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03/17/10 -- SEC Provides Interpretative Guidance on Adviser Custody
Rule
As discussed in the article entitled "Interpretative Guidance Posted for
Adviser Custody Rule" in the March 16, 2010, issue of Accounting &
Compliance Alert, the SEC updated its Small Entity Compliance Guide
on March 12, 2010, to reflect the December 2009 amendments to Rule 206(4)-2
of the Investment Advisers Act of 1940.
The update reflects the changes to the rule from Release No. IA-2968, Custody of Funds or Securities of Clients by Investment Advisers. The update provides information on the delivery of account statements and notices to clients, surprise examinations, pooled investment vehicles, the definition of custody, qualified custodians, and privately offered securities.
Among other things, the guidance clarifies that the amendments no longer permit an adviser who undergoes an annual surprise examination to send account statements to clients. The statements must now come from the custodian.
Further, the SEC said that an adviser is obligated to have a reasonable basis for believing the custodian sends statements with the addition of a requirement that the reasonable basis be formed after "due inquiry."
03/12/10 -- SEC Updates Its Interpretative Guidance on Adviser Custody
Rule
As discussed in the article entitled "FAQs on Adviser Custody Rule
Are Updated" in the March 9, 2010, issue of Accounting & Compliance
Alert, the staff in the SEC’s division of investment management updated
its responses to frequently asked questions about the custody requirements
in Rule 206(4)-2 of the Investment Advisers Act of 1940.
The responses supersede the previous interpretative guidance on the 2003 changes to the rule to reflect the December 2009 amendments in Release No. IA-2968, Custody of Funds or Securities of Clients by Investment Advisers.
The FAQs include information on compliance dates, account statements, surprise examinations, pooled investment vehicles, and privately offered securities.
The responses are the staff’s views of the rule and are considered interpretative guidance and not SEC regulations.
03/09/10 -- SEC Updates Interpretative Guidance for XBRL Filings
As discussed in the article entitled "Interpretative Guidance for XBRL
Filings Is Updated" in the March 5, 2010, issue of Accounting &
Compliance Alert, the SEC's office of interactive disclosure added
interpretative guidance to the frequently asked questions material on
the agency's website regarding the preparation of financial statements
using the eXtensible Business Reporting Language.
The material was added as Questions 36 through 40 and addresses issues such as having the format of a footnote table in the XBRL document match the original HTML/ASCII file and the use of the pre-defined table structures in the U.S. GAAP taxonomy. The taxonomy is the set of definitions for the tags used to prepare a financial statement in XBRL.
The FAQs are intended to help statement preparers submit financial statements in XBRL, which became a requirement for public companies following the publication of the January 2009 final rule in Release No. 33-9002, Interactive Data to Improve Financial Reporting.
Separately, the SEC provides small public companies and investors with Interactive Data for Financial Reporting: A Small Entity Compliance Guide. The agency's division of corporation finance also maintains interpretative guidance for XBRL filings in its compliance and disclosure interpretations (C&DI) pages.
03/05/10 -- SEC Releases First 2010 Update of Financial Reporting
Manual
As discussed in the article entitled "First 2010 Update of Financial Reporting
Manual Is Released" in the March 4, 2010, issue of Accounting &
Compliance Alert, the SEC’s division of corporation finance published
the latest edition of its Financial Reporting Manual on March 2.
The updated material in the 325-page document addresses non-GAAP measures of financial performance in Topic 8 and critical accounting estimates related to goodwill impairment in Section 9500.
The manual contains interpretative guidance used by the corporation finance staff, and it covers the financial reporting issues public companies have to address in the documents they submit to the SEC.
When the manual was first posted online in 2008, it concluded a long-running project inside the SEC.
03/03/10 -- SEC Updates Regulation S-K Interpretive Guidance
As discussed in the article entitled "Regulation S-K Interpretive Guidance
Is Updated" in the March 2, 2010, issue of Accounting & Compliance
Alert, the SEC's division of corporation finance recently updated
its compliance and disclosure interpretations for Regulation S-K.
