SEC Developments
SEC Replaces Telephone Interpretations on Rule 144 and Trust Indenture Act with New Form of Guidance
As part of its efforts to update and reorganize the Corporation Finance website, the SEC recently published a new form of guidance regarding the Trust Indenture Act and Rule 144 — Persons Not Deemed to be Engaged in a Distribution and Therefore Not Underwriters.
These new forms of guidance, posted under the heading “Compliance and Disclosure Interpretations” replace the Rule 144 and Trust Indenture Act interpretations previously found in the July 1997 Manual of Publicly Available Telephone Interpretations, the March 1999 Supplement to the Manual of Publicly Available Telephone Interpretations and the November 2000 Current Issues and Rulemaking Project Outline. Like other guidance recently published by the SEC, the Rule 144 and Trust Indenture Act guidance is divided into two parts, Questions and Answers of General Applicability (the “Q&As”) and Interpretative Responses Regarding Particular Situations (the “Interpretative Response”). For the most part, the Rule 144 and Trust Indenture Act guidance is just a republication of previous telephone interpretations but it does clarify certain items and contains a few new interpretations. We understand that the Division of Corporation Finance plans to eventually reformat all of its existing telephone interpretations in this manner.
The Rule 144 guidance includes the following clarifications or additions:
- Q&A 101.02 provides that an underwriter may resell the unsold portion of a sticky public offering as if it were compensation (wait one year from close of offering, follow Rule 144 except for filing form), provided that one year has elapsed since the last sale under the registration statement.
- Q&A 112.01 of the Rule 144 guidance clarifies that a corporation may tack the holding period of a predecessor partnership or limited liability company that has changed its legal form to become a corporation if the following conditions are met:
- the controlling agreement entered into at the time of the partnership or limited liability company’s formation specifically contemplated the change of form;
- the partners or members seeking to tack had no veto or voting rights over the reorganization;
- the reorganization does not result in a change in the business or operations of the surviving entity;
- the proportionate equity interests in the successor are the same as the interests in the predecessor entity; and
- the equity holders provide no additional consideration for the securities they receive in exchange for their equity interests in the predecessor entity.
- Q&A 122.06 provides that an amendment to Form 144 to reflect a change in broker is not permitted to contain a recalculation of a new volume limit based on trading. Interpretation #91 in the July 1997 Telephone Interpretation Manual had provided that a recalculation of a new volume limit was not required in such an instance.
- Q&A 122.07 provides that an amended Form 144 may be filed to correct inaccuracies in the original Form 144 at the time of, or subsequent to, its filing. However, the filing of an amended Form 144 does not cure any deficiencies with regard to sales made after filing the initial Form 144 and prior to the filing of the amended Form 144.
- Interpretative Response 201.06 provides that a former affiliate who wishes to sell non-restricted securities may sell without compliance with Rule 144 as soon as his or her ’affiliate” status has ceased. The cessation of affiliate status is a facts-and-circumstances determination and counsel should not assume that it ceases instantly. Rather, the former affiliate should wait some amount of time — either the 3-month period of Rule 144(k), by analogy, or until the issuer files its next periodic report, before publicly selling the non-restricted securities without complying with Rule 144.
- Interpretative Response 209.05 clarifies that when a closely held corporation distributes restricted securities pro rata and without consideration to its shareholders, three limited partnerships, which in turn distribute the restricted securities pro rata and without consideration to their partners (about 10 people in each instance), tacking of holding periods from corporation to partnership, and partnership to partner, is permitted for purposes of Rule 144(d). Interpretation #39 in the July 1997 Telephone Interpretation Manual provided similar guidance but did not explicitly provide that the distribution had to be without consideration.
- Interpretative Response 209.07 clarifies that if the terms of the convertible debenture that was originally convertible into common stock are unilaterally modified by the issuer to provide that the debenture could be converted into either common stock or bonds of the issuer, the holding period for the bonds received upon conversion could be tacked to the holding period for the convertible debentures even though the debentures were not convertible into bonds when they were originally issued. Interpretation #41 in the July 1997 Telephone Interpretation Manual provided similar guidance but did not explicitly provide that the modification had to be done unilaterally by the issuer.
