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Obligations of a public company
Form 8-K is also used for information
disclosed to ensure compliance with
Regulation FD (discussed in Section 5.5),
as well as for other information the
company considers important for
investors.
Form SD (Specialized Disclosure): As
required by the Dodd-Frank Act, the
SEC has adopted new rules that require
specialized disclosure on a new Form
SD beginning in May 2014 (but covering
activity in 2013). There are two principal
types of disclosure required by these
rules. First, a company must file Form SD
if certain “conflict minerals” or certain
of their derivatives are necessary to
the functionality or production of its
products. Second, a company involved in
the commercial development or extraction
of oil, natural gas or minerals must file
Form SD to disclose payments it makes
to governments in connection with those
activities.
Press releases: In addition to SEC reporting
requirements, the stock exchanges
impose reporting requirements on listed
companies. It was these rules that in part
drove the issuance of press releases to
announce annual and quarterly results,
which most companies do generally as
a matter of good investor relations (see
Section 5.2).
Stock exchange rules typically require
timely disclosure of material events
beyond those covered by Form 8-K.
For example, under NYSE rules, a listed
company is expected to:
• release quickly to the public any news
or information that might reasonably
be expected to materially affect the
market for its securities; and
• act promptly to dispel unfounded
rumors that result in unusual market
activity or price variations.
Examples of events that the NYSE
expects would result in prompt disclosure
include annual and quarterly earnings,
dividends, record dates, mergers,
acquisitions, tender offers, stock splits,
shareholder meetings, major management
changes and any substantive items of an
unusual or nonrecurrent nature. These
announcements may be made by any
method that constitutes compliance with
Regulation FD (discussed in Section 5.5),
although the NYSE encourages use of a
press release. The company may generally
exercise judgment as to the timing of a
public release on corporate developments
where disclosure would endanger the
company’s goals (e.g., in the MD&A
context) or provide information helpful to a
competitor.
These events generally also require
notice to the NYSE. The NYSE also
requires that the company submit an
annual affirmation concerning compliance
with the NYSE’s corporate governance
listing standards within 30 days of a
company’s annual shareholders’ meeting
(or the filing of the annual report on Form
10-K), as well as interim affirmations
in the event of certain governance
changes and a notice if the company
becomes aware of any noncompliance
with the corporate governance listing
requirements.
(b) Disclosure controls, internal controls
and certifications
One of the most significant challenges
for the company after going public is
the required control framework and
related disclosures. Perhaps the bestknown
element of that framework, often
accompanied by considerable cost, is
management’s report on the effectiveness
of ICFR and a related auditors’ attestation.
This requirement was imposed as a result
of Section 404 of the Sarbanes-Oxley Act
and is often referred to as “Section 404
reporting” or even “SOX reporting” (although
SOX provided for much more than this).
Separately, management is also required to
report on the effectiveness of disclosure
controls and procedures, and the CEO and
CFO are required to certify the company’s
periodic reports.
Internal control over financial reporting:
ICFR is a set of processes designed to
provide reasonable assurance of the
reliability of financial reporting and the
preparation of financial statements in
accordance with GAAP. These procedures
must be designed by, or under the
supervision of, the CEO and the CFO,
who must include statements about them
in their certifications (discussed below).
Once Section 404 reporting is
required, the company’s Form 10-K must
include a management report containing:
• a statement of management’s
responsibility for establishing and
maintaining adequate ICFR for the
company;
• a statement identifying the framework
used by management to evaluate the
effectiveness of ICFR;
• an assessment by management of the
effectiveness of ICFR as of the end of
the most recent fiscal year, including
a statement as to whether ICFR is
effective; and
• a statement that the auditors of the
financial statements included in the
report have issued an audit report on
the effectiveness of ICFR.
The auditors’ report must also
be included in the Form 10-K. Any
material weaknesses in ICFR must be
disclosed, and management and the
auditors may not conclude that ICFR is
effective if there are one or more material
weaknesses. U.S. companies must also
disclose material changes in ICFR in the
quarterly reports on Form 10-Q.
A newly public company typically need
not comply with the Section 404 reporting
requirements until its second Form 10-K
after the IPO. In addition, a nonaccelerated
filer need not provide the auditors’
attestation report.
Disclosure controls and procedures:
The company must also maintain
“disclosure controls and procedures”
designed to ensure that information
required to be disclosed under the
Exchange Act (discussed above) is
recorded, processed, summarized and
reported in a timely and accurate
manner. They will overlap with ICFR,
but disclosure controls and procedures
cover both financial and nonfinancial
information.
As for ICFR, disclosure controls and
procedures must be designed by, or under
the supervision of, the CEO and the CFO,
who must include statements about them
in their certifications (discussed below).
Management must evaluate and disclose
the effectiveness of disclosure controls
and procedures quarterly.
66 NYSE IPO Guide