The changes include a revision to question 119.16 related to the executive summary compensation table required by Item 402(c)(2)(v) and (vi) of Regulation S-K, and the addition of question 119.24 regarding the application of FASB ASC 718, Compensation—Stock Compensation, formerly SFAS No. 123(R). Question 119.24 concerns the application of Topic 718 when a board's compensation committee decides to lower the value of a stock award.
In addition, question 120.03 has been renumbered question 122.04, and question 120.04 has been renumbered question 122.05.
Section 220.01, which deals with the reloading of executive options under FASB ASC 718, was also updated.
The changes also include the deletion of seven questions, mostly related to instructions regarding Item 402.
02/26/10 -- SEC Updates IFRS Roadmap in Release No. 33-9109
As discussed in the article entitled "IFRS Roadmap Is Sidelined for
at Least Another Year" in the February 25, 2010, issue of Accounting
& Compliance Alert, the SEC put its IFRS Roadmap on hold on February
24, telling its staff that more information is needed about the effects
global accounting standards will have on U.S. markets before a final decision
can be made.
Shortly after announcing the decision, the agency issued Release No. 33-9109, Commission Statement in Support of Convergence and Global Accounting Standards, which essentially reviewed the SEC's actions with regard to IFRS over the past decade and the challenges regulators face in taking their support to the next stage of development. A 44-page appendix to the notice spells out the criteria the staff will use to evaluate the suitability of IFRS for U.S. markets.
By October, the staff in the chief accountant’s office and the division of corporation finance will provide a series of public reports to the commissioners on the progress in reassessing IFRS.
The SEC’s move was approved unanimously by the five commissioners, and senior officials think the agency's staff will be positioned by late 2011 to evaluate the progress on convergence.
02/25/10 -- SEC Issues Money Market Reforms in Release No. IC-29132
As discussed in the article entitled “Money Market Reforms
Are Issued in Release No. IC-29132” in the February 24, 2010, issue
of Accounting & Compliance Alert, the SEC recently implemented one
of its main responses to the credit crisis.
The rule changes issued in Release No. IC-29132, Money Market Fund Reform,
become effective May 5. They were approved by the SEC in January.
The changes to the rules that govern money market funds under the Investment
Company Act of 1940 will require funds to maintain a portion of their
portfolios in instruments that can be readily converted to cash, reducing
the maximum weighted average maturity of portfolio holdings, and improving
the quality of portfolio securities, the SEC said. The changes are intended
to tighten the risk-limiting conditions of Rule 2a-7.
Funds will have to report their portfolio holdings monthly to the SEC.
Fund that have repriced below $1 per share, or, in industry parlance broken
the buck, will be permitted to suspend shareholder redemptions.
02/23/10 -- SEC Will Discuss IFRS Roadmap at Next Meeting
As discussed in the article entitled "IFRS Roadmap Will Be Discussed
at Next Meeting" in the February 22, 2010, issue of Accounting &
Compliance Alert, the SEC said its next open meeting will include
a discussion on whether it should "publish a statement regarding its continued
support for a single-set of high-quality globally accepted accounting
standards and its ongoing consideration of incorporating International
Financial Reporting Standards into the financial reporting system for
U.S. issuers."
The meeting will be the first official discussion the SEC has had on IFRS since Mary Schapiro took over the agency from Christopher Cox, who was a vocal supporter of the global standards. It was on Cox's watch that regulators issued the proposal in Release No. 33-8982, Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers, and a final rule that permitted foreign companies that trade on U.S. stock markets to submit regulatory filings in IFRS and not U.S. GAAP.
The agenda for the meeting also includes a review of the proposal in Release No. 34-59748, Amendments to Regulation SHO, which the SEC issued last April to clamp down on some forms of short selling.
02/19/10 -- SEC Chief Accountant Advises Public Companies to Wait
on IFRS
As discussed in the article entitled "Chief Accountant Advises Public
Companies to Wait on IFRS" in the February 18, 2010, issue of Accounting
& Compliance Alert, the SEC is sticking to its oft-stated determination
to reconsider its proposed rule on adopting IFRS for U.S. companies.
