Recently in A Matter of Compliance Category

Last week, SEC Commissioner Luis Aguilar said that women and minorities remain "woefully underrepresented" on corporate boards, despite numerous studies that show "diversity in the boardroom results in real value for both companies and shareholders."

Despite the best of corporate intentions over many years, the SEC adopted a new rule, which began applying to proxy solicitations on February 28, requiring a company to disclose:

·         whether diversity is a factor in considering candidates for nomination to the board of directors;

·         how diversity is considered in that process; and

·         how the company assesses the effectiveness of its policy for considering diversity.

Recently, the SEC completed a review of the filings it received and found a broad spectrum of compliance with the rule.  Some companies have done a very good job, others have room for improvement, and still others provided only a brief statement indicating that diversity was something considered as part of an informal policy.

The SEC has now begun to act on the continuing lack of board diversity, and Commissioner Aguilar suggests that companies prepare disclosure with an eye toward it being useful to investors - especially since the rule was originally adopted at investors' requests.  Specifically, he recommends that the disclosure indicate whether the company has a policy of:

• interviewing one or more candidates who are a minority and/or a woman;
• retaining a search firm that has been specifically instructed to seek candidates who are minorities and/or women; and/or
• soliciting recommendations from organizations that have a reputation for identifying candidates with diverse backgrounds.

The SEC also recommends that the company indicate how many candidates were interviewed who were women and/or minorities and highlight the diversity of the existing board of directors.

Board diversity is an issue that has stimulated much discussion, but with not enough results.  Given its importance, it's time for businesses to make board diversity a priority.

-- Robert Jaffe, rjaffe@pondel.com

PondelWilkinson spoke to Steve Cooke, Corporate Law Partner at Paul Hastings, about the SEC's latest Reg FD enforcement action against a company that "signaled" to analysts, prior to making a public announcement, that its results would be worse than expected.

After delaying Section 404 compliance for small companies at least four times since Sarbanes Oxley became law in 2002, the SEC has set a compliance deadline of June 15, 2010 for companies with market caps of less than $75 million.  Section 404 requires that companies publicly report on the effectiveness of their internal control over financial reporting.

In a recent public statement, Mary Schapiro, the SEC’s new chairman, commented that, "Since there will be no further commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance."

Section 404 compliance is both time consuming and expensive, so if you haven’t begun planning with your auditor, there’s no time like the present.

-- Laurie Berman, Senior Vice President, lberman@pondel.com

Within the next month or two, the SEC will finalize rules that mandate XBRL-based submissions for collecting financial reporting information for all domestic and foreign SEC reporting companies.  For those of you wondering, XBRL stands for Extensible Business Reporting Language.  Proponents of  XBRL believe it will allow for more accurate, relevant and scalable analysis of financial information, as well as create greater transparency that can result in a lower cost of capital.  To read more about the SEC’s phase-in plan, click here to access Bowne & Co’s plain English summary.

-- Eileen Rauchberg, Senior Vice President, erauchberg@pondel.com

According to the Securities and Exchange Commission, the answer is…maybe.  The SEC’s new interpretive guidance states that posting material information on a corporate Web site may satisfy Regulation FD, but that the facts and circumstances of each case must be weighed first.

According to law firm, Cravath, Swaine & Moore LLP, several factors must be determined before a Web site can be used as the sole means of disseminating material information.  These include:

·            whether the Web site is a recognized channel of information distribution;

·            how, where and when the information is posted and becomes broadly accessible to the public; and

·            the Web site’s capability to meet the “simultaneous or prompt” timing requirements of Regulation FD’s Rule 100 as well as the Web site’s capability to meet reasonable usage demands.

At this point, it's probably a safer more shareholder friendly bet to continue utilizing the wire services to disclose important information.

-- Laurie Berman, Senior Vice President, lberman@pondel.com

The U.S. Department of Treasury’s Financial Management Service has designated U.S. Bank of St. Louis, Missouri as the new Financial Agent for General Lockbox Services for the Securities and Exchange Commission. US Bank assumed responsibility from Mellon Bank on February 4, 2008. All fee payments (wires and checks) must be submitted to US Bank on and after this date. No payments should be submitted to Mellon Bank after February 1, 2008.

Click here for general information on filing fee procedures, or refer to 17CFR 202.3a, Instructions for Filing Fees. 

For other questions or additional information, contact the Fee Account Services Branch in the Office of Financial Management at (202) 551-8989.

-- Angie Yang, Senior Vice President, ayang@pondel.com