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Proposed Rule:
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| (1) | are responsible for establishing and maintaining "disclosure controls and procedures" (a newly-defined term reflecting the concept of controls and procedures related to disclosure embodied in Section 302(a)(4) of the Sarbanes-Oxley Act) for the issuer; |
| (2) | have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which the periodic report is being prepared; |
| (3) | have evaluated the effectiveness of the issuer's disclosure controls and procedures as of a date within 90 days prior to the filing date of the report; and |
| (4) | have presented in the report their conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation as of that date; |
| (1) | all significant deficiencies and material weaknesses in the design or operation of internal controls (a pre-existing term relating to internal controls regarding financial reporting) which could adversely affect the issuer's ability to record, process, summarize and report financial data and have identified for the issuer's auditors any material weaknesses in internal controls; and |
| (2) | any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and |
For purposes of the Exchange Act Rules 13a-14 and 15d-14, "disclosure controls and procedures" are defined as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Exchange Act117 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.118 "Disclosure controls and procedures" include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in its Exchange Act reports is accumulated and communicated to the issuer's management, including its principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
We also adopted new Item 307 of Regulations S-K and S-B119 to require disclosure in the company's annual and quarterly reports about the principal officers' evaluation of the company's disclosure controls and procedures and whether or not there have been significant changes to the company's internal controls-disclosure that the principal officers must certify that they have made.
Regarding internal controls and procedures for financial reporting, our recently adopted rules require the company's principal executive and financial officers to disclose "any significant changes in the company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with respect to significant deficiencies and material weaknesses." Despite the reference to an evaluation in this disclosure requirement, our rules currently do not require the company's principal executive and financial officers, or the company itself, to conduct periodic evaluations of the company's internal controls. New Exchange Act Rules 13a-15 and 15d-15 do, however, require a company to conduct a quarterly evaluation of the company's disclosure controls and procedures.
As explained above, Section 404 of the Sarbanes-Oxley Act directs us to propose and adopt rules that would require management to annually assess the company's internal control structure and procedures for financial reporting. Section 404 contemplates only an annual evaluation of the company's internal controls. A company's officers already must certify to significant changes to internal controls as required by Section 302 of the Sarbanes-Oxley Act.
To provide a basis for this quarterly disclosure about changes to the company's internal controls and procedures for financial reporting, and to create symmetry between our requirements for periodic evaluations of both the company's disclosure controls and procedures and its internal controls and procedures for financial reporting, we propose to require the company's management to evaluate the effectiveness of the design and operation of the company's internal controls and procedures for financial reporting, as well as its disclosure controls and procedures, with respect to each annual and quarterly report that it is required to file under the Exchange Act.120 In addition, we propose to modify the requirement in Exchange Act Rules 13a-15 and 15d-15 that the evaluation be conducted within the 90-day period prior to the filing date of the quarterly or annual report, to require that the evaluation be made as of the end of the period covered by the report.121 We are also proposing conforming changes122 to Exchange Act Rules 13a-14, 13a-15, 15d-14 and 15d-15 and the form of certification in Forms 10-Q, 10-QSB, 10-K, 10-KSB, 20-F and 40-F.
In 1993, the Federal Deposit Insurance Corporation (FDIC) adopted rules implementing Section 36 of the Federal Deposit Insurance Act123 that requires, among other things, an insured depository institution with total assets of $500 million or more to prepare an annual management report that contains:
The FDIC's rules additionally require the institution's independent public accountant to examine, and attest to, management's assertions concerning the effectiveness of the institution's internal controls over financial reporting.126
Furthermore, the FDIC's rules permit an insured depository institution that is the subsidiary of a holding company to satisfy its internal control report requirement with an internal control report of the consolidated holding company's management if:
Bank and thrift holding companies that are required to file reports under Section 13(a) or 15(d) of the Exchange Act would be subject to the internal control reporting requirements that we are proposing today. Although our proposed amendments are similar to the FDIC's internal control report requirements, our proposed rules differ in a few respects.128
We are coordinating with the FDIC and other federal banking regulators to eliminate, to the extent possible, any unnecessary duplication between our proposed internal control report and the FDIC's internal control report requirements. We expect to provide further guidance on this subject in our release adopting final rules under Section 404 of the Sarbanes-Oxley Act.
Section 404 of the Sarbanes-Oxley Act does not apply to registered investment companies, and we are not proposing to extend any of the requirements that would implement section 404 to registered investment companies.129 We are, however, proposing to make the following technical changes to our rules and forms implementing Section 302 of the Sarbanes-Oxley Act for registered investment companies in order to conform to the rule changes that we are proposing for operating companies and for other reasons.
The annual internal controls report by management, as well as the related attestation and report on management's evaluation by auditors are proposed new requirements. Although we believe that management and auditors currently review such controls and procedures in conjunction with a company's annual audit, we understand that in many cases such reviews may not be as thorough or as detailed as the proposed rules would require. We expect that companies and their auditors will require substantial time to develop processes under relevant standards and to train appropriate personnel to ensure compliance with these requirements imposed by the Sarbanes-Oxley Act. Similarly, companies and accounting firms likely will need additional time to actually perform these activities.
The Sarbanes-Oxley Act does not impose a deadline for compliance with Section 404. Rather, the wording of this section contemplates action by both the PCAOB as well as registered public accounting firms. Specifically, the statute requires that auditor attestations conform with standards for attestation engagements adopted by the PCAOB. We therefore believe that Congress did not intend for the provisions of this section to take effect until the PCAOB has established the relevant attestation standards.133 Accordingly, we propose to delay the effectiveness of our rules under Section 404 to enable the PCAOB to act and other relevant parties to prepare for compliance.
Specifically, we propose that the rules under Section 404, if adopted, would apply to companies whose fiscal years end on or after September 15, 2003. This should provide the PCAOB sufficient time to adopt standards for attestation engagements, as well as for companies and auditors to prepare for the expected increase in workload.
We would not require companies to provide such reports or attestations before the proposed date of effectiveness. However, to the extent that a company desires to provide voluntarily an annual report on the effectiveness of its internal controls and procedures for financial reporting, we believe that existing accounting literature should be followed. Similarly, although we do not require attestations by auditors before the proposed rules become effective, we believe that to the extent such attestations are made, accountants would perform such attestations in conformity with existing accounting literature regarding attestation engagements, including Section 501 of the AICPA's Statement on Standards for Attestation Engagements.
Similarly, we believe that the effectiveness of changes to certifications by management in a company's annual and quarterly reports also should be delayed until the company has had the opportunity to perform the comprehensive evaluation of internal controls and procedures for financial reporting contemplated by Section 404. Therefore, we propose that management need not provide the proposed amended certifications until the first annual report in which the company includes the internal control report required under Section 404. Accordingly, until a company is required to provide such report, it need only provide certifications as adopted on August 29, 2002.134
In the release adopting the certification requirements,135 we noted that issuers of asset-backed securities have a reporting obligation under either Sections 13(a) or 15(d) of the Exchange Act, at least for a period of time. Because of the nature of asset-backed issuers, the staff of the Division of Corporation Finance has granted requests allowing asset-backed issuers to file modified reports under the Exchange Act.136 The modified reporting structure for asset-backed issuers allows issuers or depositors to file modified annual reports on Form 10-K and to file reports on Form 8-K tied to payments on the underlying assets in the trust. These reports include a copy of the servicing or distribution report required by the issuer's governing documents and information on the performance of the assets, payments on the asset-backed securities and any other material developments that affect the issuer. Because the information included in these reports for asset-backed issuers differs significantly from that provided by other issuers, as well as the structure of asset-backed issuers we are proposing to exclude them from the disclosure requirements under proposed Items 307, 309 and 406 of Regulation S-K and S-B.
We request and encourage any interested person to submit comments regarding:
| (1) | the proposed changes that are the subject of this release, |
| (2) | additional or different changes, or |
| (3) | other matters that may have an effect on the proposals contained in this release. |
We request comment from the point of view of registrants, investors and other users of information about the proposals. With regard to any comments, we note that such comments are of greatest assistance to our rulemaking initiative if accompanied by supporting data and analysis of the issues addressed in those comments.
Form 10-K, Form 10-KSB, Form 20-F, Form 40-F, Form 10-Q, Form 10-QSB, Form 8-K, and Form 12b-25 under the Exchange Act, Regulation S-K, Regulation S-B, and Forms N-SAR and N-CSR under the Exchange Act and the Investment Company Act contain "collection of information" requirements within the meaning of the Paperwork Reduction Act of 1995.137 We are submitting a request for approval of the proposed revisions to these requirements to the Office of Management and Budget ("OMB") for review in accordance with 44 U.S.C. §3507(d) and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
Form 10-K (OMB Control No. 3235-0063) prescribes information that a registrant must disclose annually to the market about its business. Form 10-KSB (OMB Control No. 3235-0420) prescribes information that a registrant that is a "small business issuer" as defined under our rules must disclose annually to the market about its business. Form 20-F (OMB Control No. 3235-0288) prescribes information that a registrant that is a foreign private issuer must disclose annually to the market about its business. Form 40-F (OMB Control No. 3235-0381) prescribes information that a registrant that is eligible to use that form must disclose annually to the market about its business.
Form 10-Q (OMB Control No. 3235-0070) prescribes information that a registrant must disclose quarterly to the market about its business. Form 10-QSB (OMB Control No. 3235-0416) prescribes information that a registrant that is a "small business issuer" as defined under our rules must disclose quarterly to the market about its business.
We are proposing to add several disclosure requirements to these forms relating to: (1) whether a financial expert serves on a company's audit committee; (2) the existence of a company code of ethics for specified officers, and (3) management's assessment of the effectiveness of a company's internal controls and procedures for financial reporting. These proposals would increase the amount of information that a registrant must compile and disclose in these forms. With respect to the first two items, the information in these required disclosures should be readily available to the management of a registrant. Therefore, we expect the burden to compile and report this information to be minimal. The third item requires management to evaluate the effectiveness of the company's internal controls and procedures for financial reporting. We expect that performing these acts will impose a substantially greater burden than the other two disclosure requirements.
Financial Expert. This proposed disclosure requirement would increase the disclosure burden by requiring a registrant to report the number and names of persons that the board of directors has determined to be financial experts on its audit committee as well as whether the expert is independent, and if not, an explanation of why they are not. It would not require a registrant to have a financial expert on its audit committee. Item 401 of Regulations S-K and S-B already requires registrants to ascertain and disclose the business experience of all of its directors. The inquiry that registrants should make to satisfy this disclosure requirement should assist the registrant in determining whether a particular director is a financial expert under the rules. If the registrant does not have a financial expert, the rule only requires that the registrant explain why it does not have such a person on its audit committee. Therefore, we believe the added burden of the proposed rule would be minimal. For purposes of the PRA, we estimate that the proposed disclosure requirements regarding financial experts will result in a minimal incremental increase of 0.5 burden hours per issuer in connection with preparing each annual report.
Code of Ethics. The proposed rule would require a registrant to disclose whether it has adopted a written code of ethics for its principal executive officer, principal financial officer, principal accounting officer or controller, or persons serving similar functions. If it has not, it must explain why. The proposed rule would not require any company to adopt such a code of ethics. Management should be readily able to determine whether or not its company has adopted a code of ethics. In certain cases, the required disclosure would require minimal analysis regarding why the company does not have a code. In addition, in the first year, registrants must file a copy of the code with the Commission. In the case of large manuals that must be filed, we expect a small added cost to file such a document on EDGAR. In addition, we estimate that the disclosure requirements regarding codes of ethics will also cause a minimal increase of 0.5 burden hours per issuer in connection with each annual report.
Management Assessment of Internal Controls and Procedures for Financial Reporting. The proposed rules would require management to assess its internal controls and procedures for financial reporting every quarter. In addition, registrants must provide an internal control report in its annual report as well as obtain an attestation on that evaluation from the independent accountant that audited its financial statements. The performance of, and report on, the assessment will impose costs on registrants. This requirement would not apply to registered investment companies.
Although we expect such evaluation to impose a burden on companies, they are already required to evaluate on a quarterly basis the company's disclosure controls and procedures. We believe that a significant portion of internal controls and procedures for financial reporting are included in disclosure controls and procedures. We already received OMB approval for the added burden of evaluating disclosure controls and procedures. Therefore, for purposes of this release, we need only consider the added incremental burden imposed on companies by the evaluation of that portion of internal controls and procedures for financial reporting that is not subsumed by the disclosure controls and procedures evaluation. In that submission, we estimated that the evaluation of disclosure controls and procedures would add a burden on each issuer of 5 hours per quarterly and annual report. We estimate that the proposed rules would impose and additional 5 burden hours per issuer in connection with each quarterly and annual report. We do not have any data to support this estimate. However, because much of the burden is subsumed in the previous estimate, we believe an estimate of 5 burden hours per quarter is conservative. In addition, in conjunction with annual reports, a company must provide an internal control report. Although the burden of the evaluation has already been considered, the company must compile its conclusions into a publicly disclosed report. We expect that preparation of this report would add an additional 5 hours in conjunction with the annual report.
For PRA purposes, we do not need to consider the added burden to the company of obtaining an attestation on that internal control report by the company's auditor. The Sarbanes-Oxley Act currently requires companies to obtain such an attestation. Our proposed rules do not establish standards for the contents or format of such attestation. In addition, the proposed rules requiring attestation would not be effective until the PCAOB has had the opportunity to establish such standards. The proposed rules would establish no requirements beyond those required by the Sarbanes-Oxley Act except the requirement that the attestation be filed. We do consider the incremental increase in burden caused by this proposed requirement. We estimate that the costs of filing such an attestation report would be minimal. Similar to our estimates regarding disclosure of readily known information, such as the existence of a code of ethics, we estimate that such filing would create an added burden of 0.5 hours.
The burden hours for complying with these proposed requirements are set forth below in the following table. Estimates regarding burden within the company, for third party services, and for professional costs were obtained by contacting a number of law firms and other persons regularly involved in completing the forms.
| Annual Responses | Total Hours/ Form | Total Burden138 | 75% Company139 | 25% Professional | $300 Professional Cost | |
| 10-K | 9,384 | 11.5 | 107,916 | 80,937 | 26,979 | 8,093,700 |
| 10-KSB | 3,789 | 11.5 | 43,574 | 32,680.5 | 10,893.5 | 3,268,050 |
| 20-F | 1,096 | 11.5 | 12,604 | 3,151 | 9,453 | 2,835,900 |
| 40-F | 127 | 11.5 | 1461 | 365.25 | 1,095.75 | 328,725 |
| 10-Q | 26,746 | 5 | 133,730 | 100,297.5 | 33,432.5 | 10,029,750 |
| 10-QSB | 11,608 | 5 | 58,040 | 43,530 | 14,510 | 4,353,000 |
Our current OMB inventories and requested burden estimates are presented in the following table.
| Current Hour Burden | Expected Hour Increase | Total Expected Burden | Current Cost Burden | Expected Cost Increase | Total Expected Cost | |
| 10-K | 12,337,614 | 80,937 | 12,418,551 | 1,233,761 | 8,093,700 | 1,241,854,700 |
| 10-KSB | 3,435,676 | 32,680.5 | 3,468.356.5 | 343,568,000 | 3,268,050 | 346,836,050 |
| 20-F | 583,248 | 3,151 | 586,399 | 524,496,000 | 2,835,900 | 527,331,900 |
| 40-F | 175 | 365.25 | 440.25 | 440.5138,500 | 328,725 | 467,225 |
| 10-Q | 3,109,223 | 100,297.5 | 3,209,520.5 | 310,922,000 | 10,029,750 | 320,951,750 |
| 10-QSB | 1,279,782 | 43,530 | 1,323.312 | 127,978,000 | 4,353,000 | 132,331,000 |
Form 8-K (OMB Control No. 3235-0060) prescribes information about significant events that a registrant must disclose on a current basis. Form 8-K also may be used, at a registrant's option, to report any events that the registrant deems to be of importance to shareholders. Companies also may use the form to disclose the nonpublic information required to be disclosed by Regulation FD.140 We are proposing to require disclosure in the Form 8-K of any change in, or waiver of any provision of, a company code of ethics for senior executive officers. Alternatively, companies may disclose the required information on their websites.
