Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers, 57385-57388 [2010-23492]

Download as PDF Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Rules and Regulations with ‘‘original information’’ about a violation of the Federal securities laws that leads to the successful enforcement of a ‘‘covered judicial or administrative action,’’ or a ‘‘related action,’’ as those terms are defined by the Dodd-Frank Act. Unlike the insider trading bounty program, awards may be paid in connection with original information concerning any violation of the Federal securities laws. Awards may range from 10 to 30 percent of the amounts collected as monetary sanctions imposed in the covered judicial or administrative action or related actions. In connection with enactment of the new whistleblower provision, Congress repealed Section 21A(e).3 Because that statutory provision is no longer available as a basis for awarding bounties in insider trading cases, the Commission is rescinding its rules for administration of the insider trading bounty program. Procedural and Other Matters The Administrative Procedure Act (‘‘APA’’) generally requires an agency to publish notice of a proposed rulemaking in the Federal Register.4 This requirement does not apply, however, if the agency ‘‘for good cause’’ finds * * * that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.’’ 5 Because the statutory authority for the insider trading bounty program has been repealed, the Commission is removing the rules administering the program from the Federal Register. These rules no longer have any practical effect, and their continued inclusion in the Federal Register might lead to public confusion. For these reasons, the Commission finds that good cause exists to dispense with public notice and comment because notice and comment would be unnecessary, impracticable and contrary to the public interest.6 For similar reasons the Commission finds good cause for this action to be effective immediately.7 Section 23(a)(2) of the Exchange Act requires the Commission to consider the competitive effects of rulemaking under the Exchange Act. Further, Section 3(f) of the Exchange Act requires us, when hsrobinson on DSK69SOYB1PROD with RULES 3 Section 923(b) of the Dodd-Frank Act. 4 See 5 U.S.C. 553(b). 5 5 U.S.C. 553(b). 6 Similarly, the amendments do not require analysis under the Regulatory Flexibility Act. See 5 U.S.C. 601(2) and 603(a) (for purposes of Regulatory Flexibility Act analysis, the term ‘‘rule’’ means any rule for which the agency publishes a general notice of proposed rulemaking). 7 Additionally, this finding satisfies the requirements for immediate effectiveness under the Small Business Regulatory Enforcement Fairness Act. See 5 U.S.C. 808(2); see also 5 U.S.C. 801(a)(4). VerDate Mar<15>2010 16:05 Sep 20, 2010 Jkt 220001 engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. Because Congress has repealed the insider trading bounty program, our removal of the procedural rules related to that program will not create any competitive advantages or disadvantages, or affect efficiency, competition, and capital formation. Statutory Authority and Text of Amendments The Commission is removing regulations pursuant to authority provided by Section 23(a) of the Exchange Act. List of Subjects in 17 CFR Part 201 Administrative practice and procedure. Text of Amendments For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is amended as follows: ■ PART 201—RULES OF PRACTICE 1. The authority citation for part 201 continues to read as follows: ■ Authority: 15 U.S.C. 77s, 77sss, 78w, 78x, 80a–37, and 80b–11; 5 U.S.C. 504(c)(1). Subpart C—[Removed and Reserved] ■ 2. Remove and reserve Subpart C. Dated: September 15, 2010. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2010–23457 Filed 9–20–10; 8:45 am] BILLING CODE 8010–01–P 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 Securities and Exchange Commission. ACTION: Final rule. AGENCY: 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 SUMMARY: PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 57385 ‘‘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 2–021 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 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– 29 under the Exchange Act.10 Prior to enactment of the Dodd-Frank Act, a non-accelerated filer 11 would have been 1 17 CFR 210.2–02. CFR part 210. 3 17 CFR 229.308. 4 17 CFR part 229. 5 17 CFR 249.220f. 6 17 CFR 249.240f. 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 2 17 E:\FR\FM\21SER1.SGM Continued 21SER1 57386 Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Rules and Regulations hsrobinson on DSK69SOYB1PROD with RULES 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 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. 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 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. 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 SarbanesOxley Act. 14 See new Item 308(a)(4) of Regulation S–K. VerDate Mar<15>2010 16:05 Sep 20, 2010 Jkt 220001 of management on the issuer’s internal control over financial reporting.15 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. 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. 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 DoddFrank Act. Section 23(a)(2) of the Exchange Act requires the Commission, 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. 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’’). 18 See 5 U.S.C. 553(d)(3). PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 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. New Section 404(c) of the SarbanesOxley 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 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 In accordance with the foregoing, the Commission is amending Title 17, ■ 19 15 U.S.C. 78w(a)(2). U.S.C. 78c(f). 21 44 U.S.C. 3501 et seq. 22 We are issuing a separate notice regarding the impact of this change on paperwork burdens. 20 15 E:\FR\FM\21SER1.SGM 21SER1 Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Rules and Regulations 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 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. * * * * * 2. Section 210.2–02 is amended by revising paragraph (f) to read as follows: ■ § 210.2–02 Accountants’ reports and attestation reports. hsrobinson on DSK69SOYB1PROD with RULES * VerDate Mar<15>2010 16:05 Sep 20, 2010 Jkt 220001 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. * * * * * Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. 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 Note: The text of Form 20–F does not, and this amendment will not, appear in the Code of Federal Regulations. 