What type of regulations requiring periodic reporting

Periodic Reporting and Disclosure Obligations: Overview. Annual Report to Stockholders. Conflict Minerals Diligence. Duty to Update Previously Disclosed Information.

Earnings Guidance FAQs. Earnings Releases and Earnings Calls. Filing Schedule 13D and 13G Reports. Form K. Form Q. Form 8-K. Late Filings on Form 12b Paragraph b is available if a subsidiary issuer satisfies the requirements of this paragraph but for the fact that, instead of the parent company guaranteeing the security, the subsidiary issuer co-issued the security, jointly and severally, with the parent company. In this situation, the narrative information required by paragraph b 4 must be modified accordingly.

Notes to paragraph c. Instead of the condensed consolidating financial information required by paragraph c 4 , the parent company's financial statements may include a footnote stating, if true, that the parent company has no independent assets or operations, the guarantee is full and unconditional, and any subsidiaries of the parent company other than the subsidiary issuer are minor. If the alternative disclosure permitted by Note 1 to this paragraph is not applicable because the parent company has independent assets or operations, the condensed consolidating financial information described in paragraph c 4 may omit the column for "any other subsidiaries of the parent company on a combined basis" if those other subsidiaries are minor.

Paragraph c is available if a subsidiary issuer satisfies the requirements of this paragraph but for the fact that, instead of the parent company guaranteeing the security, the subsidiary issuer co-issued the security, jointly and severally, with the parent company.

In this situation, the narrative information required by paragraph i 8 of this section must be modified accordingly. Notes to paragraph d. Paragraph d applies in the same manner whether the issuer is a finance subsidiary or an operating subsidiary. The condensed consolidating financial information described in paragraph d 4 may omit the column for "any other subsidiaries of the parent company on a combined basis" if those other subsidiaries are minor.

Paragraph d is available if a subsidiary issuer satisfies the requirements of this paragraph but for the fact that, instead of the parent company guaranteeing the security, the subsidiary issuer co-issued the security, jointly and severally, with the parent company.

If all of the requirements in paragraph d are satisfied except that the guarantee of a subsidiary is not joint and several with, as applicable, the parent company's guarantee or the guarantees of the parent company and the other subsidiaries, then each subsidiary guarantor whose guarantee is not joint and several need not include separate financial statements, but the condensed consolidating financial information should include a separate column for each guarantor whose guarantee is not joint and several.

Notes to paragraph e. Paragraph e applies in the same manner whether the guarantor is a finance subsidiary or an operating subsidiary. Instead of the condensed consolidating financial information required by paragraph e 4 , the parent company's financial statements may include a footnote stating, if true, that the parent company has no independent assets or operations, the guarantee is full and unconditional, and any subsidiaries of the parent company other than the subsidiary guarantor are minor.

If the alternative disclosure permitted by Note 2 to this paragraph is not applicable because the parent company has independent assets or operations, the condensed consolidating financial information described in paragraph e 4 may omit the column for "any other subsidiaries of the parent company on a combined basis" if those other subsidiaries are minor.

If, instead of guaranteeing the subject security, a subsidiary co-issues the security jointly and severally with its parent company, this paragraph e does not apply. Instead, the appropriate financial information requirement would depend on whether the subsidiary is a finance subsidiary or an operating subsidiary.

If the subsidiary is a finance subsidiary, paragraph b applies. If the subsidiary is an operating company, paragraph c applies. Notes to paragraph f.

Instead of the condensed consolidating financial information required by paragraph f 4 , the parent company's financial statements may include a footnote stating, if true, that the parent company has no independent assets or operations, the guarantees are full and unconditional and joint and several, and any subsidiaries of the parent company other than the subsidiary guarantors are minor.

If the alternative disclosure permitted by Note 1 to this paragraph is not applicable because the parent company has independent assets or operations, the condensed consolidating financial information described in paragraph f 4 may omit the column for "any other subsidiaries of the parent company on a combined basis" if those other subsidiaries are minor. If any of the subsidiary guarantees is not joint and several with the guarantees of the other subsidiaries, then each subsidiary guarantor whose guarantee is not joint and several need not include separate financial statements, but the condensed consolidating financial information must include a separate column for each subsidiary guarantor whose guarantee is not joint and several.

