SEC To Discuss Section 404 Proposed Guidance Dec. 13

October 12, 2006

FEI Summary

On Oct. 11, 2006, the U.S. Securities and Exchange Commission (SEC) announced it has calendared an open commission meeting on Dec. 13 to discuss proposed guidance for management relating to the internal control reporting requirements under Section 404 of the Sarbanes-Oxley Act.

Its consideration of proposed guidance for management is among the "next steps" outlined by the SEC on May 17 in response to the desire to make implementation of Section 404 - including the SEC and Public Company Accounting Oversight Board (PCAOB) rules thereunder - more efficient and effective. The Dec. 13 meeting also follows publication of the SEC's related Concept Release soliciting comment in July. The comment letter filed by FEI's Committee on Corporate Reporting (CCR) is available here.

At the Dec. 13 open commission meeting or prior, the SEC is also expected to consider whether to issue a final rule extending the compliance dates for non-accelerated filers to file their internal control reports under Section 404. A proposed rule on whether to extend the compliance date for these smaller companies was issued for comment in August; the comment letter filed by FEI's Small Public Company Task Force is available here.

PCAOB is also expected to issue proposed revisions to its internal control auditing standard, Auditing Standard 2 (AS2), some time soon, in accordance with its "four point plan" announced on May 17. At last week's PCAOB Standing Advisory Group (SAG) meeting, PCAOB Chief Auditor Tom Ray told SAG the PCAOB staff is still working on the revised standard. It was previously reported by cfo.com that the SEC had been given an early draft of the proposed revised AS2 for their feedback. Potential amendments to AS2 under consideration were presented by Ray at the June SAG meeting, as previously summarized here.

Additional matters to be discussed at the Dec. 13 SEC Open Commission meeting - besides Section 404 - according to the SEC's announcement, include Foreign Private Issuer Deregistration, Internet Availability of Proxy Materials and Securities Exchange Act Rule 14a-8. 

The Rule 14a-8 matter presumably relates to Director Nominations by Shareholders, which SEC previously announced would be discussed at the Oct. 18 open commission meeting, but apparently has been moved to the Dec. 13 meeting. Further information is available here.

For real-time updates on Section 404 related news, visit FEI’s Section 404 blog, or sign up to receive email updates by entering your email address here.

Prepared Oct. 12, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above.