Securities Exchange Act of 1934 Periodic disclosure Executive certifications Selective disclosure Last updated 16 Feb 11

What disclosure required …

Mandatory Disclosure ’33 Act – public offerings –Registration statements –Final prospectus ’34 Act – public companies –Periodic reports Annual – Form 10K Quarterly – Form 10Q Special – Form 8K –* Proxy statements – Schedule 14A –* Tender offers – Schedule 13D, TO, 14D-9 –* Insider trading – Forms 3, 4, 5 Integrated disclosure –Regulation S-K –Regulation S-X

Integrated disclosure Regulation S-K ’33 Act Form S-1 Form S-3 Form S-4 ’34 Act Form 10-K Form 10-Q Form 8-K Schedule 14A Regulation S-X

What is “public company” …

Public companies Section 12(a) –Listed on national exchange –Brokers can’t transact in stock unless registered Section 12(g) –OTC companies: 500 record Shs + $10 MM assets –Deregistration: [< 300 Shs] OR [ < 500 Shs + < 10 MM for 3 years] Section 15(d) –Company files RS under ’33 Act –Subject to periodic reporting (not proxy or TO rules)

Public companies Section 12(a) –Listed on national exchange –Brokers can’t transact in stock unless registered Section 12(g) –OTC companies: 500 record Shs + $10 MM assets –Deregistration: [< 300 Shs] OR [ < 500 Shs + < 10 MM for 3 years] Section 15(d) –Company files RS under ’33 Act –Subject to periodic reporting (not proxy or TO rules)

Public companies Section 12(a) –Listed on national exchange –Brokers can’t transact in stock unless registered Section 12(g) –OTC companies: 500 record Shs + $10 MM assets –Deregistration: [< 300 Shs] OR [ < 500 Shs + < 10 MM for 3 years] Section 15(d) –Company files RS under ’33 Act –Subject to periodic reporting (not proxy or TO rules) Pink Sheets Reverse Merger

Online information (real time) …

EDGAR –Search EDGARSearch EDGAR –Description of SEC formsDescription of SEC forms Netflix –Annual report / Form 10KForm 10K –Special report / Form 8KForm 8K –Ownership report / Form 3, 4, 5, 13GForm 3, 4, 5, 13G Regulation S-K

“Continuous disclosure” (real time basis) …

Hypothetical Orange Inc. sells consumer batteries. Sales have lagged this year so it engages in some late- year “channel stuffing.” When its auditor finds out, the auditor threatens to quit – unless the company revises its financials. Instead, the company CEO resigns. What must be disclosed? When? 1.The “channel stuffing” – once discovered. 2.The auditor’s threats to quit? 3.The CEO’s departure? 4.The company’s restatement.

Form 8-K (revised 2004) 1. Registrant’s Business & Operations The entry into, a material amendment to, or termination of a “material definitive agreement,” defined as contracts outside the ordinary course of business. The filing of bankruptcy or receivership. 2. Financial Information The completion of the acquisition or disposition of assets constituting more than 10% of the registrant’s total assets. The results of operations and financial condition (if they are disclosed by press release before the filing of the 10-Q or 10-K). The creation or triggering of an off-balance sheet arrangement. Costs associated with exit or disposal activities, including termination benefits for employees, contract termination costs and other associated costs. Material impairments to assets such as goodwill. 3. Securities & Trading Markets Receipt of a notice of delisting or a transfer of listing. The unregistered sale of equity securities. Material modifications to the rights of security holders. 4. Matters Related to Accountants & Financial Statements Changes in the company’s outside auditor (and the reasons for the change). Notice that previously issued financial statements or audit reports should no longer be relied upon.

Form 8-K (revised 2004) 5. Corporate Governance & Management A change in control of the registrant. The departure or election/appointment of directors and principal officers. Amendments to the articles of incorporation or bylaws. Changes in the company’s fiscal year. Temporary suspension of trading under employee benefit plans Amendment to the registrant’s code of ethics or the waiver of the requirements of that code. [[Reserved for later use] 7. Regulation FD Any disclosure required to comply with Regulation FD 8. Other Events Anything that the issuer thinks would be of interest to its security holders.

What must company executives certify?

CEO/CFO Certification Prior law: Certify –CEO & CFO required to sign 10-K –CFO signs 10-Q Liability –Filings and press releases subject to 10b-5 liability Sarbanes-Oxley Act: CEO/CFO certify filings –Reviewed report –On knowledge – not untrue or misleading + fairly present finances Certify internal controls –Designed to ensure info –Evaluated effectiveness (90 days) –Conclusion on effectiveness Disclose –Problems to auditors –Any changes False certification –Max: 5 years prison + $5 MM fine –“reckless disregard” in 10b-5 action

Regulation FD …

Hypothetical CEO of SSSystems Inc. is invited to tech conference by Goldman Sachs. In Q&A, CEO is asked about effects of 9/11 on industry. CEO answers that “contracts are now getting signed” and “our Q4 appears quite normal.” This is news! The securities analysts flip open their cell phones and type into their Blackberrys – “Buy SSS” Has CEO violated Reg FD – What is purpose of Reg FD? Were statements material? Non-public? Does Reg FD apply at conference? Could CEO talk to Auditor? Lawyer? Credit rating agency?

Regulation FD Disclosure of material, non-public information “covered persons”: B-D, IA, IC, person expected to trade Intentional disclosures –Must disclose “simultaneously” –Later file Form 8-K Unintentional disclosures –Must disclose “promptly” (within 24 hours) –File 8-K Applies to senior executives and those who communicate to public Exceptions: –normal course of business (but after Dodd- Frank not credit rating, unless confidentiality) –government officials –’33 Act “road show” –Disclosure by foreign private issuers (still subject to antifraud rules) Is Reg FD constitutional?

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