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Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
Rr Donnelley Secht Dallas Significant Sec Interpretations
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Rr Donnelley Secht Dallas Significant Sec Interpretations

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  • 1. SIGNIFICANT SEC INTERPRETATIONS AND DEVELOPMENTS David Hollander EDS Glen Hettinger Fulbright & Jaworski L.L.P.
  • 2. Updated Form 8-K Interpretations www.sec.gov/divisions/corpfin/guidance/8-kinterp.htm
  • 3. SEC Updated Interpretations Regarding Form 8-K
    • Issued on April 3, 2008 and June 26, 2008
    • The new set of interpretations issued by the SEC consolidates and replaces interpretations regarding Form 8-K that previously appeared in three different sources:
      • Form 8-K Interpretations in the July 1997 Manual of Publicly Available Telephone Interpretations;
      • June 13, 2003, Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures; and
      • November 22, 2004, Form 8-K Frequently Asked Questions.
    • New guidance focused on departure/appointment of directors/officers and compensatory arrangements with officers
  • 4. Form 8-K
    • Compensatory Arrangements of Certain Officers – Item
    • 5.02(e)
    • Equity Compensation Plans and Cash Bonus Plans – Adoption triggers filing requirement even if Board has not yet informed participants.
    • Establishing specific performance goals – No disclosure if the goals are materially consistent with the terms of the plan previously disclosed.
    • Specific target levels – Disclosure of specific quantitative or qualitative performance levels is not required if such disclosure would result in competitive harm to the company.
  • 5. Form 8-K
    • Compensatory Arrangements of Certain Officers –
    • Item 5.02(e)
    • Cash Awards - Disclosure required if payment inconsistent with previously disclosed terms or if performance criteria not met and payment made on discretionary basis, even if had disclosed that plan provided for Board’s exercise of discretion.
    • If a cash bonus is made pursuant to an already disclosed employment contract that provides that the bonus is determined by the compensation committee, there is no filing requirement -- but that disclosure needs to be included in the CD&A.
  • 6. Form 8-K
    • Election and Termination of Directors – Item 5.02(b)
    • and (d)
    • Notice given to the company of resignation, retirement, or refusal to stand for re-election by a director triggers filing, even if notice is oral or conditional or subject to acceptance.
    • Election of an individual to the board other than by a vote of shareholder must be disclosed as of the date of such election , even if the date of the director’s term begins at a later date.
    • Death of director does not trigger 5.02(b) filing.
  • 7. Form 8-K
    • Departure of Directors – Item 5.02(b)
    • NEW – Director Resignations to Satisfy Board Governance Policies Do Not Trigger a Form 8-K
      • A company need not file a Form 8-K when a director tenders his resignation in advance to satisfy a corporate governance policy that requires the director to offer to leave the board if certain events should occur, such as failure to receive a majority of the votes cast in an election for directors, changing jobs or reaching a mandatory retirement age.
      • Instead, the company only has to file a Form 8-K within four days after the board decides to accept the resignation .
  • 8. Form 8-K
    • Appointment and Termination of Executive Officers
    • – Items 5.02(b) & (c)
    • Temporary turnover of duties of executive officers triggers a filing requirement and a subsequent re-appointment triggers a new filing.
    • Can delay disclosure of appointment until date company makes public announcement of appointment, but if replacing a departing officer can not delay a required 8-K for that departure.
  • 9. Form 8-K
    • Other Form 8-K Items
    • 1.01: Material definitive agreements – description of material terms required even if filing the agreement as an exhibit.
    • 2.02: The 202(b) safe harbor from Form 8-K filing for results of operations and financial condition, when information is presented orally, telephonically, by webcast, by broadcast, or in a similar manner, applies to disclosures made with 48 hours , not two business days.
  • 10. Form 8-K
    • Other Form 8-K Items
    • 2.03: Creation of direct financial obligation under an off-balance sheet arrangement of a registrant even when registrant is not a party to the related transaction.
    • 2.04: Triggering events that accelerate or increase a direct financial obligation or an obligation under an off-balance sheet arrangement, including clarification that the definitive agreement will generally govern whether this disclosure is triggered by the occurrence of an event or notice of such occurrence.
  • 11. Form 8-K
    • Other Form 8-K Items
    • 2.05: Costs associated with exit or disposal activities, including clarification that this goes beyond SFAS 146.
