November 13, 2009
David Feldman will be a panelist at the Financial Executive Institute seminar entitled, "Where’s the Money? Finding Public vs. Private Capital Today."
David Feldman's book, Reverse Mergers: Taking a Company
Public Without an IPO, now in its third printing, was published in 2006
by Bloomberg Press (available on http://www.amazon.com).
View David Feldman's reverse merger blog at www.reversemergerblog.com.
David Feldman is a contributor to PIPES: Revised and Updated Edition - A Guide to Private Investments in Public Equity (Bloomberg Press, 2005) available on
http://www.amazon.com.
Dov Scherzer is the U.S. contributor to the British
treatise, Internet Law and Regulation (Sweet & Maxwell, 2d Ed. 1997;
3d Ed. 2002; 4th ed. 2007),
Available Here.
Dov Scherzer is the U.S. contributor to the British
treatise, Electronic Signatures Law and Regulation (Sweet & Maxwell,
1st Ed. 2004),
Available Here.
In the News
David
Feldman quoted in Financial Times article
on May 23, 2007 concerning Sarbox.
SEC
Set to Approve Guidance on Sarbox
by
Jeremy Grant
US
regulators are poised on Wednesday to
approve the first changes to the implementations
of the Sarbanes-Oxley law since its
passage five years ago, hoping to make
compliance with its controversial provisions
easier for top company executives.
The Securities and Exchange Commissions
five commissioners will meet to approve
a proposed new "management guidance"
to be used by executives as they perform
checks of their companies' controls
of financial statements.
The move comes after the 2002 passage
of Sarbox, which was designed to prescribe
measures that would help prevent the
kind of financial misstatements and
frauds that brought down Enron and WorldCom.
Wednesday's likely approval of a set
of guidelines originally proposed in
December will provide executives with
a clearer idea of how the SEC intends
corporate America--and foreign companies
listed in the US--to implement Section
404 of Sarbox.
It is likely most to affect small- to
medium- sized companies, because those
under &75m in market capitalization
have yet to implement Sarbox by law.
While they represent a small fraction
of the overall market capitalization
of companies listed on US stock exchanges,
they make up about 80 per cent of listed
companies by number.
The SEC is also set to make decisions
impacting smaller companies that go
beyond providing relief on Sarbox. These
include proposing increasing the number
of companies "eligible for the scaled
disclosure and reporting requirements
for smaller reporting companies".
Also under consideration is relaxing
the rules that apply to the resale of
securities sold under private placements-
the SECs so- called Rule 144- to "revise
the holding period for the resale of
restricted securities".
Section 404 of Sarbox- which requires
executives to carry out internal controls
checks- has been a lightning rod for
criticism.
In the absence of any guidance to executives
as to how they should carry out such
checks- and how far such checks should
go- executives have relied on the advice
of their external auditors, who have
tended to push for extensive -- and
often needlessly costly- checks.
In its management guidance, the SEC
proposes that section 404 checks be
focused on areas most likely to give
rise to financial misstatements.
However in making its decision its decision,
the SEC has faced a balancing act.
On the one hand pro-business advocates
say smaller businesses are in urgent
need of clearer guidance on how to apply
Section 404 because they lack the staff
and systems common at larger companies
that allow the extra costs involved
in implementing such checks.
In the absence of such guidance, the
advocates say, smaller companies are
spending valuable resources that could
be more profitably channeled to research
and development.
Paul Atkins, an SEC commissioner frequently
critical of aspects of Sarbox, says
the law has created "barriers to entry"
to public markets for some companies
fearful of the anticipated costs of
Sarbox compliance. "Some may decide
that going public is not worth it and
others may decide to go public somewhere
else. Is that good for investors?"
However critics of any easing of the
internal controls environment- such
as the Consumer Federation of America-
say smaller companies are most prone
to financial misstatements and that
investor interest are not served by
such as easing.
David Feldman, managing partner
at Manhattan law firm Feldman Weinstein
& Smith, says: "There are thousands
of reasons for misstatements. Many of
them end u being relatively innocent
and end up not having a significant
impact on [companies'] financial statements.
"They have had double the costs as a
percentage of revenue to comply with
[Sarbanes-Oxley], especially Section
404, so the logic of providing them
some relief without hurting public investors
makes a lot of sense."