Instructions to paragraph g 1 : The significance test of paragraph g 1 ii of this section should be computed using net book value of the subsidiary as of the most recent fiscal year end preceding the acquisition. Information required by this paragraph g is not required to be included in an annual report or quarterly report.

Subsidiaries shall be deemed to be related prior to their acquisition if: a They are under common control or management; b The acquisition of one subsidiary is conditioned on the acquisition of each subsidiary; or c The acquisition of each subsidiary is conditioned on a single common event.

Note to paragraph h 6. When considering a group of subsidiaries, the definition applies to each subsidiary in that group individually and to all subsidiaries in that group in the aggregate. Inclusion of a separate column does not relieve that issuer or guarantor from the requirement to file separate financial statements under paragraph a of this section. Generally Accepted Accounting Principles, reconcile the information in each column to U.

Generally Accepted Accounting Principles to the extent necessary to allow investors to evaluate the sufficiency of the guarantees.

The reconciling information need not duplicate information included elsewhere in the reconciliation of the consolidated financial statements. However, financial statements need not be filed pursuant to this section for any person whose statements are otherwise separately included in the filing on an individual basis or on a basis consolidated with its subsidiaries.

FR and the release date of August 4, , to the list of interpretive releases. Part is amended by removing and reserving Staff Accounting Bulletin No. The authority citation for part continues to read as follows: Authority: 15 U. Financial statements for a subsidiary of a small business issuer that issues securities guaranteed by the small business issuer or guarantees securities issued by the small business issuer must be presented as required by Rule of Regulation S-X 17 CFR Financial statements for a small business issuer's affiliates whose securities constitute a substantial portion of the collateral for any class of securities registered or being registered must be presented as required by Rule of Regulation S-X 17 CFR The authority citation for part continues to read, in part, as follows: Authority: 15 U.

The authority citation for Part continues to read, in part, as follows: Authority: 15 U. By the Commission. Jonathan G. Example No. Note: This situation is discussed in the release. Under these facts, you may wish to request a no-action letter from the Division of Corporation Finance. SubA has outstanding securities convertible into its voting shares.

SubA has outstanding securities convertible into the parent company's voting shares. SubA has outstanding options exercisable into its voting shares. SubA has outstanding options exercisable into the parent company's voting shares. SubA has a class of preferred stock outstanding. The common equity has full voting rights. The preferred stock is non-voting.

Appendix B-Recently Acquired Subsidiary Issuers or Subsidiary Guarantors The following examples illustrate the application of Rule g in determining the financial statements to be provided for recently acquired subsidiary issuers or subsidiary guarantors.

For ease of use, we have included only subsidiary guarantor examples in this appendix. You should note, however, that Rule g applies equally to subsidiary issuers and subsidiary guarantors. Each example is independent of the others. In each of the following examples, assume, unless stated otherwise, that: Parent company registers an offering of its debt securities under the Securities Act. The securities are guaranteed by one or more of its subsidiaries. Parent company and all acquired subsidiary guarantors have December 31 fiscal year ends and, unless otherwise specified, the parent company has filed its audited consolidated financial statements for the fiscal year in which the subsidiary was acquired.

All guarantees are full and unconditional. All guarantees are joint and several. Each subsidiary's purchase price exceeds its net book value at its fiscal year end preceding the date of acquisition. The purchase price is used for testing significance.

In each example, audited financial statements for additional periods may be required by Rule of Regulation S-X. Required financial information: No pre-acquisition financial statements of Subsidiary A are required. Required financial information: Pre-acquisition financial statements of Subsidiary B are required. Subsidiary B is significant and has been included in its parent company's audited consolidated financial statements for less than nine months of the most recent fiscal year.

