New SEC Staff Alert

By: Cydney Posner

Corp Fin has posted a new Staff Alert, which highlights some common issues that have arisen during this annual report season.

Disclosure of Previously Unreported Form 8-K Events

Where a company is required to disclose information in a report on Form 8-K during the fourth quarter of a fiscal year, but fails to file that Form 8-K, Item 9B of Form 10-K and Item 8B of Form 10-KSB require disclosure of that information in the annual report for the fiscal year including that fourth quarter. the SEC reminds us (as if we needed reminding) that there are a lot more 8-K items than in the past, so there are a lot more opportunities to fail to file a required 8-K.

Correct Version of the Certifications Required by Rules 13a-14(a) and 15d-14(a)

Accelerated filers with fiscal years ending on or after November 15, 2004 are now required to include SOX 404 reports in their annual reports on Form 10-K. The Forms 10-K required to include these internal control reports must now include certifications that include all of the required language, including the language which was previously permitted to be omitted because of the absence of SOX 404 reports. Certifying officers of non-accelerated filers, foreign private issuers and those accelerated filers taking advantage of the SEC special exemptive order may continue to omit this language from their certifications (in accordance with the transition provisions) until their companies are required to file their first internal control reports.

In addition, the SEC reiterates that the language of the certifications should not be changed from that set forth in Items 601(b)(31), except as expressly permitted in the November 2002 FAQs with respect to amended reports and "other certifying officers."

Placement of the Internal Control Reports

While the SEC has not specified precisely where management’s report on internal control must appear in the company’s annual report, the report must be in close proximity to the corresponding SOX 404 audit report. The SEC expects that companies will choose to place the internal control reports together near MD&A or immediately preceding the financial statements.

Auditor Consents

Where a Form 10-K including a SOX 404 auditor's report will be incorporated by reference into a Securities Act registration statement, the auditor’s consent should cover both the auditor’s report on the financial statements and the auditor’s report on internal control.

_______________________________________

Office of Global Security Risk

While this item is not mentioned in the SEC's Alert, please note that the SEC's Office of Global Security Risk has been up and running for the last couple of months. (See my email of 2/20/04.) The SEC now requires companies to disclose all material information regarding their activities in terrorist states, including a company's ties to or contacts with countries designated by the State Dept as state sponsors of terrorism.