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January 2008

Published by RR Donnelley
Editorial Content by LegalWorks
Blake A. Bell, Editor in Chief

In This Issue:

SEC I: New Agent Bank for SEC - Beginning Feb 4, 2008 Send Filing Fees to U.S. Bank of St. Louis, Missouri
SEC II: SEC Staffers Rule that Fidelity Cannot Exclude Shareholder's "Genocide-Free" Investment Policy Proposal from Proxy
SEC IIII: Subprime Meltdown Prompts Commission to Update Rules on How Mutual Funds Value Holdings
SEC IV: SEC Issues Final Rule Release on Electronic Shareholder Forums
SEC V: SEC Releases Draft Decision Memo of its Advisory Committee on Improvements to Financial Reporting
SEC VI: SEC's Director of OCIE Answers "Frequently-Asked Questions" Regarding SEC Examinations

SEC VII: SEC Considering Easing Limits on U.S. Investors' Access to Foreign Exchanges and Foreign Investors' Access to U.S. Exchanges
PCAOB: PCAOB Adopts New Auditing Standard No. 6: Evaluating Consistency of Financial Statements
PRACTICAL GUIDANCE: Courtesy of RealCorporateLawyer.com
COMINGS AND GOINGS: Who's Doing and Saying What and Where?

SEC I: New Agent Bank for SEC - Beginning Feb 4, 2008 Send Filing Fees to U.S. Bank of St. Louis, Missouri

U.S. Securities and Exchange Commission, New Fee Payment Instructions, Effective Feb. 4, 2008 - Notice: New SEC Financial Agent (Jan. 10, 2008).
U.S. Securities and Exchange Commission, Final Rule: Amendment of Procedures for Payment of Fees, Release Nos. 33-8885, 34-57218, 39-2452, IC-28137 (Jan. 29, 2008).

The SEC has amended its procedures for the payment of fees imposed under the federal securities laws so as to change its agent bank. The move follows the decision by the Financial Management Service of the United States Department of the Treasury to designate the U.S. Bank of St. Louis, Missouri as the new Financial Agent for General Lockbox Services for the SEC. The new agent will take over this responsibility from Mellon Bank on February 4, 2008.\

Don't get caught with insufficient funds to pay filing fees because the fees are sent to the wrong bank. All fee payments (wires and checks) must be submitted to U.S. Bank of St. Louis on and after February 4, 2008. No payments should be submitted to Mellon Bank after February 1, 2008.

The SEC Notice about this change - including instructions on how to wire fees to U.S. Bank - is available at http://www.sec.gov/info/edgar/fedwire-new.htm, and the SEC's Final Rules on this topic are available at http://www.sec.gov/rules/final/2008/33-8885.pdf.

Filers with a fund balance need not be concerned as all fees wired to Mellon Bank prior to February 4 will be in the SEC's account.

SEC II: SEC Staffers Rule that Fidelity Cannot Exclude Shareholder's "Genocide-Free" Investment Policy Proposal from Proxy

SEC Letter Re: Omission of Shareholder Proposal Pursuant to Rule 14a-8 for Certain Fidelity Funds (Jan. 22, 2008).
Jewell, Mark, SEC Ruling Could Bring Fidelity Vote on "Genocide-Free' Proposal, AP Business special to Boston.com (Jan. 24, 2008).

Last week SEC staffers ruled that Fidelity Investments cannot exclude from its Contrafund proxy materials a shareholder proposal to require the fund to adopt "genocide-free" investment policies. Fidelity sought to exclude the proposal on grounds that, among other things, it relates to the fund's ordinary business operations and contains false and misleading statements.

The proposal was made by a Boston shareholder activist group known as "Investors Against Genocide". Although such determinations are made by the Commission staff on a case-by-case basis, "Investors Against Genocide" reportedly has made similar proposals at Barclays, Franklin Templeton, T. Rowe Price and Vanguard, each of which now may decide to include such proposals on their shareholder ballots.

SEC III: Subprime Meltdown Prompts Commission to Update Rules on How Mutual Funds Value Holdings

Westbrook, Jesse & Weiss, Miles, SEC To Rework Rules After Funds Struggled with Subprime Price, Bloomberg News (Jan. 25, 2008).