Audited financial statements of Subsidiary B for its most recent fiscal year preceding the acquisition and subsequent unaudited interim financial statements are required. Upon acquisition, the assets and operations of Business D were transferred to pre-existing Subsidiary Guarantor X, which had little or no assets or operations. Required financial information: Pre-acquisition financial statements of Business D are required.

Although Subsidiary Guarantor X has been included in the consolidated financial statements for more than nine months of the most recent fiscal year, Business D is considered a predecessor of Subsidiary Guarantor X. Audited financial statements of Business D for its most recent fiscal year preceding the acquisition and subsequent unaudited interim financial statements are required. Consummation of each acquisition was conditioned upon the other. Required financial information: Pre-acquisition financial statements of Subsidiaries E and F are required.

Because the acquisitions are related, their individual significance levels must be aggregated. If Subsidiaries E and F were under common control or management before their acquisition, combined financial statements may be presented. Otherwise, separate financial statements are required. Audited financial statements of Subsidiaries E and F for their most recent fiscal years preceding the acquisition and subsequent unaudited interim financial statements are required.

Subsidiaries G and H have been included in their parent company's audited consolidated financial statements for eight and seven months of the most recent fiscal year, respectively. The acquisitions are not related by common ownership, common management, or common conditions to consummation.

Required financial information: Pre-acquisition financial statements of Subsidiaries G and H are not required. Because the acquisitions are unrelated, their significance levels are assessed individually. Subsidiary I is not yet included in the parent company's audited consolidated financial statements.

Parent Company files a Securities Act registration statement on April 2. Subsidiary I is significant and has not been included in its parent company's consolidated financial statements for nine months of the most recent fiscal year.

Audited financial statements of Subsidiary I for its most recent fiscal year preceding the acquisition are required. The 75 day post-consummation period generally available to a recently acquired business under Rule is not applicable to Rule g.

If acquired, Business J will become a subsidiary guarantor of the debt securities being registered. Consummation has not occurred at the time of effectiveness of the registration statement. Required Financial Information: Pre-acquisition financial statements of Business J are not required under Rule g. Business J is not a guarantor at the time of effectiveness of the registration statement.

However, as for all businesses to be acquired, the parent company must separately evaluate whether pre-acquisition financial statements of Business J are required by Rule As a result of application of the pooling of interests method, Subsidiary K is included retroactively in its parent company's audited consolidated financial statements for all three years. Required Financial Information: Pre-acquisition financial statements of Subsidiary K are not required.

Inclusion of Subsidiary K in its parent company's condensed consolidating financial information under Rule for all periods presented satisfies the requirements of Rule g. Appendix C-Who is the "parent company" under Rule ? Company B is not an Exchange Act reporting company. Company B issues securities. Company A guarantees those securities.

No other company in this corporate structure co-issues or guarantees the securities. Company A is the "parent company" for purposes of applying Rule to the subject securities. Company A issues securities.

Company B guarantees the subject securities. Company B is an Exchange Act reporting company. Company C is not an Exchange Act reporting company.

Company C guarantees the subject securities. Neither Company A nor any other company in this corporate structure co-issues or guarantees the securities. Company B is the "parent company" for purposes of applying Rule to the subject securities. The consolidated financial statements of Company A may not be substituted for those of Company B, even if Company A's financial statements are substantially the same as Company B's.

The parent company for purposes of Rule must be an issuer or guarantor of the subject security. Company C issues securities. Company A and Company B guarantee the subject securities. The consolidated financial statements of Company B may not be substituted for those of Company A, even if Company B's financial statements are substantially the same as Company A's. There are no exceptions to the parent company's obligation to provide the financial statements for a registrant under Rule a.

Company D is not an Exchange Act reporting company. Company E is not an Exchange Act reporting company. Company E issues securities. Companies A, B, C, and D guarantee the subject securities. Company D is an Exchange Act reporting company. Company D guarantees the subject securities. Company D is the "parent company" for purposes of applying Rule to the subject securities. Footnotes 1.

