Securities and Exchange Commission Updates
SEC proposes Sarbanes-Oxley relief for small companies
On August 9, 2006, the Securities and Exchange Commission proposed to grant smaller public companies further relief from the internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
- Companies with a market value of less than $75 million (non-accelerated filers) would not be required to comply with the internal control requirements until fiscal years ending on or after Dec. 15, 2007.
- In their first year of compliance, non-accelerated filers would be required only to complete management's portion of the internal control requirements. They would not have to provide an auditor's attestation report until the first annual report for a fiscal year ending on or after Dec. 15, 2008.
- Any company that has become public through an IPO or a registered exchange offer would not be required to provide either a management assessment or an auditor attestation report until it has previously filed one annual report with the SEC.
SEC issues final executive compensation rules
On July 26, 2006, the SEC adopted final rules amending its executive and director compensation disclosure requirements. The new rules take effect on Dec. 15, 2006. The final rules retain most of the original proposals, including expanded tabular disclosure and a Compensation Discussion and Analysis section. The final rules add the following:
- A compensation committee report must state that the committee has reviewed and discussed the new Compensation Discussion and Analysis with management and recommended that it be included in the company's annual report on Form 10-K and proxy statement.
- The Performance Graph will be retained and moved to the market price of common equity table in the annual report to security holders that accompanies the annual proxy statement.
- In response to recent disclosures about backdating of stock option grants, the final rules require clear tabular presentation of option grant information and a description of the methodology for determining the exercise price of an option grant if it is not the grant date closing market price.
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