[Federal Register Volume 75, Number 182 (Tuesday, September 21, 2010)]
[Rules and Regulations]
[Pages 57385-57388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23492]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 229, and 249
[Release Nos. 33-9142; 34-62914]
Internal Control Over Financial Reporting in Exchange Act
Periodic Reports of Non-Accelerated Filers
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
adopting amendments to its rules and forms to conform them to Section
404(c) of the Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act''),
as added by Section 989G of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the ``Dodd-Frank Act''). Section 404(c)
provides that Section 404(b) of the Sarbanes-Oxley Act shall not apply
with respect to any audit report prepared for an issuer that is neither
an accelerated filer nor a large accelerated filer as defined in Rule
12b-2 under the Securities Exchange Act of 1934 (the ``Exchange Act'').
DATES: Effective Date: September 21, 2010.
FOR FURTHER INFORMATION CONTACT: Steven G. Hearne, Special Counsel,
Office of Rulemaking, Division of Corporation Finance, at (202) 551-
3430, Steven Jacobs, Associate Chief Accountant, Division of
Corporation Finance, at (202) 551-3400, or John Offenbacher, Senior
Associate Chief Accountant, or Annemarie Ettinger, Senior Special
Counsel, Office of the Chief Accountant, at (202) 551-5300, U.S.
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549.
SUPPLEMENTARY INFORMATION: We are adopting conforming amendments to
Rule 2-02\1\ of Regulation S-X,\2\ Item 308 \3\ of Regulation S-K,\4\
Item 15 of Form 20-F,\5\ and General Instruction B.(6) of Form 40-F.\6\
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\1\ 17 CFR 210.2-02.
\2\ 17 CFR part 210.
\3\ 17 CFR 229.308.
\4\ 17 CFR part 229.
\5\ 17 CFR 249.220f.
\6\ 17 CFR 249.240f.
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I. Description of Amendments
The Commission is adopting amendments to its rules and forms to
conform them to new Section 404(c) of the Sarbanes-Oxley Act,\7\ as
added by Section 989G of the Dodd-Frank Act.\8\ Section 404(c) provides
that Section 404(b) of the Sarbanes-Oxley Act shall not apply with
respect to any audit report prepared for an issuer that is neither an
accelerated filer nor a large accelerated filer as defined in Rule 12b-
2\9\ under the Exchange Act.\10\ Prior to enactment of the Dodd-Frank
Act, a non-accelerated filer \11\ would have been
[[Page 57386]]
required, under existing Commission rules, to include an attestation
report of its registered public accounting firm on internal control
over financial reporting in the filer's annual report filed with the
Commission for fiscal years ending on or after June 15, 2010.\12\
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\7\ 15 U.S.C. 7201 et seq.
\8\ Public Law 111-203 (July 21, 2010).
\9\ 17 CFR 240.12b-2.
\10\ 15 U.S.C. 78a et seq.
\11\ Although the term ``non-accelerated filer'' is not defined
in Commission rules, we use it throughout this release to refer to a
reporting company that does not meet the definition of either an
``accelerated filer'' or a ``large accelerated filer'' under
Exchange Act Rule 12b-2. Under Exchange Act Rule 12b-2, an
accelerated filer is an issuer that ``had an aggregate worldwide
market value of the voting and non-voting common equity held by its
non-affiliates of $75 million or more, but less than $700 million,
as of the last business day of the issuer's most recently completed
second fiscal quarter'' and a large accelerated filer is an issuer
that ``had an aggregate worldwide market value of the voting and
non-voting common equity held by its non-affiliates of $700 million
or more, as of the last business day of the issuer's most recently
completed second fiscal quarter''. In addition, for both
definitions, the issuer needs to have been subject to reporting
requirements for at least twelve calendar months, have filed at
least one annual report, and not be eligible to use the requirements
for smaller reporting companies for its annual and quarterly
reports.
\12\ See Release No. 33-9072 (Oct. 13, 2009) [74 FR 53628].
