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March 2007 Published by RR Donnelley Editorial Content by LegalWorks Blake A. Bell, Editor in Chief In This Issue:
SEC I: SEC Adopts Rule Defining When Foreign Private Issuer Can Terminate Exchange Act Registration and Reporting Obligations
Under Rule 12h-6, a foreign private issuer will be eligible to terminate its registration of securities under Exchange Act section 12(g), or its reporting obligations regarding a class of equity securities under Exchange Act section 15(d), if it meets a quantitative benchmark, which is not based on a head count of its shareholders, as are the current exit rules. An issuer of equity securities will be able to terminate its Exchange Act registration and reporting obligations, assuming it meets the other conditions of Rule 12h-6, if the average daily trading volume of the subject class of securities in the United States has been 5 percent or less of the worldwide average daily trading volume of that class of securities for a recent 12-month period. 
SEC II: SEC Joins Other Regulators Seeking Comment on Model Privacy Notice
The proposed notice follows the enactment last year of the "Financial Services Regulatory Relief Act of 2006". That statute amended Gramm-Leach-Bliley to require the agencies to propose a model form that is "succinct and comprehensible to consumers, allows consumers easily to compare privacy practices of financial institutions, and uses easily readable type font". The proposed model privacy form is the "prototype privacy notice" developed by six of these federal agencies after what has been described as a "year-long consumer testing process". A detailed report describing the testing and resulting prototype privacy notice was released by these agencies in March 2006. The Notice of Proposed Rulemaking proposes that a financial institution that chooses to use the model form would satisfy the disclosure requirements for the notices and, thus, could take advantage of a legal "safe harbor" under the statute. The Notice of Proposed Rulemaking also proposes to remove, after a transition period, the sample clauses now included in some of the agencies' privacy rules.
SEC III: SEC Announces Filing Date Adjustment for Electronic TA Submissions
In the meantime, however, on March 21 the Commission announced that it "will adjust the filing date of any Form TA-1 or Form TA-2 filed between April 1, 2007 and May 31, 2007. The filing dates of those forms will be adjusted to March 31, 2007 (please note that the filing date will not be adjusted in EDGAR until after June 1, 2007)." As a consequence, according to the Commission, any Form TA-2 due by March 31, 2007 will not be treated as untimely filed if it is submitted on EDGAR by May 31, 2007".
SEC IV: SEC Conducts March 19 Roundtable on Creating Interactive Data To Serve Investors
The event began with opening remarks from SEC Chairman Christopher Cox. Vanguard Group Chairman and CEO John J. Brennan delivered a keynote address of sorts on the use of interactive data by public companies and mutual funds to improve disclosure for individual investors. Following Mr. Brennan's remarks, John White, Director of the Commission's Division of Corporation Finance, addressed the creation of interactive financial reports by public companies. There followed a panel discussion on the benefits -- including potential cost savings -- of preparing financial reports using interactive data written in XBRL. The panel was moderated by Chicago Sun-Times personal finance columnist Terry Savage. Richard Bennett, Chief Executive Officer of The Corporate Library, provided closing remarks and discussed the significance of interactive data for corporate governance. The first link above provides access to an archived copy of the Webcast of the Roundtable accessible via WindowsMedia or RealMedia.
SEC V: SEC and U.S. Attorney Charge Offshore Hackers with Hijacking Online Brokerage Accounts
According to the allegations, between July and November 2006, the defendants repeatedly hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords. Prior to intruding into these accounts, the defendants acquired positions in the securities of at least fourteen securities, including Sun Microsystems, Inc., and “out of the money” put options on shares of Google, Inc. Then, without the accountholders' knowledge, and using the victims' own accounts and funds, the Defendants placed scores of unauthorized buy orders at above-market prices. After these unauthorized buy orders were placed, the Defendants sold the positions held in their own accounts at the artificially inflated prices, realizing profits of over $121,500. According to the Commission, Hong Kong authorities have arrested two of the defendants. The third remains at large.
IOSCO I: IOSCO Releases Paper for Public Consultation Entitled "Principles for the Valuation of Hedge Funds"
In general, the proposed principles outline techniques that IOSCO believes will strengthen the process for valuing hedge funds. The closing date for comments on the proposed principles is June 21, 2007.