Reports indicate that the subprime meltdown has prompted the SEC to undertake the first "comprehensive" overhaul in four decades of its Investment Company Act rules regarding how mutual funds value holdings. In one recent interview, Commission staffer Douglas Scheidt confirmed that the Commission is aware of "several occasions" in which funds carried assets based on "stale pricing" even though "facts would suggest that the price would have gone down" on such assets. According to one report:

"The effort . . . will lay out the degree to which mutual funds can rely on price quotes from brokers and professional services. . . . The guidelines will also address the responsibilities of funds' boards of directors to make sure assets are correctly valued".

One recent study indicated that when demand for subprime-related assets declined last year "more than 80 percent of investment managers had difficulty obtaining prices for mortgage-related investments". The Commission now seeks to provide guidelines on the valuation of such assets and other infrequently-traded assets.

SEC IV: SEC Issues Final Rule Release on Electronic Shareholder Forums

U.S. Securities and Exchange Commission, Final Rule: Electronic Shareholder Forums, Release Nos. 34-57172, IC-28124 (Jan. 18, 2008) (Federal Register Version).

On January 18, the Commission released the text of its Final Rule Release on "Electronic Shareholder Forums". As previously reported by RealCorporateLawyer.com, the Commission has adopted amendments to its proxy rules to facilitate online shareholder forums.

In general, the Final Rule Release contains rule amendments to clarify that participation in an electronic shareholder forum that might otherwise be deemed to constitute a solicitation subject to the proxy rules will now be exempt from most of the proxy rules if all of the conditions to the exemption are met. The amendments also provide that a shareholder, company or a third-party acting on their behalves that establishes, maintains or operates an electronic shareholder forum will not be liable under federal securities laws for statements or information provided by anyone who participates in the forum.

According to the Commission, the amendments were necessary to "remove legal ambiguity that might deter shareholders and companies from energetically pursuing this mode of communication."

The amended rules become effective on February 25, 2008.

SEC V: SEC Releases Draft Decision Memo of its Advisory Committee on Improvements to Financial Reporting

U.S. Securities and Exchange Commission Advisory Committee on Improvements to Financial Reporting, Draft Decision Memo (Jan. 11, 2008).

On January 11, the SEC released the Advisory Committee on Improvements to Financial Reporting's Draft Decision Memo. The Commission established the Committee following concerns that the Enron scandal was facilitated by overly-complex accounting rules. According to SEC Chairman Christopher Cox's opening remarks at the first meeting of the Committee last August:

"The truth is that financial reporting has become overly complex. That means not only are financial statements difficult for investors to understand but also companies incur excessive cost as a result of complying with voluminous and overly prescriptive accounting and reporting rules. Your job on this committee is to help us end this destructive cycle and to get our financial reporting system back to first principles. We're asking you to help us reduce complexity and all of its costly burdens."

The 110-page report outlines a series of tentative proposals. Among many issues, the report addresses tentative proposals including the following:

GAAP should be based on activities, rather than industries.
GAAP should be based on a presumption that formally promulgated alternative accounting policies should not exist.
Possible expanded use of pro-rata accounting, additional disclosure and "rule-of-thumb" coupled with additional considerations in lieu of the current use of bright lines to better reflect the economic substance of an activity.
Possible development of an education program for students, users, preparers and auditors to encourage the understanding of the economic substance and business purposes of transactions in contrast to mechanical compliance with rules in the absence of sufficient context.
Development of a measurement framework for dealing with fair value issues.
Implementation of a moratorium on FASB's issuance of new standards and interpretations that require the expanded use of fair value in areas where it is not already required until the measurement framework can be completed.
Requiring a more consistently aggregated presentation of financial statements to alleviate some of the confusion and concerns regarding the use of fair value.
Requiring certain additional disclosure to signal more effectively to users the level of uncertainty associated with fair value measurements in financial statements.
Changing the disclosure framework for handling fair value issues.
Facilitating additional user / investor involvement in the standard-setting process.
Having the SEC assist the FAF in enhancing its governance over the FASB.
Improving the standard-setting process.
Encouragement of a re-prioritization of the standard-setting agenda.
Reduction of the number of parties that formally and informally issue interpretations of U.S. GAAP.
Transition to and design of new standards to promote the use of reasonable judgments.
Elimination of unnecessary restatements of financials.
Additional guidance regarding materiality.
Additional guidance on how to correct an error.