Consistent with Sections 404(a) and 404(b) of the Sarbanes-Oxley
Act, on June 5, 2003, the Commission adopted initial amendments to
its rules and forms requiring companies, other than registered
investment companies, to include in their annual reports filed with
the Commission a report of management and an accompanying auditor's
attestation report on the effectiveness of the company's internal
control over financial reporting. See Release No. 33-8238 (June 5,
2003) [68 FR 36636]. Subsequent to the adoption of those rules, the
Commission postponed the Section 404(b) auditor attestation
requirement for non-accelerated filers, such that the auditor's
attestation report for these filers would have first been required
for annual reports filed with the Commission for fiscal years ending
on or after June 15, 2010. The amendments in this Release will not
affect the transition rules applicable for non-accelerated filers
with fiscal years ending prior to June 15, 2010.
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To conform the Commission's rules to Section 404(c) of the
Sarbanes-Oxley Act, these amendments remove the requirement for a non-
accelerated filer to include in its annual report an attestation report
of the filer's registered public accounting firm.\13\ We are also
adopting a conforming change to our rules concerning management's
disclosure in the annual report regarding inclusion of an attestation
report to provide that the disclosure only applies if an attestation
report is included.\14\ Lastly, we are making a conforming change to
Rule 2-02(f) of Regulation S-X to clarify that an auditor of a non-
accelerated filer need not include in its audit report an assessment of
the issuer's internal control over financial reporting.
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\13\ An issuer that is an accelerated filer or a large
accelerated filer continues to be subject to the requirements of
Section 404(b) of the Sarbanes-Oxley Act.
\14\ See new Item 308(a)(4) of Regulation S-K.
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All issuers, including non-accelerated filers, continue to be
subject to the requirements of Section 404(a) of the Sarbanes-Oxley
Act. Section 404(a) and its implementing rules require that an issuer's
annual report include a report of management on the issuer's internal
control over financial reporting.\15\
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\15\ See 17 CFR 229.308(a). For further guidance on management's
report, see Commission Guidance Regarding Management's Report on
Internal Control Over Financial Reporting Under Section 13(a) or
15(d) of the Securities Exchange Act of 1934, Release No. 33-8810
(June 20, 2007) [72 FR 35324]. All such reports for non-accelerated
filers for fiscal years ending on or after June 15, 2010 will be
considered ``filed'' under the Exchange Act. Although there are many
different ways to conduct an evaluation of the effectiveness of
internal control over financial reporting, an evaluation that is
conducted in accordance with this interpretive guidance is one way
to satisfy the requirements for the evaluation.
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II. Procedural and Other Matters
Under the Administrative Procedure Act, a notice of proposed
rulemaking is not required when the agency, for good cause, finds that
notice and public comment are impracticable, unnecessary, or contrary
to the public interest.\16\ These amendments merely conform certain
rules and forms to a newly enacted statute, Section 404(c) of the
Sarbanes-Oxley Act, as amended by the Dodd-Frank Act, so the Commission
finds that it is unnecessary to publish notice of these amendments.\17\
These amendments revise the Commission's rules and forms to make them
consistent with the internal control reporting requirements for non-
accelerated filers in the Sarbanes-Oxley Act, as amended by the Dodd-
Frank Act, and should therefore minimize potential confusion of issuers
and investors.
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\16\ 5 U.S.C. 553(b).
\17\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rule amendment to become effective
notwithstanding the requirement of 5 U.S.C. 801 (if a Federal agency
finds that notice and public comment are ``impractical, unnecessary
or contrary to the public interest,'' a rule ``shall take effect at
such time as the federal agency promulgating the rule determines'').
For similar reasons, the amendments do not require analysis under
the Regulatory Flexibility Act. See 5 U.S.C. 601(2) (for purposes of
Regulatory Flexibility Act analysis, the term ``rule'' means ``any
rule for which the agency publishes a general notice of proposed
rulemaking'').
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The Administrative Procedure Act also requires publication of a
rule at least 30 days before its effective date unless the agency finds
otherwise for good cause.\18\ The Commission finds there is good cause
for the amendments to take effect on September 21, 2010 because the
Commission's current applicable rules and forms do not conform to
Section 404(c) of the Sarbanes-Oxley Act.