IOSCO II: IOSCO Issues Final Report on Board Independence of Listed Companies
The report also details what it describes as standards related to board independence including: (1) general standards intended to facilitate the board's exercise of "objective independent judgment"; (2) appointment and termination of board members; (3) compensation of board members; (4) the concept of "independent" board members; and (5) specialized board committees and the role of independent board members.
PRACTICAL GUIDANCE: Courtesy of RealCorporateLawyer.com RealCorporateLawyer.com provides its readers with free access to a very large collection of law firm memoranda providing practical guidance on current hot topics. Readers are encouraged to visit the frequently-updated "Emerging Legal Issues" area of the home page for such current memoranda, as well as the Expert Analysis: SEC Reform Portal section containing hundreds of other such memoranda. Recent additions include:
COMINGS AND GOINGS: Who's Doing and Saying What and Where? On March 20, the Commission announced that Andrew Petillon has been appointed as an Associate Regional Director for Enforcement in the Commission's Regional Office located in Los Angeles . See U.S. Securities and Exchange Commission, Andrew Petillon Named Associate Regional Director and Co-Head of Enforcement for the SEC's Pacific Regional Office, News Release 2007-48 (Mar. 20, 2007). The SEC announced on March 15 that Joan Loizeaux has been named Associate General Counsel for Adjudication. See U.S. Securities and Exchange Commission, Joan Loizeaux Named Associate General Counsel for Adjudication, News Release 2007-43 (Mar. 15, 2007). On March 16, NASD announced leadership and structural moves for the new, consolidated SRO. The new SRO's Member Regulation function will be split into two departments. Grace Vogel will head the new SRO's Department of Risk Oversight and Operational Regulation. Robert Errico will lead the Department of Sales Practice Regulation. The NASD and NYSAE enforcement departments will be fully integrated into a single Enforcement Department. Susan Merrill , who is in charge of Enforcement at NYSE Regulation, will be Chief of the combined operation and will be based in New York . NASD's current Enforcement chief, James Shorris , will serve as Executive Director and will be based in Washington . NYSE Regulation's Office of Risk Assessment and the NASD Office of Emerging Issues will be combined into a single group, which will report to Elisse Walter . Linda Fienberg , who runs NASD Dispute Resolution, will head the new SRO's Office of Dispute Resolution, which will combine NYSE Regulation's arbitration program with NASD's arbitration and mediation programs. The integration of the two organizations' technology portfolios will be led by NASD's Chief Technology Officer, Marty Colburn , supported by NYSE's Angela Posillico . Technology, as well as Strategy, Registration and Disclosure, Testing and Continuing Education, Member Relations, Transparency Services and International will continue to report to NASD's Doug Shulman . See NASD, Schapiro Announces Leadership and Structural Moves for New, Consolidated SRO, News Release (Mar. 16, 2007). On February 26, NYSE Group, Inc. announced the appointment of Duncan L. Niderauer to the position of President and Co-Chief Operating Officer effective April 9, 2007. See NYSE, Duncan L. Niederauer Joins NYSE Group as President and Co-Chief Operating Officer, News Release (Feb. 26, 2007). What Are the Commissioners and Commission Staffers Saying? SEC Chairman Christopher Cox delivered "Closing Remarks to the Second Annual Corporate Governance Summit" on March 23. Chairman Cox also delivered an "Address to the Joint Meeting of the National Endowment for Democracy and the Foreign Policy Association" and "Remarks to the U.S. Chamber of Commerce's First Annual Capital Market's Summit - Securing America's Competitiveness", both on March 14. Chairman Cox delivered a "Videotaped Address to the 2007 Australian Securities and Investment Commission Summer School" and also an "Address to the SEC Roundtable on International Financial Reporting Standards", both on March 6. Chairman Cox also delivered "Remarks Before the Women's History Month Program" on March 5 and "Opening Remarks at African American History Month Celebration" on February 22. SEC Commissioner Roel C. Campos also has been a busy speaker. He recently delivered "Remarks Before the Governance for Owners Conference" (March 22), "Remarks at the Open Meeting - Foreign Private Issuer Deregistration" (March 