Speech by SEC Staff:
Don’t Throw Out the Baby with the Bathwater
Keynote Address at the ABA Section of Business Law Fall Meeting
John W. White
Director, Division of Corporation Finance
U.S. Securities and Exchange Commission
November 21, 2008
Thank you Keith [Higgins].
Good afternoon and thank you for giving me the honor of being with you again this fall. As it happens, today will be my last formal remarks as Director of the Division of Corporation Finance. As you likely can imagine, this is a very bittersweet time for me. Some of you may have heard me remark at PLI’s Securities Regulation Institute last week that being Director has been the most rewarding experience of my professional life. And it truly has been. I’ve had the opportunity to work on some of the most interesting and challenging securities issues of our time, and have done so with the support of the truly dedicated and very talented members of the SEC staff. I’ve also had the opportunity to work with many of you, as the securities bar is of course an indispensable partner in our efforts at the SEC.
As I prepare to make the move back to New York, and back to my former firm, I naturally find myself reflecting on what we’ve accomplished at the SEC during my tenure, and what remains undone. We are still in the midst of a very turbulent period in the markets — so I haven’t really had the time to process the past three years. But Keith did ask that I try to provide some initial observations from my perspective as a member of the Division of Corporation Finance. First, of course, let me remind you that the views I express today are my own, and do not necessarily represent the views of the Commission or any other member of the staff.
So back to some thoughts from the Corporation Finance perspective. And what does the “Corporation Finance perspective” really mean?
As you know, the SEC has three missions:
- Protect investors;
- Maintain fair, orderly, and efficient markets; and
- Facilitate capital formation.
The SEC works toward these missions through four Divisions and a number of Offices. Of the four Divisions, three include among their duties rulemaking — these are Trading and Markets, Investment Management, and Corporation Finance. The fourth Division is, of course, Enforcement.
In Corporation Finance, we primarily focus on two of the Commission’s three missions — facilitating capital formation and protecting investors. On the former, we are talking about ease of access to capital and assisting companies in complying with the federal securities laws. But this must happen in the larger context of protecting investors — our ultimate customer. In serving this customer, disclosure is our product, with high quality disclosure obviously what we are striving for. Though targeted to investors, disclosure is actually produced by companies, so much of our time and focus is necessarily directed at this group. We work closely with companies’ counsel, auditors, and other advisors through the review process — which I will come back to when I close today. We have only limited contact in the Division with the consumers of these companies’ disclosure — the investor.
In striving to help companies produce the best possible disclosure, we constantly think and talk about the “investor,” but who is this? Is it a grandmother in Ohio? This is increasingly not the case. Direct stock ownership by U.S. retail investors has declined significantly relative to institutions over the past fifty years. This trend, which I think we all would agree is unlikely to reverse anytime soon, means that institutional investors now comprise a vast part of the consumer market for operating company disclosure.1 Individual investors of course remain the indirect owners of stock held by the institutions, but institutional investors, such as mutual funds and pension plans are, more often than not, the direct owners. So, while the retail investor is still very important, and operating company disclosure must still be accessible to and understandable by these individual investors, it is not lost on us that the primary consumers of disclosure are more often than not the professional investment community, which is sophisticated and voracious in its desire for critical information.
In seeking to assure that companies get the best disclosure out to investors — whether they be retail or institutional — the Division of Corporation Finance uses two key tools:
- Monitoring and encouraging compliance with our disclosure requirements (that’s the review process and also providing guidance); and
- Recommending that the Commission adopt, when needed, new requirements or refinements to existing requirements.
Today I would like to talk about a few developments in each of these areas — our day-to-day internal workings and our rulemaking function — in addition to a third topic that I feel very strongly about — preserving the current regulatory system for U.S. public companies’ disclosure.
Corporation Finance at Work
The internal workings of the Division are, for the most part, the one area where we have more direct control over our own fate. This is the day-to-day work of reviewing filings (over 5,000 last year) and providing interpretive guidance to the public in complying with the federal securities laws. In my time in the Division I have constantly sought to make sure the users of these services — investors, companies, their advisors, and other market participants — have access to and an understanding of what we do and how we do it. The focus here has been on transparency. So, I’m going to take some time today to provide an overview of the things we have done or are doing in this area. My goal here is to make sure you know what resources are available to you, as primary users, and what is on the horizon. A secondary goal is also to encourage you to let us know what else we can do to increase our transparency.
Though enhanced transparency about the Division has been a goal of mine since arriving at the Commission, during the last year our efforts have really accelerated. Our focus is on improving the way in which we interact with all of you — the professional advisors — and other members of the public, including how we share information about our interpretive positions, policies, and process. As part of this focus, and in an attempt to expand the audience that has access to our interpretive positions, disclosure suggestions, and other materials, we have made increasing use of the SEC website to get the word out on current topics. Most recently, last week we re-launched the Division’s portion of www.SEC.gov, including a revised “home page,”2 a new accounting “portal” page that we developed in conjunction with the Office of Chief Accountant and the Offices of Chief Accountant in Enforcement and Investment Management,3 a new page with Division contact information,4 and a new online request form for interpretive advice and other assistance.5 This re-launch represents the second reworking of our home page in as many years and constitutes the primary vehicle for delivering our content — the “product” of our transparency efforts.
The first type of content I’ll mention is interpretive guidance. Over the past year we have focused a great deal of energy on improving the way we provide and update our interpretive guidance. As many of you know, we’ve revamped the way we put out interpretive guidance by combining our various forms of guidance into one set of comprehensive Compliance and Disclosure Interpretations, or C&DIs, on our website.6 And perhaps even more important to you all, we have been continually updating and adding to these. In fact, just this afternoon our Office of Chief Counsel published filing guidance for companies that are replacing expiring shelf registration statements in accordance with Rule 415(a)(5).7
As to the schedule for completing the first full update of C&DIs, I understand from our Chief Counsel, Tom Kim, that we are on track to have the Office of Chief Counsel’s interpretations updated by the end of the year. Most recently, this fall we updated our interpretations concerning the Exchange Act rules, forms, and sections. In addition, Michele Anderson, Chief of our M&A office, has promised me that we’ll be seeing some of the updated M&A interpretations by the end of the year and all by early next year — here we’re talking about the proxy rules, beneficial ownership, the tender offer rules, going private rules, and Regulation M-A. So keep your eye on the website for these.
Another important source of guidance are our no-action letters. The Division started posting these on the Division website several years ago, with the exception of the hundreds of Rule 14a-8 (or shareholder proposal) letters that come in and are answered each season. In line with my commitment (some might call it more of an obsession) to transparency, this summer we posted, for the first time, all of the shareholder proposal no-action letter packets from the past proxy season.8 And from here on out, you will be seeing these posted throughout the season, on a more real-time basis.
