SEC Agenda

By: Cydney Posner

The SEC regularly publishes, for public comment, its agenda for the upcoming period. The current agenda, indicates a lot of activity that may be of interest. Keep in mind, however, that the new SEC Chair may have different priorities and so the timetable may change. Among the items on the agenda:

• Security Holder Director Nominations. Proposed amendments to the proxy rules regarding the inclusion in company proxy materials of shareholder nominations for director. Final action proposed for September 2005. Considered an important project to Chairman Donaldson, it is unclear whether this controversial proposal will survive the change in administration.
• Ownership Reports and Trading by Officers, Directors and Principal Security Holders. Proposed amendments to Rules 16b-3 and 16b-7, which would exempt certain transactions from the private right of action to recover short-swing profit provided by section 16(b) of the Exchange Act. The amendments clarify the exemptive scope of these rules, consistent with statements in previous SEC releases. The SEC also proposed amendments to Item 405 of Regs S-K and S-B to harmonize with the 2-business day Form 4 due date and mandated electronic filing and website posting of section 16 reports. Final action was anticipated in May 2005.
• Securities Offering Reform. Proposed modifications to the Securities Act restrictions on communications by issuers and underwriters around the time of an offering. The proposals also include procedural changes in registration forms and their use to further capital formation. Finally, the proposals address the requirements for delivery of final prospectuses. Final action was anticipated in July 2005 originally, but is now rumored to be on the agenda for the end of June, prior to the departure of Chairman Donaldson.
• Disclosure in Management's Discussion and Analysis Regarding the Application of Critical Accounting Policies. Proposed rule provisions to require a company to discuss the application of its critical accounting policies. The proposals would encompass both critical accounting estimates, including sensitivity analyses, and the initial adoption by a company of an accounting policy with a material impact on its financial presentation. The new disclosure would be included in the MD&A section of a company's annual reports, registration statements and proxy and information statements and would be updated quarterly. Final action anticipated for December 2005. Is this just a holdover or are they really resurrecting this proposal?
• Streamlining Rule 144. Revisions proposed in 1997 to Rule 144, Rule 145 and Form 144 to make the rules and form easier to understand and apply. Corp Fin may recommend that the SEC repropose amendments that would, among other things, add a bright line test to the Rule 144 definition of affiliate, increase the Form 144 filing thresholds and codify certain interpretive positions. New proposal anticipated in April 2006.
• Revision to Accelerated Filer Definition. Possible rules that would revise the definition of an "accelerated filer" in Rule 12b-2 so that an accelerated filer that no longer is subject to Exchange Act reporting with respect to any class of common equity securities, but remains subject to Exchange Act reporting with respect to one or more other classes of securities, would no longer be subject to the definition or the accelerated filing requirements. Proposal was expected in May 2005
• Definition of Securities "Held of Record." Possible revisions to the definition of securities "held of record" under the Exchange Act to include the beneficial owners of securities registered in the name of a broker, dealer, bank or similar nominee. Rule-making proposal expected September 2005. Is this just a codification of the interps?
• Termination of Reporting Obligations by Foreign Private Issuers Under the Exchange Act. Possible revisions relating to the circumstances under which foreign private issuers would be permitted to terminate their registration under section 12(g) of the Exchange Act and any reporting obligation under section 15(d) of that Act. Rule-making expected November 2005.
• Lock-Up Agreements. Possible new rule under the Securities Act to clarify how to register securities that acquiring companies issue to certain target security holders who enter into lock-up agreements in connection with acquisition transactions. Corp Fin may also recommend corresponding exemptions from certain Exchange Act rules to permit the execution of lock-up agreements without violation of the applicable rules. Proposal expected April 2006.
• Equal Treatment of Security Holders Pursuant to Rule 14d-10 and Rule 13e-4(f) Under the Exchange Act. Possible and long-promised amendments to the "best-price" rules contained in tender offer Rule 14d-10 and Rule 13e-4(f) under the Exchange Act to address issues raised by recent court decisions regarding the type of consideration to which these rules apply. Proposal was anticipated for June 2005.
• Proxy Disclosure Regarding Executive Compensation and Related Party-Transactions. Possible amendments that would enhance disclosure regarding executive compensation, the independence of a registrant's board of directors, related-party transactions between executive officers and directors and related-party transactions with an issuer. Much discussion surrounding these possible proposals make this a hot topic. Proposal expected September 2005.