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December 2007 Published by RR Donnelley Editorial Content by LegalWorks Blake A. Bell, Editor in Chief In This Issue:
SEC I: SEC Releases RAND Report on the Investment Adviser and Broker-Dealer Industries
RAND delivered the report three months before it was required to do so under the contract due to an interesting development previously reported by RealCorporateLawyer.com. In March 2007, a Federal Court of Appeals overturned a 2005 SEC rule permitting non-adviser broker-dealers to charge fees to investors based on account size. Consequently, the Commission and RAND agreed that RAND would release a "pre-publication" version of its report on December 31, 2007 -- three months before the final report is due on March 25, 2008. Interestingly, in its announcement of the release of the pre-publication version of the report, the SEC emphasized that "[n]either the data nor the analysis on which it is based will change". The 219-page report is intended to assist the Commission in future efforts to update its investment adviser and broker-dealer regulations. The report provides a detailed factual description of the current state of the investment advisory and brokerage industries with particular emphasis on how trends in the financial service market since the early 1990s have blurred the boundaries between them. 
SEC II: Commission Issues Two Fee Rate Advisories in Last Days of 2007
Five days later, on December 26, President Bush signed H.R. 2764, the appropriations bill that includes funding for the Commission. Consequently, on December 27 the Commission announced that effective December 31, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions increased to $39.30 per million dollars. (The Section 6(b) rate is also the rate used to calculate the fees payable with the Annual Notice of Securities Sold Pursuant to Rule 24f-2 under the Investment Company Act of 1940.) The Commission further announced that effective Jan. 25, 2008, the Section 31 fee rate applicable to securities transactions on the exchanges and over-the-counter markets will decrease to $11.00 per million dollars. The Section 31 assessment on security futures transactions will remain unchanged at $0.0042 per round turn transaction.
SEC III: SEC Unveils New "Executive Compensation Reader", an Online Tool for Comparisons of Executive Pay
The tool allows users to select a company by ticker symbol or name or to look at companies by levels of market capitalization or annual revenue. Upon generation of the compensation tables, users will see the following categories of data: (1) name and principal position; (2) year; (3) salary; (4) bonus; (5) stock awards; (6) option awards; non-equity incentive plan compensation; (7) change in pension value and nonqualified deferred compensation earnings; (8) all other compensation; and (9) total. The data can be viewed in tabular or graph format and can be exported into Microsoft Excel. The data can be presented through three valuation methods: (1) GAAP; (2) Estimated Potential Value at Grant Date; and (3) Both Valuation Methods.
SEC IV: SEC Issues Year-End Guidance for Expensing Employee Stock Options
The new SAB 110 expresses the views of the staff regarding the use of the "simplified" method set forth in SAB 107 to develop an estimate of expected term of "plain vanilla" share options in accordance with Statement of Financial Accounting Standards No. 123 ("Share-Based Payment" revised 2004). The staff indicated in SAB 107 that it would accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. According to the Commission, at the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff now believes that such detailed information about employee exercise behavior is not as widely available as it previously had hoped. Accordingly, the staff will continue to accept, under certain circumstances specified in SAB 110, the use of the simplified method beyond December 31, 2007.
SEC V: SEC Issues Concept Release Soliciting Comment on Oil and Gas Disclosure Requirements
The oil and gas reserves disclosure requirements exist in their current form in Rule 4-10 of Regulation S-X and Item 102 of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934. Under these rules, companies must include disclosure of their proved oil and gas reserves in their Commission filings. The purpose of the Concept Release is to solicit comment on how disclosure quality and reliability could be affected by possible changes to the Commission's reserves disclosure requirements. Additionally, the Commission seeks comment on whether it should expand its rules to require independent third party verification of the reserves disclosures that companies include in their filings with the SEC. The Commission is particularly interested in commenters’ views on whether such a requirement would be feasible or necessary.