Yet 15 months after the proposal was issued and with more than six months of promises from senior SEC officials that a decision would be reached soon, there's no clear indication what that decision will mean.
"My remarks will leave you wanting, but I'm hopeful that you'll hear more soon," said SEC chief accountant James Kroeker at a February 17 conference on corporate governance sponsored by the Practising Law Institute in New York.
Kroeker explained that with so many significant changes to U.S. GAAP expected in the next year or so—he cited the FASB's projects on revenue recognition and contingency accounting as examples—companies would do better to focus on the one-off changes rather than prepare for a wholesale switch to IFRS.
02/18/10 -- SEC Updates Interpretive Guidance for Regulation S-K and 8-K Filings
As discussed in the article entitled "Interpretive Guidance Is Updated for Regulation S-K and 8-K Filings" in the February 17, 2010, issue of Accounting & Compliance Alert, the SEC's division of corporation finance published five compliance and disclosure interpretations for Regulation S-K and one C&DI for filing an Item 5.07 Form 8-K on February 16, 2010.
The Reg S-K C&DIs address:
- The Item 401(a) and Item 401(c) disclosure requirements for directors;
- Summary compensation disclosures in Item 402 as they relate to registration statements;
- The incremental fair value of stock awards in Item 402(c)(2)(v) and Item 402(c)(2)(vi);
- Non-equity incentive plan awards as defined by Item 402(a)(6); and
- Reporting share grants and awards in the summary compensation table.
The Item 5.07 Form 8-K C&DI advises public companies to use the day after the shareholder meeting as the start of the four-day period within which the form has to be submitted to the SEC.
02/17/10 -- SEC's Investor Panel Gets Set for First Meeting of 2010
As discussed in the article entitled "Investor Panel Gets Set for First
Meeting of 2010" in the February 3, 2010, issue of Accounting &
Compliance Alert, the SEC's Investor Advisory Committee plans to meet
February 22, 2010, in Washington and hear reports its subcommittees on
investor education, investor protection, and shareholder rights.
The advisory panel also plans to hear recommendations on transparency in proxy voting and forming a committee on Regulation FD, according to a notice published by the SEC.
The advisory panel will also hear reports on a plan for disclosures related to environmental, social, and governance issues and a report on the financial reform legislation in Congress.
The panel was formed in June and had its most recent meeting in October.
02/16/10 -- SEC's Climate Change Guidance Became Effective with
Addition to Federal Register
As discussed in the article entitled "Climate Change Guidance Is Effective
with Addition to Federal Register" in the February 12, 2010, issue of
Accounting & Compliance Alert, the SEC's interpretative guidance on climate
change disclosures in Release No. 33-9106, Commission Guidance Regarding
Disclosure Related to Climate Change, became effective with its publication
in the Federal Register on February 8.
The rule became effective two weeks after the SEC approved it and one
week following the publication of the release.
The disclosure obligations are outlined in Item 101, "Description of
Business," Item 103, "Legal Proceedings," Item 503(c), "Risk Factors,"
and Item 303, "Management’s Discussion and Analysis," of Regulation S-K.
As a result of the changes, public companies will be well advised to
gain a clear understanding of their carbon emissions and how the information
about them should be disclosed in SEC filings. Companies should "review
disclosures made in prior SEC filings to determine if they are adequate
or need to be revised or updated," wrote the law firm Katten Muchin Rosenman
LLP in a notice it distributed to clients.
02/12/10 -- Comment Deadlines for Some SEC Proposals
As discussed in the article entitled "Comment Deadlines for Some SEC Proposals"
in the February 11, 2010, issue of Accounting & Compliance Alert,
the comment periods on some SEC proposed rules that are scheduled to expire
in the next few months.
Release No. 34-60997, Regulation of Non-Public Trading Interest, would put limits on electronic trading systems called dark pools. Agency officials are worried that individual investors are shut out from the systems and that a two-tiered market will result as trading volume continues to shift away from the traditional stock exchanges. Regulators want to know if giving the trading systems extra rules to follow will improve market transparency and price discovery for all investors. Comments are due February 22.