21), "Remarks Before the Association Francaise des Entreprises Privees" (March 8), Remarks Regarding "SEC Regulation Outside the United States" (Mar. 8, 2007), "Remarks Before the Hedge Fund Institutional Forum Corporate Funds Roundtable" (March 5, 2007), and "Remarks Before the Mutual Fund Directors Forum First Annual Directors Institute" (February 28). SEC Commissioner Anette L. Nazareth also delivered a number of recent speeches including "Opening Statement on Foreign Private Issuer Deregistration Final Rules" (March 21) and "Remarks Before the Council of Institutional Investors" (March 20). Commissioner Paul S. Atkins spoke recently as well. He delivered "Comments on Final Deregistration Rules at the SEC Open Meeting" (March 21, 2007), "Remarks Before the National Association for Business Economics" (March 13) and "Remarks Before the Annual Washington Conference of the Institute of International Bankers" (March 5, 2007). Commission Staffers have been nearly as busy as the Commissioners in the last month. Linda Chatman Thomsen , Director of the SEC's Division of Enforcement, delivered "Remarks at a Press Conference" Concerning Collins & Aikman Corporation (March 26), "Remarks Before the IA Week and the Investment Adviser Association 9th Annual IA Compliance Best Practices Summit 2007" (March 22), "Remarks at the 2007 Corporate Counsel Institute" (March 8), "Remarks at ‘Operation Spamalot' Press Conference" (March 8) and "Statement Concerning SEC v. Guttenberg" (March 1). Lori A. Richards , the SEC's Director of OCIE, spoke March 23 regarding the "SEC's Compliance Examinations in the Protection of Investors". John W. White, the Commission's Director of the Division of Corporation Finance, spoke recently regarding: "Seeing Down the Road: IFRS and the U.S. Capital Markets" (March 23) and "The Promise of Transparency - Corporation Finance in 2007" (February 23). Andrew J. Donohue , Director of the SEC's Division of Investment Management, delivered "Remarks Before the IA Week and the Investment Adviser Association 9th Annual IA Compliance Best Practices Summit 2007" (March 22), "Remarks Before the American Bar Association Section of Business Law Spring Meeting" (March 16), and "Keynote Address at the Mutual Fund Directors Forum Institute" (March 1, 2007). Elliot Staffin , Special Counsel in the SEC's Division of Corporation Finance, delivered "Opening Remarks at the SEC Open Meeting" regarding adoption of Exchange Act Rule 12h-6 (March 21). The Commission's Chief Economist, Chester S. Spatt , recently has delivered remarks entitled "Economic Analysis and Cost-Benefit Analysis: Substitutes or Complements?" (March 15) and "The Economics of FIN 48: Accounting for Uncertainty in Income Taxes" (March 8). Mark K. Schonfeld , the SEC's Director of the New York Regional Office, delivered "Remarks at 'Operation Spamalot' Press Conference" (March 8). Erik R. Sirri , Director of the Commission's Division of Market Regulation, spoke on March 1 regarding "Trading Foreign Shares."
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©2008 RR Donnelley This free E.Zine is provided for informational purposes only and does not constitute legal advice. RR Donnelley & Sons Company is not engaged in rendering legal or other professional services. Publication on this E.Zine is not intended to create, and the information contained hereon does not constitute, an attorney-client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent professional counsel. The RR Donnelley Financial Services Group provides a range of solutions to address all of your business communications needs. We offer financial printing services to the capital and investments markets, as well as judgment-based outsourcing and real estate services. Through our integrated global network, we file more than 50,000 documents annually with the SEC and produce many of the critical documents for regulatory compliance and financial transactions. Our BPO services leverage an on-site/offshore delivery model, leading subject matter experts and state-of-the-art, global operations to assume functions of our clients' business. We add value through highly personalized and around-the-clock service, single-source solutions, Venue virtual data rooms, worldwide regulatory and industry expertise, and insight that comes from over 140 years of experience and achievement. For more information, visit us at www.financial.rrd.com or www.RealCorporateLawyer.com , a reference resource site for corporate and securities lawyers.
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