- Interpretative Response 222.03 provides that if a holder of restricted securities or an affiliate files a notice on Form 144 to report the proposed sale of less than the full amount of the Rule 144 volume limit and later wishes to make further sales that, taken together with the original sales, would not exceed the volume limit, the holder may file a new Form 144 to sell the additional securities, as long as the conditions of Rule 144 are met. The holder can not amend the original Form 144 to accomplish the additional sales because a Form 144 must represent the holder’s intent at the time of filing. This guidance is contradictory to guidance previously provided in Interpretation #93 in the July 1997 Telephone Interpretation Manual, which stated that the individual could proceed with the additional sales by filing an amendment to the original Form 144.
- Interpretative Response 222.04 notes that once a power of attorney permitting a Form 144 to be filed on behalf of a selling security holder by an attorney in fact is filed with a Form 144, the power of attorney does not have to be refiled with subsequently filed Form 144s while the power of attorney remains in effect.
- Q&A 103.01 and 109.01 and Interpretative Responses 206.01 and 220.01 provide that if an issuer putting up an automatic shelf registration statement to register the offer and sale of debt securities on a delayed basis chooses to designate the trustee on a delayed basis, as permitted by Section 305(b)(2) of the Trust Indenture Act, the company must separately file the Form T-1 designating the trustee under the electronic form type “305B2.” In this situation, companies should not file the Form T-1 in a post-effective amendment to the registration statement or in a Form 8-K that is incorporated by reference into the registration statement. Although Q&As 103.01 and 109.01 and Section 305(b)(2) of the Trust Indenture Act provide that a Form T-1 filed in this manner would become effective 10 calendar days after filing unless effectiveness is accelerated by the SEC, the SEC staff has indicated to Davis Polk orally that an issuer may issue securities off the shelf registration statement during that 10-day period. If the offering is not made on a delayed basis, the Form T-1 must be filed as an exhibit to the automatic shelf registration statement or post-effective amendment to the automatic shelf registration statement filed to register the debt securities, and qualification would occur upon effectiveness of those filings.
- Interpretative Response 201.04 confirms that the following approach with respect to the qualification of indentures for shelf registration statements:
- The indenture that is filed with, and qualified upon the effectiveness of, the registration statement may be “open-ended” (i.e., it may provide a generic, non-specific description of the securities, such as “unsecured debentures, notes or other evidences of indebtedness” which are to be issued in series). For automatic shelf registration statements, the “open-ended” indenture must be filed as an exhibit to the registration statement or as an exhibit to a post-effective amendment to the registration statement that registers the securities to be issued under the indenture.
- The details of the securities to be offered in each series under the indenture (e.g., type of securities [notes, debentures, or other], interest rates, and maturities) must be disclosed both in a prospectus supplement and in a supplemental indenture at the time such series is to be offered. The supplemental indenture may be filed as an exhibit to a Form 8-K (in the same manner as specified for underwriting agreements), or in an automatically effective, exhibits-only, post-effective amendment filed pursuant to Rule 462(d). For automatic shelf registration statements, the post-effective amendment would be filed pursuant to Rule 462(e).
SEC Holds Open Meeting to Discuss Improvements to SOX 404 Implementation
On April 4, 2007, the SEC held an open meeting to discuss ways to improve the implementation of Section 404 of the Sarbanes-Oxley Act (“SOX 404” ), particularly for smaller companies. At the meeting, the SEC Commissioners, PCAOB representatives and SEC staff members discussed how to improve the proposed new PCAOB auditing standard for internal controls (“AS 5”) and harmonize it with the SEC’s proposed SOX 404 guidance for management in light of the comments received with respect to both proposals. The SEC staff and Commissioners also affirmed their commitment to finalizing both AS 5 and the SEC’s management guidance this spring. Although no rulemaking resulted from the meeting, it is a positive indication of the SEC’s intent to improve SOX 404.
SEC Issues Final Deregistration Rules
The SEC has issued its long-awaited final rules regarding a foreign private issuer’s deregistration with the SEC and termination of reporting obligations under the Exchange Act. The rules establish a new threshold for deregistration of a class of equity securities: an average daily trading volume (“ADTV”) in the United States of 5% or less of the worldwide ADTV. This is a substantial improvement from the re-proposed rules, which required that U.S. ADTV be compared to ADTV in a foreign private issuer’s “primary trading market” and reflects the impact of comment letters submitted by foreign private issuers, associations and law firms around the world.
