The Commission also proposed that several new items or events be reported on Form 8-K in an effort to improve the quality, amount and timeliness of public disclosure of extraordinary corporate events. In addition, the Commission proposed that Form 8-K reports, also known as current reports, be filed within two business days instead of the current five to 15 days.
Certification of Quarterly and Annual Reports
The proposed certification rules are consistent with a key provision of the President's 10-point "Plan to Improve Corporate Responsibility and Protect America's Shareholders," announced March 7, 2002. The plan states that CEOs should personally vouch for the veracity, timeliness and fairness of their companies' public disclosures, including financial statements.
As proposed, new Exchange Act Rule 13a-14 would require the principal executive officer and principal financial officer of a company each to certify, with respect to the company's quarterly and annual reports, that:
- he or she has read the report;
- to his or her knowledge, the information in the report is true in all important respects as of the last day of the period covered by the report; and
- the report contains all information about the company of which he or she is aware that he or she believes is important to a reasonable investor as of the last day of the period covered by the report.
- there is a substantial likelihood that a reasonable investor would view the information as significantly altering the total mix of information in the report; and
- the report would be misleading to a reasonable investor if the information was omitted from the report.
The proposed rules would apply to any domestic company that is subject to the reporting requirements of the Securities Exchange Act of 1934. The Commission invites public comment on the proposed rules. Comments should be received within 60 days of publication of the proposed rules in the Federal Register.
For further information, please contact Elizabeth M. Murphy or Mark A. Borges, Office of Rulemaking, Division of Corporation Finance, at +1 202 942-2910.
New Form 8-K Disclosure Requirements and Deadlines
The proposals would require current reports on Form 8-K of 11 new items or events:
- Entry into a material agreement not made in the ordinary course of business;
- Termination of a material agreement not made in the ordinary course of business;
- Termination or reduction of a business relationship with a customer that constitutes a specified amount of the company's revenues;
- Creation of a direct or contingent financial obligation that is material to the company;
- Events triggering a direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation;
- Exit activities including any material write-off or restructuring;
- Any material impairment;
- A change in a rating agency decision, issuance of a credit watch or change in a company outlook;
- Movement of the company's securities from one national securities exchange or inter-dealer quotation system of a registered national securities association to another, delisting of the company's securities from an exchange or quotation system, or a notice that a company does not comply with a listing standard;
- Notice to the company from its currently or previously engaged independent accountant that the independent accountant is withdrawing a previously issued audit report or that the company may not rely on a previously issued audit report; and
- Any material limitation, restriction or prohibition, including the beginning and end of lock-out periods, regarding the company's employee benefit, retirement and stock ownership plans.
- Unregistered sales of equity securities by the company;
- Material modifications to rights of holders of the company's securities.
- disclosure regarding the departure of a director for reasons other than a disagreement or removal for cause;
- the appointment or departure of a principal officer, and the election of new directors; and
- disclosure regarding any material amendment to a company's certificate of incorporation or bylaws.
The proposals would also accelerate the current five business day deadline for disclosure about changes in a company's independent accountant and resignations of directors, and 15 calendar day deadline for other required disclosures, to two business days, so that there would be a uniform filing period for all of the mandated Form 8-K disclosure items.
The Commission invites public comment on the proposed rules. Comments should be received within 60 days of publication of the proposed rules in the Federal Register.
For further information, please contact Elizabeth M. Murphy, Division of Corporation Finance, at +1 202 942-2910.