I also should not forget to mention the posting of comment letters, initiated during Alan’s tenure. This has really taken off. When Alan left and I joined the Division, there were fewer than 1,000 sets of review correspondence posted in EDGAR. Today, there are over 20,000. So this is obviously a tremendous tool for following what we do.
Second, let me mention our recent efforts to get a bit ahead of the game in the Disclosure Operations comment process. A major theme here is our work to expand the comment process, which is an after-the-fact process and one-on-one with individual companies, to be more forward-looking in nature. It seems like an obvious concept, but still one worth noting — whenever we can give advice and suggestions on disclosure in advance, and to everyone at once, we are more transparent and it is easier for companies to know what to expect. In addition, it streamlines the comment process, leverages staff resources, and gets more information to investors more quickly (an entire reporting cycle earlier).9
To this end, on the Disclosure Operations side, we have posted what we refer to as “Dear CFO” letters, covering common comment themes and identifying current disclosure issues that companies might wish to consider. Last December we posted a letter addressing off-balance sheet disclosures in connection with preparing annual MD&As,10 and in late March we posted a letter identifying a number of disclosure issues regarding FAS 157 (Fair Value Measurement) for consideration as first quarter MD&As were prepared.11 In September, we issued a follow-up letter concerning additional fair value measurement disclosure items for consideration in drafting MD&As.12 Our goal in posting these letters is to be more proactive by providing companies with guidance on how to better comply with the letter (and the spirit) of the MD&A requirements before they file, rather than after they file. I expect that we are going to be providing guidance on other topics using this or similar techniques, so stay tuned.
As another example, we have posted “staff observations” — really summaries of comment themes — both in summer 2007 with regard to IFRS reviews13 and fall 2007 on executive compensation reviews.14 Like all of the resources I’ve described, these are available on the Corporation Finance portion of the SEC website.
Also this summer, in an effort to provide guidance on how to better navigate the Division, we published on our website a document describing our filing review process.15 We didn’t provide a lot of publicity about it when it came out, so I’ll do a little now. If you are involved with our process of reviewing companies’ Form 10-Ks and 10-Qs (that is, responding to our comment letters), I would definitely recommend that you take a look. Not only does this document describe the basics of how the process typically works, it also lays out the procedure for seeking reconsideration of comments (both legal and accounting) when you are not able to reach a satisfactory conclusion with your examiner and/or reviewer. And perhaps most importantly, it has the names of the players — the Legal Branch Chiefs, the Assistant Directors, the Associate Directors, the Accounting Branch Chiefs, the Senior Assistant Chief Accountants, and the Associate Chief Accountants. Hopefully this document will help demystify the process a bit (about what over 70% of the Division does every day), and make clear that we are open to hearing from you.
In a similar vein, we posted last week a parallel document on navigating our regulatory policy group.16 This describes how the various support offices work, including the Offices of Chief Counsel, Chief Accountant, Mergers and Acquisitions, International Corporate Finance, Small Business, Rulemaking, and Enforcement Liaison. It also explains how to request interpretive and no-action relief. On this front, as I noted, we have a new way to ask us questions through an online form on the Corp Fin home page and a new phone process for channeling inquiries to the right location. This is part of a larger project to develop a formal protocol for receiving and responding to public inquiries (just so you understand scope, our Office of Chief Counsel alone receives over 7,000 inquiries a year). As part of this, our Office of Chief Counsel has recently undergone a reorganization to put in place senior attorneys who hold special expertise in specific areas of the securities laws. Wayne Carnall, the Division’s Chief Accountant, also has reorganized the Office of Chief Accountant to add a new policy position to focus on consistency of accounting interpretations within Corporation Finance and training of accountants. In addition, Wayne is in the process of updating our training manual for the Division’s accountants and, in light of the level of outside interest in getting copies of this document, we plan to publish the manual on our website in the near future.
Hopefully that didn’t seem like too much of a laundry list. I’m just very excited about all the new content and want to make sure the public knows how to get to it. In the years to come I anticipate that the Division will continue its efforts toward greater transparency and find new and creative ways to keep the information flowing out of the Division. As a soon-to-be member of the private bar, I certainly have an interest in this practice continuing to flourish. And frankly, the Division does as well — our jobs as staff members of the Division are easier when the public knows what we do and how we do it.
Rulemaking — Progress and Future Goals and Challenges
As I noted, in addition to monitoring and encouraging compliance with our existing rules, the Division also has a very important rulemaking function. As those of us who have had the privilege of leading the Division come and go, the rulemaking agenda continues to move forward. When we depart the Commission, we leave behind both our accomplishments and our unfinished “to do” lists for our successors to build off of. Looking back before my arrival, at my predecessor Alan Beller’s time at the Commission, what stands out of course is his work in implementing the Sarbanes-Oxley Act, Congress’s response to the scandals surrounding some of our biggest companies at the time — Enron, Adelphia, Worldcom, and others. This of course involved a massive and unprecedented rulemaking effort, much of it aimed at the integrity of the financial reporting system. Out of this rulemaking came CEO and CFO certifications, disclosure controls, Section 404 and internal control audits, and much more. Following up on the Sarbanes-Oxley rulemaking, Alan turned to securities offering reform, which I think we can all agree was an incredibly well thought out and successful project. As a testament to this, once the final rulemaking was complete, there was little in the way of follow-on rulemaking required — quite a feat considering the scope of the project. On his departure, Alan left for me executive compensation disclosure, foreign deregistration, electronic proxy, Sarbanes-Oxley Section 404 and interactive data, among others, each of which I took up during my time on the staff.
Like Alan, I have my list of accomplishments as well as my list of remaining “to dos” for the next director, just as each director before and after me will. So let me briefly go through some of these.
When I arrived at the Commission in early 2006, my first major project was developing and then acting on a plan to improve implementation of Sarbanes-Oxley Section 404. I saw this as one of the biggest challenges the agency faced when I came on board The headlines were hard to miss — the U.S. was losing the global competitive battle for companies, markets, and investors to London, largely because of what was said to be the inhospitable and onerous regulatory environment in the United States. Three separate studies analyzed the issue, with Sarbanes-Oxley as the focal point, but with plenty of attention also directed at the broader regulatory picture as well.17 In the considered opinion of these studies, the heavy hand of government regulation imposed on companies was causing a mass exodus from U.S. markets — companies were voting with their feet (or more accurately, with their listings). And investors were voting with their dollars.