The new rules will become effective on June 4, 2007. A foreign private issuer whose last financial year ended at December 31, 2006, could, as a result, submit the required deregistration certification on Form 15F prior to the end of June and thereby suspend its reporting obligations without having to file its 2006 Annual Report on Form 20-F or, to the extent required this year, the Section 404 report on internal controls.
- See the Davis Polk memorandum discussing the new deregistration rules in more detail
- See the SEC’s final deregistration rule
SEC Publishes Guidance on Regulation S-K Items 201, 403, 404 and 407
In March, the Division of Corporation Finance issued new guidance on Items 201, 403, 404 and 407 of Regulation S-K. Like the Rule 144 and Trust Indenture Act guidance discussed above, this guidance is in the form of Q&As and Interpretative Responses and supersedes previous telephone interpretations. Highlights of the guidance include the following:
Item 201 of Regulation S-K
Q&As 5.05-5.07 of the Item 201 guidance confirm that the Regulation S-K, Item 201(e) requirement to include the performance graph in the annual report that precedes or accompanies the proxy does not require the performance graph to be included in the Form 10-K unless a copy of the Form 10-K (instead of a glossy annual report) is all that is provided to stockholders to meet the annual report requirement under Exchange Act Rule 14a-3.
Q&A 5.07 notes that the registrant has the option of including the performance graph in its proxy statement so long as it is also in its annual report.
Item 403 of Regulation S-K — Security Ownership of Certain Beneficial Owners and Management
Q&A 2.04 indicates that a negative pledge of the company's stock by a director or executive officer should be noted in a footnote to the beneficial ownership table.
Q&A 3.01 indicates that an ordinary course negative pledge by a principal shareholder would not necessarily require disclosure under Item 403(c) of Regulation S-K as an arrangement that might result in a change of control.
Item 404 of Regulation S-K — Transactions with Related Persons, Promoters and Certain Control Persons
Q&A 2.03 notes that the condition that loans be made on substantially the same terms as for “comparable loans with persons not related to the lender” is not satisfied with respect to loans made to executive officers that are on the same terms as loans made to other employees who are not executive officers, but the same terms are not offered to non-employees.
Interpretative Response Item 2.01 notes that the term “any immediate family member,” as used in Item 404, is defined to include, among others, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and stepchildren and stepparents. According to interpretative response Item 2.01, for purposes of this item, such relatives are deemed to be: (1) only those persons who are currently related to the primary reporting person (e.g., a person who is divorced from a director’s daughter would no longer be a son-in-law whose transactions must be reported); and (2) only those persons who are related by blood or step relationship to the primary reporting person or his spouse (e.g., the sister of a director’s spouse is considered a sister-in-law for purposes of this item; the sister’s husband, however, is not considered a brother-in-law for purposes of this item).
Interpretative Response Item 2.08 notes that an agreement by a company with a related person to repurchase company shares from the related person’s estate upon death with the proceeds of a life insurance policy paid for by the company should be disclosed pursuant to Item 404(a).
Item 407 of Regulation S-K — Corporate Governance
Q&A 5.02 provides that a description of a compensation consultant’s role in determining and recommending the amount or form of director or officer compensation as required by Item 407(e)(3) will not result in the consultant being deemed an “expert” for purposes of the Securities Act.
Interpretative response 2.01 provides that the total number of meetings of the Board of Directors used as the basis for calculating the directors’ meeting attendance in Item 407(b)(1) does not include board action by written consent.
SEC Focuses on International Financial Reporting Standards Convergence
On Tuesday, March 6, 2007, SEC Chairman Christopher Cox, certain other SEC commissioners and staff members from the Office of the Chief Accountant, the Division of Corporation Finance and the Office of International Affairs held a roundtable to discuss the status of convergence to International Financial Reporting Standards (“IFRS”).
The focus of the roundtable was a discussion of the status of the “Roadmap” for convergence to IFRS. The Roadmap was first described in April 2005 by then SEC Chief Accountant Donald Nicolaisen and the SEC’s ongoing commitment to the Roadmap was affirmed by Chairman Cox during his introduction to the roundtable. The Roadmap describes a path toward eliminating the need for U.S. GAAP reconciliation of IFRS financial statements in filings with the SEC by non-U.S. companies by 2009. Although non-U.S. issuers may currently include financial statements prepared in accordance with IFRS, rather than U.S. GAAP, in their filings with the SEC under the Securities Act and the Exchange Act, such issuers must reconcile these IFRS financial statements to U.S. GAAP.