    • 3.01: Notice of delisting or failure to satisfy a continued listing rule or standard triggers filing requirement. Transfer of listing from OTC trading or filing an application to list on an exchange does not trigger filing requirement because the OTC is not an automated inter-dealer quotation system or a registered national securities association or an exchange.
  • 12. Form 8-K
    • Other Form 8-K Items
    • 3.02: Unregistered sales of equity securities, including when issuance of unregistered securities exceed the one-percent volume threshold for the underlying equity securities. This includes agreements to sell warrants, options, convertible notes, etc.
    • 4.02: Non-reliance on a previously issued financial statement or a related audit report or completed interim review, including technical requirement that a Form 8-K is required even if also filing an amended quarterly or annual report disclosing such non-reliance.
  • 13. New Compliance and Disclosure Interpretations www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm
  • 14. Regulation S-K
    • New Compliance and Disclosure Interpretations
      • Released July 3, 2008
      • Replaces prior C&DIs including:
        • The July 1997 Manual of Publicly Available Telephone Interpretations
        • The March 1999 Interim Supplement to the Manual of Publicly Available Telephone Interpretations
        • The November 2000 Current Issues and Rulemaking Project Outline
        • The 2007 C&DIs on Items 201, 402, 403, 404, and 407 of Regulation S-K
        • The March 2008 C&DIs on smaller reporting companies
  • 15. Regulation S-K
    • Smaller reporting companies
      • A corporate parent must meet the requirements of a “smaller reporting company,” for a majority-owned subsidiary to be considered a smaller reporting company.
      • A smaller reporting company must provide a MD&A even if the smaller reporting company has had no revenues from operations.
      • A smaller reporting company is always required to provide an audit committee report, although the audit committee financial expert disclosure is not required until its first annual report after initial registration.
  • 16. Regulation S-K
    • Executive compensation
      • Performance Targets. Disclosure of performance target levels is not required if the performance targets are not material in the context of executive compensation. If performance targets are a material component of a company’s compensation policies, the performance targets must be disclosed unless disclosure would result in competitive-harm.
      • Executive Bonuses. Agreements to pay a named executive officer a cash retention bonus upon satisfaction of a performance condition need only be reported on the Summary Compensation Table in the year in which the performance condition is satisfied. However, the registrant will need to discuss the cash retention bonus in its CD&A from the year the agreement was made through the year the performance condition has been satisfied.
  • 17. Regulation S-K
    • Internal Controls
      • In annual reports for fiscal years ending before December 15, 2009, non-accelerated filers are required to provide management’s report on internal control over financial reporting pursuant to Item 308T.
      • The absence of management’s report will render the annual report materially deficient and preclude a company from filing a new Form S-3 or Form S-8.
      • Sales under already effective Forms S-3 and S-8 would also have to be suspended and the company would lose the ability to rely upon Rule 144.
  • 18. Regulation S-K
    • Stock repurchases
      • Cashless Exercises. An employee’s exercise of an option via cashless net exercise does not constitute a repurchase by the issuer; however, any shares withheld over the amount necessary to pay the exercise price and taxes must be reported as a repurchase. In addition, the issuer must also report a repurchase under Item 703 where the exercise price is paid using the issuer’s stock already owned by the option holder.
      • Restricted Stock Forfeitures. Issuers do not need to report restricted stock forfeited due to the holder’s failure to meet vesting conditions as a stock repurchase.
      • Litigation Settlements. Shares received back from a vendor in a litigation settlement must be disclosed as a repurchase under Item 703.
      • Note Defaults. If an investor is unable to pay a promissory note made to the company to purchase stock, and thereby forfeits the purchased stock, then the company must report the forfeiture of the stock as an issuer repurchase under Item 703.
  • 19. Regulation S-K
    • Selling Securityholders in Secondary Offerings
      • Disclosure is required regarding the “beneficial owner” of securities as well as any investment advisor who has the authority to sell or vote the securities.
      • A resale registration statement that names several investment funds as security holders must also name the individuals who have or share voting or investment power for each fund, regardless of whether such power is controlled by an investment committee consisting of a large number of individuals who each have a vote.
      • A company may add or substitute selling shareholders to a registration statement by prospectus supplement (filed under Rule 424(b)(7)) if the company was eligible to rely on Rule 430B when the registration statement was originally filed.
  • 20. Section 16 Reporting www.sec.gov/divisions/corpfin/guidance/sec16interp.htm
  • 21. Section 16 Reporting
    • The SEC issued a no action letter allowing Section 16 reporting persons to report multiple same-day, same-way  transactions that occur within a one dollar price range on an aggregate basis provided the following conditions are met:
      • The transactions must be made through a trade order executed by  a broker-dealer.
