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1/02/09 - Study on Mark-to-Market Accounting is Released
The SEC issued its congressionally mandated study on mark-to-market accounting,
recommending that this area of guidance be improved and not suspended,
on December 30, 2008.
The study recommended improvements to existing practice, including reconsidering the guidance for impairment tests and the development of additional guidance for determining the fair value of investments in inactive markets, including situations where market prices are not readily available.
Congress required the SEC to conduct the study when it approved the government's $700 billion bailout package in October in the Emergency Economic Stabilization Act of 2008.
The report said investors generally believe fair value accounting increases financial reporting transparency and facilitates better investment decision-making.
12/29/08 - Pension Bill May Ease Funding Requirements for Cash-Strapped
Plan Sponsors
President Bush's signing of the Worker, Retiree and Employer Recovery
Act of 2008 on December 23, 2008, hardly solves all the problems plan
sponsors have with underfunded pensions, but it at least eases some of
the obligations they have to make up the shortfalls in defined benefit
plans that have suffered sharp losses in the financial meltdown.
The bill was approved by Congress earlier this month, and the wide support it garnered in both houses was taken as a sign of the unusual urgency lawmakers feel to ease up on cash-strapped companies.
The bill also happened to be passed just days before the final provisions of the FASB's SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, became effective on December 15. The accounting guidance, which was issued in 2008, called for plan sponsors to measure assets and obligations on their year-end balance sheets. The law does not change the guidance in SFAS No. 158, but by providing some relief for single-employer and multi-employer pension plans puts a lid on the funding shortfalls companies will have to report in their 2008 financials.
12/24/08- Proposed Guidance in FSP No. EITF 99-20-a Would Standardize
Calculation for Impairments
The issuance of the Proposed FASB Staff Position (FSP) No. EITF 99-20-a, Amendments to the Impairment and Interest Income Measurement Guidance of EITF Issue No. 99-20, on December 19, 2008, makes clear that the recognition of an impairment to financial instruments has become the focal point in the debate over the role of fair value accounting in the credit crisis.
The issuance of the document under a fast-track due process is part of the FASB's response to marching orders given to it by the SEC and Congress.
The proposed amendment will resolve differences between the measurement of declines in market value under EITF No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, and SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Accounting practitioners campaigning for this change have argued that revising the impairment guidance will benefit the frozen credit markets.
12/22/08 -- FINRA Chief Mary Schapiro Named by Obama to Head SEC
President-elect Barack Obama nominated Mary Schapiro to serve as chairwoman
of the SEC, replacing Christopher Cox.
Making the formal announcement during a December 18, 2008, press conference, Obama said the scandal surrounding Bernard Madoff, his investment firm, and the SEC's failure for a decade to follow up on tips about Madoff's activities reminded the public of the need for regulatory reform.
Schapiro has been chairman and CEO of the Financial Industry Regulatory Authority (FINRA) since 2006, and she has served in numerous financial regulatory roles in the past 20 years. She was briefly acting chair of the SEC prior to Arthur Levitt becoming chairman in 1993.
Schapiro was appointed to the SEC by President Ronald Reagan in 1988
and served as a commissioner for six years. In 1994, President Bill Clinton
selected her to run the Commodity Futures Trading Commission (CFTC). She
became president of NASD Regulation at the National Association of Securities
Dealers in 1996. She became the NASD's vice chairman in 2002 and took
her current post in 2006. The NASD was renamed FINRA in 2006 after being
merged with the New York Stock Exchange's regulatory arm.
12/17/08 -- Cox Emphasizes Benefits of Fair Value Accounting, Independent
Standard-Setting
With the SEC nearing completion of its congressionally mandated study
of mark-to-market accounting, the agency's chairman said the final document
is likely to reaffirm the role this area of guidance plays for investors
and accounting practitioners.
"Most investors, and many others, agree that fair value is a meaningful and transparent measure of an investment for financial reporting purposes," said Christopher Cox during the AICPA's National Conference on Current SEC and PCAOB Developments in Washington on December 8, 2008. "Financial reporting is intended to meet the needs of investors. While financial reporting may serve as a starting point for other users, such as prudential regulators, the information content provided to investors should not be compromised to meet other needs."
The results of the study should be out by January 2, 2009, Cox said.