A substantial majority of participants at the roundtable, including Donald Nicolaisen, were clear that they believe that the U.S. GAAP reconciliation should be eliminated as soon as possible. These participants generally expressed the view that the reconciliation is becoming increasingly inefficient and irrelevant as issuers, analysts, regulators, auditors and investors become more familiar and comfortable with IFRS, and as IFRS develops a track record of implementation and interpretations. They noted that a large percentage of U.S. investors and analysts already rely on the IFRS financial statements, because by the time U.S. GAAP reconciled financials are filed with the SEC, usually in June, the IFRS financials have been available for several months, and the market has already changed its focus towards the anticipation of half-year results, making U.S. GAAP reconciliation of largely historical significance.
The participants urged the SEC not to wait until IFRS is “perfect” to eliminate the reconciliation requirement, noting that many do not believe U.S. GAAP to be a better standard in all respects despite its long history. Participants urged the SEC to focus its efforts on reviewing IFRS financial statements and the accompanying disclosures for consistency, robustness and transparency rather than focusing on the comparability of IFRS to U.S. GAAP. They noted that U.S. investors would be more protected by bringing more non-U.S. companies, in which U.S. investors of all sizes already invest, into the U.S. regulatory and enforcement system, and that this would be more likely to occur without the costly requirement of reconciliation.
Most panelists were eager to move beyond the elimination of the reconciliation requirement towards full convergence of U.S. GAAP and IFRS. According to several panelists, all issuers should be using some form of IFRS or “global GAAP” rather than U.S. GAAP; alternatively, at a minimum, both U.S. and non-U.S. issuers should be able to choose whether to report under U.S. GAAP or IFRS. Even Donald Nicolaisen, while acknowledging that the original Roadmap did not focus on elimination of U.S. GAAP, noted that he is concerned that U.S. regulators are currently focusing too much on fixing U.S. GAAP rather than moving to IFRS, which he believes is the future. Panelists agreed, however, that a wholesale transition to IFRS will take considerable time and resources because many U.S. issuers, analysts, regulators, auditors and investors are not currently equipped to analyze, review, audit and value companies based on IFRS financial statements. SEC staff members and Commissioners offered little in the way of commentary at the roundtable but instead listened to the suggestions of the participants at the roundtable who were generally private citizens.
Separately, however, SEC Commissioners have been advocating similar themes. In a speech on March 26, 2007, Commissioner Paul Atkins said that he believes that the SEC is “well on our way to eliminating the reconciliation requirement.” He also echoed the view of the roundtable participants that U.S. issuers should also be able to report under IFRS, noting “when we recognize IFRS as an acceptable set of standards for foreign companies to use in their U.S. filings, why should it not be equally acceptable for U.S. companies to use as well?”
Commissioner Roel Campos expressed a similar, though slightly more reserved, sentiment in a speech on March 8, 2007. While confirming that the “SEC is absolutely committed to doing what we can to facilitate meeting the goals of the roadmap,” Commissioner Campos also cautioned that the elimination of the reconciliation ’is still a work-in-process.” Commissioner Campos expressed concern about the small number of foreign private issuers filing audited financial statements with the SEC that comply with IFRS as promulgated by the International Accounting Standards Board (“IASB”). According to Commission Campos, the SEC had expected to see approximately 300 of such filings by now but instead has seen only around 40. Instead, foreign private issuers are filing financial statements based upon national jurisdictional adaptations of IFRS. According to Commissioner Campos, while ’these financial statements certainly fit within the SEC’s filing requirements . . .they do not appear to be financial statements that fit under the one set of global accounting standards” contemplated by the Roadmap. Commissioner Campos thinks a critical discussion between issuers and their auditors is necessary to determine how and when these issues can prepare financial statements that comply with IFRS as promulgated by the IASB because a critical mass of such filings is a prerequisite to the elimination of the U.S. GAAP reconciliation requirement.
