SEC Open Meeting: May 23, 2007

Overview

Interpretive guidance for management regarding evaluation and assessment of internal control over financial reporting; SEC worked closely with PCAOB to align SEC interpretive guidance with PCAOB's new auditing standard (Auditing Standard No. 5)

Rule amendments to clarify that management evaluation of internal controls in accordance with SEC interpretive guidance would satisfy annual evaluation required by Exchange Act Rules 13a-15 and 15a-15
Amendment of Rules 12b-2 and 1-02 of Regulation S-X to define "material weakness" as "a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis"
Amendment of Rules 1-02(a)(2) and 2-02(f) of Regulation S-X to clarify that auditor is opining directly on internal control over financial reporting (not management's evaluation process)

Effective 30 days from publication in Federal Register
PCAOB auditing standard is subject to SEC approval, and is expected to be effective no later than calendar year 2007 audit season

SEC press release 5.23.07
SEC proposed six measures to modernize and improve capital-raising and reporting requirements for smaller companies, many of which were key recommendations of final report issued by Advisory Committee on Smaller Public Companies
Pending publish of related proposal releases, press release provided detail on each of the six measures

Smaller reporting company regulatory relief and simplification
Revisions to eligibility requirements for primary securities offerings on Form S-3 and Form F-3
Exemption of compensatory employee stock options from registration under Section 12(g) of Exchange Act
New Regulation D limited offering exemption
Electronic filing for Form D
Revisions to Securities Act Rules 144 and 145

SEC adopted final rules to implement the Credit Rating Agency Reform Act of 2006 (Public Law No. 109-291)

SEC Chairman Cox stated, "The heart of the Act calls on the Commission to replace the barriers to entry that had previously existed. The replacement is a transparent and voluntary Commission registration system that favors no particular business model."

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