12/16/08 -- SEC to Discuss Final Rule on XBRL Disclosures
The SEC will meet on December 17, 2008, to discuss a series of rulemaking
proposals, including the use of the eXtensible business reporting language,
mutual fund disclosures with interactive data, and annuity contracts.
The five commissioners will also consider whether to adopt the PCAOB's 2009 budget.
In late May, the SEC issued a proposed rule on the adoption of XBRL for companies to file their financial reports. Release No. 33-8924, Interactive Data to Improve Financial Reporting, set out the schedule for large companies with a public float above $5 billion and that use U.S. GAAP to submit their financial statements tagged in XBRL as separate exhibits to their filings for their periods that end on or after December 15, 2008.
Other domestic and foreign filers that use U.S. GAAP would begin submitting these exhibits for reporting periods that begin after December 15, 2009. All other companies that follow U.S. GAAP and foreign issuers that use IFRS would submit their filings for periods beginning on or after December 15, 2010.
In June, the SEC issued proposed changes to the disclosure rules governing mutual funds in Release No. 33-8929, Interactive Data for Mutual Fund Risk/Return Summary. The SEC will consider whether to require fund companies to file information using XBRL. Rule amendments allowing investment companies to submit portfolio holding information voluntarily under XBRL will also be considered.
The SEC will also consider adopting amendments to the terms defining annuity
contracts under the Securities Act of 1933, and whether to exempt insurers'
annuity businesses from the periodic reporting requirements under the
Securities Exchange Act of 1934.
12/11/08 -- SEC Chief Accountant Continues Push for IFRS, XBRL
Clear and straightforward financial reporting provides investors with
the best information, and that is the best argument for the U.S. adoption
of IFRS, said Conrad Hewitt, the SEC's chief accountant.
Hewitt, who is one of several senior agency officials who is planning on leaving the agency within the next month or two, gave his assessment of IFRS and some other key SEC initiatives, including interactive data and the agency's pending study on fair value accounting, during the AICPA's National Conference on Current SEC and PCAOB Developments in Washington on December 8, 2008.
Hewitt said he fully embraced the concept of one set of rules and applauded the SEC for voting to propose for public comment a proposed roadmap for the potential adoption of IFRS in August. The rule proposal was issued in November in Release No. 33-8982, Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers.
In regard to the eXtensible Business Reporting Language (XBRL), Hewitt
said he believed that interactive data "will transform how investors access
information in a very easy to use format. I hope very soon the Commission
will have the vote adopting the release for XBRL." Hewittt added that
he has reviewed the first draft of the Commission's congressionally-mandated
study on mark-to-market accounting and is "very pleased" with the study
so far.
12/10/08 -- SEC Issues Release No. 34-59062 to Improve Disclosures
in Municipal Bond Market
The SEC issued Release No. 34-59062, Amendment to Municipal Securities
Disclosure, on December 5, 2008.
The final rule amends some of the requirements regarding the information that the broker-dealers and underwriters have to get from issuers in floating a municipal bond offering.
The rule becomes effective July 1, 2009.
Brokers and underwriters have to determine that the issuer, or the issuer's representative, has agreed to provide the information covered by the written agreement to the Municipal Securities Rulemaking Board, instead of to multiple nationally recognized municipal securities information repositories and state information depositories. The information also has to be provided electronically under MSRB guidelines.
12/09/08 -- In Release No. 34-59036, SEC Grants Accelerated Approval
for Options Clearing Corporation Rule
On December 1, 2008, the SEC granted accelerated approval of a proposed
rule change to the Options Clearing Corporation's stock loan and hedge
program.
Release No. 34-59036, Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Stock Loan/Hedge Program, approves three rule changes to the program under Section 19(b)(1) of the Securities Exchange Act of 1934:
- Rule 601(e) eliminates its current category of margin-ineligible accounts and instead will apply its standard margining approach to all program positions using its STANS system. In addition, a new interpretation .06 will be added to Rule 601 setting forth the additional margin charges and credits and the implementation schedule applicable to stock loan and borrow positions that have collateral set at 102%;
- Rule 2201(a) will now state that with respect to standing instructions that clearing members provide to OCC, the requirement to notify OCC of the fact that the clearing member is approved to maintain stock loan positions and stock borrow positions in its accounts on a non-margined basis and the account or accounts that are to be margin-ineligible shall become inapplicable in three months. After that time, OCC will have eliminated the ability to carry any stock loan or borrow positions on a margin-ineligible basis; and
- Rule 2202(f) is being amended to specify that in one month a member shall not be able to submit new stock loan transactions to the OCC for clearance in a margin-ineligible account.