SEC Speaks
Chairman Cox Expresses Disappointment in Executive Compensation Disclosures Filed to Date
On March 23, 2007, in a speech before the Second Annual Corporate Governance Summit, Chairman Cox expressed disappointment in the quality of the Compensation Discussion & Analysis (“CD&A”) disclosure contained in the proxy statements filed to date. According to Chairman Cox, generally the CD&A disclosure is too legalistic, is not in plain English and is too long. Chairman Cox went on to note that “it doesn’t have to be this way.” According to Chairman Cox, because CD&A is a “brand new creation” there is “no reason for a company to match up its disclosure to that of its peers or competitors. Every company has a chance to start with a clean slate.”
Campos Speaks Out Strongly for Proxy Access
On March 22, 2007, in a speech before the Governance for Owners Conference in London, England, SEC Commissioner Roel Campos again made it clear that he strongly believes that the ability of shareholders to nominate directors or “proxy access” needs to be improved in the United States. According to Commissioner Campos, the “U.S. is on the wrong side of the tracks” with respect to proxy access and “the U.S. system of electing directors is an absolute joke.” Commissioner Campos went on to say that “shareholders in the U.S. — even very large, institutional shareholders — have virtually no meaningful choice with respect to the election of directors.” Commissioner Campos further stated, however, that he does not believe that the lack of proxy access puts the U.S. markets at a competitive disadvantage. Noting that he finds it “curious that an investor would shun the U.S. market over a single issue, even one as important as proxy access,” Commissioner Campos said that he believes that the U.S. regulatory system, while sometimes burdensome to issuers, is overall a competitive advantage for the U.S. markets because it provides investors the protection that they need.
Commissioner Atkins Concerned Implementation of FIN 48 Will Mirror SOX 404 Implementation
On March 13, 2007, in remarks to the National Association for Business Economics, Commissioner Paul Atkins expressed concerned that there may be problems with the implementation of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), similar to those experienced in the implementation of SOX 404. Commissioner Atkins is concerned that companies may feel the need to over document their tax positions in order to satisfy their auditors, in the same way that companies over documented their internal controls to comply with SOX 404. Commissioner Atkins is also concerned that the lack of a materiality filter in FIN 48 will lead companies to ask whether “every tax position, regardless of size, get[s] the same level of scrutiny?” In response to these concerns Commissioner Atkins noted that “the SEC staff has attempted to inject a sense of reasonableness into the documentation process, and I hope that companies and their auditors are taking this to heart.”
SEC Chief Counsel Clarifies Related Party Transaction Disclosure Requirements
On March 7, 2007, at a Practising Law Institute teleconference on the new Related Party Transaction disclosure requirements, David Lynn, Chief Counsel, Division of Corporation Finance, provided the following insights.
Regulation S-K, Item 404(a). David Lynn agreed with other panelists that for purposes of disclosing related party transactions under Item 404(a) of Regulation S-K, $120,000 is the threshold after which you have to start considering whether to disclose a transaction. Even if a transaction involves more than $120,000, it may not need to be disclosed if a related party does not have a “material” interest in a transaction. In other words, all transactions and/or interests over $120,000 are not necessarily material and do not necessarily require disclosure. David Lynn noted that whether the transaction is an ordinary course transaction with ordinary terms available to anyone would be one factor to be considered in determining whether the transaction is material.
David Lynn said that the SEC has been asked whether a company must disclose a material transaction with a 5% shareholder if the transaction occurred before the person/entity became a 5% shareholder. The answer is no if the transaction/relationship ended before the person/entity became a 5% shareholder. If the transaction is still continuing or was part of what made that person/entity a 5% shareholder then disclosure may be required if the other 404(a) disclosure thresholds are met. The SEC included a similar statement in the recently issued Item 404 guidance.
Regulation S-K, Item 404(b). David Lynn said that the SEC staff takes the position that whether or not a company has related party transactions that need to be disclosed, the company is still required by Reg S-K, Item 404(b) to disclose what its policies and procedures are for approving and reviewing related party transactions. He also suggested that the SEC staff expects companies to state that they do not have any related party policies or procedures if this is the case.
Regulation S-K, Item 407(a)(3). David Lynn said that Reg S-K, Item 407(a)(3) (requiring disclosure of relationships that were considered in making independence determinations but not disclosed under Item 404(a) of Reg S-K) was adopted because the SEC thought it would be useful to learn what types of transactions are underlying independence decisions. In terms of how Item 407(a)(3) interacts with the New York Stock Exchange director independence disclosure requirements, Mr. Lynn said that companies should disclose whether a director has any relationships that fall within their categorical standards.