Release No. 34-61379, Risk Management Controls for Brokers or Dealers with Market Access, proposes new Rule 15c3-5 under the Securities Exchange Act of 1934 that would require brokers or dealers with access to trading directly on an exchange or alternative trading system, including those providing sponsored or direct market access to customers or other persons, to implement risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity. Comments are due March 29.
Release No. 34-61414, Purchases of Certain Equity Securities by the Issuer and Others, proposes amendments to Rule 10b-18 of the Securities Exchange Act of 1934 that are intended to clarify and modernize the safe harbor provisions in light of market developments since Rule 10b-18's adoption in 1982. Comments are due March 1.
The SEC is also looking for public comment about various market structure issues, including high-frequency trading, order routing, market data linkages, and dark liquidity. On January 14, the commission issued Release No. 34-61358, Concept Release on Equity Market Structure, to help determine whether regulatory initiatives to improve the current equity market structure are needed and, if so, the specific nature of such initiatives.
Comments on Release No. 34-61358 are due April 21.
02/11/10 -- FASB and IASB Plan to Discuss Joint Financial Statement
Presentation Project
As discussed in the article entitled "Boards Plan to Discuss Joint Financial
Statement Presentation Project" in the February 10, 2010, issue of Accounting
& Compliance Alert, the IASB and FASB plan to address a number
of issues related to the joint financial presentation project during a
meeting at the IASB's offices in London on February 16-18.
According to the meeting agenda, the boards will discuss:
- Application guidance for the analysis of changes in significant accounts;
- The definition of a remeasurement;
- Presentation of financing arising from operating activities; and
- Presentation of cash flow information by a financial services entity.
In addition, the boards will discuss the differences in their tentative decisions on the October 2008 Preliminary Views (PV) No. 1630-100, Preliminary Views on Financial Statement Presentation, which was available for comment until April 2009. The boards are deliberating the issues raised by respondents to the discussion paper with a view to developing an exposure draft for release in April 2010.
The meeting will follow a February 12 meeting at the FASB's Norwalk, CT, offices of two advisory bodies, the International Group on financial statement presentation and the Financial Institutions Advisory Group. The groups plan to discuss how the boards can assess and communicate the costs and benefits of the financial statement presentation model to be proposed in the exposure draft.
02/10/10 -- Crisis Response, Proxy Access Will Top 2010 Agenda for the
SEC’s Division of Corporation Finance
As discussed in the article entitled "Crisis Response, Proxy Access Will
Top Corporation Finance's 2010 Agenda" in the February 9, 2010, issue
of Accounting & Compliance Alert, the tumult in the financial
markets is still reverberating through the SEC’s division of corporation
finance and will go a long way in setting the division's priorities for
the year ahead.
The crisis atmosphere meant that 2009 was an "incredibly busy time," said Meredith Cross, who became the division's chief in April. In 2010, she said she expects the division to draft guidance on:
- Proxy disclosures and procedures in order to restore investor confidence in corporate governance;
- Gaps in financial reporting and disclosures highlighted by the financial crisis in areas such as asset backed securities and the use of credit ratings;
- Derivatives trading and other market practices that can pose risks to the financial system;
- Modernizing the process for filing Forms 13D and 13G; and
- Clarifying disclosure rules to make sure that companies are providing the right information to investors and not simply resorting to boilerplate statements.
Cross, who was speaking during the Practising Law Institute’s "SEC Speaks" conference in Washington on February 5, 2010, said her staff was also working to get guidance posted to the agency's website as quickly as possible, citing as an example, Interpretative Release No. 33-9106, Commission Guidance Regarding Disclosure Related to Climate Change.
02/05/10 -- SEC Issues Interpretive Guidance on Climate Change Disclosures
in Release No. 33-9106
As discussed in the article entitled "Interpretive Guidance on Climate
Change Disclosures Is Issued in Release No. 33-9106" in the February 3,
2010, issue of Accounting & Compliance Alert, the SEC issued
Release No. 33-9106, Commission Guidance Regarding Disclosure Related
to Climate Change, on February 2.