In response to some of the specific criticisms concerning the costs and burdens of compliance with the internal control provisions of Section 404, and its impact on public companies and U.S. global competitiveness, in May 2006 the Commission developed its “next steps” plan to improve implementation of Section 404,18 under which we issued for the first time guidance regarding management’s report on internal control over financial reporting;19 worked with the PCAOB to issue a new audit standard for internal controls;20 and phased in the Commission’s rules implementing Section 404 to accommodate smaller public companies.21 Though in my view much of the hype surrounding the U.S.’s loss of competitiveness was just that, hype, and Sarbanes-Oxley was unfairly scapegoated in many respects, there were some important regulatory changes that I think needed to be made, and that the Commission did make, in implementing the “next steps” plan. For the most part though, Sarbanes-Oxley has dramatically improved the quality and reliability of financial reporting — particularly the processes and controls that were introduced or required for the first time, including CEO and CFO certifications, disclosure controls, and internal control assessments and audits (which now rely on a top down, risk-based approach that focuses on risk and materiality). I am pleased to have been able to guide the staff in helping the Commission develop the “next steps” plan, and to have participated in its implementation.
Still outstanding, of course, is compliance with the Section 404(b) auditor attestation requirement for non-accelerated filers. This has been deferred a number of times, but absent further Commission action, this requirement will become applicable to non-accelerated filers for fiscal years ending on or after December 15, 2009.22 The other item to watch in this area is the Commission’s cost-benefit study on Section 404 as it relates to smaller companies.23 The idea here being that the study will help inform us on whether we need to further improve implementation of Section 404.
Executive Compensation Disclosure
Next up was executive compensation disclosure. When I arrived at the Commission, the rule proposals had just been published and we were a month away from the close of the comment period. So my task was first to get up to speed on the proposal (all 370 pages of it)24 and the thinking behind each aspect of the proposal. And second and third, to absorb what we were hearing from the thousands of commenters — over 30,000 — and lead the staff in translating all of that into final rules. The rulewriting was made more complex by the fact that we were updating rules that were last updated in 1992, and there had been enormous developments in the ways that executives are compensated since then. The option backdating scandal was at its height at this point and, conveniently, we were able to include in the final rule key disclosure requirements related to the granting of stock options. Executive compensation was and is an area that many people care passionately about (if only people were half this interested in oil and gas disclosure). In short, there obviously was an enormous amount to this rulemaking — as evidenced by the size of both the proposing and adopting25 (436 pages) releases — and the Commission really achieved something important with this one. Investors now have an incredible array of new compensation information at their disposal, and I am proud to have had a part in this important rulemaking.
As with any rulemaking of this magnitude, we did not just put the new rules out and move on. It was clear to all of us that having the Commission pass new rules was only the beginning — without effective implementation (a theme I will return to later), our goals would not be achieved. Accordingly, in the spring of 2007, we conducted a targeted review of 350 companies’ first-year disclosures and published the staff’s observations in a report that is available on our website (and that I mentioned briefly in my discussion of transparency). This was an enormous project for us, and a significant outlay of resources, but I think warranted in light of the subject matter. This past October I provided a less formal second-year report in remarks I gave at a compensation conference in New Orleans.26
So looking forward, how does all the public interest in, and scrutiny of, executive compensation involve us at the SEC? While we have no role in establishing the substantive requirements relating to executive compensation (including the form and amount of executive compensation), our rules do require full and fair disclosure about how companies determine and pay that compensation. With recent market events and rollout of the Troubled Asset Relief Program (TARP) (and its Capital Purchase Program),27 executive compensation will obviously change dramatically going forward for many, many companies. So we’ve been spending time learning what these changes are so we can comment intelligently when we review next season’s executive compensation disclosure.
Among the most important challenges of my last couple of years has been how best to address the ever-increasing internationalization of the securities markets and the need to update and modernize the Commission’s rules to reflect these changes. We continued the revision of the deregistration process with a re-proposal at the end of 2006 (it having been started in 2005), with the Commission adopting new rules in spring 2007 to significantly simplify the process for foreign private issuers to terminate their SEC reporting obligations.28 Since effectiveness in June 2007, we’ve seen approximately 150 foreign private issuers file Form 15Fs to terminate their reporting obligations with us. After the first rush of filings, we saw the numbers level off, then drop off pretty significantly this year. Deregistration was clearly a major initiative, as the foreign issuer community had been decrying our old rules for trapping them into continued SEC reporting. I think we addressed this situation very well, in a way that serves both investors and issuers.
We next tackled the growing movement toward international accounting standards, with the Commission adopting new rules to eliminate the requirement for foreign private issuers to reconcile their financial statements to U.S. GAAP, provided the financial statements are prepared in accordance with IFRS as issued by the IASB.29 This was obviously a change of huge magnitude in the financial reporting world, and one that laid the groundwork for the next step — possibly moving to IFRS for U.S. issuers as well. As you likely saw, the Commission just published its proposed roadmap for required use of IFRS by U.S. issuers last Friday.30 But I’ll come back to that in moment when I switch gears to talk about the challenges that lie ahead.
Following up on IFRS, last summer we continued our efforts to modernize the rules applicable to foreign issuers and U.S. investors in foreign companies with a package of three rulemaking initiatives revising existing Commission rules — some of which date back as far as the 1960s. These included enhancements to the foreign issuer reporting regime,31 revision of the exemption from registration for foreign private issuers,32 and improvements to the cross-border tender offer rules to facilitate U.S. investor participation.33 The first of these, which we refer to by its acronym “FIRE,” revised the deadline for when a foreign private issuer must file its annual report on Form 20-F to no later than four (rather than six) months after its fiscal year-end beginning with filings made in 2012. Also included in the rulemaking were revisions to a number of other Form 20-F disclosure requirements. The second release, concerning foreign issuer registration, substantially revised the 12g3-2(b) exemption that permits a foreign private issuer to exceed the shareholder thresholds for registration under Section 12(g) of the Exchange Act and have its equity securities traded on a limited basis in the over-the-counter market in the United States. Under the new rules, a foreign private issuer whose primary market is outside the United States and who also posts information in English on its website is provided with an automatic exemption from Exchange Act registration. This was a rulewriting that also capitalized on our focus on technology — moving an exemptive process from difficult to obtain papers stored in the SEC’s basement to relying on Internet disclosure. And finally, the Commission expanded and enhanced various exemptions relating to cross-border tender offers, exchange offers, business combinations and rights offers. These exemptions are intended to encourage offerors and issuers to permit U.S. security holders to participate in M&A and other transactions involving a foreign private issuer target on the same terms as other security holders. All three of these were adopted by the Commission this past fall, so we don’t yet have experience under the new rules. But I believe we got them right and look forward to seeing the new rules in practice in the coming months.