We currently estimate that Form 8-K results in a total annual compliance burden of 627,300 hours and an annual cost of $81,377,000. We estimate the number of Form 8-K filers to be 13,200, based on the actual number of Form 10-K and 10-KSB filers during the 2001 fiscal year. For purposes of this analysis, we estimate that the number of reports on Form 8-K filed is 276,800.141 We estimate that each entity spends, on average, approximately 5 hours completing the form. We note that a company need not file a Form 8-K to report these events if it discloses the information on its Internet website. If a company elects to disclose such information only on its website, the proposed rules would require the company to keep such information on its website for 12 months and to keep such disclosure for five years. We estimate that the cost of disclosing and maintaining the information on a company's website would be no more than the cost to file a Form 8-K. Therefore, for a particular reporting event, whether disclosed on Form 8-K or through a company's website, we estimate the burden would be 5 hours. We estimate that 75% of the burden is prepared by the company and that 25% of the burden is prepared by outside counsel retained by the company at an average cost of $300 per hour. The staff estimated the average number of hours each entity spends completing the form, and the average hourly rate for outside securities counsel, by contacting a number of law firms and other persons regularly involved in completing the forms.
Under the proposals, we estimate that, on average, completing and filing a Form 8-K if the proposed new disclosure items are adopted would require the same amount of time currently spent by entities completing the form-approximately 5 hours. We believe that changes to a company's code of ethics and waivers from a code will be relatively rare events. Therefore, we expect that on average, a company will file a Form 8-K to report such an event once every three years, resulting in a total increase of 4,400 filings on Form 8-K per year. The additional filings would result in an added annual burden of 16,500 hours (4,400 × 5 × .75 = 16,500) and a total annual burden of 643,800 (627,300 + 16,500). We estimate that, if the proposals are adopted, the additional filings would result in an added annual cost of $1,650,000 (4,400 × 5 × .25 × $300 = $1,650,000) and a total annual cost to issuers of $83,027,000 ($81,377,000 + $1,650,000 = $83,027,000).
Regulation S-K (OMB Control No. 3235-0071) includes the requirements that a registrant must provide in filings under both the Securities Act and the Exchange Act. Regulation S-B (OMB Control No. 3235-0417) includes the requirements that a small business issuer must provide in filings under the Securities Act and the Exchange Act.
The proposed changes to these items would create new items under Regulation S-K and Regulation S-B. However, the filing requirements themselves are included in Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Form 20-F, Form 40-F, and Form 8-K. We have reflected the burden for these new requirements in the burden estimate for those forms. These items in Regulation S-K and Regulation S-B do not impose any separate burden. We assign one burden hour each to Regulations S-B and S-K for administrative convenience to reflect the fact that these regulations do not impose any direct burden on companies.
Form N-SAR (OMB Control No. 3235-0330) under the Exchange Act and the Investment Company Act is used by registered investment companies to file periodic reports with the Commission. We estimate that 4500 investment companies, including 798 unit investment trusts and 2 small business investment companies, currently file reports on Form N-SAR. The current estimated total compliance burden of Form N-SAR is 154,450 hours. Unit investment trusts would be required to make the proposed disclosure regarding codes of ethics on Form N-SAR, and small business investment companies would be required to make the proposed disclosure regarding codes of ethics and financial experts on Form N-SAR. We estimate that the proposed disclosure requirements will increase the annual burden of filing Form N-SAR by 0.5 hours per unit investment trust, and by 1.0 hour per small business investment company. Therefore, the new estimated total compliance burden of filing Form N-SAR would be 154,851 hours.
We issued a release proposing Form N-CSR on August 30, 2002, pursuant to Section 8(a) of the Investment Company Act [15 U.S.C. 80a-8] and Section 13 of the Securities Exchange Act [15 U.S.C. 78m]. Proposed Form N-CSR would be used by registered management investment companies to file certified shareholder reports with the Commission. We estimate that 3700 registered management investment companies would be required to file reports on Form N-CSR, and the total compliance burden for Form N-CSR would be 111,000 hours, excluding the amendments proposed in this release. We estimate that the proposed disclosure requirements would increase the annual burden of filing Form N-CSR by 1.0 hours per management investment company. Therefore, the new estimated total compliance burden of filing Form N-CSR would be 114,700 hours.
Form 12b-25 (OMB Control No. 3235-0058) was adopted pursuant to Sections 13, 15, and 23 of the Exchange Act. Form 12b-25 provides notice to the Commission and the marketplace that a public company will be unable to file a required report in a timely manner. If certain conditions are met, the company will be granted an automatic filing extension. The proposed amendments would permit investment companies to use Form 12b-25 for the purpose of obtaining extensions with respect to filing Form N-CSR. We estimate that Form 12b-25 results in a total annual compliance burden currently of 31,750 hours, and that each entity using Form 12b-25 spends, on average, approximately 2.5 hours completing the form. Currently, 168 investment companies use Form 12b-25 to obtain extensions of time for filing Form N-SAR. We estimate that the same number of investment companies annually would use Form 12b-25 to obtain extensions of filing Form N-CSR, resulting in a new total compliance burden of 32, 170 hours.
Compliance with the revised disclosure requirements would be mandatory. Responses to the disclosure requirements would not be kept confidential.
Pursuant to 44 U.S.C. §3506(c)(2)(B), we solicit comments to: (i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (ii) evaluate the accuracy of our estimate of the burden of the proposed collection of information; (iii) determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and (iv) evaluate whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. In addition, we solicit any comments on this analysis.
Persons submitting comments on the collection of information requirements should direct the comments to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, D.C. 20503, and should send a copy to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549-0609, with reference to File No. S7-40-02. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7-40-02, and be submitted to the Securities and Exchange Commission, Records Management, Office of Filings and Information Services. OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this release. Consequently, a comment to OMB is assured of having its full effect if OMB receives it within 30 days of publication.
The Sarbanes-Oxley Act requires us to propose most of the requirements discussed in this release. These changes will affect all companies reporting under Section 13(a) and 15(d) of the Exchange Act, including foreign private issuers and small business issuers, and certain of the proposed changes will affect registered investment companies. We recognize that any implementation of the Sarbanes-Oxley Act will likely result in costs as well as benefits and have an effect on the economy. We are sensitive to the costs and benefits of the proposed rules, if adopted. We discuss these costs and benefits below.
One of the main goals of the Sarbanes-Oxley Act is to improve investor confidence in the financial markets. These proposals are among many required by the Sarbanes-Oxley Act. They seek to achieve the Sarbanes-Oxley Act's goals by providing greater transparency regarding issues such as the competency of audit committee members, compliance of senior financial officers with ethics codes of conduct, and the adequacy of a company's internal controls and procedures for financial reporting. By increasing transparency regarding key aspects of corporate activities and conduct, the proposals are designed to improve the quality of information available to investors. Greater transparency should assist the market in properly valuing securities, which leads to more efficient allocation of capital resources.
In addition to the requirements under the Sarbanes-Oxley Act, we are proposing additional requirements. First, the proposal regarding disclosure of whether a company has a financial expert on its audit committee would require disclosure of the names and number of the financial experts on an audit committee and whether those persons are independent of management. We think that investors would benefit from this disclosure by being able to consider it when reviewing the disclosure currently required about all directors' past business experience. The proposal to require companies to file copies of their codes of ethics would allow investors to better understand the ethical principles that guide executives of companies in which they invest. With respect to registered investment companies, these code of ethics disclosure requirements would apply to a registrant's investment adviser and principal underwriter also, and, in the case of a unit investment trust, would apply to the trust's sponsor, depositor and trustee. The proposals also would require companies, other than investment companies, to make quarterly evaluations of their internal controls and procedures for financial reporting. In addition to the above stated benefits of greater transparency, to the extent companies currently do not perform such evaluations, we believe that the proposed requirements would increase the effectiveness of such controls, which would increase the overall quality of financial disclosures in publicly filed reports, as well as companies' internal operations.
The proposals would require companies to disclose additional information about financial experts on a company's audit committee and the existence of a code of conduct for financial executives. This information is readily available to management and the board of directors of a company. Therefore, we expect that the cost of compiling and reporting this information should be minimal. The proposals would also require management to assess its system of controls and the independent public accountant to attest to, and report on, that assessment.
As stated above, in limited instances, we propose to require more disclosure than mandated by the Sarbanes-Oxley Act. For example, if adopted, we expect that companies will incur added costs to disclose the names of financial experts, file codes of ethics in the first year of the rules' effectiveness, and disclose in their periodic reports that they intend to disclose changes in, and waivers from, their codes of ethics via their websites in lieu of publicly filing such disclosure on Form 8-K, or in the case of registered investment companies, Form N-SAR or Form N-CSR.
With respect to the additional disclosures related to financial experts, we believe the added burden would be minimal. We do not expect that the disclosure of the names of the financial experts itself would increase the legal obligations or potential liability of such individuals. In addition, for companies other than investment companies, the proposed rules would require a quarterly evaluation of a company's internal controls and procedures for financial reporting. We believe the costs of such evaluations would be mitigated by the fact that companies are already required to perform such evaluations of their disclosure controls and procedures. In several aspects, these disclosure controls and procedures would overlap with internal controls and procedures. To the extent that companies would already be evaluating particular controls and procedures, there would be no added cost.
We also note that we are proposing to require registered investment companies to provide disclosure of any codes of ethics of certain of their principal service providers. This additional disclosure may impose certain costs. We note, however, that investment companies, pursuant to Investment Company Act Rule 17j-1, must already provide disclosure regarding the codes of ethics of their investment advisers and principal underwriters that are required under the rule with respect to the personal trading of their employees. We estimate the additional costs to investment companies in complying with these provisions would be limited. Furthermore, although investment companies are not subject to Section 404 of the Sarbanes-Oxley Act, we are proposing certain technical amendments to our rules and forms implementing Section 302 of the Sarbanes-Oxley Act. We estimate that these technical amendments will not result in any additional costs to investment companies.
We believe that these additional requirements are necessary to implement the purposes of the Sarbanes-Oxley Act and pose minimal additional burden on companies. Such costs do not include the costs imposed on companies by the Sarbanes-Oxley Act itself. Rather, they reflect the costs of our proposed requirements beyond the requirements of the Sarbanes-Oxley Act. For purposes of the Paperwork Reduction Act, we have estimated that these required activities and reporting will result in an approximate cost of $65,000,000.
We request comment on issues related to this cost-benefit analysis. In particular, are there additional benefits and costs associated with the proposed rules? We are especially interested in obtaining data regarding the estimated cost of the proposed internal control evaluation and auditor attestation requirements, as we expect that these costs could be significant. Please provide any quantitative data on which you rely in formulating your comments.
Section 23(a)(2)142 of the Exchange Act requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition. In addition, Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.
The proposed amendments are intended to increase transparency regarding the competence of the audit committee, the application of ethics codes of conduct to certain of a company's executive officers, and the adequacy of a company's internal controls and procedures for financial reporting. We anticipate that these proposals would enhance the proper functioning of the capital markets by giving investors greater insight into the inner workings of public companies. This increases the competitiveness of companies participating in the U.S. capital markets. However, because only companies subject to the reporting requirements of Sections 13 and 15 of the Exchange Act (and all registered investment companies with respect to the financial expert and code of ethics disclosure requirements) would be required to make the disclosures in this proposal, competitors not subject to those reporting requirements potentially could gain an informational advantage.
We request comment on whether the proposed amendments, if adopted, would impose a burden on competition. Commenters are requested to provide empirical data and other factual support for their views if possible.
Section 2(b)143 of the Securities Act and Section 3(f) 144 of the Exchange Act require us, when engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. The proposed amendments would enhance our reporting requirements. The purpose of the amendments is to increase transparency of the inner workings of public companies. This should improve investors' ability to make informed investment and voting decisions. Informed investor decisions generally promote market efficiency and capital formation. As noted above, however, the proposals could have certain indirect consequences, which could adversely impact their ability to raise capital. The possibility of these effects and their magnitude if they were to occur are difficult to quantify.
We request comment on whether the proposed amendments, if adopted, would promote efficiency, competition, and capital formation. Commenters are requested to provide empirical data and other factual support for their views if possible.
This Initial Regulatory Flexibility Analysis has been prepared in accordance with 5 U.S.C. §603. It relates to proposed revisions to Exchange Act Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Form 20-F, Form 40-F, Form 8-K, Form 12b-25, Rule 12b-25, Rule 13a-14, Rule 13a-15, Rule 15d-14 and Rule 15d-15 under the Exchange Act and Regulation S-K and Regulation S-B and Exchange Act and Investment Company Act Form N-SAR and Form N-CSR, Rule 30a-2 and Rule 30a-3 under the Investment Company Act.
We are proposing these disclosure requirements to comply with the mandate of, and fulfill the purposes underlying the provisions of, the Sarbanes-Oxley Act of 2002.
The proposals are intended to enhance investor confidence in the fairness and integrity of the securities markets by increasing transparency regarding the expertise of the audit committee, the ethics codes of that apply to companies' principal executive officer and senior financial officers, and the adequacy of a company's internal controls and procedures for financial reporting. We believe that these proposals would help investors to understand and assess the inner-workings of public companies.
We are proposing the amendments to Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Form 20-F, Form 40-F, Form 8-K, Form N-SAR, Form N-CSR, Form 12b-25, Rule 12b-25, Rule 13a-14, Rule 13a-15, Rule 15d-14, Rule 15d-15, Rule 30a-2, Rule 30a-3, Regulation S-K and Regulation S-B under the authority set forth in Sections 5, 6, 7, 10, 17 and 19 of the Securities Act, Sections 12, 13, 15, 23 and 36 of the Exchange Act, Sections 8, 30, 31 and 38 of the Investment Company Act, and Sections 3(a), 404, 406 and 407 of the Sarbanes-Oxley Act of 2002.
The proposed changes would affect issuers that are small entities. Exchange Act Rule 0-10(a)145 defines an issuer, other than an investment company, to be a "small business" or "small organization" if it had total assets of $5 million or less on the last day of its most recent fiscal year. As of February 20, 2002, we estimated that there were approximately 2,500 issuers, other than investment companies, that may be considered small entities. We estimate that there are 225 registered investment companies that may be considered small entities. The proposed revisions would apply to any small entity that is subject to Exchange Act reporting requirements.
