U.S. securities regulators have been all over the map in recent years when it comes to setting priorities and getting necessary rules in the hands of those who need to follow them. Certainly, that has been the principal problem for the Sarbanes-Oxley Act–and particularly Section 404–in its first years. But besides the long-overdue guidance now coming out of both the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) on 404, regulators this year seem ready to go beyond the outline of the priorities they provide companies annually. In a speech delivered late last week called "The Promise of Transparency — Corporation Finance in 2007," John W. White, the SEC's director of the division of corporation finance, listed 11 initiatives in various forms of development on which his division is working. Several involve rulemaking changes– such as foreign deregistrations, Section 404 management guidance, online availability of proxy materials and executive compensation disclosures–that are pending or already completed. But there are several others, such as new rulemaking for shareholder access to corporate proxies, on which the SEC staff is still hard at work developing proposals.
White promised that amendments to the compensation rules may be on the way as the SEC is preparing "targeted reviews of a critical mass of these new disclosures." He added, that the agency is "also planning to prepare a report in some form to assist in conveying our observations to issuers for the next proxy season."
On the issue of international financial reporting standards and their reconciliation with U.S. GAAP, White indicated an upcoming roundtable in March and added, "I believe the time when the staff will recommend the end of reconciliation is clearly in sight." On new interactive data initiatives (XBRL), he said the SEC is considering applying interactive data tagging to certain new executive compensation disclosures, to make the information more useful.
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Two important clarifications were also included in the director's comments. The first involved disclosures and registrations of "problematic" private investment public equity offerings, or PIPES. "The staff's response to these transactions has also drawn attention due to the mistaken view that we are reconsidering our approach to PIPE transactions," White told a Dallas audience. "I'll be very clear about this–the staff's view of PIPE transactions has not changed; we have simply addressed the recent development where convertible note transactions are structured in an abusive manner."
The second clarification involved the SEC's interest in so-called "stealth restatements," in which he said that some companies may tuck restatements into periodic reports rather than issue a separate Form 8K, owing largely to a weakness in the current rule. White said a clarification is expected within the next few months. Regulators also continue to monitor the issue of small business capital raising and private offering reform, which White said is being actively reviewed.
Finally, White indicated important changes to the corporation finance pages to the SEC.gov Web site, where all guidance is in the process of being updated by subject matter, making for quicker and easier navigation in the coming months.
John White will be a keynote speaker at Treasury & Risk's Vision for Tomorrow's Treasurer conference March 27 and 28 in New York.
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