More broadly, I think that long term we will see our efforts in this area continue to enhance the international perception of U.S. regulation and the desirability of listing in the U.S. markets. Particularly when you look at some of our financial reporting initiatives — including of course, our Section 404 efforts. On this last point, though I haven’t discussed 404 in the international context, it will undeniably have an impact.
From my first conversation with Chairman Cox, I knew that we shared a fundamental belief in the importance of using technology wherever possible to improve the accessibility and usability of disclosure. Though I will mention three rulemakings in particular, I really want to emphasize the extent to which we have tried to incorporate advances in technology across all of our rulemakings in the Division.
First, of course, is interactive data. The Commission has been studying the use of interactive data in Commission filings for over four years now. And I believe we are close to expanding this initiative to make mandatory use a reality. As I’ve said many times before, this is a huge priority both for me and for the Chairman, and I think it is likely we’ll see final action on it before year-end. Looking back to March 2005, the Commission launched its XBRL Voluntary Program, designed to help the staff evaluate the usefulness of data tagging for companies, investors, the Commission, and other market participants. After receiving a great deal of feedback, including through multiple Commission roundtables, last spring the Commission proposed rules that would require companies to provide financial statement information in interactive data format — starting as early as next year.34 I’m not going to take you through the details of the proposal, but if you haven’t read it, I really encourage you to get familiar with it very soon. Because if adopted, the proposals will have an enormous impact on financial reporting.
A second rulemaking that I want to highlight is electronic delivery of proxy materials. Adopted in 2007, e-proxy enables companies to satisfy their obligation to deliver proxy materials by utilizing electronic means rather than by mailing paper proxy materials.35 Both shareholders and companies have been able to take advantage of the new rules on a voluntary basis since July 1, 2007, and as of January 1, 2008, large accelerated filers have been required to follow the new rules. All other companies subject to the proxy rules will be required to comply beginning on January 1, 2009.
We’ve seen a significant number of companies using the new rules, and we’ve heard generally positive feedback on their experience. The most worrying negative we’ve heard is that the retail vote has decreased under e-proxy, but we understand that overall voting rates at corporate meetings have not been significantly affected. We continue to monitor implementation of the new rules and hope to recommend to the Commission several technical changes that we think would improve implementation.
Finally, corporate websites. This is one that we’d been thinking about for some time when we started formally drafting recommendations to the Commission, as there has been a great deal of change since the Commission last issued guidance in this area. So we were really pleased when the SEC’s Advisory Committee on Improvements to Financial Reporting (CIFiR) took the issue up as well in drafting their recommendations to the Commission. Because CIFiR issued interim recommendations back in February, we were able to incorporate their work into the guidance that the Commission issued at the beginning of August.36 Hopefully you all are familiar with the release at this point and have found it useful. Among many other things, the guidance addresses when information is “public” and what the liability standards are for electronic disclosures.
As I noted a moment ago, these are the obvious instances where you have seen us focusing on the use of technology over the past few years. But this focus is truly pervasive (as it should be) — from encouraging the use of electronic shareholder forums, to requiring electronic filing of Form D.
Small Business Capital Raising and Private Offering Reform
So in looking back, what else jumps to mind? I’d be remiss in not mentioning the Commission’s efforts to recognize and address the unique issues applicable to smaller public companies over the past few years, both in forming the Advisory Committee on Smaller Public Companies (on Alan’s watch), as well as the Commission’s subsequent rulemaking (on my watch).
Shortly after I arrived at the Commission, the SEC’s Advisory Committee on Smaller Public Companies delivered its final report, including 33 recommendations, addressing the regulatory system for smaller companies.37 Based in large part on these recommendations, the Commission proposed a package of six proposals concerning small business capital raising and private offering reform. Five of these were adopted last year,38 with one remaining proposal outstanding on Regulation D (which I’ll come back to shortly).39 Most significantly, in my view, the Commission:
- established shortened holding periods for restricted securities under Rule 144, making it easier for shareholders to resell their securities and reducing the discount companies must absorb to sell restricted securities;
- amended the Commission’s disclosure system to expand the number of companies that qualify for scaled disclosure by almost 1,600, an increase of over 45% in the number of small companies that were eligible; and
- amended the eligibility requirements of Forms S-3 and F-3 under the Securities Act to give small businesses access to the expedited “shelf” registration process for their own securities offerings, subject to certain restrictions.
Though we’ve gotten through an enormous amount over the past three years, there remain many projects on the Division’s “to do” list. In some cases we are nearly done, but market events necessarily diverted our efforts. In other cases we are just beginning to think about what needs to be done. As I wrote today’s remarks, I began to feel as though I was laying out an agenda for my successor, and in a way I am. Where all this goes exactly will of course depend on the interests and focus of the new Chairman and the Commission, as well as the new Director, but for what they are worth, here are my thoughts.
Looking forward, I’d like to talk about five major areas that I think need to be addressed — IFRS for U.S. issuers, the remaining CIFiR recommendations, proxy matters, technology, and beneficial ownership — and then I’ll list a number of other projects that I hope the Commission gets to as well.
First, IFRS for U.S. issuers. This is a critically important initiative, and one that the Commission has taken some important steps toward. As I noted, just last Friday the Commission published its proposed roadmap, which includes suggested timing under which the Commission would make a decision whether to implement mandatory IFRS in 2011, with implementation taking place as early as year-end 2014. Even with the steps that we’ve taken to date, there remain a number of challenges that the Commission will have to address in moving forward. These include the vocal concerns of some commenters who view IFRS as a loosening of standards, as well as the readiness of companies, preparers, auditors, academia, state boards of accountancy, and other regulators. I believe it will be important to give market participants a date certain, with adequate lead-time, which of course is the goal of the roadmap. We heard this at our IFRS roundtables — give us a date, then we will know how to react. Well, the roadmap includes dates; we look forward to the comments.
If you listen to the initial reaction of many commenters, in the press in particular, you may become skeptical about the likelihood (or perhaps even the desirability) of reaching the end goal, but we must keep that goal in sight — a single set of global accounting standards. In my view, the benefit of achieving comparability is truly compelling, and ultimately will carry the day. And in looking at that goal I cannot imagine that U.S. GAAP will be the ultimate survivor. Look around the globe — the E.U., Australia, and Israel have IFRS, Canada is moving there, and now so is Mexico, and many others. So in my mind it really is a question not of if, but of when. In getting there, the challenge for the Commission (and so also for my successor), will be to provide leadership and vision in the coming years, recognizing that there are outstanding issues, but that the end result will almost certainly be IFRS. So concerns about current readiness and the current state of IASB funding, governance, and so on should not deter us from pursuing the ultimate goal. Remember, the roadmap is looking to readiness and a Commission decision in 2011, not 2008. In short, long-term forward-looking leadership will be critical.