The proposals would require companies to disclose information regarding whether a financial expert serves on the audit committee, the ethics codes companies have created that apply to certain senior officers, and the adequacy of a company's internal controls and procedures for financial reporting. All small entities that are subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act (and all small entities that are registered investment companies, with respect to the code of ethics and financial expert disclosure requirements) would be subject to these amendments. Because reporting companies already file the forms proposed to be amended, no additional professional skills beyond those currently possessed by these filers would be necessary to prepare the proposed new disclosure. We expect that reporting information in response to these new disclosure items would increase costs incurred by small entities because they would require these entities to compile and report more information. In addition, to the extent that some small entities may have difficulty attracting qualified financial experts onto their boards, such negative disclosure may have an impact on the market price of their securities. We expect that the added cost of the quarterly evaluations of internal controls and procedures for financial reporting would be mitigated by the fact that such entities currently are required to evaluate their disclosure controls and procedures. In large part, we believe there is significant overlap between these two types of controls and procedures. We have calculated for purposes of the Paperwork Reduction Act that each company, including a small entity, would be subject to an added annual reporting burden of up to 26 hours and an estimated annual average cost of up to $2,650 for disclosure assistance from outside counsel as a result of the amendments.
The proposed disclosure would not duplicate, overlap, or conflict with other federal rules. The Federal Deposit Insurance Corporation has in place rules that, among other things, require insured depository institutions with total assets of $500 million or more to prepare an annual internal control report of management containing information similar to information that would be required under the proposed rules. Insured depository institutions would not be subject to the proposed disclosure requirements; however, the FDIC's rules permit an insured depository institution that is the subsidiary of a holding company to satisfy its internal control report requirement with an internal control report of the consolidated holding company. Bank and thrift holding companies that are required to file reports under Section 13(a) or 15(d) of the Exchange Act would be subject to the disclosure requirements under the proposed rules. We are coordinating with the FDIC and other federal banking regulators to eliminate, to the extent possible, any unnecessary duplication between our proposed disclosure and the FDIC's annual internal control report requirements. There are no other requirements that companies file or provide similar information.
The Regulatory Flexibility Act directs the Commission to consider significant alternatives that would accomplish the stated objective, while minimizing any significant adverse impact on small entity issuers. In connection with the proposed revisions, we considered the following alternatives: (a) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (b) the clarification, consolidation, or simplification of the reporting requirements for small entities; (c) the use of performance rather than design standards; and (d) an exemption from coverage of the requirements, or any part thereof, for small entities.
We believe that different compliance or reporting requirements or timetables for small entities would interfere with achieving the primary goal of increasing transparency of corporate activities and internal procedures. We do, however, solicit comment on whether small business issuers, which is a broader category of issuers than small entities,146 should be subject to fewer disclosure requirements than other issuers. Although we generally believe that an exemption for small entities from coverage of the proposed revisions is not appropriate and inconsistent with the policies underlying the Sarbanes-Oxley Act, we solicit comment on the propriety of a complete or partial exemption from the requirements for small business issuers. We also think that the current and proposed disclosure requirements are clear and straightforward. The proposed new financial expert and code of ethics disclosure requirements would require brief disclosure. The proposed annual internal control requirement would require more. Therefore, it does not seem necessary to develop separate requirements for small entities. We have used design rather than performance standards in connection with the proposed revisions because we want this disclosure to appear in a specific type of disclosure filing so that investors will know where to find the information. We also want the information to be filed electronically with us using the EDGAR filing system. We do not believe that performance standards for small entities would be consistent with the purpose of the proposed revisions.
We encourage the submission of comments with respect to any aspect of this Initial Regulatory Flexibility Analysis. In particular, we request comments regarding: (i) the number of small entity issuers that may be affected by the proposed revisions; (ii) the existence or nature of the potential impact of the proposed revisions on small entity issuers discussed in the analysis; and (iii) how to quantify the impact of the proposed revisions. Commenters are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. Such comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed revisions are adopted, and will be placed in the same public file as comments on the proposed amendments themselves.
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 ("SBREFA"),147 a rule is "major" if it has resulted, or is likely to result in:
Commenters should provide empirical data on (a) the annual effect on the economy; (b) any increase in costs or prices for consumers or individual industries; and (c) any effect on competition, investment or innovation. We request your comments on the reasonableness of this estimate.
List of Subjects
17 CFR Part 210
Accountants, Accounting, Reporting and recordkeeping requirements, Securities.
17 CFR Part 228
Reporting and recordkeeping requirements, Securities, Small businesses.
17 CFR Parts 229, 240 and 249
Reporting and recordkeeping requirements, Securities.
17 CFR Parts 270 and 274
Investment companies, Reporting and recordkeeping requirements, Securities.
For the reasons set out above, we propose to amend title 17, chapter II of the Code of Federal Regulations as follows:
PART 210 - FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975
1. The authority citation for Part 210 is amended by adding the following citations:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5, 78w(a), 78ll, 78mm, 79e(b), 79j(a), 79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37(a), 80b-3, 80b-11 unless otherwise noted.
Section 210.1-02 is also issued under secs. 3(a) and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 210.2-02 is also issued under secs. 3(a) and 404, Pub. L. No. 107-204, 116 Stat. 745.
2. Amend §210.1-02 by:
a. Removing the authority citation following §210.1-02;
b. Redesignating paragraphs (a) through (bb) as (b) through (cc); and
c. Adding new paragraph (a) to read as follows:
§210.1-02 Definition of terms used in Regulation S-X (17 CFR part 210).
(a) Accountant's attestation. The term accountant's attestation means a document in which a registered public accounting firm expresses an opinion concerning a registrant's assertion about the effectiveness of its internal controls and procedures for financial reporting in accordance with standards for attestation engagements. The attestation indicates the scope of the accountant's examination and sets forth the accountant's opinion as to whether the registrant's assertion about the effectiveness of its internal controls and procedures for financial reporting is fairly stated, in all material respects, or includes an opinion to the effect that an overall opinion cannot be expressed. When an overall opinion cannot be expressed, the registered public accounting firm must explain why it is unable to express such an opinion.
* * * * *
3. Amend §210.2-02 by:
a. Revising the section heading;
b. Revising the headings of paragraphs (a), (b), (c) and (d); and
c. Adding new paragraph (f).
The additions and revisions read as follows.
§210.2-02 Accountants' reports and attestations.
(a) Technical requirements for accountants' reports. * * *
(b) Representations as to the audit included in accountants' reports. * * *
(c) Opinions to be expressed in accountants' reports. * * *
(d) Exceptions identified in accountants' reports. * * *
* * * * *
(f) Accountants' attestations. Every registered public accounting firm that issues or prepares an accountant's report for a registrant, other than an investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), must examine, attest to, and report separately on, the internal control report of management concerning the effectiveness of the registrant's internal controls and procedures for financial reporting. The accountant's attestation shall be dated, signed manually, identify the period covered by the report and clearly state the opinion of the accountant as to whether the registrant's disclosure about the effectiveness of its internal controls and procedures for financial reporting is fairly stated in all material respects, or must include an opinion to the effect that an overall opinion cannot be expressed. If an overall opinion cannot be expressed, explain why.
PART 228 - INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
4. The authority citation for Part 228 is revised to read as follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-29, 80a-30, 80a-37 and 80b-11.
Section 228.307 is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 228.309 is also issued under secs. 3(a) and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 228.406 is also issued under secs. 3(a) and 406, Pub. L. No. 107-204, 116 Stat. 745.
5. Revise §228.307 to read as follows:
§228.307 (Item 307) Controls and procedures.
(a) Evaluation of disclosure controls and procedures and internal controls and procedures for financial reporting. Disclose the conclusions of the small business issuer's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the small business issuer's disclosure controls and procedures and internal controls and procedures for financial reporting based on management's evaluation of these controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the period covered by the quarterly or annual report that includes the disclosure required by this paragraph.
(b) Changes to internal controls and procedures for financial reporting.
Disclose any significant changes to the small business issuer's internal controls and procedures for financial reporting made during the period covered by the quarterly or annual report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the small business issuer's internal controls and procedures for financial reporting.
(c) Report on management's responsibilities. Furnish an internal control report of management that includes:
(1) A statement of management's responsibilities for establishing and maintaining adequate internal controls and procedures for financial reporting for the small business issuer;
(2) Conclusions about the effectiveness of the small business issuer's internal controls and procedures for financial reporting based on management's evaluation of those controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the small business issuer's most recent fiscal year;
(3) A statement that the registered public accounting firm that prepared or issued the small business issuer's audit report relating to the financial statements included in the report containing the disclosure required by this Item has attested to, and reported on, management's evaluation of the small business issuer's internal controls and procedures for financial reporting; and
(4) The attestation report of the registered public accounting firm that audited or reviewed the financial statements included in the annual report containing the disclosure required by this Item.
Instructions to Item 307
1. A small business issuer that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
2. For purposes of this Item, the terms "disclosure controls and procedures" and "internal controls and procedures for financial reporting" shall have the meanings specified in §240.13a-14 and §240.15d-14 of this chapter.
3. If the conclusions of the small business issuer's principal executive and financial officers are reflected in the conclusions disclosed pursuant to paragraph (c)(2) of this Item, the small business issuer does not have to include any separate disclosure required by paragraph (a) of this Item regarding the effectiveness of the small business issuer's internal controls and procedures for financial reporting as of the end of the small business issuer's most recent fiscal year.
4. The small business issuer is encouraged, but not required, to include the annual report disclosure required by paragraph (b) of this Item in the internal control report required by paragraph (c) of this Item, rather than disclosing it elsewhere in the annual report.
6. Add §228.309 to read as follows:
§228.309 (Item 309) Audit committee financial experts.
Disclose the number and names of the persons that the small business issuer's board of directors has determined to be the financial expert or experts serving on the small business issuer's audit committee, as defined in section 3(a)(58) of the Exchange Act (15 U.S.C. 78c(a)(58)). Also disclose whether the financial expert or experts are independent, as that term is used in section 10A(m)(3) of the Exchange Act (15 U.S.C. 78j-1(m)(3)) and if not, an explanation of why they are not. If the small business issuer's board of directors has not determined that a financial expert is serving on its audit committee, the small business issuer must disclose that fact and explain why it does not have such an expert.
Instructions to Item 309.
1. For purposes of the determination by the board of directors under this Item 309, the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) and 78o(d)), or experience in one or more positions that involve the performance of similar functions (or that results, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals and reserves, if any, used in the small business issuer's financial statements;
c. Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the small business issuer's financial statements;
d. Experience with internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
2. If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the small business issuer must disclose the basis for that determination.
3. In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
a. The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
b. Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
c. Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
d. Whether the person has served as a principal financial officer, controller or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, and if so, for how long;
e. The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
f. The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
g. The level and amount of the person's direct experience reviewing, preparing, auditing or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
h. The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act;
i. The person's level of familiarity and experience with the use and analysis of financial statements of public companies;
j. Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the small business issuer's financial statements and other financial information and to make knowledgeable and thorough inquiries whether:
i. The financial statements fairly present the financial condition, results of operations and cash flows of the small business issuer in accordance with generally accepted accounting principles; and
ii. The financial statements and other financial information, taken together, fairly present the financial condition, results of operations and cash flows of the small business issuer; and
k. In the case of a foreign private issuer, the person's level of experience in respect of public companies in the foreign private issuer's home country, generally accepted accounting principles used by the issuer, and the reconciliation of financial statements with U.S. generally accepted accounting principles.
4. Although the board of directors should consider the factors listed in Instruction 3, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in Instruction 1 to this Item.
5. In the case of foreign private issuers with two-tier boards of directors, for purposes of this Item 309, the term "board of directors" means the supervisory or non-management board.
6. A small business issuer that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
7. Add §228.406 to read as follows:
§228.406 (Item 406) Code of ethics.
(a) Disclose whether the small business issuer has adopted a written code of ethics that applies to the small business issuer's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. If the small business issuer has not adopted such a code of ethics, explain why it has not done so.
(b) If the small business issuer plans to elect to disclose any amendments to, or waivers from, its code of ethics on its Internet website, disclose the small business issuer's Internet address and its intention to disclose these events on its website. If the small business issuer elects to disclose this information through its website, it must make such information available for at least a 12-month period. Following the 12-month period, the small business issuer must retain the information for a period of five years. Upon request, the small business issuer must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
Instructions to Item 406
1. For purposes of this Item 406, the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(a) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(b) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(c) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the small business issuer;
(d) Compliance with applicable governmental laws, rules and regulations;
(e) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(f) Accountability for adherence to the code.
2. A small business issuer that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
8. Amend §228.601 by:
a. Removing the "No exhibit required" designation for exhibit (14) and adding "Code of ethics" in its place in the Exhibit Table;
b. Removing "N/A" corresponding to exhibit (14) under all captions in the Exhibit Table;
c. Adding an "X" corresponding to exhibit (14) under the caption "Exchange Act Forms," "8-K and "10-KSB" in the Exhibit Table; and
d. Adding the text of paragraph (b)(14).
The addition reads as follows:
§228.601 (Item 601) Exhibits.
* * * * *
(b) Description of exhibits. * * *
(14) Code of ethics. Any written code of ethics, or amendment to that code of ethics, that applies to the small business issuer's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, subject to disclosure under Item 406 of Regulation S-B (§228.406) or Item 5.05 of Form 8-K (§249.308 of this chapter).
* * * * *
PART 229 - STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975 - REGULATION S-K
9. The authority citation for Part 229 is revised to read as follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll(d), 78mm, 79e, 79n, 79t, 80a-8, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-38(a) and 80b-11, unless otherwise noted.
Section 229.307 is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 229.309 is also issued under secs. 3(a) and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 229.406 is also issued under secs. 3(a) and 406, Pub. L. No. 107-204, 116 Stat. 745.
Section 229.601 is also issued under secs. 3(a) and 406, Pub. L. No. 107-204, 116 Stat. 745.
10. Revise §229.307 to read as follows.
§229.307 (Item 307) Controls and Procedures.
(a) Evaluation of disclosure controls and procedures and internal controls and procedures for financial reporting. Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting based on management's evaluation of these controls and procedures in accordance with §§240.13a-15 and 240.15d-15 of this chapter as of the end of the period covered by the quarterly or annual report that includes the disclosure required by this paragraph.
(b) Changes to internal controls and procedures for financial reporting. Disclose any significant changes to the registrant's internal controls and procedures for financial reporting made during the period covered by the quarterly or annual report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
(c) Report on management's responsibilities. Furnish an internal control report of management that includes:
(1) A statement of management's responsibilities for establishing and maintaining adequate internal controls and procedures for financial reporting for the registrant;
(2) Conclusions about the effectiveness of the registrant's internal controls and procedures for financial reporting based on management's evaluation of those controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the registrant's most recent fiscal year;
(3) A statement that the registered public accounting firm that prepared or issued the registrant's audit report relating to the financial statements included in the report containing the disclosure required by this Item has attested to, and reported on, management's evaluation of the registrant's internal controls and procedures for financial reporting; and
(4) The attestation report of the registered public accounting firm that audited or reviewed the financial statements included in the annual report containing the disclosure required by this Item.
Instructions to Item 307
1. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
2. For purposes of this Item, the terms "disclosure controls and procedures" and "internal controls and procedures for financial reporting" shall have the meanings specified in §240.13a-14 and §240.15d-14 of this chapter.