NASDAQ Developments
Nasdaq Raises Independence Threshold to $100,000
The SEC has approved the rule change submitted by the Nasdaq which increases the threshold of compensation that may be received by a independent director under Rule 4200(a)(15)(B) from $60,000 to $100,000. Under the pre-amended Nasdaq Rule 4200(a)(15)(B), a director of a listed issuer was generally precluded from being considered independent if that director had received more than $60,000 in compensation from the issuer during any period of 12 consecutive months within the 3 years preceding the determination of independence. The rule change raises this amount to $100,000, the same figure used by the NYSE in its comparable standard.
A Nasdaq listed issuer’s board still has the responsibility to make an affirmative determination that an independent director has no relationship whatsoever with the issuer that would impair his or her independence, even when the director has passed the ‘bright line’ test of the rule and has not accepted (and has no family member who has accepted) more than $100,000 in compensation from the issuer during the relevant period.
Nasdaq Files Proposed Rule Change to Require Companies to Submit Material News to Exchange by Electronic Means Rather Than by Fax or Phone
The Nasdaq has filed a proposed rule change with the SEC which would require companies listed on the Nasdaq to submit material news to Nasdaq using Nasdaq’s electronic disclosure system, except in emergency situations. Currently, Nasdaq listed companies can also submit material information by phone or fax. The proposed rule change is subject to publication and approval by the SEC and contemplates a public comment period.
Nasdaq Files Proposal to Eliminate Related Party Transaction Approval Requirement
The Nasdaq has filed a proposed rule change with the SEC to eliminate the requirement in Nasdaq Rule 4350(h) that related party transactions be approved by a listed company’s audit committee or another independent body of the board of directors. The existing rule requires both an appropriate review of related party transactions on an ongoing basis and approval of those transactions by the company’s audit committee or another independent body of the board of directors. The rule, as proposed, would continue to require ongoing review (but not approval) of related party transactions by a company’s audit committee or another independent body of the board of directors. For purposes of the rule, the term related party transaction generally is defined as a transaction that is required to be disclosed in Reg S-K.
The proposed rule filing has yet to be published or approved by the SEC.
FASB Developments
FASB Issues Proposed Staff Position About Treatment of Prior Year Misstatements
The FASB has issued a proposed FASB Staff Position, No. 154-a, Considering the Effects of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements, which extends the guidance in SAB 108 (which discusses the SEC staff’s views regarding the process of quantifying financial statement misstatements) to privately held companies not subject to SEC requirements.
The proposed staff position is subject to a comment period ending April 30, 2007.
PCAOB Developments
PCAOB Issues Guidance Related to Auditor Independence Rules and Extends Compliance Date for Portion of Rule 3523
On April 3, 2007, the PCAOB further extended the effective date for a portion of one of its auditor independence rules, Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles. Rule 3523 restricts the provision of tax services to a person in a financial reporting oversight role at an audit client or an immediate family member of such person. A financial reporting oversight role is defined under both SEC and PCAOB rules as a role in which a person is in a position to or does exercise influence over the contents of the financial statements or anyone who prepares them.
The Rule 3523 extension applies to tax services provided to a person in a financial oversight role during the audit period only (i.e., the period covered by the audited financial statements-for example, January 1, 2007 through December 31, 2007).
Rule 3523 is already effective with respect to audit services provided during the engagement period (i.e., the period after the auditor has been engaged to audit the issuer’s financial statements). As a result of the extension, Rule 3523 will not apply to tax services provided on or before July 31, 2007, when those services are provided during the audit period and are completed before the professional engagement period begins.
The PCAOB also issued a concept release to solicit comments about the possible effects on an audit firm’s independence of providing tax services to a person covered by Rule 3523 during the portion of the audit period that precedes the beginning of the professional engagement period, and other practical consequences of applying the restrictions imposed by Rule 3523 to that portion of the audit period.
In addition, the PCAOB issued six Q&As on Rule 3522, Tax Transactions, and Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles. Several of the questions and answers address issues that the SEC encouraged the Board to provide additional guidance on when it approved the PCAOB’s rules on tax services and independence.
- See the PCAOB proposed rule release adjusting the implementation schedule for Rule 3523
- See the PCAOB concept release regarding Rule 3523
- See the PCAOB staff Q&As on the auditor ethics and independence rules