Second, my successor will inherit the wealth of information and ideas in the final recommendations issued by CIFiR.40 There is a lot there, and it will take time to work through it all — materiality, correction of errors, professional judgment, summary disclosures, and so on. In my view, there is much to act on, but I hope in particular that the recommendation concerning the correction of errors (which would include some related 8-K revisions) is acted on. This is certainly something that I would recommend for Commission action (and had hoped to recommend before market events took priority) were I still at the Commission in the spring. I think it is clear that our rules and practice in this area need clarification. Again, commenters on CIFiR’s report have expressed some initial concerns about the recommendation, but I hope that the public will reserve their judgment until a proposal is actually available from the Commission for consideration, as it would be a mistake to dismiss CIFiR’s work in this area without a real understanding of what is being proposed.
Third, proxy matters. As I noted last week at PLI’s Securities Regulation Institute, this is the elephant in the room. Alan grappled with this tough issue in 2003 and 2004, as I did in 2007. And I think it is more than likely that my successor will have to take it on in 2009. The “access” debate was by far the most challenging issue that I faced in my time on the staff (other than recent market events of course). We put an enormous amount of effort and resources into a large scale review of the proxy process last year, with the Commission hosting three roundtables in May 2007,41 followed by two rule proposals42 and over 34,000 comment letters. One proposal was adopted in November of last year.43
Unfortunately, as I found out pretty quickly after getting up the learning curve on this issue, there is little common ground in the proxy access debate. On the one side is the view that shareholders are being shut out of the nomination and election process for board members by the current system –forced to launch costly proxy contests in order to effect change at the companies in which they invest. On the other side are concerns that proxy access would be disruptive to boards and result in special interest board members. Despite collecting an enormous amount of information and public comment, little concrete progress resulted from our efforts other than reconfirming the agency’s existing position concerning the use of our shareholder proposal rule for proposals relating to an election of directors after the Second Circuit opened up the issue in AFSCME v. AIG.44 Putting aside what the right answer may be on access itself, which I won’t express a view on, there are many related issues that have been swept up in the policy debate here, and that I believe need to be addressed soon. These include:
- non-objecting beneficial owner/objecting beneficial owner (NOBO/OBO) issues;
- NYSE Rule 452;
- company communications with shareholders;
- empty voting; and
- ownership thresholds for shareholder proposals.
This is all so much more than access, and though I understand why the issues have been grouped together, in my view the Commission needs to be weighing in. And if that means separating the issues from access to get them addressed, then I believe that is what should be done. In this regard, it may be instructive to compare the Division’s experience with the Aircraft Carrier proposal, the size and complexity of which likely determined its fate, with the very successful and necessary Securities Act Reform rulemaking — which pulled out and acted on key pieces of the Aircraft Carrier proposal.
Fourth, technology. As I noted, I’ve been an outspoken advocate here, but this is an area that presents significant challenges alongside the opportunities. There is a lot that remains to be done. Interactive data is on the horizon, and if the Commission implements the proposed rules, then perhaps the next step should be looking to expand interactive data beyond the financials, perhaps even to all disclosure documents.
Technology impacts everything we do at the Commission — and this will become even more apparent in the near future when the Commission is presented with the blueprint for the 21st Century Disclosure Initiative.45 But two warnings — do not lose sight of what technology is and what it is not. First, it is packaging, a delivery vehicle — we still need accurate, reliable, and complete content to deliver, and that comes primarily from issuers. Second, periodic disclosure, and the safeguards and protections that accompany it, is the hallmark of our disclosure system. Disclosure controls, audit committees, CEO and CFO certifications, internal controls, are all important parts of this system and the periodic disclosure process. The temptation of continuous or real time disclosure is magnified by technology; but instant access to unreliable information cannot be our goal.
Fifth, we are in the early stages of evaluating our beneficial ownership reporting regime in light of recent judicial and other developments and considering what recommendations, if any, to make to the Commission concerning possible improvements to our rules. In particular, we’re very aware of the need of the financial community for certainty regarding the treatment of equity swaps and other derivative instruments following a federal district court decision in CSX Corporation v. The Children’s Investment Fund Management (UK) LLP in June 2008.46 In CSX, the Court indicated that it was strongly inclined toward the view, under the basic definition of “beneficial ownership” in Rule 13d-3(a), that TCI, as the holder of long positions under cash-settled equity swaps, beneficially owned the stock referenced by the swaps. The case is currently on appeal with the Second Circuit. Whether to recommend changes to our rules to address this issue (as well as others I imagine) will almost certainly be an issue that the next director of Corporation Finance will have to address.
In addition, as I mentioned, there are also a wealth of other projects in various stages of progress, including some much nearer completion like the proposed updates to our 25-year-old oil and gas reporting requirements47 and the security ratings proposal.48 The latter would replace rule and form requirements under the 1933 and 1934 Acts that rely on security ratings with alternative requirements. You’ll want to keep an eye out for these.
The list of course also includes final action on Regulation D, the sixth item in the private offering and small business capital raising reform package. I truly thought I’d get this one done by the close of the year, but reality has set in. So this will be one for the next director. The list also includes possible Commission action to facilitate the creation of a central counterparty for over-the-counter credit default swaps, possible rulemaking concerning capital raising communications (Rule 163), possible updates to Regulation AB, addressing the application of Section 5 to short sales and, though I haven’t talked about it recently, possible proposals concerning voluntary filers. And also, as I mentioned earlier, the final step of Section 404 implementation remains outstanding, as do the results of the Commission’s current cost-benefit study, which is anticipated to be completed by the middle of next year.
Most Important Challenge — Preservation of the Corp Fin Role
Finally, I’d like to move to what I view as the most important challenge that my successor will take on. And that is preservation of the very important role of the Division of Corporation Finance.
The SEC is an agency under intense examination. We’ve all heard the calls to restructure the oversight regime of the U.S. capital markets, including calls for the possible merger of the SEC and the CFTC (starting with the Treasury blueprint this past March),49 or the creation of a super-regulator overseeing the U.S. financial system. This discussion has accelerated recently in light of ongoing turmoil in the credit and equity markets. Most of the focus of late has been on regulation of financial institutions and regulation of complex products, including credit default swaps and other derivatives, mortgage-backed securities, CDOs, asset-backed securities, and auction rate securities. Complicating matters, these are all areas where a multitude of agencies have a role — the SEC, Treasury, the Federal Reserve, and the CFTC, among others.
Policymakers and commentators at all levels have weighed in and provided their views on possible restructurings, highlighting what they believe to be the failings of the current structure and advocating changes to address those perceived failings. Where we will end up, it is fair to say, no one knows. But in getting there, I believe it is critically important to look as well at the successes in the U.S. capital markets and in its regulatory structure, and to advocate maintaining and strengthening those regulatory elements that support those successes.