3. If the conclusions of the registrant's principal executive and financial officers are reflected in the conclusions disclosed pursuant to paragraph (c)(2) of this Item, the registrant does not have to include any separate disclosure required by paragraph (a) of this Item regarding the effectiveness of the registrant's internal controls and procedures for financial reporting as of the end of the registrant's most recent fiscal year.
4. The registrant is encouraged, but not required, to include the annual report disclosure required by paragraph (b) of this Item in the internal control report required by paragraph (c) of this Item, rather than disclosing it elsewhere in the annual report.
11. Add §229.309 to read as follows:
§229.309 (Item 309) Audit committee financial experts.
Disclose the number and names of the persons that the registrant's board of directors has determined to be the financial experts serving on the registrant's audit committee, as defined in section 3(a)(58) of the Exchange Act (15 U.S.C. 78c(a)(58)). Also disclose whether the financial expert or experts are independent as that term is used in section 10A(m)(3) of the Exchange Act (15 U.S.C. 78j-1(m)(3)), and if not, an explanation of why they are not. If the registrant's board of directors has not determined that a financial expert is serving on its audit committee, the registrant must disclose that fact and explain why it does not have such an expert.
Instructions to Item 309.
1. For purposes of the determination by the board of directors under this Item 309, the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) and 78o(d)), or experience in one or more positions that involve the performance of similar functions (or that results, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals and reserves, if any, used in the registrant's financial statements;
c. Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;
d. Experience with internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
2. If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the registrant must disclose the basis for that determination.
3. In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
a. The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
b. Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
c. Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
d. Whether the person has served as a principal financial officer, controller or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, and if so, for how long;
e. The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
f. The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
g. The level and amount of the person's direct experience reviewing, preparing, auditing or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
h. The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act;
i. The person's level of familiarity and experience with the use and analysis of financial statements of public companies;
j. Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the registrant's financial statements and other financial information and to make knowledgeable and thorough inquiries whether:
i. The financial statements fairly present the financial condition, results of operations and cash flows of the registrant in accordance with generally accepted accounting principles; and
ii. The financial statements and other financial information, taken together, fairly present the financial condition, results of operations and cash flows of the registrant; and
k. In the case of a foreign private issuer, the person's level of experience in respect of public companies in the foreign private issuer's home country, generally accepted accounting principles used by the issuer, and the reconciliation of financial statements with U.S. generally accepted accounting principles.
4. Although the board of directors should consider the factors listed in Instruction 3, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in Instruction 1 to this Item.
5. In the case of foreign private issuers with two-tier boards of directors, for purposes of this Item 309, the term "board of directors" means the supervisory or non-management board.
6. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
12. Add §229.406 to read as follows:
§229.406 (Item 406) Code of ethics.
(a) Disclose whether the registrant has adopted a written code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. If the registrant has not adopted such a code of ethics, explain why it has not done so.
(b) If the registrant plans to elect to disclose any amendments to, or waivers from, its code of ethics on its Internet website, disclose the registrant's Internet address and its intention to disclose these events on its website. If the registrant elects to disclose this information through its website, it must make such information available for at least a 12-month period. Following the 12-month period, the registrant must retain the information for a period of not less than five years. Upon request, the registrant must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
Instructions to Item 406.
1. For purposes of this Item 406, the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(a) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(b) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(c) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(d) Compliance with applicable governmental laws, rules and regulations;
(e) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(f) Accountability for adherence to the code.
2. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
13. Amend §229.601 by:
a. Removing the "reserved" designation for exhibit (14) and adding "Code of ethics" in its place in the Exhibit Table;
b. Removing "N/A" corresponding to exhibit (14) under all captions in the Exhibit Table;
c. Adding an "X" corresponding to exhibit (14) under the caption "Exchange Act Forms", "8-K" and "10-K" in the Exhibit Table; and
d. Adding the text of paragraph (b)(14).
The addition reads as follows:
§229.601 (Item 601) Exhibits.
* * * * *
(b) Description of exhibits. * * *
(14) Code of ethics. Any written code of ethics, or amendment to that code of ethics, that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, subject to disclosure under Item 406 of Regulation S-K (§229.406) or Item 5.05 of Form 8-K (§249.308 of this chapter).
* * * * *
PART 240 - GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
14. The authority citation for Part 240 is amended by revising the specific authority for "Section 240.13a-15" and "Section 240.15d-15" and adding an authority in numerical order to read as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
Section 240.13a-15 is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
* * * * *
Section 240.14a-101 is also issued under secs. 3(a) and 407, Pub. L. No. 107-204, 116 Stat. 745.
* * * * *
Section 240.15d-15 is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
* * * * *
15. As proposed in 67 FR 42914, amend §240.12b-25 by revising the section heading and paragraphs (a) and (b)(2)(ii) to read as follows:
§240.12b-25 Notification of inability to timely file all or any required portion of a Form 10-K, 10-KSB, 20-F, 11-K, N-SAR, N-CSR, 10-Q, 10-QSB or 8-K.
(a) If all or any required portion of an annual or transition report on Form 10-K, 10-KSB, 20-F or 11-K (17 CFR 249.310, 249.310b, 249.220f or 249.311), or a quarterly or transition report on Form 10-Q or 10-QSB (17 CFR 249.308a or 249.308b), or a current report on Form 8-K (17 CFR 249.308) required to be filed pursuant to sections 13 or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) and rules thereunder, or if all or any portion of a semi-annual, annual or transition report on Form N-SAR or N-CSR (17 CFR 274.101 or 274.128 of this chapter) required to be filed pursuant to sections 13 or 15(d) of the Act or section 30 of the Investment Company Act of 1940 (15 U.S.C. 80a-29) and the rules thereunder is not filed within the time period prescribed for such report, the registrant, no later than one business day after the due date for such report, shall file a Form 12b-25 (17 CFR 249.322 of this chapter) with the Commission which shall contain disclosure of its inability to file the report timely and the reasons therefor in reasonable detail.
(b) * * *
(1) * * *
(2) * * *
(i) * * *
(ii) The subject annual report, semi-annual report or transition report on Form 10-K, 10-KSB, 20-F, 11-K, N-SAR, or N-CSR, or portion thereof, will be filed no later than the fifteenth calendar day following the prescribed due date; or the subject quarterly report or transition report on Form 10-Q or 10-QSB, or portion thereof, will be filed no later than the fifth calendar day following the prescribed due date; or the subject current report on Form 8-K, or portion thereof, will be filed no later than the second business day following the prescribed due date and, in the case of Form 8-K, specifying the Item number or numbers to be included in the filing; and
* * * * *
16. Amend §240.13a-14 by:
a. Revising paragraph (b)(4);
b. Redesignating paragraphs (d), (e), (f) and (g) as paragraphs (e), (f), (g) and (h); and
c. Adding new paragraph (d).
The revisions and additions read as follows:
§240.13a-14 Certification of disclosure in annual and quarterly reports.
* * * * *
(b) * * *
(4) He or she and the other certifying officers are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as such terms are defined in paragraphs (c) and (d) of this section) for the issuer and have:
(i) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which periodic reports are being prepared;
(ii) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
(iii) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by the report ("Evaluation Date");
(iv) Presented in the report their conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting, in each case based on their evaluation as of the Evaluation Date;
(v) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(A) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the Commission's rules and forms; and
(B) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
(vi) Indicated in the report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by the report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
* * * * *
(d) For purposes of this section and §240.13a-15, the term internal controls and procedures for financial reporting means controls that pertain to the preparation of financial statements for external purposes that are fairly presented in conformity with generally accepted accounting principles as addressed by the Codification of Statements on Auditing Standards §319 or any superseding definition or other literature that is issued or adopted by the Public Company Accounting Oversight Board.
* * * * *
17. Amend §240.13a-15 by:
a. Revising the section heading and paragraph (b); and
b. Adding paragraph (c).
The revisions and addition read as follows:
§240.13a-15 Controls and procedures.
* * * * *
(b) In connection with each report, including transition reports, filed on Form 10-Q, Form 10-QSB, Form 10-K, Form 10-KSB, Form 20-F or Form 40-F (§§249.308a, 249.308b, 249.310, 249.310b, 249.220f or 249.240f of this chapter) under section 13(a) of the Act (15 U.S.C. 78m(a)), other than a report filed by an Asset-Backed Issuer (as defined in §240.13a-14), the issuer's management must conduct an evaluation, with the participation of the issuer's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, of the effectiveness, as of the end of the period covered by the report, of the design and operation of the issuer's disclosure controls and procedures and the issuer's internal controls and procedures for financial reporting.
(c) In connection with each report, including transition reports, filed on Form N-CSR (§§249.331 and 274.128 of this chapter) or Form N-SAR (§§249.330 and 274.101 of this chapter) that requires certification under §270.30a-2 of this chapter, the issuer's management must conduct an evaluation, with the participation of the issuer's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, of the effectiveness, as of the end of the period covered by the report, of the design and operation of the issuer's disclosure controls and procedures.
18. Amend §240.15d-14 by:
a. Revising paragraph (b)(4);
b. Redesignating paragraphs (d), (e), (f) and (g) as paragraphs (e), (f), (g) and (h); and
c. Adding new paragraph (d).
The revisions and additions read as follows:
§240.15d-14 Certification of disclosure in annual and quarterly reports.
* * * * *
(b) * * *
(4) He or she and the other certifying officers are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as such terms are defined in paragraphs (c) and (d) of this section) for the issuer and have:
(i) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which periodic reports are being prepared;
(ii) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
(iii) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by the report ("Evaluation Date");
(iv) Presented in the report their conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting, in each case based on their evaluation as of the Evaluation Date;
(v) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(A) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the Commission's rules and forms; and
(B) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
(vi) Indicated in the report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by the report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
* * * * *
(d) For purposes of this section and §240.15d-15, the term internal controls and procedures for financial reporting means controls that pertain to the preparation of financial statements for external purposes that are fairly presented in conformity with generally accepted accounting principles as addressed by the Codification of Statements on Auditing Standards §319 or any superseding definition or other literature that is issued or adopted by the Public Company Accounting Oversight Board.
* * * * *
19. Amend §240.15d-15 by:
a. Revising the section heading and paragraph (b); and
b. Adding paragraph (c).
The revisions and addition read as follows:
§240.15d-15 Controls and procedures.
* * * * *
(b) In connection with each report, including transition reports, filed on Form 10-Q, Form 10-QSB, Form 10-K, Form 10-KSB, Form 20-F or Form 40-F (§§249.308a, 249.308b, 249.310, 249.310b, 249.220f or 249.240f of this chapter) under section 15(d) of the Act (15 U.S.C. 78o(d)), other than a report filed by an Asset-Backed Issuer (as defined in §240.15d-14), the issuer's management must conduct an evaluation, with the participation of the issuer's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, of the effectiveness, as of the end of the period covered by the report, of the design and operation of the issuer's disclosure controls and procedures and the issuer's internal controls and procedures for financial reporting.
(c) In connection with each report, including transition reports, filed on Form N-CSR (§§249.331 and 274.128 of this chapter) or Form N-SAR (§§249.330 and 274.101 of this chapter) that requires certification under §270.30a-2 of this chapter, the issuer's management must conduct an evaluation, with the participation of the issuer's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, of the effectiveness, as of the end of the period covered by the report, of the design and operation of the issuer's disclosure controls and procedures.
PART 249 - FORMS, SECURITIES EXCHANGE ACT OF 1934
20. The authority citation for Part 249 is revised to read as follows:
Authority: 15 U.S.C. 78a et seq., unless otherwise noted.
Section 249.220f is also issued under secs. 3(a), 302, 404 and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.240f is also issued under secs. 3(a), 302, 404 and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.308 is also issued under 15 U.S.C. 80a-29 and secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.308a is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.308b is also issued under secs. 3(a), 302 and 404, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.310 is also issued under secs. 3(a), 302, 404 and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.310b is also issued under secs. 3(a), 302, 404 and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.326(T) is also issued under 15 U.S.C. 78m(f)(1).
Section 249.330 is also issued under secs. 3(a), 302, 406, and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 249.331 is also issued under secs. 3(a), 302, 406, and 407, Pub. L. No. 107-204, 116 Stat. 745.
21. As proposed in 67 FR 42914, amend Form 8-K (referenced in §249.308) by adding Item 5.05 to read as follows:
Note -- The text of Form 8-K does not, and this amendment will not, appear in the Code of Federal Regulations.
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
* * * * *
Item 5.05. Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics.
If the registrant has amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or granted a waiver, including an implicit waiver, from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver.
Instruction.
The registrant does not need to provide any information pursuant to this Item if it discloses the required information on its Internet website within two business days following the date of the amendment or waiver and the registrant has disclosed in its most recently filed annual report its Internet address and intention to provide disclosure in this manner. If the registrant elects to disclose the information required by this Item through its website, such information must remain available on the website for at least a 12-month period. Following the 12-month period, the registrant must retain the information for a period of not less than five years. Upon request, the registrant must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
* * * * *
22. Amend Form 10-Q (referenced in §249.308a) by:
a. Revising Item 4 in Part I-Financial Information; and
b. Revising the "Certifications" section.
The revisions read as follows:
Note: The text of Form 10-Q does not, and this amendment will not, appear in the Code of Federal Regulations.
FORM 10-Q
* * * * *
Part I-Financial Information
* * * * *
Item 4. Controls and Procedures.
Furnish the information required by Item 307(a) and (b) of Regulation S-K (§229.307(a) and (b) of this chapter).
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this quarterly report on Form 10-Q of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
23. Amend Form 10-QSB (referenced in §249.308b) by:
a Revising Item 3 in Part I-Financial Information; and
b. Revising the "Certifications" section.
The revisions read as follows:
Note: The text of Form 10-QSB does not, and this amendment will not, appear in the Code of Federal Regulations.
FORM 10-QSB
* * * * *
Part I-Financial Information
* * * * *
Item 3. Controls and Procedures.
Furnish the information required by Item 307(a) and (b) of Regulation S-B (§228.307(a) and (b) of this chapter).
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this quarterly report on Form 10-QSB of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the small business issuer's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the small business issuer's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the small business issuer's ability to record, process, summarize and report financial information required to be disclosed by the small business issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the small business issuer's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the small business issuer's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the small business issuer. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
24. Amend Form 20-F (referenced in §249.220f) by:
a. Adding Item 15;
b. Redesignating paragraph 10 of "Instructions as to Exhibits" as paragraph 11;
c. Adding new paragraph 10 to "Instructions as to Exhibits"; and
d. Revising the "Certifications" section.
The additions and revisions read as follows:
Note: The text of Form 20-F does not, and this amendment will not, appear in the Code of Federal Regulations.
FORM 20-F
* * * * *
Item 15 Certain Disclosures
(a) Controls and Procedures.
(1) Evaluation of Disclosure Controls and Procedures and Internal Controls and Procedures for Financial Reporting. Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting based on management's evaluation of these controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the period covered by the annual report that includes the disclosure required by this paragraph.