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\18\ See 5 U.S.C. 553(d)(3).
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The Commission is taking this action to implement the Dodd-Frank
Act. Thus, any costs and benefits to the economy resulting from these
amendments are mandated by the Dodd-Frank Act. Section 23(a)(2) of the
Exchange Act requires the Commission, in adopting rules under the
Exchange Act, to consider the competitive effects of such rules, if
any, and to refrain from adopting a rule that would impose a burden on
competition not necessary or appropriate in furtherance of the purposes
of the Exchange Act.\19\ Section 3(f) of the Exchange Act requires the
Commission, whenever it engages in rulemaking and must consider or
determine if an action is necessary or appropriate in the public
interest, to consider if the action will promote efficiency,
competition, and capital formation.\20\ We do not anticipate any
competitive or capital formation effects from these amendments as they
merely conform certain rules and forms to new Section 404(c) of the
Sarbanes-Oxley Act. We do not anticipate that these conforming
amendments will impose any costs, and they may promote efficiency by
eliminating potential confusion that may otherwise result from a
discrepancy between our rules and the statute.
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\19\ 15 U.S.C. 78w(a)(2).
\20\ 15 U.S.C. 78c(f).
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New Section 404(c) of the Sarbanes-Oxley Act will have an effect on
the ``collection of information'' requirements within the meaning of
the Paperwork Reduction Act of 1995.\21\ The current burden estimates
for the relevant forms include 0.5 hours for approximately 4,700 non-
accelerated filers attributable to the burden of filing the auditor
attestation report and related disclosure, but not the audit work. As a
result of the statutory change, those non-accelerated filers no longer
are required to include that attestation.\22\
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\21\ 44 U.S.C. 3501 et seq.
\22\ We are issuing a separate notice regarding the impact of
this change on paperwork burdens.
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III. Statutory Basis and Text of Amendments
The amendments described in this release are made under the
authority set forth in Section 19 of the Securities Act, Sections 3,
12, 13, 15, and 23 of the Exchange Act, and Sections 3(a) and 404 of
the Sarbanes-Oxley Act.
List of Subjects
17 CFR Part 210
Accountants, Accounting, Reporting and recordkeeping requirements,
Securities.
17 CFR Parts 229 and 249
Reporting and recordkeeping requirements, Securities.
Text of Amendments
0
In accordance with the foregoing, the Commission is amending Title 17,
[[Page 57387]]
Chapter II of the Code of Federal Regulations as follows:
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940 AND ENERGY
POLICY AND CONSERVATION ACT OF 1975
0
1. The authority citation for part 210 continues to read as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n,
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30,
80a-31, 80a-37(a), 80b-3, 80b-11, 7202, and 7262, unless otherwise
noted.
* * * * *
0
2. Section 210.2-02 is amended by revising paragraph (f) to read as
follows:
Sec. 210.2-02 Accountants' reports and attestation reports.
* * * * *
(f) Attestation report on internal control over financial
reporting. (1) Every registered public accounting firm that issues or
prepares an accountant's report for a registrant, other than a
registrant that is neither an accelerated filer nor a large accelerated
filer (as defined in Sec. 240.12b-2 of this chapter) or an investment
company registered under section 8 of the Investment Company Act of
1940 (15 U.S.C. 80a-8), that is included in an annual report required
by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) containing an assessment by management of the
effectiveness of the registrant's internal control over financial
reporting must include an attestation report on internal control over
financial reporting.
(2) If an attestation report on internal control over financial
reporting is included in an annual report required by section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
it shall clearly state the opinion of the accountant, either
unqualified or adverse, as to whether the registrant maintained, in all
material respects, effective internal control over financial reporting,
except in the rare circumstance of a scope limitation that cannot be
overcome by the registrant or the registered public accounting firm
which would result in the accounting firm disclaiming an opinion. The
attestation report on internal control over financial reporting shall
be dated, signed manually, identify the period covered by the report
and indicate that the accountant has audited the effectiveness of
internal control over financial reporting. The attestation report on
internal control over financial reporting may be separate from the
accountant's report.
