A few new CDIs

By Cydney Posner

The SEC today posted a few new CDIs, summarized below.

Form 12b-25 

• Form 12b-25 must be filed to provide notice of a late periodic report, regardless of whether the company will be able to file within the specified Rule 12b-25(b) extension period. If a company believes that it will not be able to file the report within the extension period, it should not check the box in Part II of Form 12b-25 indicating that it will do so. In the event that the issuer does, in fact, file its complete periodic report within the extension period, then the report will be considered timely, even though the issuer did not check the box in Part II of Form 12b-25.

Form 8-K, Item 5.07 Submission of Matters to a Vote of Security Holders

• With respect to the advisory vote on the frequency of shareholder advisory votes on executive compensation, Item 5.07(b) requires disclosure of the number of votes cast for each of the one, two and three year frequency options, as well as the number of abstentions. Item 5.07(b) does not require disclosure of the number of broker non-votes on that matter. However, if a company believes this information would be useful for investors, then it may disclose that information under Item 5.07(b).
• Pursuant to General Instruction B.3, an issuer may report Item 5.07 Form 8-K information in a periodic report that is filed on or before the date that an Item 5.07 Form 8-K would otherwise be due. If the issuer reports its annual meeting voting results in a Form 10-Q or Form 10-K, it may file a new Item 5.07 Form 8-K, rather than an amended Form 10-Q or Form 10-K, to report its decision as to how frequently it will include a shareholder advisory vote on executive compensation in its proxy materials. However, if the issuer reports its annual meeting voting results in an Item 5.07(b) Form 8-K and also intends to report its frequency decision in a Form 8-K, then, as required by Item 5.07(d), that Form 8-K must be filed as an amendment to the Item 5.07(b) Form 8-K and not as a new Form 8-K.

Regulation S-K

Item 401 - Directors, Executive Officers, Promoters and Control Persons 

• If an issuer provides its Form 10-K, Part III information by incorporation by reference from the proxy statement and then files its definitive proxy statement within 120 days of its fiscal year-end, the issuer may rely on Instruction 3 to Item 401(a) to omit, from both the proxy statement and the Form 10-K, Item 401(a) and Item 401(e) information with respect to directors whose terms will not continue after the annual meeting. If an issuer includes Item 401(a) and Item 401(e) information directly in Part III of Form 10-K, the issuer must provide this information about all current directors, including those directors whose terms will not continue after the annual meeting. (This new CDI replaces one that provided contrary guidance. Corp Fin indicated in April that it intended to withdraw that earlier contrary advice and issue this new CDI. See my email of April 19, 2011.)

Item 402(a) - Executive Compensation; General

• Item 402(a)(6)(ii) provides that "registrants may omit information regarding group life, health, hospitalization, or medical reimbursement plans that do not discriminate in scope, terms or operation, in favor of executive officers or directors of the registrant and that are available generally to all salaried employees." To the extent that a disability plan provides benefits not related to termination of employment, a company may rely on Item 402(a)(6)(ii) to omit information regarding the disability plan. To the extent that the disability plan provides benefits related to termination of employment, a company may rely on Instruction 5 to Item 402(j) to omit information regarding the disability plan.

Item 402(b) - Executive Compensation; CD&A

• Instruction 5 to Item 402(b) provides that "[d]isclosure of target levels that are non-GAAP financial measures will not be subject to Reg G and Item 10(e); however, disclosure must be provided as to how the number is calculated from the registrant's audited financial statements." This instruction applies only to CD&A disclosure of target levels that are non-GAAP financial measures, not to other non-GAAP financial measures used in CD&A. If non-GAAP financial measures are used in CD&A or in any other part of the proxy statement for any other purpose, such as to explain the relationship between pay and performance or to justify certain levels or amounts of pay, then those measures are subject to the requirements of Reg G and Item 10(e) of Reg S-K. However, in these pay-related circumstances only, companies may include the required GAAP reconciliation and other information in an annex to the proxy statement, so long as they include a prominent cross-reference to the annex. Alternatively, if the non-GAAP financial measures are the same as those included in the Form 10-K that is incorporating by reference the proxy statement's Item 402 disclosure as part of its Part III information, companies may comply by providing a prominent cross-reference to the pages in the Form 10-K containing the required GAAP reconciliation and other information. [This CDI is also included as part of the Non-GAAP Financial Measures CDIs.]

Item 402(c) - Executive Compensation; Summary Compensation Table

• The Stock Awards column must reflect the grant date fair value for stock and option awards subject to performance conditions based on the probable outcome of the performance conditions as of the grant date, even if the actual outcome of the performance conditions - and therefore, the number of restricted shares actually awarded - is known by the time of the filing of the proxy statement.