521 Fifth Avenue
New York, New York 10175
August 9, 2002

RE: File No. S7-21-02
Comments on Release No. 34-46079 and Release No. 34-46300

Jonathan G. Katz, Secretary
United States Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Dear Mr. Katz:

The American Society of Corporate Secretaries is pleased to have this opportunity to comment on the Proposed Rule: Certification of Disclosure in Companies' Quarterly and Annual Reports. The Society is comprised of over 3,800 members representing 2,500 corporations in the United States and other countries.

The Society recognizes that, as described in Release No. 34-46300, the recently-enacted Sarbanes-Oxley Act of 2002 (the "Sarbanes Act") includes certification requirements that are slightly different than those set forth in Release No. 34-46079, which will necessitate some revision of the SEC's proposal. The Society offers these comments on the proposed rulemaking, as well as initial thoughts on the related legislative provisions. The Society endorses Congress and the Commission's objectives of improving the quality of disclosure and investor confidence by requiring a company's principal executive officer and principal financial officer to certify that, to their knowledge, the information in the company's quarterly and annual reports is true and complete in all material respects.

We will begin our discussion with some general comments applicable to the certification process as a whole, followed by comments concerning the procedural provisions. We will then provide our responses to the series of questions presented by the SEC. In those responses, we will include some specific drafting comments and suggested modifications to the rulemaking.

General Comments

  1. Of paramount importance to our members, as well as the investor community, is the development of one single certification process with clear and simple requirements that would satisfy all related legislative, regulatory and self-regulatory provisions. While we recognize that the SEC may not be able to address immediately both of the certification provisions of the Sarbanes Act (Sections 906 and 302), we encourage the SEC to work toward final rulemaking addressing both provisions, as well as any specific concerns of the listing authorities, so that a single certification process results. As indicated in our introductory comments, the Society endorses the concept that chief executive officers and chief financial officers certify companies' quarterly and annual reports. It is important to all our members that the business community work with the government to restore investor confidence.

  2. A consistent definition for the term "material" in disclosure standards is critically important to the Society, particularly in light of the numerous related legislative, regulatory and listing agency provisions with sometimes overlapping requirements. The Sarbanes Act's use of the disclosure standard for "material" information found in Exchange Act Rules 10b-5(b) and 12b-20 offers some clarity, if it can be applied to all situations where materiality is applicable. We do note that the first element of the Section 906 certification in the Sarbanes Act (that the report complies fully with the requirements of Section 13(a) or 15(d) of the Exchange Act) does not explicitly contain a materiality requirement. However, since many of the Exchange Act's underlying requirements contain a materiality standard, we would urge the SEC to uniformly apply a materiality standard to certifications.

  3. The timing of the required reports, combined with the global nature of business today and the travel schedule of many CEO's and CFO's, necessitates a certain amount of flexibility by the SEC to allow facsimile and electronic signatures, to be followed up with actual signatures, since signature by power of attorney is disallowed. We encourage the SEC to specify in its rulemaking how the certifications should be delivered. We suggest that the SEC allow that the certifications be filed by EDGAR and that electronic signatures be permitted with the EDGAR filings of the reports. In addition, we suggest that the SEC specify whether the certification must be included on the signature page of the reports, must be filed as an exhibit, must be filed as correspondence or can be filed in any one of the preceding three ways. Registrants could be required to keep on file the original documents containing all of the actual signatures just as they are now required, or to submit the actual signature certification within an additional specified time period. Permitting the certifications to be filed via EDGAR as part of or accompanying the relevant report (with the companies retaining originally-signed certifications) would eliminate the need for the SEC to review, maintain and make available for public viewing, a multitude of separate documents, without limiting the force or effect of the certifications, and would also allow for more efficient access to the information by the investing public.

Comments Concerning Procedural Provisions

  1. The Society also supports the concept of requiring processes to ensure accuracy in the collection, processing and disclosure of the information required in the quarterly and annual reports. Most members already have well-defined processes because we recognize their importance in ensuring accuracy and consistency.

  2. The Society endorses the SEC approach to the internal controls and procedures requirement. The proposal would require companies to "maintain sufficient procedures to provide reasonable assurance" in this area, without specifying what those procedures might be. The latitude to develop procedures that fit particular industries, business models, and company sizes is essential to making this proposal workable.

  3. Likewise, we endorse the SEC approach to the required evaluation, which does not "require any particular procedures for conducting this evaluation." Again, the latitude to develop an evaluation method that fits a particular company is essential to this proposal's workability.

  4. We strongly encourage the SEC to develop rules making the procedural certification as simple and straight-forward as possible. Requiring the CEO and CFO to certify to the accuracy and completeness of the quarterly and annual reports will itself provide greater assurance to the users of the reports that there are procedures in place to collect, process and review financial information and other disclosures before the reports are filed. Since the additional value of the procedural certification requirements (specifically, the responsibility for internal reporting controls (Section 302) and a review of the evaluation of reporting procedures (the proposed rulemaking and Section 302)) is unclear, promulgating detailed specifications for these certifications would be unlikely to increase investor confidence.

Responses to Questions Presented

  1. Comments on the Questions regarding the objectives of the proposed certification requirement.

  2. Comments on the Questions regarding the form of the proposed certification.

  3. Comments on the Questions regarding the potential liability consequences of the proposed certification requirement.

  4. Comments on Questions regarding the proposed internal procedures and controls.

  5. Comments on Questions regarding certification of review of evaluation of procedures.

  6. Comments on Questions regarding the scope of the proposed rules.

  7. Comments on the Questions on general aspects of the proposed rules.


The Society is supportive of the certification process as well as the procedural requirement. Of utmost importance to us is the creation of a single certification process that is simple and clear. We support allowing individual companies latitude in developing their procedures. We thank the SEC for its consideration of these comments. We would be pleased to provide additional information concerning any of these comments or to otherwise work with you in any way that would be helpful as you move to finalize rules governing the certification process. I can be reached at ChevronTexaco, Corporate Secretary, (415) 894-2735, and Susan Wolf can be reached at Schering-Plough, Senior Director, Corporate Law, (908) 298-7354. Either of us would be pleased to coordinate further involvement by the Society, and we expect one or the other of us to be available over the coming weeks.


Lydia I. Beebe
Society Director and Chairman of the Subcommittee on Certification of Disclosure

cc: Peggy Foran
Kathy Gibson
Tom Sanger
David Smith
Susan Wolf
Subcommittee on Certification of Disclosure