One of the key areas of success in the U.S. capital markets, and one of the areas in which I believe we are head and shoulders above any other market in the world, is the provision of full, fair, robust, timely, material disclosure to investors and the market at large so that market participants can make fully informed investment decisions. The great power of the U.S. capital markets is fueled by issuer transparency, by the disclosure process. Full and fair disclosure supports not only investor protection, by giving investors the material information they need to make informed investment decisions, but it also promotes capital formation, because the cost of capital is lowered when there is no risk premium associated with wondering whether information is reliable in the first place.
There are many important components to the process — including great disclosure rules, availability of information in EDGAR, liability under Sections 11 and 12 and Rule 10b-5, CEO and CFO certifications, audits by independent accountants in accordance with PCAOB standards, financial statements prepared under U.S. GAAP (or IFRS as issued by the IASB). But a key driver of the disclosure process is the review of company filings by Corporation Finance staff.
Our disclosure process is the envy of the world. During my time on the staff, foreign securities regulators have asked me, how do we do it? How does the SEC get issuers to provide all the good disclosure that we do? In fact, there is no magic to the process. First, as I mentioned, we have great disclosure requirements. But rules are only useful to the extent that they are complied with. No regulator can write rules that, on their own, will elicit full and fair disclosure. This is where implementation of the rules comes in. And a vital part of implementation is our review process.
Although it’s only been since 2002 that the Sarbanes-Oxley Act required the SEC staff to review issuer filings, the staff, through the Division of Corporation Finance, has been reviewing issuer disclosure for decades. And the benefits of this review are very evident. The staff brings an independent pair of eyes, and sometimes several pairs of eyes, to a set of financial statements, to MD&A disclosure, to a compensation table, to pages of risk factors. Perhaps most importantly, the staff brings to the table its vast experience. Inside counsel and management of a company may only be familiar with their own filings; an individual independent auditor or outside counsel may be able to be seriously involved with the filings of a handful of issuers, at best. But a trained Corp Fin attorney or accountant may easily review over four dozen issuers every year (many in the same industry, since that is the way our review program is organized). The depth of their knowledge and experience in an industry is hard to match in the private sector.
The staff’s process for reviewing disclosure is really quite simple — we read a filing from cover to cover, write comments where we think something doesn’t make sense under GAAP or otherwise, then repeat — approximately 5,000 times every 12 months. We ask questions, always pushing to help give investors better insight into a company, cajoling a little bit extra to help investors see a company through the eyes of management. Then we move on, and the issuer moves on, quite quickly, and investors have better information. One of the things that make our program unique is that it does not seek to punish an issuer for poor disclosure or accounting. Of course, there are exceptions involving possible fraud or bad actors (which are referred to Enforcement), but the vast majority of Corp Fin reviews simply result in better disclosure to investors ─ usually a better Form 10-K or 10-Q next period; occasionally an amended filing. The process really is a dialogue between issuers and their advisers on the one hand and the staff on the other hand that enhances full and fair disclosure. The players all know their roles — the lawyers, the accountants, the company finance staff — many of you do this every day. Now maybe some of the success of our disclosure system can be attributed to companies knowing that they are going to be reviewed — so they are motivated to comply in advance. And I am sure that it helps to have an active team of enforcement lawyers down the hall at Station Place and in eleven regional offices around the country. But, however it happens, it works. It is one of the successes.
In going through all this, I am trying to get my successor, as well as each of you, to focus on and be an advocate for our basic disclosure system for public companies (and the implementation and “enforcement” of that system). In the myriad of commentary about what has gone wrong today — loose lending standards, bad assets, regulators looking the other way, conflicting and overlapping regulation, fair value accounting, overpaid executives, poor assessment of risk, bad management, and so on, what you do not hear is that there is something wrong with our basic disclosure system and how we implement it. And that is, of course, what we do in Corp Fin.
So letís go back now and talk about the proposed revamp of the financial regulatory structure. Here, I think it is important to acknowledge and respect the very real differences between the SECís philosophy, which includes investor protection and disclosure, and that of some of the other regulators, which instead focus on the pricing efficiency of markets or, in the case of prudential regulators, on protecting the soundness of institutions (goals which may not always be aligned with a philosophy of full disclosure to investors). These distinctions become important because, if these important SEC goals were to come under the jurisdiction of a regulator whose principal focus was not investor protection and disclosure, these goals could suffer.
So what is the challenge here, and why am I asking you to focus on the area where many of us in this room spend our professional lives and already know so well. Because, as we seek to correct our failings, we must be careful not to lose our successes in the process. We must take care that “we don’t throw out the baby with the bathwater.” And what does that mean? I Googled it and found that it means “take care, when getting rid of outworn and unnecessary things, not to jettison something important along with them.” It originates from a 15th-century German satire, and was used by Martin Luther. (It does not, according to further Google research, derive from medieval bathing habits, i.e., that peasant families would all use the same bathwater until it was so filthy that the baby could go missing in it. This is just an urban legend.)
Maybe this is not the perfect analogy, but many are suggesting that our current regulatory system is “outworn and unnecessary” and needs to be jettisoned in lieu of some new and improved system. And that may be the case in terms of how we address complex financial products, and how we address the regulation of financial institutions, but that is beyond my remarks today.
So here is my message for today. There is only one agency, and one group in that agency, that focuses on disclosure to investors by U.S. public operating companies — and that is the SEC and the Division of Corporation Finance. The system (and the process) can always be refined and improved, but is a system that I maintain is working and not only should, but must, be preserved in its present form. We must be ever vigilant in continuously improving the process — focusing on who we review and when, what we focus our comments on, what new areas of disclosure we should recommend that the Commission adopt or what areas should be supplemented. But the basic system works. And yes we may need tougher enforcement (a proposition that I generally concur with). And yes we need to look at our regulatory structure and where the SEC fits in with the Federal Reserve, Treasury, the CFTC and others, and what is overlapping and whether there are regulatory gaps. But, as the forces of change look to revise our regulatory structure, don’t lose sight of what we have that is good (and works) — and that is the basic system in which I believe that Corporation Finance plays a crucial role. So, I would caution the policymakers out there who are spending their days (and probably nights) thinking about what to do with the SEC, “don’t throw out the baby with the bathwater.”
1 See “The Future of Securities Regulation,” Brian G. Cartwright, General Counsel, U.S. Securities and Exchange Commission, October 24, 2007, available at http://www.sec.gov/news/speech/2007/spch102407bgc.htm.