Public companies are being advised to address any disclosure requirements related to climate change that may be triggered by lawsuits, business risks, lawsuits, regulation, or international treaties.
The disclosure obligations are outlined in Item 101, "Description of Business," Item 103, "Legal Proceedings," Item 503(c), "Risk Factors," and Item 303, "Management’s Discussion and Analysis," of Regulation S-K.
For example, under Item 101, a company would have to disclose any material capital costs on environmental controls, the SEC says. Item 503(c) might require disclosures about the risk a company faces from pending litigation related to environmental damage.
02/03/10 -- Proposed 2010 Budget Increase May Let SEC Add 200 Jobs
As discussed in the article entitled "Proposed 2010 Budget Increase May
Let SEC Add 200 Jobs," in the February 2, 2010, issue of Accounting &
Compliance Alert, President Obama proposed a $1.26 billion fiscal 2011
budget for the SEC on February 1, a 12% increase over the fiscal 2010 spending.
The extra funds "will do a great deal to help us keep pace with the continuing growth of the markets and provide necessary resources to support important regulatory initiatives in 2011," SEC Chairman Mary Schapiro said.
According to the SEC's Congressional Justification for fiscal 2011, which begins October 1, 2010, the personnel budget would increase to $646 million from $582 million. The extra money will let the SEC add jobs in enforcement, examinations, and in the new division of risk, strategy and financial innovation.
02/02/10 -- Senior SEC Officials Set to Appear at 2010 Reprise of
SEC Speaks
As discussed in the article entitled "Senior Officials Set to Appear at
2010 Reprise of SEC Speaks," in the February 2, 2010, issue of Accounting
& Compliance Alert, the Practising Law Institute's "The SEC Speaks
in 2010," is scheduled for February 5-6 in Washington, and all five SEC
commissioners and senior officials from the agency's divisions will discuss
the key developments on the regulatory agenda.
Chairman Mary Schapiro is scheduled to give a keynote early on the first day after being introduced by Andrew Donohue, director of the division of investment management, and enforcement chief Robert Khuzami.
The agenda says financial reporting, disclosure, and accounting issues will be addressed by senior agency accountants, including:
- James Kroeker, the SEC’s chief accountant;
- Wayne Carnall, chief accountant of corporation finance;
- Richard Sennett, chief accountant for investment management; and
- Jason Flemmons, associate chief accountant in the enforcement division.
The scheduled commentators on accounting issues include former SEC commissioners Roel Campos, partner in charge of the law firm Cooley Godward Kronish’s Washington office; Edward Fleischman, senior counsel with Linklaters LLP; and Cynthia Glassman, a member of the board of directors of Navigant Consulting.
01/29/10 -- SEC Issues Plan to Amend Stock Buyback Safe Harbor
in Release No. 34-61414
As discussed in the article entitled "Plan to Amend Stock Buyback
Safe Harbor Issued in Release No. 34-61414," in the January 27, 2010,
issue of Accounting & Compliance Alert, the SEC recently released
a proposed revision of a stock buyback safe harbor in Release No. 34-61414,
Purchases of Certain Equity Securities by the Issuer and Others.
"The increased speed of today’s market activity, as evidenced
by flickering quotes, has made it increasingly difficult for issuers to
ensure that every purchase of its common stock during the day will meet
the requirements of the safe harbor in Rule 10b-18 of the Securities Exchange
Act of 1934," the SEC said in Release No. 34-61414.
The proposal will be out for comment until March 1.
Public companies have to make their share repurchases through one broker-dealer
per day and have to satisfy the price, volume, and timing restrictions
in Rule 10b-18 in order to qualify for the safe harbor. But the restrictions
haven't been updated in years and were written before the advent of common
techniques such as volume-weighted average pricing (VWAP).