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. * * * * * (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 § 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 57387 * * * * 4. Section 229.308 is amended by revising paragraphs (a)(4) and (b) to read as follows: ■ § 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 § 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 § 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. * * * * * * * * * * 6. Form 20–F (referenced in § 249.220f) is amended by revising paragraphs (b)(4) and (c) of Item 15 to read as follows: ■ FORM 20–F * * * * Sfmt 4700 * * * * * * (b) * * * (4) If an issuer is an accelerated filer or a large accelerated filer (as defined in § 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 § 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. * * * * * ■ 7. Form 40–F (referenced in § 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 * Fmt 4700 * * 5. The authority citation for part 249 continues to read, in part, as follows: Frm 00017 * Item 15. Controls and Procedures. * PO 00000 * PART II PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 ■ * * * * * B. Information To Be Filed on this Form * * (6) * * * E:\FR\FM\21SER1.SGM 21SER1 * * 57388 Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Rules and Regulations (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 § 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 DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 100 [Docket No. USCG–2010–0383] RIN 1625–AA08 Special Local Regulations for Marine Events; Patuxent River, Solomons, MD Coast Guard, DHS. Temporary final rule. AGENCY: ACTION: The Coast Guard is establishing special local regulations during the ‘‘Chesapeake Challenge’’ power boat races, a marine event to be held on the waters of the Patuxent River, near Solomons, MD on October 1, 2010 and October 3, 2010. These special local regulations are necessary to provide for the safety of life on navigable waters during the event. This action is intended to temporarily restrict vessel traffic in a portion of the Patuxent River during the event. hsrobinson on DSK69SOYB1PROD with RULES SUMMARY: VerDate Mar<15>2010 16:05 Sep 20, 2010 Jkt 220001 This rule is effective from 10 a.m. on October 1, 2010 until 6 p.m. on October 3, 2010. ADDRESSES: Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, are part of docket USCG–2010–0383 and are available online by going to https:// www.regulations.gov, inserting USCG– 2010–0383 in the ‘‘Keyword’’ box, and then clicking ‘‘Search.’’ This material is also available for inspection or copying at the Docket Management Facility (M– 30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: If you have questions on this temporary rule, call or e-mail Mr. Ronald Houck, U.S. Coast Guard Sector, Baltimore, MD; telephone 410–576–2674, e-mail Ronald.L.Houck@uscg.mil. If you have questions on viewing the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 202–366– 9826. SUPPLEMENTARY INFORMATION: DATES: Regulatory Information On June 10, 2010, we published a notice of proposed rulemaking (NPRM) entitled ‘‘Special Local Regulations for Marine Events; Patuxent River, Solomons, MD’’ in the Federal Register (75 FR 32866). Additionally, on July 19, 2010, we published a supplemental notice of proposed rulemaking (SNPRM) entitled ‘‘Special Local Regulations for Marine Events; Patuxent River, Solomons, MD’’ in the Federal Register (75 FR 41789). We received no comments on the proposed rules. No public meeting was requested, and none was held. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register. Due to the need for immediate action, the restriction of vessel traffic is necessary to protect life, property and the environment against the hazards associated with high-speed offshore power boat races on confined navigable waters. Such hazards include damages and injuries caused by collisions with other vessels and navigational obstructions and hazards caused by vessel sinkings. In addition, with no changes from the information provided in the SNPRM and no comments received, the public has been aware of the scheduled date since July 19, 2010. Therefore, a 30-day notice is contrary to PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 the public interest. Delaying the effective date would be contrary to the regulated area’s intended objectives of protecting persons and vessels involved in the event, and enhancing public and maritime safety. Basis and Purpose On October 1, 2010 and October 3, 2010, the Chesapeake Bay Power Boat Association will sponsor power boat races on the Patuxent River near Solomons, MD. The event consists of offshore power boats racing in a counter-clockwise direction on a racetrack-type course located between the Governor Thomas Johnson Memorial (SR–4) Bridge and the U.S. Naval Air Station Patuxent River, MD. The start and finish lines will be located near the Solomon’s Pier. A large spectator fleet is expected during the event. Due to the need for vessel control during the event, the Coast Guard will temporarily restrict vessel traffic in the event area to provide for the safety of participants, spectators and other transiting vessels. Discussion of Comments and Changes The Coast Guard received no comments in response to the NPRM and SNPRM. No public meeting was requested and none was held. The regulation proposed in the SNPRM is the regulation being added. Regulatory Analyses We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders. Regulatory Planning and Review This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. Although this regulation will prevent traffic from transiting a portion of the Patuxent River during the event, the effect of this regulation will not be significant due to the limited duration that the regulated area will be in effect and the extensive advance notifications that will be made to the maritime community via the Local Notice to Mariners and marine information broadcasts, so mariners can adjust their plans accordingly. Additionally, the regulated area has been narrowly tailored to impose the least impact on general navigation yet provide the level E:\FR\FM\21SER1.SGM 21SER1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 75, Number 182 (Tuesday, September 21, 2010)]
[Rules and Regulations]
[Pages 57385-57388]
From the Federal Register Online via the Government Printing 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \18\ See 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78w(a)(2).
    \20\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \21\ 44 U.S.C. 3501 et seq.
    \22\ We are issuing a separate notice regarding the impact of 
this change on paperwork burdens.
---------------------------------------------------------------------------

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

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