      • The trades reported on a single line must occur within a one dollar price range and on the same day.
      • The price column must report the weighted average purchase or sale price for the transactions reported on that line and must specify in a footnote the range of prices for the transactions reported on that line.
      • The reporting person must undertake, in a footnote, to provide the SEC staff, the issuer, or a security holder of the issuer, upon request, full information regarding the number of shares sold or purchased at each separate price.
      • The trades must be open market purchase or sale transactions reportable using transaction codes “P” and “S.”
      • The reporting person may not aggregate separate transactions involving direct and indirect forms of beneficial ownership, or different forms of indirect beneficial ownership.  For example, sales of shares owned directly by a reporting person may not be aggregated with sales of shares owned indirectly through a trust.
  • 22. Section 16 Reporting
    • The SEC’s June 28, 2008 no action letter responded to a letter from the Society of Secretaries and Corporate Governance pointing out that a reporting person must often “report dozens of transactions on multiple Forms 4 in order to report the execution of a single market order,” which results in disclosure that is confusing and misleading to investors.
    • The no action letter also noted that the range of prices reported in the footnote would allow the issuer and security holders to determine whether the reporting person realized a short-swing profit for purposes of Exchange Act Section 16(b).
    • Simultaneously with the issuance of the no action letter, the SEC deleted Question 133.08 (prohibiting aggregation of same-day, same-way transactions made at different prices) from its Compliance and Disclosure Interpretations. 
  • 23. SEC Review Process www.sec.gov/divisions/corpfin/cffilingreview.htm
  • 24. SEC Review Process
    • Division of Corporate Finance comprises 11 offices staffed by experts in specialized industries, accounting, and disclosure. 
    • Director
      • Deputy Director
        • Associate Directors
          • Assistant Directors
            • Offices 
    • Every filer is assigned to a particular office based on primary industry.
  • 25.  
  • 26. SEC Review Process
    • Selective review process: every filing is subject to preliminary review  for substantial compliance and may be selected for further review. 
    • SEC’s preliminary review criteria is not publicly available.
  • 27. SEC Review Process
    • Industries covered:
      • Health care and insurance
      • Consumer products
      • Computers and online services
      • Natural resources and food
      • Structured finance, transportation, and leisure
      • Manufacturing and construction
      • Financial services
      • Real estate and business services
      • Beverages, apparel, and health care services
      • Electronics and machinery
      • Telecommunications
  • 28. SEC Review Process
    • Under SOX §308 , every reporting company gets some level of review every three years, the extent of which depends on many factors.
    • Other filings get picked up for review on particular transactions.
    • Levels of review:
      • Cover-to-cover review
      • Financial statement and accounting review (includes MD&A)
      • Targeted issue review of disclosure (e.g. risk factor review)
    • Comments may or may not be issued but will focus on enhancing disclosure or improving compliance with disclosure requirements.
    • Often, comments are resolved by the company’s letter to the staff, but in some cases the company may have to amend its filing.
    • Often the staff issues no comments.
  • 29. SEC Review Process
    • SEC views the process as a “dialogue.”
    • Company may be asked to provide “supplemental” information.
    • Company may be required to change or add disclosure.
    • Company may be asked to make different disclosure going forward.
  • 30. SEC Review Process
    • The SEC encourages reconsideration of its comments.
    • There is no formal reconsideration process , but the release outlines a reconsideration chain for legal issues:
      • Seek clarification from the staff examiner.
      • Request to speak with staff’s reviewer.
      • Seek senior level reconsideration of legal and textual issues by contacting the Legal Branch Chief in the Assistant Director Office and then proceeding to the Assistant Director.
      • Further reconsideration requests may be directed to the Deputy Director or Director of the Division of Corporation Finance.
  • 31. SEC Review Process
    • For accounting issues:
      • Accounting Branch Chief in the Assistant Director’s Office
      • Senior Associate Chief Accountant
      • Associate Chief Accountant
      • Chief Accountant
  • 32. SEC Review Process
    • Unlike past practice, the SEC will now issue a “no further comment” letter to the company to indicate that the review is complete.
    • All correspondence with the Division related to a review is posted on the SEC’s website no sooner than 45 days after the completion of the review.
    • Confidential treatment may be requested under Rule 83.

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