01/27/10 -- SEC Issues Additional C&DIs to Address Expanded Proxy
Disclosure Requirements
As discussed in the article entitled "Additional C&DIs Are Issued
to Address Expanded Proxy Disclosure Requirements," in the January 25,
2010, issue of Accounting & Compliance Alert, the SEC's division
of corporation finance recently updated its compliance and disclosure
interpretations to explain some of the proxy disclosure rules that will
be in effect for the 2010 shareholder meeting season following the issuance
of Release No. 33-9089, Proxy Disclosure Enhancements.
Release No. 33-9089 requires public companies to increase the amount of information they provide on executive compensation policies and how they affect risk management. In addition, proxy statement summary compensation tables will have to include the fair value of stock and option grants under FASB ASC 718, Compensation—Stock Compensation, formerly SFAS No. 123(R).
The rule goes into effect February 28, 2010, in time for 2010 shareholder meetings.
The C&DIs address:
- How registrants should report the results of an annual meeting of shareholders on Form 10-K or Form 10-Q, if the meeting takes place before February 28, but the forms are due on or after that date; and
- How the February 28 effective date for the Regulation S-K amendments affects registration statements filed under the Securities Act of 1933 or Securities Exchange Act of 1934, for an issuer with a fiscal year ending on or after December 20, 2009.
01/26/10 -- SEC Issues Small Business Compliance Guide for Energy
Companies
As discussed in the article entitled "Small Business Compliance Guide
Issued for Energy Companies," in the January 25, 2010, issue of Accounting
& Compliance Alert, the SEC recently published a small business
compliance guide on its website to reflect the changes in Release No.
33-8995, Modernization of Oil and Gas Reporting.
The final rule was issued in December 2008 and became effective at the beginning of 2010. It amended the disclosure requirements in Regulation S-K, and Regulation S-X, and added Subpart 1200 to Regulation S-K to codify the revised disclosure requirements from Industry Guide 2, which was phased out.
The rule requires energy companies to price their proved oil and gas reserves with the average of the first-day-of-the-month price for each month for the 12 months prior to the end of the quarter or year.
The old disclosure requirements relied on the closing price from the last day of the fiscal year.
The rule also revised the definition of proved oil and gas reserves and amended Rule 4-10 of Regulation S-X.
01/21/10 -- SEC Seeks Public Comment on Equity Market Structure
in Concept Release No. 34-61358
As discussed in the article entitled "Commission Seeks Public Comment
on Equity Market Structure in Concept Release No. 34-61358," in the January
19, 2010, issue of Accounting & Compliance Alert, the SEC recently
issued Release No. 34-61358, Concept Release on Equity Market Structure.
The 74-page concept release asks for public comment about various market structure issues, including high frequency trading, order routing, market data linkages, and undisplayed, or "dark," liquidity. The commission plans to use the comments to help determine whether regulatory initiatives to improve the current equity market structure are needed, and the specific nature of such initiatives.
Comments on the release are due by April 21.
01/20/10 -- SEC Approves AS 7 and Conforming Amendment
As discussed in the article entitled "Commission Approves AS 7 and Conforming
Amendment," in the January 19, 2010, issue of Accounting & Compliance
Alert, the SEC recently approved the PCAOB’s Auditing Standard (AS)
7, Engagement Quality Review and Conforming Amendment.
AS 7 applies to all audit engagements and engagements to review interim financial information conducted under PCAOB standards.
The standard requires the reviewer to:
- Evaluate the significant judgments made and related conclusions reached by the engagement team in forming the overall conclusion on the engagement and in preparing the engagement report; and
- Perform procedures designed to focus the reviewer on the engagement team’s conclusions.
According to AS 7, if the reviewer is from within the firm, he or she must be a partner or the equivalent. The reviewer must also possess the accounting, auditing, and reporting skills sufficient to serve as the engagement partner.
AS 7 is effective for both the review of audits and of interim reviews for fiscal years beginning on or after December 15, 2009.
01/06/10 -- Financial Crisis Advisory Group Urges Continuing with
Convergence Effort
As discussed in the article entitled "Crisis Panel Urges Continuing with
Convergence Effort" in the January 5, 2010, issue of Accounting &
Compliance Alert, the leaders of the Financial Crisis Advisory Group
said that completing the process of converging global accounting standards
remains “critically important” despite the easing of the global crisis
that led to the group's formation.