2 Available at http://www.sec.gov/divisions/corpfin.shtml.
3 Accounting and Financial Reporting Guidance, available at http://www.sec.gov/divisions/corpfin/cfreportingguidance.shtml.
4 Contacting the Division of Corporation Finance, available at http://www.sec.gov/divisions/corpfin/cfcontact.shtml.
5 Corporation Finance Request Form for Interpretive Advice and Other Assistance, available at https://tts.sec.gov/cgi-bin/corp_fin_interpretive.
6 Compliance and Disclosure Interpretations, available at http://www.sec.gov/divisions/corpfin/cfguidance.shtml.
7 Filing Guidance for Companies Replacing Expiring Shelf Registration Statements in Accordance with Securities Act Rules 415(a)(5) and (6), November 21, 2008, available at
8 Division of Corporation Finance Shareholder Proposal No-Action Letters Issued Under
Exchange Act Rule 14a-8, available at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml.
9 Recommendation 2.5 in the Final Report of the Advisory Committee on Improvements in Financial Reporting provided, in part, that “The SEC staff should re-emphasize that its comment letter and ‘pre-clearance’ processes are registrant-specific; other registrants should not necessarily change their accounting because they become aware of another comment letter, unless they conclude, on their own, that it is appropriate to do so.” On behalf of the Division of Corporation Finance, I would like to emphasize that point.
10 Sample Letter Sent to Public Companies That Have Identified Investments in Structured Investment Vehicles, Conduits or Collateralized Debt Obligations (Off-balance Sheet Entities), December 2007, available at http://www.sec.gov/divisions/corpfin/guidance/cfoffbalanceltr1207.htm.
11 Sample Letter Sent to Public Companies on MD&A Disclosure Regarding the Application of SFAS 157 (Fair Value Measurements), March 2008, available at http://www.sec.gov/divisions/corpfin/guidance/fairvalueltr0308.htm.
12 Sample Letter Sent to Public Companies on MD&A Disclosure Regarding the Application of SFAS 157 (Fair Value Measurements), September 2008, available at http://www.sec.gov/divisions/corpfin/guidance/fairvalueltr0908.htm.
13 “Staff Observations in the Review of IFRS Financial Statements,” July 2, 2007, available at http://www.sec.gov/divisions/corpfin/ifrs_staffobservations.htm.
14 “Staff Observations in the Review of Executive Compensation Disclosure, Division of Corporation Finance,” available at http://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm.
15 Filing Review Process, Division of Corporation Finance, June 2008, available at http://www.sec.gov/divisions/corpfin/cffilingreview.htm.
16 Overview of the Legal and Regulatory Policy Offices, Division of Corporation Finance, November 2008, available at http://www.sec.gov/divisions/corpfin/cflegalregpolicy.htm.
17 See Interim Report of the Committee on Capital Markets Regulation, November 30, 2006, available at http://www.capmktsreg.org/pdfs/11.30Committee_Interim_ReportREV2.pdf (followed by The Competitive Position of the U.S. Public Equity Market, Committee on Capital Markets Regulation, December 4, 2007, available at http://www.capmktsreg.org/pdfs/
The_Competitive_Position_of_the_US_Public_Equity_Market.pdf ); Sustaining New York’s and the U.S.’s Global Financial Services Leadership, McKinsey & Company and the New York City Economic Development Corporation, sponsored by Mayor Bloomberg and Senator Schumer, January 2007, available at http://www.nyc.gov/html/om/pdf/ny_report_final.pdf; Commission on the Regulation of U.S. Capital Markets in the 21st Century, Report and Recommendations of the U.S. Chamber of Commerce, March 2007, available at http://www.uschamber.com/NR/rdonlyres/
18 See SEC Press Release 2006-75, “SEC Announces Next Steps for Sarbanes-Oxley Implementation,” May 17, 2006, available at http://www.sec.gov/news/press/2006/2006-75.htm. See also, PCAOB Press Release “Board Announces Four-Point Plan to Improve Implementation of Internal Control Reporting Requirements,” May 17, 2006, available at http://www.pcaob.com/News_and_Events/News/2006/05-17.aspx; SEC Spotlight on: Internal Control Reporting Provisions, available at http://www.sec.gov/spotlight/soxcomp.htm.
19 SEC Release No. 33-8810, “Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,” June 20, 2007, available at http://www.sec.gov/rules/interp/2007/33-8810.pdf. See also
SEC Release No. 33-8809, “Amendments to Rules Regarding Management’s Report on Internal Control Over Financial Reporting,” June 20, 2007, available at http://www.sec.gov/rules/final/2007/33-8809.pdf; SEC Release No. 33-8811, “Definition of a Significant Deficiency,” June 20, 2007, available at http://www.sec.gov/rules/proposed/2007/33-8811.pdf; SEC Release No. 33-8829, “Definition of the Term Significant Deficiency,” August 3, 2007, available at http://www.sec.gov/rules/final/2007/33-8829.pdf.
20 SEC Release No. 34-56152, “Public Company Accounting Oversight Board; Order Approving Proposed Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements, a Related Independence Rule, and Conforming Amendments,” July 27, 2007, available at http://www.sec.gov/rules/pcaob/2007/34-56152.pdf.
21 SEC Release No. 33-8760, “Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers and Newly Public Companies,” December 15, 2006, available at http://www.sec.gov/rules/final/2006/33-8760.pdf.
22 See SEC Release No. 33-8934, “Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers,” June 26, 2008, available at http://www.sec.gov/rules/final/2008/33-8934.pdf.
23 See SEC Press Release No. 2008-116, “SEC Approves One-Year Extension for Small Businesses From Auditor Attestation Requirement in Sarbanes-Oxley Act; SEC Staff Gains OMB Approval to Proceed With Data Collection for Cost-Benefit Study of SOX 404 Implementation,” June 20, 2008, available at http://www.sec.gov/news/press/2008/2008-116.htm; SEC Press Release No. 2008-8, “SEC Begins Small Business Costs and Benefits Study of Sarbanes-Oxley Act Section 404,” February 1, 2008, available at http://www.sec.gov/news/press/2008/2008-8.htm.
24 SEC Release No. 33-8655, “Executive Compensation and Related Party Disclosure,” January 27, 2006, available at http://www.sec.gov/rules/proposed/33-8655.pdf.
25 SEC Release No. 33-8732A, “Executive Compensation and Related Person Disclosure (Conforming Version),” August 29, 2006, available at http://www.sec.gov/rules/final/2006/33-8732a.pdf.
26 “Executive Compensation Disclosure: Observations on Year Two and a Look Forward to the Changing Landscape for 2009,” John W. White, Director, Division of Corporation Finance, October 21, 2008, available at http://www.sec.gov/news/speech/2008/spch102108jww.htm.