SEC VI: SEC Approves Changes To Facilitate Smaller Company Access to Capital Markets
In its announcement, the Commission noted that the amendments to Forms S-3 and F-3 will allow companies with less than $75 million in public float to register primary offerings of their securities on these forms, provided that they:
RealCorporateLawyer.com is pleased to make law firm memo guidance on these developments available to its readers. See:
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? December was a quiet month for moves. The NYSE, Amex, FINRA, PCAOB, FASB and AICPA issued no announcements of executive moves. The SEC, however, issued two such announcements. On December 5, the SEC announced that John Loesch has been named Deputy Director of the Commission's Office of Investor Education and Advocacy. He previously served in the SEC's Division of Enforcement as Senior Counsel and Branch Chief. See U.S. Securities and Exchange Commission, John Loesch Named Deputy Director in SEC's Office of Investor Education and Advocacy, News Release 2007-252 (Dec. 5, 2007). The Commission also announced on December 5 that H. David Kotz has been named the agency's new Inspector General. He previously served as Inspector General of the Peace Corps. See U.S. Securities and Exchange Commission, H. David Kotz Named New Inspector General at SEC, News Release 2007-251 (Dec. 5, 2007). What Are the Commissioners and Commission Staffers Saying? On December 19, SEC Chairman Christopher Cox delivered the "Keynote Address to the Columbia Law and Business Schools" at the Cross Border Securities Market Mergers Conference in New York. Chairman Cox also delivered "Remarks Before the Commission Open Meeting Regarding PCAOB Budget and Accounting Support Fees" on December 18 (Windows Media Player Video File). During the Commission's December 11 open meeting, Commissioner Paul S. Atkins delivered "Statement at Open Meeting to Consider PCAOB's Proposed 2008 Budget". During the same meeting, Chairman Cox delivered "Remarks Before the Commission Open Meeting Regarding Concept Release on Possible Revisions to the Disclosure Requirements Relating to Oil and Gas Reserves" (Windows Media Player Video File). Also at the same meeting Chairman Cox delivered "Remarks Before the Commission Open Meeting Regarding Electronic Filing and Revision of Form D" and "Remarks Before the Commission Open Meeting Regarding Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S-3 and F-3" (Both Windows Media Player Video Files). Commissioner Kathleen L. Casey delivered "Remarks at the 35th Annual AICPA National Conference on Current SEC and PCAOB Developments" on December 10. Chairman Cox spoke on December 10 in Washington, D.C. regarding "The Rise of Sovereign Business". Chairman Cox also delivered "Remarks Introducing 'The Hub'" on December 4. Janet Luallen, an Associate Chief Accountant with the Commission, delivered "Remarks Before the 2007 AICPA National Conference on Current SEC and PCAOB Developments" on Dec. 12. Several Commission Staffers delivered remarks during the Commission's December 11 open meeting including: Mellissa Campbell, Attorney-Adviser, Division of Corporation Finance ("Opening Statement of the Division of Corporation Finance: Oil and Gas Concept Release"); Corey A. Jennings, Attorney-Adviser, Division of Corporation Finance ("Opening Statement of the Division of Corporation Finance Regarding Electronic Filing and Revision of Form D"); and Daniel Greenspan, Special Counsel, Division of Corporation Finance ("Opening Statement of the Division of Corporation Finance Regarding Revisions to the Eligibility Requirements of Forms S-3 and F-3"). A large number of Commission Staffers also delivered remarks on December 10 and December 11 before the 2007 AICPA National Conference on Current SEC and PCAOB Developments including: Todd E. Hardiman, Associate Chief Accountant, Division of Corporation Finance (Remarks; Slide Presentation); Stephanie L. Hunsaker, Associate Chief Accountant, Division of Corporation Finance (Remarks; Slide Presentation); Steven C. Jacobs, Associate Chief Accountant, Division of Corporation Finance (Remarks; Slide Presentation); Joel K. Levine, Associate Chief Accountant, Division of Corporation Finance (Remarks; Slide Presentation); Linda Chatman Thomsen, Director of the Division of Enforcement (Remarks); Julie A. Erhardt, Deputy Chief Accountant, Office of the Chief Accountant (Remarks); Mark Barrysmith, Professional Accounting Fellow, Office of the Chief Accountant (Remarks); Ashley W. Carpenter, Professional Accounting Fellow, Office of the Chief Accountant (Remarks); Conrad W. Hewitt, Chief Accountant (Remarks); Josh Jones, Professional Accounting Fellow, Office of the Chief Accountant (Remarks); Len Jui, Associate Chief Accountant, Office of the Chief Accountant (Remarks); Vassilios Karapanos, Associate Chief Accountant, Office of the Chief Accountant (Remarks); Sandie E. Kim, Professional Accounting Fellow, Office of the Chief Accountant (Remarks); Katrina A. Kimpel, Professional Accounting Fellow, Office of the Chief Accountant (Remarks); James L. Kroeker, Deputy Chief Accountant, Office of the Chief Accountant (Remarks); Zoe-Vonna Palmrose, Deputy Chief Accountant for Professional Practice (Remarks); and Eric C. West, Associate Chief Accountant, Office of the Chief Accountant (Remarks). Andrew J. Donohue, Director of the Division of Investment Management, delivered "Remarks Before the ICI 2007 Securities Law Developments Conference" on Dec. 6.
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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.
RR Donnelley Financial is a business of RR Donnelley (DNY).
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