The message was delivered in a January 4 letter the FCAG sent to the chairman of the Group of 20 nations, Prime Minister Chung Un-Chan of the Republic of Korea, which has just assumed leadership of the G-20 for the coming year.
Starting with a November 2008 summit in Washington and subsequent meetings in London and Pittsburgh, the G-20 has been urging the IASB to complete its work on the accounting for financial instruments in response to the financial crisis. The G-20 has also issued several statements pressing the FASB and IASB to continue working on international convergence.
"In order to develop high-quality standards that provide unbiased, transparent and relevant information, it is critical that the boards enjoy a high degree of independence from undue commercial and political pressures," wrote FCAG co-chairs Harvey Goldschmid and Hans Hoogervorst in the letter they signed on behalf of the other panel members.
01/05/10 -- In Release No. IA-2968, SEC Establishes Requirements
for Investment Advisors in Audits of Client Assets
As discussed in the article entitled "Release No. IA-2968 Establishes
Requirements for Investment Advisors in Audits of Client Assets" in the
January 4, 2010, issue of Accounting & Compliance Alert, the
SEC recently issued Release No. IA-2968, Custody of Funds or Securities
of Clients by Investment Advisers.
The release amends Rule 206(4)-2 of the Investment Advisers Act of 1940 by requiring registered investment advisers to be subject to surprise exams once a year by independent public accountants to verify client assets.
Release No. IA-2968 requires investment advisers to have qualified custodians maintaining client funds and securities send account statements directly to the advisory clients.
The rule amendment eliminates an alternative employed by advisers that permits them to send quarterly account statements to clients if they undergo annual surprise exams by an independent auditor. The SEC thinks that having custodians send statements directly to clients will provide more integrity to account statements.
The rule will become effective 60 days after its publication in the Federal Register, which normally occurs a few days after a rule has been posted on the SEC's website.
01/04/10 -- SEC Proposes to Extend Shelf-Registration Exemption to Underwriters
and Brokers in Release No. 33-9098
As discussed in the article entitled "Plan to Extend Shelf-Registration
Exemption to Underwriters and Brokers Offered in Release No. 33-9098"
in the December 23, 2009, issue of Accounting & Compliance Alert,
the SEC recently issued Release No. 33-9098, Revisions to Rule 163,
to propose expanding an exemption on communications with investors.
The proposal seeks to aid the process of capital formation by expanding an exemption under Rule 163 of the Securities Act of 1933, and permit underwriters and brokers working on the behalf of large-cap companies to talk to investors.
For a broker or underwriter to receive the exemption, the company has to meet the SEC's definition of well-known seasoned issuer, which generally means that the company has to have a market cap of $700 million or $1 billion in securities other than common stock and is current with its regulatory filings. Shell companies and limited partnerships don't qualify for the WKSI classification under the ineligible issuer definition of Rule 405 of the 1933 Act.
Comments on the proposal are due January 27, 2010.
12/28/09 -- SEC Expands Proxy Disclosures on Executive Compensation,
Risk Management in Release No. 33-9089
As discussed in the article entitled "Proxy Disclosures on Executive Compensation,
Risk Management Are Expanded in Release No. 33-9089" in the December 24,
2009, issue of Accounting & Compliance Alert, the SEC issued
Release No. 33-9089, Proxy Disclosure Enhancements, just hours
after the commissioners approved the changes at a public meeting.
The SEC said it scaled back some of the changes from the proposed version of the rule, Release No. 33-9052, so that the amendments could be put in place for proxy season, but it hopes to address some of the other topics, such as adding to the number of executives for which compensation has to be disclosed and ending an exemption that permitted some companies not to reveal their performance target data, in upcoming proposals.
The changes that were implemented include increasing the amount of information companies will have to provide about the board's role in risk management and director qualifications.
The summary compensation table and director compensation table as described in Item 402 of Regulation S-K will have to provide the aggregate grant date fair value of stock and options awarded during the year according to FASB ASC 718, Compensation—Stock Compensation, formerly SFAS No. 123(R).