* * * * *
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
0
3. The authority citation for part 229 continues to read, in part, as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll,
78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-
38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless
otherwise noted.
* * * * *
0
4. Section 229.308 is amended by revising paragraphs (a)(4) and (b) to
read as follows:
Sec. 229.308 (Item 308) Internal control over financial reporting.
(a) * * *
(4) If the registrant is an accelerated filer or a large
accelerated filer (as defined in Sec. 240.12b-2 of this chapter), or
otherwise includes in its annual report a registered public accounting
firm's attestation report on internal control over financial reporting,
a statement that the registered public accounting firm that audited the
financial statements included in the annual report containing the
disclosure required by this Item has issued an attestation report on
the registrant's internal control over financial reporting.
(b) Attestation report of the registered public accounting firm. If
the registrant is an accelerated filer or a large accelerated filer (as
defined in Sec. 240.12b-2 of this chapter), provide the registered
public accounting firm's attestation report on the registrant's
internal control over financial reporting in the registrant's annual
report containing the disclosure required by this Item.
* * * * *
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
0
5. The authority citation for part 249 continues to read, in part, as
follows:
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C.
1350, unless otherwise noted.
* * * * *
0
6. Form 20-F (referenced in Sec. 249.220f) is amended by revising
paragraphs (b)(4) and (c) of Item 15 to read as follows:
Note: The text of Form 20-F does not, and this amendment will
not, appear in the Code of Federal Regulations.
FORM 20-F
* * * * *
PART II
* * * * *
Item 15. Controls and Procedures.
* * * * *
(b) * * *
(4) If an issuer is an accelerated filer or a large accelerated
filer (as defined in Sec. 240.12b-2 of this chapter), or otherwise
includes in its annual report a registered public accounting firm's
attestation report on internal control over financial reporting, a
statement that the registered public accounting firm that audited the
financial statements included in the annual report containing the
disclosure required by this Item has issued an attestation report on
management's assessment of the issuer's internal control over financial
reporting.
(c) Attestation report of the registered public accounting firm. If
an issuer is an accelerated filer or a large accelerated filer (as
defined in Sec. 240.12b-2 of this chapter), and where the Form is
being used as an annual report filed under Section 13(a) or 15(d) of
the Exchange Act, provide the registered public accounting firm's
attestation report on management's assessment of the issuer's internal
control over financial reporting in the issuer's annual report
containing the disclosure required by this Item.
* * * * *
0
7. Form 40-F (referenced in Sec. 249.240f) is amended by revising
paragraphs (c)(4) and (d) in General Instruction B.(6) to read as
follows:
Note: The text of Form 40-F does not, and this amendment will
not, appear in the Code of Federal Regulations.
FORM 40-F
* * * * *
GENERAL INSTRUCTIONS
* * * * *
B. Information To Be Filed on this Form
* * * * *
(6) * * *
[[Page 57388]]
(c)(4) If an issuer is an accelerated filer or a large accelerated
filer (as defined in 17 CFR 240.12b-2), or otherwise includes in its
annual report a registered public accounting firm's attestation report
on internal control over financial reporting, a statement that the
registered public accounting firm that audited the financial statements
included in the annual report containing the disclosure required by
this Item has issued an attestation report on management's assessment
of the issuer's internal control over financial reporting.
(d) Attestation report of the registered public accounting firm. If
an issuer is an accelerated filer or a large accelerated filer (as
defined in Sec. 240.12b-2 of this chapter), and where the Form is
being used as an annual report filed under Section 13(a) or 15(d) of
the Exchange Act, provide the registered public accounting firm's
attestation report on management's assessment of the issuer's internal
control over financial reporting in the issuer's annual report
containing the disclosure required by this Item.
* * * * *
By the Commission.
Dated: September 15, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-23492 Filed 9-20-10; 8:45 am]
BILLING CODE 8010-01-P