(2) Changes to Internal Controls and Procedures for Financial Reporting. Disclose any significant changes to the registrant's internal controls and procedures for financial reporting made during the period covered by the annual report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
(3) Report on management's responsibilities. Furnish an internal control report of management that includes:
(i) A statement of management's responsibilities for establishing and maintaining adequate internal controls and procedures for financial reporting for the registrant;
(ii) Conclusions about the effectiveness of the registrant's internal controls and procedures for financial reporting based on management's evaluation of those controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the registrant's most recent fiscal year;
(iii) A statement that the registered public accounting firm that prepared or issued the registrant's audit report relating to the financial statements included in the report containing the disclosure required by this Item has attested to, and reported on, management's evaluation of the registrant's internal controls and procedures for financial reporting; and
(iv) The attestation report of the registered public accounting firm that audited or reviewed the financial statements included in the annual report containing the disclosure required by this Item 15(a)(3).
Instructions to Item 15(a)
1. You do not need to provide the information called for by this Item 15(a) unless you are using this form as an annual report.
2. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g)) is not required to disclose the information required by this Item 15(a).
3. For purposes of this Item, the terms "disclosure controls and procedures" and "internal controls and procedures for financial reporting" shall have the meanings specified in §240.13a-14 and §240.15d-14 of this chapter.
4. If the conclusions of the registrant's principal executive and financial officers are reflected in the conclusions disclosed pursuant to paragraph (c)(2) of this Item, the registrant does not have to include any separate disclosure required by paragraph (a) of this Item regarding the effectiveness of the registrant's internal controls and procedures for financial reporting as of the end of the registrant's most recent fiscal year.
5. The registrant is encouraged, but not required, to include the annual report disclosure required by paragraph (a)(2) of this Item in the internal control report required by paragraph (a)(3) of this Item, rather than disclosing it elsewhere in the annual report.
(b) Audit Committee Financial Experts.
Disclose the number and names of the persons that the registrant's board of directors has determined to be the financial experts serving on the registrant's audit committee, as defined in section 3(a)(58) of the Exchange Act. Also disclose whether the financial expert or experts are independent as that term is used in section 10A(m)(3) of the Exchange Act, and if not, an explanation of why they are not. If the registrant's board of directors has not determined that a financial expert is serving on its audit committee, the registrant must disclose that fact and explain why it does not have such an expert.
Instructions to Item 15(b).
1. You do not need to provide the information called for by this Item 15(b) unless you are using this form as an annual report.
2. For purposes of the determination by the board of directors under this Item 15(b), the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, or experience in one or more positions that involve the performance of similar functions (or that result, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
a. An understanding of financial statements and generally accepted accounting principles used by the registrant in its primary financial statements;
b. Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals and reserves, if any, used in the registrant's financial statements;
c. Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;
d. Experience with internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
3. If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the registrant must disclose the basis for that determination.
4. In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
a. The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
b. Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
c. Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
d. Whether the person has served as a principal financial officer, controller or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, and if so, for how long;
e. The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
f. The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
g. The level and amount of the person's direct experience reviewing, preparing, auditing or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
h. The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act;
i. The person's level of familiarity and experience with the use and analysis of financial statements of public companies;
j. Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the registrant's financial statements and other financial information and to make knowledgeable and thorough inquiries whether:
i. The financial statements fairly present the financial condition, results of operations and cash flows of the registrant in accordance with generally accepted accounting principles; and
ii. The financial statements and other financial information, taken together, fairly present the financial condition, results of operations and cash flows of the registrant; and
k. The person's level of experience with reconciliation of financial statements with U.S. generally accepted accounting principles.
5. Although the board of directors should consider the factors listed in Instruction 4, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in Instruction 2 to this Item 15(b).
6. In the case of foreign private issuers with two-tier boards of directors, for purposes of this Item 15(b), the term "board of directors" means the supervisory or non-management board.
7. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item.
(c) Code of Ethics.
(1) Disclose whether the registrant has adopted a written code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. If the registrant has not adopted such a code of ethics, explain why it has not done so.
(2) If, during the last fiscal year, the registrant has amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or granted a waiver from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver.
Instructions to Item 15(c)
1. You do not need to provide the information called for by this Item 15(c) unless you are using this form as an annual report.
2. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Item 15(c).
3. For purposes of this Item 15(c), the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
a. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
b. Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
c. Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
d. Compliance with applicable governmental laws, rules and regulations;
e. The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
f. Accountability for adherence to the code.
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 20-F of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
INSTRUCTIONS AS TO EXHIBITS
* * * * *
10. Any written code of ethics, or amendment to that code of ethics, that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, subject to disclosure under Item 15(c) of this Form.
* * * * *
25. Amend Form 40-F (referenced in §249.240f) by:
a. Adding paragraphs (7), (8) and (9) to General Instruction B; and
b. Revising the "Certifications" section.
The additions and revisions read as follows.
Note: The text of Form 40-F does not, and this amendment will not, appear in the Code of Federal Regulations.
FORM 40-F
* * * * *
GENERAL INSTRUCTIONS
* * * * *
B. Information To Be Filed on this Form.
* * * * *
(7) Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures and Internal Controls and Procedures for Financial Reporting. Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting based on management's evaluation of these controls and procedures in accordance with §§240.13a-15 or 240.15d-15 of this chapter as of the end of the period covered by the annual report that includes the disclosure required by this paragraph.
(b) Changes to Internal Controls and Procedures for Financial Reporting. Disclose any significant changes to the registrant's internal controls and procedures for financial reporting made during the period covered by the annual report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
(c) Report on management's responsibilities. Furnish an internal control report of management that includes:
(1) A statement of management's responsibilities for establishing and maintaining adequate internal controls and procedures for financial reporting for the registrant;
(2) Conclusions about the effectiveness of the registrant's internal controls and procedures for financial reporting based on management's evaluation of those controls and procedures in accordance with §§240.13a-15 of 240.15d-15 of this chapter as of the end of the registrant's most recent fiscal year;
(3) A statement that the registered public accounting firm that prepared or issued the registrant's audit report relating to the financial statements included in the report containing the disclosure required by this Instruction B.(7)(c) has attested to, and reported on, management's evaluation of the registrant's internal controls and procedures for financial reporting;
(4) The attestation report of the registered public accounting firm that audited or reviewed the financial statements included in the annual report containing the disclosure required by this Instruction B.(7)(c).
Notes to Instruction B.(7)
1. You do not need to provide the information called for by this Instruction B.(7) unless you are using this form as an annual report.
2. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g)) is not required to disclose the information required by this Instruction B.(7).
3. For purposes of this Instruction B.(7), the terms "disclosure controls and procedures" and "internal controls and procedures for financial reporting" shall have the meanings specified in §240.13a-14 and §240.15d-14 of this chapter.
4. If the conclusions of the registrant's principal executive and financial officers are reflected in the conclusions disclosed pursuant to paragraph (c)(2) of this Instruction B.(7), the registrant does not have to include any separate disclosure required by paragraph (a) of this Item regarding the effectiveness of the registrant's internal controls and procedures for financial reporting as of the end of the registrant's most recent fiscal year.
5. The registrant is encouraged, but not required, to include the annual report disclosure required by paragraph (b) of this Instruction B.(7) in the internal control report required by paragraph (c) of this Instruction B.(7), rather than disclosing it elsewhere in the annual report.
(8) Audit Committee Financial Experts.
(a) Disclose the number and names of the persons that the board of directors has determined to be the financial experts serving on the registrant's audit committee, as defined in section 3(a)(58) of the Exchange Act. Also disclose whether the financial expert or experts are independent as that term is used in section 10A(m)(3) of the Exchange Act, and if not, an explanation of why they are not. If the registrant's board of directors has not determined that a financial expert is serving on its audit committee, the registrant must disclose that fact and explain why it does not have such an expert.
Notes to Instruction B.(8)
1. You do not need to provide the information called for by this Instruction B.(8) unless you are using this form as an annual report.
2. For purposes of the determination by the board of directors under this Instruction B.(8), the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, or experience in one or more positions that involve the performance of similar functions (or that result, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
a. An understanding of financial statements and generally accepted accounting principles used by the registrant in its primary financial statements;
b. Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals and reserves, if any, used in the registrant's financial statements;
c. Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;
d. Experience with internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
3. If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the registrant must disclose the basis for that determination.
4. In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
a. The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
b. Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
c. Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
d. Whether the person has served as a principal financial officer, controller or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act, and if so, for how long;
e. The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
f. The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
g. The level and amount of the person's direct experience reviewing, preparing, auditing or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the Exchange Act;
h. The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the Exchange Act;
i. The person's level of familiarity and experience with the use and analysis of financial statements of public companies;
j. Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the registrant's financial statements and other financial information and to make knowledgeable and thorough inquiries whether:
i. The financial statements fairly present the financial condition, results of operations and cash flows of the registrant in accordance with generally accepted accounting principles; and
ii. The financial statements and other financial information, taken together, fairly present the financial condition, results of operations and cash flows of the registrant; and
k. The person's level of experience with reconciliation of financial statements with U.S. generally accepted accounting principles.
5. Although the board of directors should consider the factors listed in Note 4, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in Note 2 to this Instruction B.(8).
6. In the case of foreign private issuers with two-tier boards of directors, for purposes of this Instruction B.(8), the term "board of directors" means the supervisory or non-management board.
7. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Instruction B.(8).
(9) Code of Ethics.
(a) Disclose whether the registrant has adopted a written code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Such code of ethics, or amendment to that code of ethics, must be attached as an exhibit and filed with this Form. If the registrant has not adopted such a code of ethics, explain why it has not done so.
(b) If, during the last fiscal year, the registrant has amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or granted a waiver from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver.
Notes to Instruction B.(9)
1. You do not need to provide the information called for by this Instruction B.(9) unless you are using this form as an annual report.
2. A registrant that is an Asset-Backed Issuer (as defined in §240.13a-14(g) and §240.15d-14(g) of this chapter) is not required to disclose the information required by this Instruction B.(9).
3. For purposes of the required disclosures, the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(a) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(b) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(c) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(d) Compliance with applicable governmental laws, rules and regulations;
(e) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(f) Accountability for adherence to the code.
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 40-F of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
26. Amend Form 10-K (referenced in §249.310) by:
a. Revising Item 10 in Part III;
b. Redesignating Item 15 as Item 16 in Part IV;
c. Adding new Item 15 to Part III; and
d. Revising the "Certifications" section.
The revisions and additions read as follows:
Note -- The text of Form 10-K does not, and this amendment will not, appear in the Code of Federal Regulations.
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
* * * * *
PART III
* * * * *
Item 10. Directors and Executive Officers of the Registrant.
Furnish the information required by Items 401, 405 and 406 of Regulation S-K (§§229.401, 229.405 and 229.406 of this chapter).
* * * * *
Item 15. Audit Committee Financial Experts.
Furnish the information required by Item 309 of Regulation S-K (§229.309 of this chapter).
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 10-K of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
* * * * *
29. Amend Form 10-KSB (referenced in §249.310b) by:
a. Revising Item 9 in Part III;
b. Adding Item 15 in Part III; and
c. Revising the "Certifications" section.
The revisions and addition read as follows:
Note -- The text of Form 10-KSB does not, and this amendment will not, appear in the Code of Federal Regulations.
Form 10-KSB
[ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
* * * * *
PART III
* * * * *
Item 9. Directors and Executive Officers of the Registrant.
Furnish the information required by Items 401, 405 and 406 of Regulation S-B (§§228.401, 228.405, and 228.406 of this chapter).
* * * * *
Item 15. Audit Committee Financial Experts.
Provide the information required by Item 309 of Regulation S-B (§228.309 of this chapter).
* * * * *
CERTIFICATIONS*
I, [identify the certifying individual], certify that:
1. I have reviewed this annual report on Form 10-KSB of [identify registrant];
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the small business issuer's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and internal controls and procedures for financial reporting as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and internal controls and procedures for financial reporting based on our evaluation as of the Evaluation Date;
e) Disclosed to the small business issuer's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the small business issuer's ability to record, process, summarize and report financial information required to be disclosed by the small business issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.), within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the small business issuer's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the small business issuer's internal controls and procedures for financial reporting.
Date: ...............
_______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the small business issuer. See Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.
* * * * *
30. Amend §249.322 by revising paragraph (a) to read as follows:
§249.322 Form 12b-25 - Notification of late filing.
(a) This form shall be filed pursuant to §240.12b-25 of this chapter by issuers who are unable to file timely all or any required portion of an annual or transition report on Form 10-K and Form 10-KSB, 20-F, or 11-K (§§249.310, 249.310b, 249.220f or 249.311) or a quarterly or transition report on Form 10-Q and Form 10-QSB (§§249.308a and 249.308b) or a current report on Form 8-K (§249.308) pursuant to section 13 or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) or a semi-annual, annual or transition report on Form N-SAR or Form N-CSR (17 CFR 274.101 or 274.128) pursuant to section 13 or 15(d) of the Act or section 30 of the Investment Company Act of 1940 (15 U.S.C. 80a-29). The filing shall consist of a signed original and three conformed copies, and shall be filed with the Commission at Washington, DC 20549, no later than one business day after the due date for the periodic report in question. Copies of this form may be obtained from "Publications," Securities and Exchange Commission, 450 5th Street, NW, Washington, DC 20549 and at our website at http://www.sec.gov.
* * * * *
31. Amend Form 12b-25 (referenced in §249.322) by:
a. Revising the preamble;
b. Revising paragraph (b) of Part II; and
c. Revising Part III to read as follows:
Note: The text of Form 12b-25 does not, and this amendment will not, appear in the Code of Federal Regulations.
Form 12b-25
NOTIFICATION OF LATE FILING
(Check One): ___ Form 10-K ___ Form 20-F ___ Form 11-K ___ Form 10-Q ___ Form 8-K ___ Form N-SAR ___ Form N-CSR
* * * * *
PART II - RULES 12b-25(b) and (c)
* * * * *
(b) The subject annual report, semi-annual report, transition report on Form 10-K, Form 20-F, Form 11-K, Form N-SAR or Form N-CSR, or portion thereof, will be filed on or before the fifteenth calendar day following the prescribed due date; or the subject quarterly report or transition report on Form 10-Q, or portion thereof, will be filed on or before the fifth calendar day following the prescribed due date; or the subject current report on Form 8-K will be filed on or before the second business day following the prescribed due date; and
* * * * *
PART III - NARRATIVE
State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, 8-K, N-SAR, N-CSR, or the transition report or portion thereof, could not be filed within the prescribed time period.
* * * * *
PART 270 - RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
32. The general authority citation for part 270 is revised to read as follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, and 80a-39, unless otherwise noted;
* * * * *
33. Amend §270.30a-2 by:
a. Revising paragraph (b)(4);
b. Removing paragraphs (b)(5) and (b)(6); and
c. Adding paragraph (d).
The revisions and additions read as follows:
§270.30a-2 Certification of disclosure in annual and semi-annual reports.
* * * * *
(b) * * *
(4) He or she and the other certifying officers are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as such terms are defined in paragraphs (c) and (d) of this section) for the investment company and have:
(i) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material information relating to the investment company, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which periodic reports are being prepared;
(ii) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under their supervision, to provide reasonable assurances that the investment company's financial statements are fairly presented in conformity with generally accepted accounting principles;
(iii) Evaluated the effectiveness of the investment company's disclosure controls and procedures as of the end of the period covered by the report ("Evaluation Date");
(iv) Presented in the report their conclusions about the effectiveness of the disclosure controls and procedures based on their evaluation as of the Evaluation Date; and
(v) Disclosed to the investment company's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(A) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the investment company's ability to record, process, summarize, and report financial information required to be disclosed by the investment company in the reports that it files or submits under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) and the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), within the time periods specified in the Commission's rules and forms; and
(B) Any fraud, whether or not material, that involves management or other employees who have a significant role in the investment company's internal controls and procedures for financial reporting; and
(vi) Indicated in the report any significant changes in the investment company's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by the report, including any actions taken to correct significant deficiencies and material weaknesses in the investment company's internal controls and procedures for financial reporting.