12/21/09 -- SEC Expands Proxy Disclosures on Executive Compensation,
Risk Management in Release No. 33-9089
As discussed in the article entitled "Proxy Disclosures on Executive Compensation,
Risk Management Are Expanded in Release No. 33-9089" in the December 18,
2009, issue of Accounting & Compliance Alert, the SEC issued Release
No. 33-9089, Proxy Disclosure Enhancements, just hours after the
commissioners approved the changes at a public meeting.
The SEC said it scaled back some of the changes from the proposed version of the rule, Release No. 33-9052, so that the amendments could be put in place for proxy season, but it hopes to address some of the other topics, such as adding to the number of executives for which compensation has to be disclosed and ending an exemption that permitted some companies not to reveal their performance target data, in upcoming proposals.
The changes that were implemented include increasing the amount of information companies will have to provide about the board's role in risk management and director qualifications.
The summary compensation table and director compensation table as described
in Item 402 of Regulation S-K will have to provide the aggregate grant
date fair value of stock and options awarded during the year according
to FASB ASC 718, Compensation-Stock Compensation, formerly SFAS
No. 123(R).
12/18/09 -- SEC Extends ABS Web Disclosure Option in Release No. 33-9087
As discussed in the article entitled "ABS Web Disclosure Option Extended
in Release No. 33-9087" in the December 17, 2009, issue of Accounting
& Compliance Alert, the SEC granted a one-year extension of a disclosure
option for sponsors of securitized trusts in Release No. 33-9087, Extension
of Filing Accommodation for Static Pool Information in Filings With Respect
to Asset-Backed Securities.
The rule amends Rule 312 of Regulation S-T by extending its effectiveness to include the static pool, or underlying asset information, in asset-backed securities (ABS) offerings issued before December 31, 2010.
Regulation S-T provides the guidelines for submitting electronic filings to the SEC. Rule 312 allows pool information posted to the trust sponsor's website to be considered part of the prospectus and had been set to expire at the end of this year.
The extension was proposed in October in Release No. 33-9074, with a comment period that ended November 23.
The SEC's division of corporation finance said the extra year would give it time to review the ABS offering process and static pool disclosures. The staff wants to consider the costs associated with submitting the information to the EDGAR filing system, which the SEC believes is still not capable of handling the massive amounts of data in the static pools.
12/16/09 -- SEC Reopens Comment Period for Proxy Access in Release
No. 33-9086
As discussed in the article entitled "Comment Period for Proxy Access Proposal Is Reopened in Release No. 33-9086" in the December 15, 2009, issue of Accounting & Compliance Alert, the SEC recently said in Release No. 33-9086, Facilitating Shareholder Director Nominations, that it wants the public's views on the additional data and related analyses the commission received after the close of the original comment period on August 17.
In Release No. 33-9046, the SEC proposed changes to facilitate the rights of shareholders to nominate directors on corporate boards.
According to Release No. 33-9086, the SEC staff continues to expect to make a final recommendation to the commission in early 2010.
Comments on the data and related analyses are due no later than 30 days after the publication of the commission's release in the Federal Register, which normally occurs a few days after a rule is posted to the SEC's website.
12/14/09 -- SEC Seeks Comments on 2010 Mutual Fund Risk/Return Summary
Taxonomy
As discussed in the article entitled "Comments Sought on 2010 Mutual Fund Risk/Return Summary Taxonomy" in the December 11, 2009, issue of Accounting & Compliance Alert, the SEC recently said that it has developed the 2010 Mutual Fund Risk/Return Summary Taxonomy, an update to the 2008 taxonomy.
Public comments are due December 31.
The agency said the updates were made primarily "to optimize the taxonomy for use in the commission's previewer and viewer which are currently being updated to support this taxonomy." The update includes what the SEC classified as minor technical edits and corrections to the 2008 edition. The element names and content of the taxonomy remain unchanged.
After the staff completes its review of the feedback next year, the taxonomy will be finalized for use with the SEC's systems.
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