On June 12, the SEC proposed rules that would force CEOs to "personally vouch" for their companies' public disclosures, and would increase the number of items to be reported in current reports (Form 8-K). Those current reports would also need to be filed within two business days, instead of the current five to 15 business days.

On July 30, the SEC submitted changes to this proposal as a result of the Sarbanes-Oxley Act of 2002.

Key elements of the original proposal are as follows:

REFERENCE

Topics Covered

Certification of Quarterly and Annual Reports and New Form 8-K Disclosures and Filing Deadlines

File Number

S7-21-02 (Complete text)

Release Number

34-46079 (Press release)

Comments

Read all comments submitted electronically

Comment period until approximately August 15. (See "Feedback" section, below, for instructions and key points to be addressed)

CERTIFICATION BY CEO AND CFO

1.

Report Has Been Read

Both the CEO and the CFO will be required to certify that they have read the company's quarterly and annual reports.

2.

Report is True

Both the CEO and the CFO will be required to certify that the report is "true in all important respects" throughout the period covered in the report.

3.

Report is Complete

Both the CEO and the CFO will be required to certify that the report contains all the information of which they are aware that is "important to a reasonable investor," which is defined as:

Information that a reasonable investor would view as "significantly altering the total mix of information in the report;" and

Information that if omitted would be misleading to a reasonable investor.

4.

Procedures in Place

The CEO and CFO would also both have to certify in the company's annual report that the company has procedures in place that ensure it can collect, process and disclose all information in periodic and current reports.

NEW FORM 8-K DISCLOSURES

1.

New Material Agreements

Companies must report entry into a material agreement not made in the ordinary course of business. Report would need to be filed within two business days.

2.

Terminated Material Agreements

Companies must report termination of a material agreement not made in the ordinary course of business. Report would need to be filed within two business days.

3.

Termination of Business Relations

Companies must report termination or reduction of a business relationship with a customer that constitutes a specified amount of the company's revenues. Report would need to be filed within two business days.

4.

Contingent Obligations

Companies must report the creation of a direct or contingent financial obligation that is material to the company. Report would need to be filed within two business days.

5.

Contingent Triggers

Companies must report events triggering a direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation. Report would need to be filed within two business days.

6.

Exit Activities

Companies must report exit activities including any material write-off or restructuring. Report would need to be filed within two business days.

7.

Impairments

Companies must report any material impairment. Report would need to be filed within two business days.

8.

Outlook, Rating Changes

Companies must report any change in a rating agency decision, issuance of a credit watch or change in a company outlook. Report would need to be filed within two business days.

9.

Listing Changes

Companies must report 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. Report would need to be filed within two business days.

10.

Previously Issued Audits

A company must report if it has been given notice 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. Report would need to be filed within two business days.

11.

Limitation of Company Plans

Companies must report 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. Again, report would need to be filed within two business days.

MOVEMENT OF DISCLOSURES TO FORM 8-K

1.

Unregistered Sales

Disclosure of unregistered sales of equity securities, currently required in companies' annual and quarterly reports, would be moved to Form 8-K current reports (within two business days).

2.

Modification of Rights

Disclosure of material modifications to rights of holders of the company's securities, currently required in companies' annual and quarterly reports, would be moved to Form 8-K current reports (within two business days).

AMMENDED FORM 8-K DISCLOSURES

1.

Director Departures

Form 8-K disclosure items would include disclosure regarding the departure of a director for reasons other than a disagreement or removal for cause (within two business days).

2.

Principal Officers, Directors

Form 8-K disclosure items would include disclosure regarding the appointment or departure of a principal officer, and the election of new directors (within two business days).

3.

Incorporation or Bylaws

Form 8-K disclosure items would include disclosure regarding any material amendment to a company's certificate of incorporation or bylaws (within two business days).

OTHER PROPOSALS

1.

Uniform Two-Day Filing for All 8-K Items

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.

2.

Two-Day Extension

Proposals would also grant a two business day extension of the Form 8-K filing deadline to a company that provides proper notice of its inability to timely file a Form 8-K (would impact Form 12b-25).

3.

More

Proposals would also create safe harbor provisions, and would reorganize disclosure items into "logical categories."

FEEDBACK

Comments

Submit comments to rule-comments@sec.gov by Aug. 15, 2002 (approximately; actual deadline will be 60 days after publication of proposed rules in the Federal Register). Click here for instructions.

Key Questions

Is it necessary to have both the CEO and CFO certify the information?

Would the proposed certification contribute to investor confidence in the accuracy and completeness of the information?

Should the SEC require directors to also certify that they have reviewed the evaluation of procedures?

Should the SEC exclude small entities from the proposed rules?

Questions?

Elizabeth M. Murphy, Office of Rulemaking, Division of Corp. Finance, (202) 942-2910.

Mark A. Borges, Office of Rulemaking, Division of Corp. Finance, (202) 942-2910.

NOTE: Please note that this is a summary of SEC recommendations for new rules, and should not be construed to be the most complete, timely or final set of rules. Please refer to the SEC's Web site for updated and final rule information.