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                            INSTRUCTIONS AS TO EXHIBITS
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Page 1

Conforming Version (To Conform to Release Published in the Federal Register)


17 CFR PARTS 228, 229, 232, 239, 240, 245, 249 AND 274

[RELEASE NOS. 33-8732A; 34-54302A; IC-27444A; FILE NO. S7-03-06]

RIN 3235-AI80


AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission is adopting amendments to the

disclosure requirements for executive and director compensation, related person

transactions, director independence and other corporate governance matters and security

ownership of officers and directors. These amendments apply to disclosure in proxy and

information statements, periodic reports, current reports and other filings under the

Securities Exchange Act of 1934 and to registration statements under the Exchange Act

and the Securities Act of 1933. We are also adopting a requirement that disclosure under

the amended items generally be provided in plain English. The amendments are intended

to make proxy and information statements, reports and registration statements easier to

understand. They are also intended to provide investors with a clearer and more

complete picture of the compensation earned by a company’s principal executive officer,

principal financial officer and highest paid executive officers and members of its board of

directors. In addition, they are intended to provide better information about key financial

relationships among companies and their executive officers, directors, significant

shareholders and their respective immediate family members. In Release No. 33-8735,

published elsewhere in the proposed rules section of this issue of the Federal Register,

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we also request additional comments regarding the proposal to require compensation

disclosure for three additional highly compensated employees.

DATES: Effective Date: November 7, 2006.

Comment Date: Comments regarding the request for comment in Section II.C.3.b. of this

document should be received on or before October 23, 2006.

Compliance Dates: Companies must comply with these disclosure requirements in

Forms 8-K for triggering events that occur on or after November 7, 2006 and in Forms

10-K and 10-KSB for fiscal years ending on or after December 15, 2006. Companies

other than registered investment companies must comply with these disclosure

requirements in Securities Act registration statements and Exchange Act registration

statements (including pre-effective and post-effective amendments), and in any proxy or

information statements filed on or after December 15, 2006 that are required to include

Item 402 and 404 disclosure for fiscal years ending on or after December 15, 2006.

Registered investment companies must comply with these disclosure requirements in

initial registration statements and post-effective amendments that are annual updates to

effective registration statements on Forms N-1A, N-2 (except those filed by business

development companies) and N-3, and in any new proxy or information statements, filed

with the Commission on or after December 15, 2006.

ADDRESSES: Comments may be submitted by any of the following methods:


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expanded disclosures concerning options and other equity-based awards and new

disclosure requirements regarding pension benefits, non-qualified deferred

compensation, other potential post-employment payments and director


Companies filing annual reports on Form 10-K that will be required to include

disclosure under Item 402 of Regulation S-K, as we are amending it, and Item

407(e)(4) of Regulation S-K (regarding compensation committee interlocks and

insider participation), will experience greater costs in responding to these

disclosure requirements in the first year of compliance with them, and, to a lesser

extent, in the second and third years, as systems and processes are implemented to

obtain the relevant data and disclosure controls and procedures with respect to

new or expanded disclosure requirements are implemented, with lower

incremental costs expected in subsequent years.

The hours of company personnel time and outside professional time required to

prepare the disclosure regarding related person transactions under amended Item

404, director independence under new Item 407(a) and compensation committee

functions under paragraphs (e)(1) through (e)(3) of Item 407 of both Regulation

S-K and Regulation S-B, will be greater as compared to the burden that was

imposed in complying with the related party transaction disclosure requirements

and disclosure about the board of directors required by Item 404 of Regulations S-

K and S-B and Item 7 of Schedule 14A prior to these amendments. The new

577 In the Proposing Release, we estimated that the proposed revisions would average 67 hours per

Form 10-K; 35 hours per Form 10-KSB; 60 hours per Form 10; 30 hours per Forms 10-SB and
SB-2; 60 hours per Forms S-1, S-4 and S-11; and 1.675 hours per Form N-2.


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Compensation Committee Report that is required in the Form 10-K (and is not

required for small business issuers, because they are not required to include

Compensation Discussion and Analysis) will increase the burdens. Other

amendments to be made by moving disclosure requirements relating to corporate

governance to new Item 407 of Regulations S-K and S-B will not change the

substance of the disclosure requirements and will therefore not increase burdens,

particularly for proxy or information statements where much of the disclosure

about these topics is currently required.

For Form 10-K, we estimate that it would take issuers 170 additional hours to

prepare the amended disclosure in year one, 80 hours in year two and 35 hours in

year three and thereafter, which results in an average of 95 hours over the three

year period to comply with the amended disclosure requirements. This estimate

takes into account that the burden will be incurred by either including the required

disclosure in the report directly or incorporating by reference from a proxy or

information statement. This estimated incremental burden is based on a

consideration of the extent to which the amendments will increase, decrease or

not affect the burden imposed by the requirements in place prior to these

amendments, as described in Section VIII.B., above. The incremental burden

represents the estimate of the average burden across the range of companies that

file annual reports on Form 10-K, recognizing that larger companies with more

complex executive and director compensation arrangements, more related person

transactions and more involved corporate governance structures may require more

time to comply with the amended disclosure requirements, while smaller issuers


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* * * * *

14. In the case of a Registrant that is a business development company, provide

the information required by Item 402 of Regulation S-K (17 CFR 229.402).

* * * * *

51. Amend Form N-3 (referenced in §§239.17a and 274.11b) by:

a. Revising “$60,000” to read “$120,000” in the introductory text of paragraphs

(h), (i), and (j) of Item 20; Instruction 2 to paragraph (h) of Item 20; and Instruction 5 to

paragraph (j) of Item 20; and

b. Removing the word “relocation,” in the second sentence of Instruction 2 to

Item 22(b).

Note-The text of Form N-3 does not, and this amendment will not, appear in the
Code of Federal Regulations.

52. Amend Form N-CSR (referenced in §§249.331 and 274.128) by revising

Item 10 to read as follows:

Note-The text of Form N-CSR does not, and this amendment will not, appear in the
Code of Federal Regulations.


* * * * *

Item 10. Submission of Matters to a Vote of Security Holders.

Describe any material changes to the procedures by which shareholders may

recommend nominees to the registrant’s board of directors, where those changes were

implemented after the registrant last provided disclosure in response to the requirements

of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15)

of Schedule 14A (17 CFR 240.14a-101)), or this Item.


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Instruction. For purposes of this Item, adoption of procedures by which

shareholders may recommend nominees to the registrant’s board of directors, where the

registrant’s most recent disclosure in response to the requirements of Item 407(c)(2)(iv)

of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17

CFR 240.14a-101)), or this Item, indicated that the registrant did not have in place such

procedures, will constitute a material change.

* * * * *

By the Commission.

Nancy M. Morris

Dated: August 29, 2006


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