27 TARP Capital Purchase Program, Interim Final Rule, 73 FR 62205, October 20, 2008. See also, TARP Capital Purchase Program Summary Term Sheet, available at http://www.ustreas.gov/press/releases/reports/document5hp1207.pdf.
28 SEC Release No. 34-55540, “Termination of a Foreign Private Issuer's Registration of a Class of Securities Under Section 12(g) and Duty to File Reports Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,” March 27, 2007, available at http://www.sec.gov/rules/final/2007/34-55540.pdf.
29 SEC Release No. 33-8818, “Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards Without Reconciliation to U.S. GAAP,” July 2, 2007, available at http://www.sec.gov/rules/proposed/2007/33-8818.pdf.
30 SEC Release No. 33-8982, “Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers,” November 14, 2008, available at http://www.sec.gov/rules/proposed/2008/33-8982.pdf.
31 SEC Release No. 33-8959, “Foreign Issuer Reporting Enhancements,” September 23, 2008, available at http://www.sec.gov/rules/final/2008/33-8959.pdf.
32 SEC Release No. 34-58465, “Exemption From Registration Under Section 12(g) of the Securities Exchange Act of 1934 for Foreign Private Issuers,” September 5, 2008, available at http://www.sec.gov/rules/final/2008/34-58465.pdf.
33 SEC Release No. 33-8957, “Commission Guidance and Revisions to the Cross-Border Tender Offer, Exchange Offer, Rights Offerings, and Business Combination Rules and Beneficial Ownership Reporting Rules for Certain Foreign Institutions,” September 19, 2008, available at http://www.sec.gov/rules/final/2008/33-8957.pdf.
34 SEC Release No. 33-8924, “Interactive Data to Improve Financial Reporting,” May 30, 2008, available at http://www.sec.gov/rules/proposed/2008/33-8924.pdf.
35 See SEC Release No. 34-56135, “Shareholder Choice Regarding Proxy Materials,” July 26, 2007, available at http://www.sec.gov/rules/final/2007/34-56135.pdf; SEC Release No. 34-55146, “Internet Availability of Proxy Materials,” January 22, 2007, available at http://www.sec.gov/rules/final/2007/34-55146.pdf.
36 SEC Release No. 34-58288, “Commission Guidance on the Use of Company Web Sites,” August 1, 2008, available at http://www.sec.gov/rules/interp/2008/34-58288.pdf.
37 Final Report of the Advisory Committee on Smaller Public Companies to the United States Securities and Exchange Commission, April 23, 2006, available at http://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf.
38 SEC Release No. 33-8891, “Electronic Filing and Revision of Form D (Conforming Version),” February 6, 2008, available at http://www.sec.gov/rules/final/2008/33-8891.pdf; SEC Release No. 33-8876, “Smaller Reporting Company Regulatory Relief and Simplification,” December 19, 2007, available at http://www.sec.gov/rules/final/2007/33-8876.pdf; SEC Release No. 33-8878, “Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S-3 and F-3,” December 19, 2007, available at
http://www.sec.gov/rules/final/2007/33-8878.pdf; SEC Release No. 33-8869, “Revisions to Rule 144 and Rule 145 to Shorten Holding Period for Affiliates and Non-Affiliates,” December 6, 2007, available at http://www.sec.gov/rules/final/2007/33-8869.pdf; SEC Release No. 34-56887, “Exemption of Compensatory Employee Stock Options from Registration under Section 12(g) of the Securities Exchange Act of 1934,” December 3, 2007, available at http://www.sec.gov/rules/final/2007/34-56887.pdf.
39 SEC Release No. 33-8828, “Revisions of Limited Offering Exemptions in Regulation D,” August 3, 2007, available at http://www.sec.gov/rules/proposed/2007/33-8828.pdf.
40 See Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission, August 1, 2008, available at http://www.sec.gov/about/offices/oca/acifr/acifr-finalreport.pdf. See also, SEC Spotlight on: Advisory Committee on Improvements to Financial Reporting, available at http://www.sec.gov/about/offices/oca/acifr.shtml.
41 See SEC Press Release 2007-71, “SEC Announces Roundtable Discussions Regarding Proxy Process,” April 24, 2007, available at http://www.sec.gov/news/press/2007/2007-71.htm; SEC Press Release 2007-86, “SEC Announces Agenda and Panelists for Federal Proxy Rules and State Corporation Law Roundtable,” May 4, 2007, available at http://www.sec.gov/news/press/2007/2007-86.htm; SEC Press Release 2007-99, “SEC Announces Agendas and Panelists for Final Roundtables on the Proxy Process,” May 23, 2007, available at http://www.sec.gov/news/press/2007/2007-99.htm. See also, SEC Spotlight on: Roundtable Discussions Regarding the Proxy Process, available at http://www.sec.gov/spotlight/proxyprocess.htm, for archived webcasts, unofficial roundtable transcripts, and other materials.
42 SEC Release No. 34-56160, “Shareholder Proposals,” July 27, 2007, available at http://www.sec.gov/rules/proposed/2007/34-56160.pdf; SEC Release No. 34-56161, “Shareholder Proposals Relating to the Election of Directors,” July 27, 2007, available at http://www.sec.gov/rules/proposed/2007/34-56161.pdf.
43 SEC Release No. 34-56914, “Shareholder Proposals Relating to the Election of Directors,” December 6, 2007, available at http://www.sec.gov/rules/final/2007/34-56914.pdf.
44 American Federation of State, County & Municipal Employees, Employees Pension Plan v. American International Group, Inc., 462 F.3d 121 (2d Cir. 2006).
45 See SEC Press Release No. 2008-119, “SEC Announces ‘21st Century Disclosure’ Initiative to Fundamentally Rethink the Way Companies Report and Investors Acquire Information,” June 24, 2008, available at http://www.sec.gov/news/press/2008/2008-119.htm.
46 CSX Corp. v. Children’s Inv. Fund Mgmt. (UK) LLP, 562 F. Supp. 2d 511 (S.D.N.Y. 2008); affirmed without opinion by CSX Corp. v. Children’s Inv. Fund Mgmt. (UK) LLP, 2008 U.S. App. LEXIS 19788 (2d Cir. N.Y., Sept. 15, 2008).
47 SEC Release No. 33-8935, “Modernization of the Oil and Gas Reporting Requirements,” June 26, 2008, available at http://www.sec.gov/rules/proposed/2008/33-8935.pdf.
48 SEC Release No. 33-8940, “Security Ratings,” July 1, 2008, available at http://www.sec.gov/rules/proposed/2008/33-8940.pdf.
49 The Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure, March 2008, available at http://www.treas.gov/press/releases/reports/Blueprint.pdf.