* * * * *
(d) For purposes of this section, the term internal controls and procedures for financial reporting means controls that pertain to the preparation of financial statements for external purposes that are fairly presented in conformity with generally accepted accounting principles as addressed by the Codification of Statements on Auditing Standards §319 or any superseding definition or other literature that is issued or adopted by the Public Company Accounting Oversight Board.
34. Amend § 270.30a-3 (as proposed in 67 FR 57298 (9/9/02)) by revising paragraph (b) to read as follows:
§270.30a-3 Disclosure controls and procedures related to preparation of required filings.
* * * * *
(b) In connection with each report, including transition reports, that requires certification under § 270.30a-2, the registered investment company's management must conduct an evaluation, with the participation of the registered investment company's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, of the effectiveness, as of the end of the period covered by the report, of the design and operation of the registered investment company's disclosure controls and procedures.
PART 274 - FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
35. The authority citation for Part 274 is revised to read as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise noted.
Section 274.101 is also issued under secs. 3(a), 302, 406, and 407, Pub. L. No. 107-204, 116 Stat. 745.
Section 274.128 is also issued under secs. 3(a), 302, 406, and 407, Pub. L. No. 107-204, 116 Stat. 745.
PART 249 - FORMS, SECURITIES EXCHANGE ACT OF 1934
PART 274 - FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
36. Amend Form N-SAR (referenced in §§ 249.330 and 274.101) by:
a. Revising the reference "133" in item 6 to read "134";
b. Redesignating item 133 as item 134;
c. Adding new item 133;
d. Revising newly redesignated item 134;
e. Revising the reference "items 77 and 102" in paragraph (1) of General Instruction D, "Preparation of Report," to read "items 77, 102, and 134(b)";
f. Revising the reference "133" in the fifth paragraph of General Instruction A to read "134";
g. Revising paragraphs (a)(i) and (a)(ii) of sub-item 77Q3 in Instructions to Specific Items;
h. Revising the Certification contained in paragraph (a)(iii) of sub-item 77Q3 in Instructions to Specific Items;
i. Designating the current Instruction to sub-item 102P3 as Instruction (c);
j. Adding Instructions (a) and (b) to sub-item 102P3;
k. Adding an Instruction to item 133;
l. Revising the Instruction to newly redesignated item 134; and
m. Revising the reference "133" in the Instructions to the Signature Page to read "134."
These additions and revisions read as follows:
Note: The text of Form N-SAR does not, and this amendment will not, appear in the Code of Federal Regulations.
FORM N-SAR
* * * * *
ITEM 133: Code of Ethics
(a) Disclose whether each of the registrant's sponsor, depositor, trustee, and principal underwriter has adopted a written code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of, respectively, the registrant's sponsor, depositor, trustee, and principal underwriter. If any of the registrant's sponsor, depositor, trustee, and principal underwriter has not adopted such a code of ethics, explain why it has not done so.
(b) If the registrant's sponsor, depositor, trustee, or principal underwriter has amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or granted a waiver, including an implicit waiver, from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver.
(c) If the registrant plans to elect to disclose any amendments to, or waivers from, its sponsor's, depositor's, trustee's, or principal underwriter's codes of ethics on the registrant's Internet website, disclose the registrant's Internet address and its intention to disclose these events on its website.
ITEM 134
Include the following exhibits:
(a) The certifications required by rule 30a-2 under the Investment Company Act (17 CFR 270.30a-2).
(b) Any written code of ethics, or amendment to that code of ethics, that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of registrant's sponsor, depositor, trustee, or principal underwriter, subject to disclosure under Item 133 of this Form.
* * * * *
Instructions To Specific Items
* * * * *
SUB-ITEM 77Q3:
* * * * *
(a) * * *
(i) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on management's evaluation of these controls and procedures in accordance with Rule 13a-15(c) or 15d-15(c) under the 1934 Act (17 CFR 240.13a-15(c) or 15d-15(c)) and Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) as of the end of the period covered by the report that includes the disclosure required by this paragraph.
(ii) Disclose any significant changes to the registrant's internal controls and procedures for financial reporting (as defined in rule 30a-2(d) under the Act (17 CFR 270.30a-2(d))) made during the period covered by the report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
(iii) * * *
CERTIFICATIONS
I, [identify the certifying individual], certify that:
1. I have reviewed this report on Form N-SAR, including exhibits, of [identify registrant];
2. Based on my knowledge, this report, including exhibits, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial information included in this report, including exhibits, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in rule 30a-2(c) and (d) under the Investment Company Act) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under our supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize, and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Securities Exchange Act of 1934 and the Investment Company Act of 1940, within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ___________________
______________________
[Signature]
[Title]
* * * * *
SUB-ITEM 102P3
* * * * *
Instructions:
(a)(1) Disclose whether each of the registrant, its investment adviser, and its principal underwriter has adopted a written code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of, respectively, the registrant, its investment adviser, and its principal underwriter. If any of the registrant, its investment adviser, and its principal underwriter has not adopted such a code of ethics, explain why it has not done so.
(2) If the registrant, its investment adviser, or its principal underwriter has amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or granted a waiver, including an implicit waiver, from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver. The registrant does not need to provide any information pursuant to this paragraph (a)(2) if it discloses the required information on its Internet website within two business days following the date of the amendment or waiver and the registrant has disclosed in its most recently filed report on this form its Internet address and intention to provide disclosure in this manner. If the amendment or waiver occurs on a Saturday, Sunday, or holiday on which the Commission is not open for business, then the two business day period shall begin to run on and include the first business day thereafter. If the registrant elects to disclose this information through its website, such information must remain available on the website for at least a 12-month period. The registrant must retain the information for a period of not less than six years following the end of the fiscal year in which the amendment or waiver occurred. Upon request, the registrant must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
(3) If the registrant plans to elect to disclose any amendments to, or waivers from, its code of ethics, or its investment adviser's or principal underwriter's codes of ethics, on the registrant's Internet website, disclose the registrant's Internet address and its intention to disclose these events on its website.
(4) Include any written code of ethics, or amendment to that code of ethics, that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of the registrant, its investment adviser, or its principal underwriter, subject to disclosure under paragraphs (a)(1) and (a)(2) of this Instruction.
(5) The requirements of paragraphs (a)(1) through (a)(4) of this Instruction do not apply with respect to a code of ethics of any principal underwriter of the registrant unless:
(i) The principal underwriter is an affiliated person of the registrant or the registrant's investment adviser; or
(ii) An officer, director, or general partner of the principal underwriter serves as an officer, director, or general partner of the registrant or of the registrant's investment adviser.
(6) For purposes of this Instruction 102P3(a), the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(i) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(ii) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(iii) Full, fair, accurate, timely, and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications;
(iv) Compliance with applicable governmental laws, rules and regulations;
(v) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(vi) Accountability for adherence to the code.
(7) The information required by paragraph (a)(1) of this Instruction is only required for a report on this form filed for the registrant's fiscal year.
(b)(1) Disclose the number and names of the persons that the registrant's board of directors has determined to be the financial experts serving on the registrant's audit committee, as defined in section 3(a)(58) of the 1934 Act, as of the end of the period covered by the report. Also disclose whether the financial expert or experts are "independent," and if not, an explanation of why they are not. For this purpose, a financial expert would be considered to be "independent" if he or she (i) meets the criteria set forth in section 10A(m)(3)(B)(i) of the 1934 Act; and (ii) is not an "interested person" of the investment company as defined in section 2(a)(19) of the Act. If the registrant's board of directors has not determined that a financial expert is serving on its audit committee, the registrant must disclose that fact and explain why it does not have such an expert.
(2) For purposes of the determination by the board of directors under this Instruction 102P3(b), the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the 1934 Act, or experience in one or more positions that involve the performance of similar functions (or that results, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
(i) An understanding of generally accepted accounting principles and financial statements;
(ii) Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals, and reserves, if any, used in the registrant's financial statements;
(iii) Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;
(iv) Experience with internal controls and procedures for financial reporting; and
(v) An understanding of audit committee functions.
(3) If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the registrant must disclose the basis for that determination.
(4) In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
(i) The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
(ii) Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
(iii) Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
(iv) Whether the person has served as a principal financial officer, controller, or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the 1934 Act, and if so, for how long;
(v) The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
(vi) The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the 1934 Act;
(vii) The level and amount of the person's direct experience reviewing, preparing, auditing, or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the 1934 Act;
(viii) The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the 1934 Act;
(ix) The person's level of familiarity and experience with the use and analysis of financial statements of public companies; and
(x) Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the registrant's financial statements and other financial information and to make knowledgeable and thorough inquiries whether: (A) the financial statements fairly present the financial condition, results of operations, and cash flows of the registrant in accordance with generally accepted accounting principles; and (B) the financial statements and other financial information, taken together, fairly present the financial condition, results of operations, and cash flows of the registrant.
(5) Although the board of directors should consider the factors listed in paragraph (b)(4) of this Instruction, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in paragraph (b)(2) of this Instruction.
(c) * * *
* * * * *
ITEM 133
* * * * *
Instructions:
(a) The requirements of Item 133 do not apply with respect to a code of ethics of any principal underwriter of the registrant unless:
(1) The principal underwriter is an affiliated person of the registrant or the registrant's sponsor, depositor, or trustee; or
(2) An officer, director, or general partner of the principal underwriter serves as an officer, director, or general partner of the registrant's sponsor, depositor, or trustee.
(b) For purposes of Item 133, the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(3) Full, fair, accurate, timely, and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications;
(4) Compliance with applicable governmental laws, rules and regulations;
(5) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(6) Accountability for adherence to the code.
(c) The registrant does not need to provide any information pursuant to paragraph (b) of this Item if it discloses the required information on its Internet website within two business days following the date of the amendment or waiver and the registrant has disclosed in its most recently filed report on this form its Internet address and intention to provide disclosure in this manner. If the amendment or waiver occurs on a Saturday, Sunday, or holiday on which the Commission is not open for business, then the two business day period shall begin to run on and include the first business day thereafter. If the registrant elects to disclose this information through its website, such information must remain available on the website for at least a 12-month period. The registrant must retain the information for a period of not less than six years following the end of the fiscal year in which the amendment or waiver occurred. Upon request, the registrant must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
ITEM 134
In responding to sub-item 134(a), include the exhibit required by instruction (a) for sub-item 77Q3. The registrant may omit paragraph 3 of the certification required by instruction (a)(iii).
* * * * *
37. Amend Form N-CSR (referenced in §§ 249.331 and 274.128; as proposed in 67 FR 57298 (9/9/02) and 67 FR 60828 (9/26/02)) by:
a. Revising General Instruction D;
b. Redesignating General Instruction E as General Instruction F;
c. Adding new General Instruction E;
d. Removing Item 1;
e. Redesignating Items 2, 3, and 4 as Items 1, 2, and 5;
f. Adding new Items 3, 4 and 6;
g. Revising newly redesignated Item 5; and
h. Revising the "Certifications" section, to read as follows:
Note: The text of Form N-CSR does not, and this amendment will not, appear in the Code of Federal Regulations.
Form N-CSR
* * * * *
GENERAL INSTRUCTIONS
* * * * *
D. Incorporation by Reference.
A registrant may incorporate by reference information required by Item 6(b), but no other Items of the Form shall be answered by incorporating any information by reference. All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: Rule 10(d) of Regulation S-K under the Securities Act of 1933 [17 CFR 229.10(d)] (general rules on incorporation by reference, which, among other things, prohibit, unless specifically required by this Form, incorporating by reference a document that includes incorporation by reference to another document, and limits incorporation to documents filed within the last 5 years, with certain exceptions); Rule 303 of Regulation S-T [17 CFR 232.303] (specific requirements for electronically filed documents); Rules 12b-23 and 12b-32 under the Securities Exchange Act of 1934 (additional rules on incorporation by reference for reports filed pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934); and Rules 0-4, 8b-23, and 8b-32 under the Investment Company Act of 1940 [17 CFR 270.0-4, 270.8b-23, and 270.8b-32] (additional rules on incorporation by reference for investment companies).
E. Definitions.
Unless the context clearly indicates the contrary, terms used in this Form N-CSR have meanings as defined in the Investment Company Act of 1940 and the rules and regulations thereunder. Unless otherwise indicated, all references in the form to statutory sections or to rules are sections of the Investment Company Act of 1940 and the rules and regulations thereunder.
* * * * *
Item 3. Code of Ethics.
(a) Disclose whether, as of the end of the period covered by the report, each of the registrant, its investment adviser, and its principal underwriter has adopted a written code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of, respectively, the registrant, its investment adviser, and its principal underwriter. If any of the registrant, its investment adviser, and its principal underwriter has not adopted such a code of ethics, explain why it has not done so.
Instruction. The information required by this Item 3(a) is only required in a report on this Form N-CSR that is required by Item 6(a) to include a copy of an annual report transmitted to stockholders.
(b) If the registrant, its investment adviser, or its principal underwriter has, during the period covered by the report, amended its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or granted a waiver, including an implicit waiver, from a provision of the code of ethics to one of these officers or persons, the registrant must briefly describe the nature of the amendment or waiver. Disclosure regarding waivers must include the name of the person to whom the waiver was granted, and the date of the waiver.
(c) If the registrant plans to elect to disclose any amendments to, or waivers from, its code of ethics, or its investment adviser's or principal underwriter's codes of ethics, on the registrant's Internet website, disclose the registrant's Internet address and its intention to disclose these events on its website.
Instructions.
1. The requirements of this Item 3 do not apply with respect to a code of ethics of any principal underwriter of the registrant unless:
(a) The principal underwriter is an affiliated person of the registrant or the registrant's investment adviser; or
(b) An officer, director, or general partner of the principal underwriter serves as an officer, director, or general partner of the registrant or of the registrant's investment adviser.
2. For purposes of this Item 3, the term "code of ethics" means a codification of such standards that is reasonably designed to deter wrongdoing and to promote:
(a) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(b) Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
(c) Full, fair, accurate, timely, and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications;
(d) Compliance with applicable governmental laws, rules and regulations;
(e) The prompt internal reporting to an appropriate person or persons identified in the code of violations of the code; and
(f) Accountability for adherence to the code.
3. The registrant does not need to provide any information pursuant to this Item if it discloses the required information on its Internet website within two business days following the date of the amendment or waiver and the registrant has disclosed in its most recently filed report on this Form N-CSR its Internet address and intention to provide disclosure in this manner. If the amendment or waiver occurs on a Saturday, Sunday, or holiday on which the Commission is not open for business, then the two business day period shall begin to run on and include the first business day thereafter. If the registrant elects to disclose this information through its website, such information must remain available on the website for at least a 12-month period. The registrant must retain the information for a period of not less than six years following the end of the fiscal year in which the amendment or waiver occurred. Upon request, the registrant must furnish to the Commission or its staff a copy of any or all information retained pursuant to this requirement.
Item 4. Audit Committee Financial Experts.
