Director White Highlights the Status of Corporation Finance Initiatives
August 25, 2008
On August 11, 2008, the Director of the SEC’s Division of Corporation Finance, John White, updated members of the American Bar Association’s Business Law Section on the status of the Division’s initiatives during 2008 and a preview of what can be expected for the remainder of 2008 and 2009. White discussed a variety of initiatives, including financial reporting initiatives, XBRL, the SEC’s recently issued interpretive guidance on company Web sites, international initiatives, inflation, the 21st Century Disclosure Project, e-Proxy and shareholder proposals. Below is a summary of a few key highlights from White’s speech.
White stated that the Division of Corporation Finance is studying very closely CIFIR’s final recommendations issued on August 1, 2008, regarding materiality, correction of accounting errors and an SEC policy statement addressing accounting judgments and is considering making recommendations on these areas to the SEC.
White also gave an update regarding the SEC’s proposed rules on XBRL, specifically that the comment period has ended, the Division is studying the over 70 comments received and that final rules would hopefully be issued this fall. From a practical perspective, companies should be paying attention to where this process stands and become familiar with XBRL as certain companies may be subject to XBRL data reporting requirements beginning December 15, 2008.
White concluded his update on financial reporting with a discussion on IFRS. White is hopeful that the Division will be making a recommendation shortly on IFRS and he urged that we keep in mind that “we are headed toward a single set of high quality, globally accepted accounting standards” and “IFRS is where the future is.”
White also highlighted that the Division has been reviewing all SEC rules to determine whether the dollar amounts in the rules should be adjusted now or in the future to account for inflation. White commented that this review has been in progress for over a year but the Division is getting closer to making recommendations on the issue.
With the 2007-2008 proxy season concluded, White also said it was a good time to discuss what the Division observed during the proxy season both in the use of e-proxy materials, which went into effect last summer as a voluntary model, and in the area of shareholder proposals. With respect to e-proxy, White discussed the experiences of companies using e-proxy, including that (i) companies using e-proxy have seen significant savings; (ii) there has been a decline in the retail vote – Broadridge reports a 73% decrease in the number of retail accounts voting and a 52% decrease in the number of retail shares voting; (iii) some companies and intermediaries would like to include educational material about e-proxy in the notice; (iv) the requirement to send the notice 40 days prior to the meeting has been difficult to meet; and (v) some shareholders found the notices confusing. White added that the Division is looking at whether any rulemaking refinements are needed.
With respect to shareholder proposals, White summarized the Shareholder Proposal Task Force’s top five wish list for those submitting no-action letter requests: (i) submit your requests promptly; (ii) send the SEC all correspondence from proponents; (iii) don’t assume your Rule 14a-8(b) notice of defect is good just because you have had no-action relief granted in the past; (iv) focus your arguments for exclusion on those arguments providing a solid basis for exclusion; and (v) let the SEC know as soon as possible when a request is withdrawn.
http://www.sec.gov/news/speech/2008/spch081108jww.htm