On November 30, 2004, the Securities and Exchange Commission issued an exemptive order granting certain accelerated filers an additional 45 days to comply with the requirement under Section 404 of the Sarbanes-Oxley Act to provide a management report on internal control over financial reporting and the related independent auditor’s attestation report. The exemptive order applies to accelerated filers with a fiscal year ending between and including November 15, 2004 and February 28, 2005, and a public float held by non-affiliates of less than $700 million at the end of their second fiscal quarter in 2004. Such companies will be permitted to omit the internal control reports from their initial Form 10-K filing, so long as they include them in an amended Form 10-K filed within 45 days after the initial filing deadline, currently set at 75 days after fiscal year end.
An issuer relying on the exemptive order must meet the following conditions:
- The initial Form 10-K must be filed within 75 days after fiscal year-end and must include all other required information, including audited financial statements and the accompanying report of independent auditors regarding the financial statements;
- The issuer must identify the omitted information;
- If, before the initial Form 10-K is filed, the issuer identified a material weakness in its internal control over financial reporting or the auditor identified such a material weakness and communicated this finding to the company, the accelarated filer must disclose this information in the Form 10-K; and
- The issuer must file an amendment to its Form 10-K to include the management report and related auditor attestation report not later than 45 days after the original deadline for filing the Form 10-K, and the issuer may not extend that deadline by relying on Rule 12b-25.
Note, the SEC determined that an issuer relying on the extension will not be considered to have timely filed its Form 10-K for purposes of Form S-2 and S-3 eligibility until it has filed the amended Form 10-K containing the internal control reports. Some practitioners interpret this restriction as precluding the use of an effective Form S-2 and S-3 during the interim 45 day period. Whereas, use of Rule 144 and effective Form S-8s, may continue unimpeded as their use is not impacted by Form S-2 or S-3 eligibility.
On November 30, 2004, the Public Company Accounting Oversight Board also adopted a temporary transition rule, subject to SEC approval, that would permit the delayed filing of the auditor's attestation consistent with the SEC's exemptive order.
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