Disclose the number and names of the persons that the registrant's board of directors has determined to be the financial experts serving on the registrant's audit committee, as defined in section 3(a)(58) of the Securities Exchange Act of 1934, as of the end of the period covered by the report. Also disclose whether the financial expert or experts are "independent," and if not, an explanation of why they are not. For this purpose, a financial expert would be considered to be "independent" if he or she (i) meets the criteria set forth in section 10A(m)(3)(B)(i) of the Securities Exchange Act of 1934; and (ii) is not an "interested person" of the investment company as defined in section 2(a)(19) of the Investment Company Act of 1940. If the registrant's board of directors has not determined that a financial expert is serving on its audit committee, the registrant must disclose that fact and explain why it does not have such an expert.
Instructions.
1. The information required by this Item 4 is only required in a report on this Form N-CSR that is required by Item 6(a) to include a copy of an annual report transmitted to stockholders.
2. For purposes of the determination by the board of directors under this Item 4, the term "financial expert" means a person who has, through education and experience as a public accountant or auditor, or a principal financial officer, controller, or principal accounting officer, of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, or experience in one or more positions that involve the performance of similar functions (or that results, in the judgment of the board of directors, in the person's having similar expertise and experience), the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. Experience applying such generally accepted accounting principles in connection with the accounting for estimates, accruals, and reserves that are generally comparable to the estimates, accruals, and reserves, if any, used in the registrant's financial statements;
c. Experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the registrant's financial statements;
d. Experience with internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
3. If the board of directors has determined that a person is a financial expert because, in the board's judgment, he or she has similar expertise and experience to those enumerated, the registrant must disclose the basis for that determination.
4. In evaluating the education and experience of a person, the board of directors should consider the following factors in the aggregate:
a. The level of the person's accounting or financial education, including whether the person has earned an advanced degree in finance or accounting;
b. Whether the person is a certified public accountant, or the equivalent, in good standing, and the length of time that the person actively has practiced as a certified public accountant, or the equivalent;
c. Whether the person is certified or otherwise identified as having accounting or financial experience by a recognized private body that establishes and administers standards in respect of such expertise, whether that person is in good standing with the recognized private body, and the length of time that the person has been actively certified or identified as having this expertise;
d. Whether the person has served as a principal financial officer, controller, or principal accounting officer of a company that, at the time the person held such position, was required to file reports pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, and if so, for how long;
e. The person's specific duties while serving as a public accountant, auditor, principal financial officer, controller, principal accounting officer or position involving the performance of similar functions;
f. The person's level of familiarity and experience with all applicable laws and regulations regarding the preparation of financial statements that must be included in reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934;
g. The level and amount of the person's direct experience reviewing, preparing, auditing, or analyzing financial statements that must be included in reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934;
h. The person's past or current membership on one or more audit committees of companies that, at the time the person held such membership, were required to file reports pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934;
i. The person's level of familiarity and experience with the use and analysis of financial statements of public companies; and
j. Whether the person has any other relevant qualifications or experience that would assist him or her in understanding and evaluating the registrant's financial statements and other financial information and to make knowledgeable and thorough inquiries whether: (i) the financial statements fairly present the financial condition, results of operations and cash flows of the registrant in accordance with generally accepted accounting principles; and (ii) the financial statements and other financial information, taken together, fairly present the financial condition, results of operations, and cash flows of the registrant.
5. Although the board of directors should consider the factors listed in Instruction 4, those factors are not replacements for, and a financial expert must satisfy, all of the attributes listed in Instruction 2 to this Item.
Item 5. Controls and Procedures.
(a) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940 (17 CFR 270.30a-2(c))) based on management's evaluation of these controls and procedures in accordance with Rule 13a-15(c) or 15d-15(c) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(c) or 240.15d-15(c)) and Rule 30a-3(b) under the Investment Company Act of 1940 (17 CFR 270.30a-3(b)) as of the end of the period covered by the report that includes the disclosure required by this paragraph.
(b) Disclose any significant changes to the registrant's internal controls and procedures for financial reporting (as defined in rule 30a-2(d) under the Investment Company Act of 1940 (17 CFR 270.30a-2(d))) made during the period covered by the report that includes the disclosure required by this paragraph, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Item 6. Exhibits.
File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated.
(a) A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
(b) Any written code of ethics, or amendment to that code of ethics, that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions of the registrant, its investment adviser, or its principal underwriter, subject to disclosure under Item 3.
* * * * *
Certifications*
I, [identify the certifying individual], certify that:
1. I have reviewed this report on Form N-CSR, including exhibits, of [identify registrant];
2. Based on my knowledge, this report, including exhibits, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, including exhibits, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in rule 30a-2(c) and (d) under the Investment Company Act of 1940) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal controls and procedures for financial reporting, or caused such internal controls and procedures for financial reporting to be designed under our supervision, to provide reasonable assurances that the registrant's financial statements are fairly presented in conformity with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the end of the period covered by this report ("Evaluation Date");
d) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
e) Disclosed to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design or operation of internal controls and procedures for financial reporting which could adversely affect the registrant's ability to record, process, summarize, and report financial information required to be disclosed by the registrant in the reports that it files or submits under the Securities Exchange Act of 1934 and the Investment Company Act of 1940, within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and
(ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls and procedures for financial reporting; and
f) Indicated in this report any significant changes in the registrant's internal controls and procedures for financial reporting or in other factors that could significantly affect internal controls and procedures for financial reporting made during the period covered by this report, including any actions taken to correct significant deficiencies and material weaknesses in the registrant's internal controls and procedures for financial reporting.
Date: ___________________
______________________
[Signature]
[Title]
* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2). The required certification must be in the exact form set forth above.
By the Commission.
Margaret H. McFarland
Deputy Secretary
October 22, 2002
1 We do not edit personal information, such as names or electronic mail addresses, from electronic submissions. You should submit only information that you wish to make available publicly.
2 17 CFR 249.308.
3 17 CFR 249.310.
4 17 CFR 249.310b.
5 17 CFR 249.308a.
6 17 CFR 249.308b.
7 17 CFR 249.220f.
8 17 CFR 249.240f.
9 17 CFR 249.322.
10 17 CFR 240.12b-25.
11 17 CFR 240.13a-14.
12 17 CFR 240.13a-15.
13 17 CFR 140.15d-14.
14 17 CFR 240.15d-15.
15 15 U.S.C. §78a et seq.
16 17 CFR 228.10 et seq.
17 17 CFR 229.10 et seq.
18 17 CFR 210.1-01 et seq.
19 17 CFR 249.330; 17 CFR 274.101.
20 17 CFR 249.331; 17 CFR 274.128.
21 15 U.S.C. §80a-1 et seq.
22 17 CFR 270.30a-2.
23 See, for example, John Waggoner and Thomas A. Fogarty, "Scandals Shred Investors' Faith: Because of Enron, Andersen and Rising Gas Prices, the Public Is More Wary Than Ever of Corporate America," USA Today, May 5, 2002, and Louis Aguilar, "Scandals Jolting Faith of Investors," Denver Post, June 27, 2002.
24 Pub. L. 107-204, 116 Stat. 745 (2002).
25 The term "registered public accounting firm" is defined in Section 2(a)(12) of the Sarbanes-Oxley Act to mean a public accounting firm registered with the Public Company Accounting Oversight Board (the "PCAOB") in accordance with the Sarbanes-Oxley Act.
26 These include Exchange Act Rules 13a-14, 13a-15, 15d-14, 15d-15, Investment Company Act Rules 30a-2 and 30a-3, Item 307 of Regulations S-B and S-K and the forms of certification included in Forms 10-Q, 10-QSB, 10-K, 10-KSB, 20-F, 40-F, N-SAR and N-CSR.
27 Accounting Series Release (ASR) 123 (March 23, 1972).
28 See the Report of the National Commission on Fraudulent Financial Reporting (1987). This commission, also known as the Treadway Commission, was sponsored by the AICPA, the American Accounting Association, the Financial Executives Institute (now Financial Executives International), the Institute of Internal Auditor and the National Association of Accountants. Collectively, these groups were known as the Committee of Sponsoring Organizations, or COSO.
29 GAO, "CPA Audit Quality: Status of Actions Taken to Improve Auditing and Financial Reporting of Public Companies," at 5 (GAO/AFMD-89-38, March 1989).
30 Release No. 34-42266 (Dec. 22, 1999) [64 FR 73389]. This release addressed numerous issues related to auditor independence.
31 See Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (1999).
32 The NASD rules referred to herein apply to NASDAQ listed companies.
33 NYSE Rule 303.01, NASD Rule 4350(d)(2), AMEX Company Guide §121 and PCX Equities Rule 5.3(b). See also Release No. 34-42233 (December 14, 1999) [64 FR 71529], Release No. 34-42231 (December 14, 1999) [64 FR 71523], Release No. 34-42232 (December 14, 1999) [64 FR 71518], and Release No. 34-43941 (February 7, 2001) [66 FR 10545] respectively.
34 NYSE Rule 303.01 and PCX Rule 5.3(b).
35 NASD Rule 4350(d)(2) and AMEX Company Guide §121.
36 For example, the NASD Manual states that audit committee members must become able to read and understand fundamental financial statements within a reasonable time after being appointed to the audit committee. Similarly, the NYSE listing standard require such appointees to become financially literate, as that term is interpreted by the board of directors, within a reasonable period of time after appointment. Therefore, these rules do not require that members be so qualified at the time of appointment. Also, in general, with respect to foreign private issuers, the self-regulatory organization rules accommodate differences in home country practices regarding, among other things, audit committee composition. The Sarbanes-Oxley Act does not exempt foreign private issuers from the financial expert disclosure requirements. Our proposed rules similarly do not include an exemption for foreign private issuers.
37 Id.
38 The NYSE has indicated that it will await the Commission's interpretation of the definition of the term "financial expert" before proposing amendments to its rules. See File No. SR-NYSE-2002-33 (pending before the Commission). The NASD has indicated that it intends to file rule proposals for the Nasdaq Stock Market with the Commission addressing similar issues. Although we will continue to work with the self-regulatory organizations to reconcile to the extent possible the various definitions of expert.
39 15 U.S.C. §78j-1(m)(3). The Sarbanes-Oxley Act amended the Exchange Act to add this section.
40 Section 3(a)(58) of the Exchange Act, as amended by the Sarbanes-Oxley Act, defines the term "audit committee" as "a committee (or equivalent body) established by and amongst the board of directors of an issuer for the purpose of overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements of the issuer; and . . . if no such committee exists with respect to an issuer, the entire board of directors of the issuer." 15 U.S.C. §78c(a)(58).
41 The Sarbanes-Oxley Act only directs the Commission to adopt rules requiring disclosure of whether or not the audit committee has at least one member who is a financial expert and, if not, why. See Section 407 of the Sarbanes-Oxley Act.
42 See Item 401(e) of Regulation S-K and Item 401(a)(4) of Regulation S-B [17 CFR 229.401(e) and 228.401(a)(4)].
43 See Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (1999).
44 15 U.S.C. 77k.
45 See Section 301 of the Sarbanes-Oxley Act.
46 The Sarbanes-Oxley Act uses the term "comptroller." It is our understanding that a comptroller position generally is the position in a government agency or non-profit organization with oversight responsibilities for the agency's or organization's primary accounting function. We believe that for-profit organizations typically use the term "controller" to describe this function. Therefore, throughout this release, we have used the term "controller" instead of the term "comptroller."
47 See Instructions 1-4 to proposed Item 309 of Regulations S-K and S-B. In particular, we propose to break the four attributes into five attributes and several changes to clarify that the required attributes include experience applying generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves that are generally comparable to those, if any, used in the company's financial statements, and experience preparing or auditing financial statements that present accounting issues that are generally comparable to those raised by the company's financial statements.
48 Section 407 of the Sarbanes-Oxley Act states that, among other attributes, the SEC, in defining the term "financial expert," should consider whether a person has experience with internal accounting controls. This release proposes rules under Section 404, which would require an annual report by management evaluating the effectiveness of its internal controls and procedures for financial accounting (a defined term). We believe that this term has substantially the same meaning as "internal accounting controls" in Section 407. Therefore, we propose to use the newly defined term for consistency.
49 See Section II.A.3., Determination by the Board of Directors of Who Is a Financial Expert, below.
50 This approach is consistent with the approach taken in NASD and NYSE rules. The NASD requires each issuer to have "at least one member of the audit committee that has past employment experience in finance and accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities." NASD Rule 4350(d)(2)(A). Similarly, the NYSE requires at least one member who has "accounting or related financial management expertise." NYSE Listed Company Manual §303.01. Both of these provisions focus on the level of expertise without providing any mechanical formula for determining whether an individual has the requisite expertise.
51 See 17 CFR 201.102(f).
52 See 17 CFR 201.102(e).
53 See Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, at 7 (1999).
54 Referenced in 17 CFR 249.310.
55 Referenced in 17 CFR 249.310b.
56 Therefore if, for example, a director who is the audit committee financial expert resigned or was removed from the board one month after the company filed its annual report, the company would have to disclose this event on a Form 8-K filed within two business days after the director's departure. See Release No. 33-8106 (June 17, 2002) [67 FR 42914]. The proposals in that release have not yet been adopted. The proposals do not require disclosure of whether the departing director is a financial expert. We are seeking comment on whether we should require such disclosure.
57 See General Instruction E(3) to Form 10-KSB [17 CFR 249.310b] and General Instruction G(3) to Form 10-K [17 CFR 249.310].
58 Referenced in 17 CFR 249.220f.
59 Referenced in 17 CFR 249.240f.
60 Referenced in 17 CFR 249.331 and 274.128. A management investment company is an investment company other than a unit investment trust or face-amount certificate company. See Section 4 of the Investment Company Act [15 U.S.C. 80a-4]. A unit investment trust ("UIT") is "an investment company which (A) is organized under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does not have a board of directors, and (C) issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities; but does not include a voting trust." Section 4(2) of the Investment Company Act [15 U.S.C. 80a-4(2)]. A face-amount certificate company is an investment company that engages or proposes to engage in the business of issuing certain face-amount certificates. Section 4(1) of the Investment Company Act [15 U.S.C. 80a-4(1)].
61 The proposed amendments would add similar disclosure requirements applicable to small business investment companies ("SBICs") to Item 102P3 of Form N-SAR. Proposed Instruction (b) to Item 102P3 of Form N-SAR (referenced in 17 CFR 249.330 and 274.101). SBICs are investment companies that are licensed as SBICs under the Small Business Investment Act of 1958. We are proposing to add financial expert disclosure requirements for SBICs to Form N-SAR because SBICs would not be required to file reports on proposed Form N-CSR.
62 Proposed Instruction 3 to Item 4 of proposed Form N-CSR; proposed Instruction (b)(3) to Item 102P3 of Form N-SAR.
63 Proposed Instructions 2 and 4 to Item 4 of proposed Form N-CSR.
64 Proposed Item 4 of proposed Form N-CSR.
65 We expect that many companies already have a code of ethics that applies to these officers, as well as additional officers, directors and employees. We encourage companies to apply the code of ethics to as broad a spectrum of personnel and affiliates as practicable.
66 The Sarbanes-Oxley Act Section 406(c) definition of the term "code of ethics" does not include the phrase "to deter wrongdoing" that we have incorporated into proposed Item 406 of Regulations S-K and S-B, but we think that it is appropriate to expand the definition in this manner. Although codes of ethics typically are designed to promote high standards of ethical conduct, they also generally seek to instruct those to whom they apply as to improper or illegal conduct or activity and to prohibit such conduct or activity.
