ranges of up to 20%, based on the high end of the range, may be deemed "bona fide" for purposes of requirements under the Securities Act.
In addition to this outline, several other sources of information relating to the Division of Corporation Finance are available on the Division's homepage located on the Securities and Exchange Commission's web site, http://www.sec.gov:
Commission releases and Staff Accounting Bulletins also are available on the Commission's website under the caption "Commission Business."
http://www.sec.gov/divisions/corpfin/cfcrq093001.htm