12/04/08 -- SEC Warns Brokerage and Fund Management Officials to Not
Stint on Compliance Programs
Lori Richards, the SEC's compliance director, sent an open letter to SEC-registered companies on December 2, 2008, to remind them that as they consider ways to cut costs, they should remember the critical role played by compliance programs in meeting obligations under the securities laws.
"Firms must be vigilant and proactive in preventing, detecting and correcting problems that could occur," Richards wrote. "Firms should pay attention to ensuring that their interactions with investors meet high standards, that sales and trading practices are appropriate, that financial, valuation and risk controls are followed, and that all disclosure obligations are met-as well as meeting all other obligations in conformity with the securities laws."
According to the SEC, the letter is for the 11,300 investment advisers, 950 mutual fund complexes, 5,600 broker-dealers, and 410 transfer agents registered with the SEC and subject to compliance obligations under the federal securities laws.
In the letter, Richards said compliance programs:
- Assure that a company's operations comply with the law and industry participation rules;
- Protect the interests of a company's customers, clients and shareholders; and
- Protect a company from conduct that could negatively impact its business and reputation.
12/02/08 -- Nasdaq Proposal in SEC Release No. 34-59014 Would Require Partnerships to Get Shareholder Approval Before Issuing Stock Options
The Nasdaq OMX Group Inc. proposed a rule amendment that would require limited partnerships to seek shareholder approval before issuing stock options as compensation to employees, officers, directors, or consultants in a rule proposal filed with the SEC on November 25, 2008.
Release No. 34-59014, Notice of filing of a Proposed rule Change to Require Limited Partnerships to Obtain Shareholder Approval for the Use of Equity Compensation and make Other Clarifying Changes to the Listing Requirements for Limited Partnerships, would add the requirement for shareholder approval when a stock option or purchase plan is to be established or amended.
When Nasdaq amended its listing requirements following the passage of the Sarbanes-Oxley
Act of 2002, it inadvertently exempted partnerships, the SEC said. The
recent controversy over executive compensation and shareholder pressure
to improve corporate governance measures led Nasdaq to propose the change.
12/01/08 -- SEC Staff Issues Guidance For Proxy Statements Under the
TARP
The SEC issued staff guidance for financial institutions filing proxy
statements for securities purchases under the government's financial bailout
package, known as the Troubled Asset Relief Program.
Under the Treasury Department's Capital Purchase Program, announced in October, financial institutions seeking to issue securities may be required to solicit and obtain shareholder approval for the authorization of the securities. To solicit shareholder approval, a financial institution
must comply with the federal securities laws and any applicable state laws. The federal securities laws require certain financial institutions to file a proxy statement on Schedule 14A when soliciting shareholder approval.
Because the Treasury Department is injecting capital directly into banks through the purchase of preferred shares, companies without preferred stock plans in place have to get shareholder approval before they get aid.
11/25/08 -- In Release No. IC-28487, the SEC Provides Exemption for
Money Funds Getting Treasury Backing
The SEC adopted an interim final temporary rule on November 20,
2008, to provide money market funds participating in the Treasury
Department's $50 billion temporary guaranty program relief from certain
provisions under the Investment Company Act of 1940.
In Release No. IC-28487, Temporary Exemption for Liquidation of Certain Money Market Funds, the SEC is adopting Rule 22e-3T to provide an exemption that allows funds taking part in the guaranty program to temporarily suspend redemptions of their outstanding shares and postpone the payment of redemption proceeds. The exemption includes a procedure for liquidating money funds in certain circumstances.
Comments on the proposal are due 30 days after publication in the Federal
Register, which usually occurs a few days after its publication on
the SEC's website. The rule is effective until October 18, 2009.
11/20/08 -- In Release No. 34-58911, SEC Approves Nasdaq Proposal
for Late Filers
On November 6, 2008, the SEC approved a Nasdaq proposal to modify the
procedures for listed companies that are late in filing a required periodic
report with the SEC.
