Friday 16 May 2014
Monday 31 March 2014
DISCLOSURE — OPENING WINDOWS By Hartley Bernstein
Information is the word of the moment. The SEC has released details of proposed rules that would require companies to disclose a broader scope of major corporate events, and do it on a speedy basis. (See Taking Responsibility).
Companies currently are required to file a Form 8-K within 5 business days (to disclose certain changes in the company's independent accountant and resignations of directors) or within 15 calendar days (all other required disclosures). The new rules would require all Forms 8-K to be filed within two business days, subject to a possible two day extension.
The new rules would require companies file a Form 8-K disclosing the following:
• Whenever the company enters into, or terminates, any material agreement not made in the ordinary course of business;
• Termination or reduction of a business relationship with a customer that accounts for a specified portion of the company's revenues;
• Entering into, or triggering, a direct or contingent financial obligation that is material to the company, including any default on, or acceleration of, the obligation;
• Exit activities including any material write-off or restructuring;
• Any material impairment;
• Changes in the ratings given to the company by any credit agency, the issuance of a credit watch, or any change in projected company outlook;
• If the company's securities are (i) moved from one national securities exchange or inter-dealer quotation system to another, or delisted; or (ii) if the company is advised that it does not comply with a listing standard;
• If the company’s present (or former) independent auditor indicates that it is withdrawing a previously issued audit report or that the company may not rely on a previously issued audit report;
• Any material limitation, restriction or prohibition regarding the company's employee benefit, retirement and stock ownership plans, including the beginning and end of lock-out periods.
• Unregistered sales of equity securities by the company; and
• Material modifications to shareholders’ rights.
The SEC also wants to enhance existing Form S-8 disclosures by requiring the following:
• Current rules require a company to file a Form 8-K when a director departs because of a disagreement or is removed for cause. The new rules will require a Form 8-K to be filed whenever a director departs;
• The appointment or departure of a principal executive officer;
• The election of new directors; and
• Any material amendment to a company's certificate of incorporation or bylaws.
The expanded Form 8-K disclosure was only one part of a comprehensive rule proposal that also will require Chief Executive Officers and Chief Financial Officers to certify that they have reviewed their company’s quarterly and annual financial reports. As part of that new responsibility, those executive officers will have to assure the public that the financial reports are true, and that they contain all information that a reasonable investor would want to know.
This enhanced disclosure is designed to provide investors with more detailed, more timely information so that they can make informed investment decisions.
Companies currently are required to file a Form 8-K within 5 business days (to disclose certain changes in the company's independent accountant and resignations of directors) or within 15 calendar days (all other required disclosures). The new rules would require all Forms 8-K to be filed within two business days, subject to a possible two day extension.
The new rules would require companies file a Form 8-K disclosing the following:
• Whenever the company enters into, or terminates, any material agreement not made in the ordinary course of business;
• Termination or reduction of a business relationship with a customer that accounts for a specified portion of the company's revenues;
• Entering into, or triggering, a direct or contingent financial obligation that is material to the company, including any default on, or acceleration of, the obligation;
• Exit activities including any material write-off or restructuring;
• Any material impairment;
• Changes in the ratings given to the company by any credit agency, the issuance of a credit watch, or any change in projected company outlook;
• If the company's securities are (i) moved from one national securities exchange or inter-dealer quotation system to another, or delisted; or (ii) if the company is advised that it does not comply with a listing standard;
• If the company’s present (or former) independent auditor indicates that it is withdrawing a previously issued audit report or that the company may not rely on a previously issued audit report;
• Any material limitation, restriction or prohibition regarding the company's employee benefit, retirement and stock ownership plans, including the beginning and end of lock-out periods.
• Unregistered sales of equity securities by the company; and
• Material modifications to shareholders’ rights.
The SEC also wants to enhance existing Form S-8 disclosures by requiring the following:
• Current rules require a company to file a Form 8-K when a director departs because of a disagreement or is removed for cause. The new rules will require a Form 8-K to be filed whenever a director departs;
• The appointment or departure of a principal executive officer;
• The election of new directors; and
• Any material amendment to a company's certificate of incorporation or bylaws.
The expanded Form 8-K disclosure was only one part of a comprehensive rule proposal that also will require Chief Executive Officers and Chief Financial Officers to certify that they have reviewed their company’s quarterly and annual financial reports. As part of that new responsibility, those executive officers will have to assure the public that the financial reports are true, and that they contain all information that a reasonable investor would want to know.
This enhanced disclosure is designed to provide investors with more detailed, more timely information so that they can make informed investment decisions.
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