67 Under our proposal, although the company would retain discretion to determine the identity of the appropriate person or persons, such person should not be involved in the matter giving rise to the conflict of interest. Furthermore, we believe the person identified in the code should have sufficient status within the company to engender respect for the code and the authority to adequately deal with the persons subject to the code regardless of their stature in the company.
68 We propose to add "laws" to this prong of the proposed definition. The Sarbanes-Oxley Act Section 406(c) definition refers only to compliance with applicable governmental rules and regulations. This language also is intended to ensure compliance with other provisions of the Sarbanes-Oxley Act, including "up-the-ladder" reporting by lawyers, "whistleblower" protection and the enhanced conflict of interest provisions
69 The concerns regarding the identification of appropriate persons for the reporting of potential conflicts of interest discussed above would similarly apply to the reporting of violations of the code.
70 There are a number of provisions in the Sarbanes-Oxley Act that require internal reporting of events. We believe that it is incumbent upon public companies to coordinate these requirements.
71 See proposed Item 601(b)(14) of Regulations S-K and S-B. Section 406 of the Sarbanes-Oxley Act does not state that our rules must require a company to file a copy of the code of ethics as an exhibit to its annual report, but we think investors may be interested in examining the actual code itself, given that codes are likely to vary significantly from one company to another.
72 Exchange Act Rule 3b-7 [17 CFR 240.3b-7] defines the term "executive officer" as a registrant's president, any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function or any other person who performs similar policy-making functions for the registrant. Executive officers of subsidiaries may be deemed executive officers of the registrant if they perform such policy-making functions for the registrant.
73 On August 16, 2002, NYSE submitted proposed new listing standards that would, among other things, require all NYSE listed companies to adopt a code of business conduct and ethics consistent with the principles enumerated in the listing standards. See File No. SR-NYSE-2002-33. The NASD has indicated that it intends to propose new listing standards that would require a code of conduct for NASDAQ listed companies.
74 This disclosure would be required by Item 10 of Form 10-K and Item 9 of Form 10-KSB.
75 Under the proposed rules this would also include an implicit waiver due to inaction on the part of the company with respect to a reported or known violation of a code provision.
76 See Release No. 33-8106 (June 17, 2002) [67 FR 42914].
77 See proposed Item 5.05 to Form 8-K. In Release No. 33-8106, we proposed to reorganize and renumber the Form 8-K items as part of our Form 8-K proposals. The proposed Item 5.05 designation is consistent with the renumbering scheme proposed in that release.
78 A two business day filing period is consistent with the accelerated filing deadline that we proposed in Release No. 33-8106.
79 Section 406(b) of the Sarbanes-Oxley Act states that our rules should require a company to report this disclosure on Form 8-K or by "dissemination by the Internet or by other electronic means." Our proposed rules would permit optional dissemination of the required disclosure through the company's website; it is not clear whether there are "other electronic means" that would result in widespread dissemination of the disclosure that would be accessible by a company's investors and potential investors. This release seeks comment on that issue.
80 We are allowing website disclosure in these limited circumstances consistent with the terms of Section 406 of the Sarbanes-Oxley Act. The present proposal does not indicate that the Commission deems website postings as sufficient to broadly and simultaneously disseminate information to the public in other contexts.
81 A company choosing to post proposed disclosure about a change to its code of ethics on its website also would have to post a copy of the amended provision on its website.
82 See proposed Item 406(b) of Regulations S-K and S-B. Because investors may not expect these disclosures to be made on the company's website in lieu of a Form 8-K filing, we are proposing to require a company to provide investors with advance notice that it may choose to use this option. Otherwise, investors may be confused regarding the location of this disclosure.
83 Proposed Item 406 of Regulations S-B and S-K.
84 See Exchange Act Rules 13a-11 and 15d-11 [17 CFR 240.13a-11 and 15d-11].
85 Referenced in 17 CFR 249.306.
86 See Exchange Act Rule 13a-16 [17 CFR 240.13a-16].
87 See proposed Instructions (a)(1) and (a)(7) to Item 102P3 of Form N-SAR; proposed Item 3(a) and proposed instruction to Item 3(a) of proposed Form N-CSR. In the case of a UIT, the code of ethics disclosure requirements would apply with respect to the UIT's sponsor, depositor, trustee, and principal underwriter. Proposed Item 133(a) of Form N-SAR.
88 Proposed Item 133(a) and Instruction (a)(1) to Item 102P3 of Form N-SAR; proposed Item 3(a) of Form N-CSR.
89 Proposed Item 133(b) and (c), proposed Instructions (a)(2) and (a)(3) to Item 102P3 and proposed Instruction (c) to Item 133 of Form N-SAR; proposed Item 3(b) and 3(c) and proposed Instruction 3 to Item 3 of proposed Form N-CSR.
90 Item 134(b) and proposed Instruction (a)(4) to Item 102P3 of Form N-SAR; proposed Item 6(b) of proposed Form N-CSR.
91 See proposed Item 3 of proposed Form N-CSR (management investment companies, other than SBICs); proposed Instruction (a) to Item 102P3 of Form N-SAR (SBICs); proposed Items 133 and 134(b) of Form N-SAR (UITs).
92 Proposed Instruction (a)(6) to Item 102P3 and proposed Instruction (b) to Item 133 of Form N-SAR; proposed Instruction 2 to Item 3 of proposed Form N-CSR. See Section II.B.2. above, "Description of the Proposed Code of Ethics Disclosure Requirements."
93 17 CFR 270.17j-1.
94 Proposed General Instruction D to Form N-CSR would permit a registered management investment company to incorporate its code of ethics by reference from another document, such as the fund's registration statement. See Item 23(p) of Form N-1A; Item 24.2.r of Form N-2; Item 28(b)(17) of Form N-3 (requiring codes of ethics required by Rule 17j-1 to be filed as exhibits to registration statements).
95 Proposed Instruction 1 to Item 3 of proposed Form N-CSR; proposed Instruction (a)(5) to Item 102P3 of Form N-SAR. See also Investment Company Act Rule 17j-1(c)(3) [17 CFR 270.17j-1(c)(3)].
96 Proposed Items 133 and 134(b) of Form N-SAR.
97 Proposed Instruction (a) to Item 133 of Form N-SAR.
98 See Investment Company Act Rule 31a-2 [17 CFR 270.31a-2] (requiring retention by registered investment companies of various types of records for not less than six years).
99 Section 404 of the Sarbanes-Oxley Act, and any rules of the Commission under Section 404, do not apply to any registered investment company. Section 405 of the Sarbanes-Oxley Act. See Section II.C.4 below "Registered Investment Companies."
100 Section 404 also requires every registered public accounting firm that prepares or issues an audit report for a company to attest to, and report on, the assessment made by the management of a company.
101 Title I of Pub. Law No. 95-213 (1977). Partially codified in 15 U.S.C. §78m(b)(2), these provisions require issuers, with securities registered under Section 12 of the Exchange Act, to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and to devise and maintain a system of internal accounting control sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary (a) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (b) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
102 Release No. 34-15772 (April 30, 1979) [44 FR 26702].
103 Release No. 34-16877 (June 6, 1980) [45 FR 40134].
104 Release No. 34-25925 (July 19, 1988) [53 FR 28009].
105 Committee of Sponsoring Organizations of the Treadway Commission, Internal Control-Integrated Framework, (August 1992) (the "COSO Report").
106 A proposed instruction to Item 307 of Regulations S-K and S-B, Item 15(a) of Form 20-F and Instruction B.(7) of Form 40-F states that if the conclusions of the company's principal executive and financial officers are reflected in management's conclusions disclosed in the internal control report, the company does not have to include any separate disclosure required by Item 307(a) (or relevant provision in the foreign forms) regarding the conclusions of those officers about the effectiveness of the company's internal controls and procedures for financial reporting in its report for its fourth fiscal quarter. Another proposed instruction to those provisions states that the company is encouraged, but not required, to include the disclosure required by Item 307(b) (or relevant provision in the foreign forms) for the company's fourth fiscal quarter in the annual internal control report, rather than disclose this information separately.
107 See American Institute of Certified Public Accountants (AICPA), Codification of Statements on Auditing Standards (AU) §319.53, "Internal Control in a Financial Statement Audit."
108 In this release we use the term "internal controls" and "internal control structure" synonymously.
109 See Release No. 33-8124 (August 29, 2002) [67 FR 57276].
110 See Committee on Auditing Procedure, AICPA, Statement on Auditing Procedure No. 29, "Scope of the Independent Auditor's Review of Internal Control" (1958).
111 See Committee on Auditing Procedure, AICPA, Statement on Auditing Procedure No. 54. The FCPA codified the accounting control provisions of SAP No. 54, see note 58.
112 Auditing Standards Board, AICPA, Statement on Auditing Standards No. 78, "Consideration of Internal Control in a Financial Statement Audit: An Amendment to SAS No. 55" (1995).
113 Among other things, Section 103 of the Act [Pub. L. 107-204 §103] directs the Public Company Accounting Oversight Board to adopt auditing standards that would require all registered public accounting firms to present in each audit report or in a separate report: (1) the scope of the auditor's testing of the internal control structure and procedures of the issuer; (2) the findings of the auditor from such testing; (3) the auditor's evaluation of whether such internal control structure and procedures include maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer, provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (4) a description, at a minimum, of material weaknesses in such internal controls, and of any material noncompliance found on the basis of such testing.
114 We believe that this definition integrates the various concepts of internal control into a unified concept that is widely understood by the accounting profession and issuers.
115 See Section 405 of the Sarbanes-Oxley Act, which states that rules under Section 404 of the Act shall not apply to registered investment companies.
116 See proposed Items 210.1-02(b) and 210.2-02(d) of Regulation S-X.
117 These reports include quarterly reports on Form 10-Q or 10-QSB, annual reports on Form 10-K, 10-KSB, 20-F or 40-F, current reports, definitive proxy materials filed under Section 14(a) of the Exchange Act [15 U.S.C. §78n(a)], definitive information statements filed under Section 14(c) of the Exchange Act [15 U.S.C. §78n(c)] and amendments to any of these reports or documents.
118 See Exchange Act Rules 13a-14(c) and 15d-14(c).
119 In addition, we adopted corresponding amendments to Forms 20-F and 40-F for private foreign issuers. See 17 CFR 249.220f and 17 CFR 249.240f.
120 Rules 13a-15(b) and 15d-15(b). As originally adopted, Rules 13a-15 and 15d-15 required the company to carry out this evaluation under the supervision of, and with the participation of the company's management, including the company's principal executive and financial officers. To better reconcile this requirement with the proposed rules under Section 404 of the Sarbanes-Oxley Act, we propose to revise these rules to state more directly that company's management, rather than the company itself, must undertake the required evaluations with the participation of the principal executive and financial officers.
121 Rules 13a-15(b) and 15d-15(b).
122 We have also made several clarifying amendments. In particular, the current certification would require management to disclose significant deficiencies to the auditors and audit committee, and identify material weaknesses to the auditors. The accounting literature states that a "reportable condition" is one that represents significant deficiencies in the design or operation of internal control. AICPA Codification of Statements on Auditing Standards, Section 325. A material weakness is a reportable condition of a magnitude discussed in the literature. Id. Therefore, material weaknesses are a subset of significant deficiencies. To clarify, and amplify, that significant weaknesses, including material weaknesses must be disclosed to the auditor and audit committee, we have proposed clarifying language. We have also added language to clarify that the certifying officers need not personally design the company's controls and procedures, and may have such controls and procedures designed under their supervision. In so doing, we recognize that the certifying officers may not have appropriate expertise to do so, and in such case should obtain assistance from third parties. We have also clarified that the reports conclusions must be based on the certifying officers' evaluation as of the end of the period covered by the report.
123 12 U.S.C. §1831m.
124 The designated laws and regulations are federal laws and regulations concerning loans to insiders and federal and state laws and regulations concerning dividend restrictions. See 12 CFR Part 363, Appendix A, Guideline 12.
125 See 12 CFR 363.2, adopted in 58 FR 31332.
126 12 CFR 363.3.
127 This rating is more commonly known as the CAMELS rating, which addresses Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. See 12 CFR 363.1(b)(2).
128 Most notably, proposed Item 307(b) and (c) of Regulations S-K and S-B would not require a statement of compliance with laws and regulations as is required by FDIC Rule 363.2 [12 CFR 363.2].
129 See Section 405 of the Sarbanes-Oxley Act ("Nothing in section 401, 402, or 404, the amendments made by those sections, or the rules of the Commission under those sections shall apply to any investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8)."). The provisions that would not extend to registered investment companies include proposed amendments to Item 307(a) of Regulation S-K, Exchange Act rules 13a-14(b)(4)(iii) and (iv), 13a-15(b), 15a-14(b)(4)(iii) and (iv), and 15d-15(b) (disclosure of effectiveness of internal controls and procedures for financial reporting); proposed Item 307(c) of Regulation S-K (management report on internal controls); and proposed Item 210.2-02(d) of Regulation S-X (attestation to, and report on, management's internal control report).
130 The proposed amendments would delete Item 1 of proposed Form N-CSR.
131 Referenced in 17 CFR 249.322.
132 See Release No. 33-8124 (Aug. 28, 2002) [67 FR 57276, 57282 n. 86].
133 Such standards would be subject to approval by the Commission.
134 See Release No. 33-8124 (August 29, 2002) [67 FR 57276].
135 Id.
136 See, for example, Release No. 34-16520 (January 23, 1980) (order granting application pursuant to Section 12(h) of the Exchange Act [15 U.S.C. §78l(h)] of Home Savings and Loan Association); Release No. 34-14446 (February 6, 1978) (order granting application pursuant to Section 12(h) of Bank of America National Trust and Savings Association); Bay View Securitization Corporation (January 15, 1998); and Key Bank USA, National Association (May 9, 1997).
137 44 U.S.C. §3501 et seq.
138 Annual Responses × Total Hours per Form
139 The staff estimated the average number of hours each entity spends completing the form, and the average hourly rate for outside securities counsel, by contacting a number of law firms and other persons regularly involved in completing the forms. For Forms 20-F and 40-F, we estimate that 25% of the burden is imposed on the company and 75% of the burden is attributed to costs of third parties.
140 17 CFR 243.100-103.
141 This number assumes adoption of the proposals in Release No. 33-8090 (April 12, 2002) [67 FR 19914] If adopted, those proposals would cause companies to file estimated additional 215,500 Form 8-K reports each year.
142 15 U.S.C. §78w(a)(2).
143 15 U.S.C. §77b(b).
144 15 U.S.C. §78c(f).
145 17 CFR 240.0-10(a).
146 Item 10 of Regulation S-B (17 CFR 228.10) defines a small business issuer as a company that has revenues of less than $25 million, is a U.S. or Canadian issuer, is not an investment company, and has a public float of less than $25 million. Also, if it is a majority owned subsidiary, the parent corporation also must be a small business issuer. Rule 0-10 of the Exchange Act (17 CFR 240.10) defines a small entity for purposes of the Regulatory Flexibility Act as a company that, on the last day of its most recent fiscal year, had total assets of $5 million or less.
147 Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
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