Release No. 34-58911, Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify the Procedures Applicable to Listed Companies that Are Late in Filing a Required Periodic Report with the Commission, is effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934.
Comments on the proposal are due December 9.
11/19/08 -- SEC Issued IFRS Roadmap in Release No. 33-8982
The SEC issued the long-awaited proposal to pave the way for U.S. companies
to use global accounting rules in Release No. 33-8982, Roadmap for
the Potential Use of Financial Statements Prepared in Accordance with
International Financial Reporting Standards by U.S. Issuers, on November
14, 2008.
The proposed rule provides a timeline for U.S. companies to adopt IFRS in a phased-in approach from 2010 through 2017, provided several conditions are met each stage along the away. Large companies approved to be in the first wave of adopters can use the rules for the regulatory filings they submit in 2010 for their 2009 fiscal years. Only companies that are among the largest global entities in industries where IFRS are followed by more firms than any other set of accounting principles would be eligible to become early users. The proposal's 90-day comment period ends on February 19, 2009.
11/17/08 -- SEC to Consider Proposals on Rating Agencies and Fund Disclosures
The SEC plans to have an open meeting on November 19, 2008, to consider two regulatory and administrative proposals.
The proposals include rule amendments that would:
- Impose additional requirements on nationally recognized statistical rating organizations (NRSROs) to address concerns about the integrity of their credit rating procedures and methodologies; and
- Improve mutual fund disclosure by providing investors with a summary prospectus containing key information in plain English in a clear and concise format, and by enhancing the availability on the Internet of more detailed information to investors. The SEC will also consider adopting related amendments to Form N 1A, including amendments that address exchange-traded funds (ETFs).
The proposed amendments are detailed in a series of releases the SEC
issued during the summer.
11/12/08 -- SLB No. 14D Clarifies Right to Reject Proposals on Corporate
Charters
The SEC's division of corporation finance said there is "some basis" for
companies to omit shareholder proposals to amend a company's charter under
Rule 14a-8 of the Securities Exchange Act of 1934.
In Staff Legal Bulletin (SLB) No. 14D, issued on November 7, 2008, the
SEC said the omission would be allowed "if the company meets its burden
of establishing that applicable state law requires any such amendment
to be initiated by the board and then approved by shareholders in order
for the charter to be amended."
11/06/08 -- SEC and FASB Say Warrants in Bailout Package May Be Treated
as Equity
The SEC and the FASB told the Treasury Department that warrants issued
under the government's plan to buy troubled assets from financial institutions
may be treated as permanent equity under U.S. GAAP.
The standard-setters outlined their opinion in a joint letter to David Nason, Treasury's assistant secretary for financial institutions in an October 24, 2008, letter.
"We would not object if the warrants…were to be classified as permanent
equity under applicable U.S. GAAP, provided that the issuer of such warrants
has sufficient authorized but unissued shares of the class of stock that
may be required upon settlement and any other necessary shareholder approvals
have been obtained," wrote James Kroeker, deputy chief accountant for
the SEC and Russell Golden, technical director for the FASB.
11/03/08 -- With SEC Release No. 33-8981, Electronic Filings Are Now
Mandatory Under the Investment Company Act
The SEC issued a final rule on October 29, 2008, requiring all applications
for exemptions under the Investment Company Act of 1940 to be made electronically.
The rule in Release No. 33-8981, Mandatory Electronic Submission of
Applications for Orders under the Investment company Act and Filing Made
Pursuant to Regulation E, will become effective January 1, 2009.
Under Chairman Christopher Cox, who has indicated he will leave the agency in 2009, the regulatory agency has approved a number of rules to increase the electronic filing of forms and disclosures on the SEC's EDGAR system.
The final rule amends certain provisions of Regulation S-T and Investment Company Act Rule 0-2 to require electronic submission on EDGAR. Rule 0-2 requires every application for an exemption that does not have a specific form to contain a statement from the company that all requirements have been met and the person signing the application is fully authorized. Regulation E allows for the exemption from registration of securities issued by small business investment companies registered under the Investment Company Act.
The goal of the rule change is to increase the speed of delivery of financial
and business information to investors, the SEC said.
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