SEC VI: SEC's Director of OCIE Answers "Frequently-Asked Questions" Regarding SEC Examinations

U.S. Securities and Exchange Commission, Speech by Lori Richards, Director of the Office of Compliance Inspections and Examinations Frequently-Asked Questions About SEC Examinations (Jan. 17, 2008).

On January 17, the SEC's Director of its Office of Compliance Inspections and Examinations, Lori Richards, spoke at the SIFMA Compliance and Legal Division's January General Luncheon Meeting in New York City. The subject of her remarks was "Frequently-Asked Questions About SEC Examinations".

In her remarks, Ms. Richards addressed five important questions frequently asked of OCIE:

Will my firm be examined?
What issues are SEC examiners focused on now?
If my firm is examined, what kind of information and documents are examiners likely to request?
What are the possible outcomes of an SEC examination?
What can I do to ensure the examination goes smoothly?

Perhaps the most significant of her remarks revolved around discussion of issues on which SEC examiners presently are focused. Such issues include: (1) the increasingly blurred line between broker-dealers and investment advisers and, more particularly, issues involving "dually-registered broker-dealers and investment advisers"; (2) controls over valuation; (3) controls over non-public information; and (4) dealings with senior investors.

SEC VII: SEC Considering Easing Limits on U.S. Investors' Access to Foreign Exchanges and Foreign Investors' Access to U.S. Exchanges

Caterinicchia, Dan, SEC Eyes Foreign Exchanges' Access to US, Associated Press (Jan. 3, 2008).

In January reports surfaced that the SEC is considering the possibility of permitting U.S. investors to have direct access to trade on certain foreign stock exchanges. The Commission reportedly is considering a mutual recognition proposal to facilitate U.S. investor access to foreign exchanges that are subject to regulatory oversight "comparable" to that in the United States.

Under the proposal, of course, U.S. securities regulations would continue to apply to U.S. brokers providing access to foreign exchanges. According to one report:

"SEC staff are drafting a mutual recognition proposal, but no date has been set for the commission to consider it, SEC spokesman John Nester wrote in an e-mail Thursday."

PCAOB: PCAOB Adopts Auditing Standard No. 6: Evaluating Consistency of Financial Statements

Public Company Accounting Oversight Board, Board Adopts New Auditing Standard No. 6: Evaluating Consistency of Financial Statements, News Release (Jan. 29, 2008).
Public Company Accounting Oversight Board, Auditing Standard No. 6, PCAOB Release No. 2008-001 (Jan. 29, 2008).
Auditing Standard No. 6 Rulemaking Docket.

On January 29, the Public Company Accounting Oversight Board adopted Auditing Standard No. 6: Evaluating Consistency of Financial Statements as well as a related set of amendments to the Board's interim auditing standards. According to the Board:

"The new standard and related amendments update the auditor's responsibilities to evaluate and report on the consistency of a company's financial statements and align the auditor's responsibilities with SFAS No. 154. Auditing Standard No. 6 also improves the auditor reporting requirements by clarifying that the auditor's report should indicate whether an adjustment to previously issued financial statements results from a change in accounting principle or the correction of a misstatement. The Board also removed the hierarchy of generally accepted accounting principles (GAAP) from its interim auditing standards. The GAAP hierarchy identifies the sources of accounting principles and the framework for selecting principles to be used in preparing financial statements. The Board believes that the GAAP hierarchy is more appropriately located in the accounting standards. Because the FASB intends to incorporate the hierarchy in the accounting standards, it no longer will be needed in the auditing standards. The Board has coordinated with the FASB and understands that the FASB intends to coincide the effective date of its GAAP hierarchy standard with that of the PCAOB."

The new standard will become effective 60 days after SEC approval.

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:

Avoiding Litigation With Disgruntled Bidders (01/25/2008)
From: Wachtell, Lipton, Rosen & Katz
Supreme Court Rejects �Scheme Liability� (01/15/2008)
From: Wachtell, Lipton, Rosen & Katz
Compensation Season (01/24/2008)
From: Wachtell, Lipton, Rosen & Katz
Seventh Circuit Affirms Trial Judgment for Defendants in Indianapolis Power & Light 401(k) Stock-Drop Case. (01/14/2008)
From: Alston & Bird LLP
Corporate Governance Update: Do Corporate Governance Ratings Fail to Make the Grade? (01/24/2008)
From: Wachtell, Lipton, Rosen & Katz
Mixed Results in SEC's Latest PIPE Case (01/11/2008)
From: Wachtell, Lipton, Rosen & Katz
Annual Report on Securities Litigation 2007 (01/23/2008)
From: Alston & Bird LLP
January 2008 Corporate Communicator Newsletter: The 2008 Annual Meeting (01/10/2008)
From: Snell & Wilmer L.L.P.
De-Coupling of Economic and Voting Power in Public Companies - Equity Ownership Derivatives Create Unforeseen Dangers (01/22/2008)
From: Wachtell, Lipton, Rosen & Katz
New Mayer Brown Electronic Discovery & Records Mgmt Alert (01/09/2008)
From: Mayer Brown LLP
2007 Year in Review: SEC and SRO Selected Enforcement Cases and Developments Regarding Broker-Dealers (01/18/2008)
From: Morgan Lewis
Year End Review - The Current Regulatory and Enforcement Climate (01/09/2008)
From: Wachtell, Lipton, Rosen & Katz
Seventh Circuit Again Holds That Tellabs Plaintiffs Adequately Pled Scienter (01/18/2008)
From: Wachtell, Lipton, Rosen & Katz
Covington Advisory: "Resales of Securities--An Expanded Safe Harbor" (01/09/2008)
From: Covington & Burling LLP
Supreme Court Affirms Limitations on Third-Party Liability for Securities Fraud (01/17/2008)
From: Morgan Lewis
Canadian Securities Law 2007: A Year in Review and What's Ahead in 2008 (01/08/2008)
From: Stikeman Elliott LLP
The Supreme Court Rejects 'Scheme Liability' in the Much-Anticipated Stoneridge Case (01/16/2008)
From: Thacher, Proffitt, & Wood, LLP
Trade Secret Report - December 2007 (01/07/2008)
From: Morrison & Foerster
Supreme Court Rejects Plaintiffs� �Scheme Liability� Theory Under the Federal Securities Laws (01/16/2008)
From: Alston & Bird LLP
SEC Eliminates US GAAP Reconciliation Requirement For Foreign Private Issuers that Use IFRS (12/31/2007)
From: Wachtell, Lipton, Rosen & Katz
SEC Rule 144 Amendments Make Resales of Restricted Securities Easier (01/16/2008)
From: Mayer Brown LLP
New Mayer Brown LLP Corporate & Securities Alert (12/28/2007)
From: Mayer Brown LLP
Supreme Court Rejects �Scheme� Liability Under Section 10(b) (01/15/2008)
From: Morrison & Foerster LLP
Client Bulletin - Exemption from SEC Registration Requirements for Issuers of Employee Stock Options (12/27/2007)
From: Thacher Proffitt & Wood LLP

RR Donnelley offers reference publications designed to help with your SEC filing requirements. For a copy, contact your RR Donnelley sales representative or click here.

COMINGS AND GOINGS: Who's Doing and Saying What and Where?

Like December, January was a quiet month for moves. The NYSE, Amex, FINRA, PCAOB, FASB and AICPA released no announcements of executive moves. The SEC, however, issued one such announcement.

On January 9, the SEC announced that Mary S. Head has been named Assistant Director, Policy, in the Office of Investor Education and Advocacy. She previously served as Counsel to SEC Commissioner Kathleen L. Casey. See U.S. Securities and Exchange Commission, Mary S. Head Named Assistant Director in SEC Office of Investor Education and Advocacy, News Release 2008-4 (Jan. 9, 2008).

What Are the Commissioners and Commission Staffers Saying?

On January 10, SEC Chairman Christopher Cox spoke on "International Business - An SEC Perspective", an address to the American Institute of Certified Public Accountants' International Issues Conference in Washington, D.C

Commission Staffers were not much more active than the Commissioners on the lecture circuit in January. John W. White, Director of the Division of Corporation Finance, spoke on January 23 at the 35th Annual Securities Regulation Institute in San Diego regarding "Corporation Finance in 2008 - A Focus on Financial Reporting". He also spoke in London on January 14 regarding "Corporation Finance in 2008 - International Initiatives". Lori Richards, Director of the SEC's Office of Compliance, Inspections and Examinations, spoke on January 17 at the SIFMA Compliance and Legal Division January General Luncheon Meeting in New York regarding "Frequently-Asked Questions About SEC Examinations". Finally, on January 15 the SEC's Director of the Division of Investment Management, Andrew J. Donohue, delivered an "Address at the Mutual Fund Directors Forum Second Annual Directors' Institute".

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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