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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
Obligations of a public company Sample summary annual reporting cycle for U.S. large accelerated filer (calendar year-end) January • Press release announcing Q4 earnings call/webcast (c. 1 week in advance). • Q4 earnings release and Form 8-K. • Q4 earnings call/webcast. April • Press release announcing Q1 earnings call/webcast (c. 1 week in advance). • Q1 earnings release and Form 8-K. • Q1 earnings call/webcast. • File and post/mail definitive proxy (no later than 120 days after year-end if incorporated into 10-K; at least 40 days before annual meeting if using e-proxy “notice and access”). July • Press release announcing Q2 earnings call/webcast (c. 1 week in advance). • Q2 earnings release and Form 8-K. • Q2 earnings call/webcast. October • Press release announcing Q3 earnings call/webcast (c. 1 week in advance). • Q3 earnings release and Form 8-K. • Q3 earnings call/webcast. February • Submit SEC no-action requests to exclude stockholder proposals from proxy (at least 80 calendar days before definitive proxy filed). • File Form 10-K (no later than 60 days after fiscal year end—i.e., by March 1 or 2). • File “glossy,” if incorporated by reference into Form 10-K, and print/post on website. May • File Q1 Form 10-Q (no later than 40 days after quarter end—i.e., by May 10). • May 31—File Form SD (if applicable). August • File Q2 Form 10-Q (no later than 40 days after quarter end—i.e., by August 9). November • File Q3 Form 10-Q (no later than 40 days after quarter end—i.e., by November 9). • Notify stockholder proposal proponents of eligibility or procedural defects in proposal (within 14 days of receiving proposal). March • File preliminary proxy with SEC (unless it contains only certain specified matters) at least 10 calendar days before definitive proxy filed, but review may take up to 30 days). • March 31—Q1 quarter end. June • Annual stockholders’ meeting. • June 30—Q2 quarter end. September • September 30—Q3 quarter end. December • Deadline for stockholder proposals (120 days before date of prior year’s proxy statement). • Send directors’ and officers’ questionnaires to board members and executive officers (for proxy preparation). • December 31—year-end. Disclosure controls and procedures should generally be documented in writing and tailored to reflect the operations of the company and its particular risk profile. The starting point for creating a system of disclosure controls and procedures should be an inventory of the company’s existing practices. The company should develop its disclosure controls and procedures in consultation with its auditors and outside counsel and ensure their compatibility with the company’s internal controls and other compliance policies and procedures. Many companies choose to create a disclosure committee as part of their disclosure controls and procedures. This committee is responsible for considering the materiality of information and determining disclosure obligations on a timely basis and typically includes: • the principal accounting officer or controller; • the general counsel or other senior legal officer with responsibility for disclosure matters; • the principal risk management officer; and • the chief investor relations officer. CEO and CFO certifications: As a result of SOX, the company’s periodic reports must include two types of certifications by the CEO and CFO: Section 302 certifications and Section 906 certifications. These certifications must reproduce the required statements exactly—they may not be changed in any respect, even if the change appears inconsequential in nature, although certain portions of the certifications will not be required until the company is subject to Section 404 reporting. Under Section 302, each Form 10-K or Form 10-Q (but not Form 8-K) must NYSE IPO Guide 67
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NEW YORK STOCK EXCHANGE IPO Guide,
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NYSE IPO Guide For an electronic ve
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9. Foreign private issuers 97 9.1 A
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Preface Congratulations on making i
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Introduction: Advantages of a NYSE
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Why go public? 1.1 Advantages of co
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2 Preparing to go public NYSE IPO G
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Page 85 and 86: 8 Managing risk NYSE IPO Guide 83
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Appendices Appendix VI: Summary of
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Contributor profiles NYSE IPO Guide
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Contributor profiles (SEC) register
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Contributor profiles The Children
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Contributor profiles KPMG 345 Park
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Contributor profiles Morrow & Co.,
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