SAB 53 instructs issuers to file exemptive applications under Section 12 h of the Exchange Act with regard to the Exchange Act reporting obligations of subsidiary issuers and subsidiary guarantors. Early in the development of SAB 53 issues, the staff began processing these exemptive requests as requests for no-action letters instead of exemptive applications.

This process continues today. Throughout this release, we will refer to these requests as requests for no-action letters. Comment letters sent to the Commission electronically are available at our web site -- www. Issuers of guaranteed securities and guarantors could still request a no-action letter from the Division of Corporation Finance if today's amendments do not address their situation.

The staff will apply the principles expressed in this release to those requests. In connection with the revision to Rule , we are moving the financial statement requirement of affiliates whose securities collateralize registered securities from Rule to new Rule ; and adopting new Notes 3 and 4 to Item of Regulation S-B requiring small business issuers to present financial information for the fiscal periods they are required to present in accordance with amended Rule and new Rule of Regulation S-X.

Rule and the positions expressed in this release will replace all prior Division of Corporation Finance no-action positions relating to SAB Before today's amendments, Rule of Regulation S-X also prescribed financial statement requirements for affiliates of reporting issuers when the securities of such affiliates are the collateral for any class of the issuer's registered securities. We included four appendices in the proposing release to give guidance on the application of the proposed rules.

We are rescinding those appendices. Issuers and guarantors should not rely on those appendices. Instead, issuers and guarantors should consider the appendices to this adopting release when applying today's amendments to specific situations.

The staff intends to publish additional guidance on the application of today's amendments. This test is unaffected by the existence of other securities that grant the right to vote in the event of special circumstances, such as a default. Rule h 7 states that a subsidiary is a finance subsidiary if "it has no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the security being registered and any other securities guaranteed by its parent company.

The staff expanded this relief to subsidiary guarantors in Anheuser-Busch Companies, Inc. April 2, The staff required condensed consolidating financial information in all situations except those specifically addressed in SAB 53 - specifically, those where a there was a single subsidiary issuer or, where there was a parent issuer and a subsidiary guarantee, that guarantee was provided by either a single subsidiary or all subsidiaries; or b the issuer was a finance subsidiary and the parent was the sole guarantor.

The staff first accepted condensed consolidating financial information in connection with its case-by-case review of Securities Act registration statements.

Consistent with the earlier development of SAB 53 interpretation, the staff applied the same analysis to no-action requests relating to Exchange Act reporting. See , e.

March 13, The staff permits subsidiary guarantors to combine financial information in one column if their guarantees are joint and several.

Summarized financial information may obscure these distinctions, particularly if subsidiary guarantors themselves have consolidated operating subsidiaries that are not guarantors. As noted above, four commenters argued that Section should not apply to Form K. We are amending Exchange Act Rules 13a and 15d and Investment Company Act Rule 30a-2 to require the Section certifications to accompany periodic reports containing financial statements as exhibits.

We also are amending the exhibit requirements in Forms F, F and Item of Regulations S-B and S-K to add the Section certifications to the list of required exhibits to be included in reports filed with the Commission. Because the Section certification requirement applies to periodic reports containing financial statements that are filed by an issuer pursuant to Section 13 a or 15 d of the Exchange Act, the exhibit requirement will only apply to reports on Form N-CSR filed under these sections and not to reports on Form N-CSR that are filed under the Investment Company Act only.

This is in contrast to Section , which requires the certifications to be included "in" the periodic report. In recognition of this difference, we are permitting companies to "furnish," rather than "file," the Section certifications with the Commission.

Although Section does not explicitly require the certifications to be made public, we believe that it is appropriate to require certifications that "accompany" a publicly filed periodic report to be provided publicly in this manner.

We believe that Congress intended for Section certifications to be publicly provided. Civil liability already exists under our signature requirements and the Section certifications.

In addition, any Section certification submitted to the Commission as correspondence is subject to the Freedom of Information Act. First, the exhibit requirement enhances compliance by allowing the Commission, the Department of Justice and the public to monitor the certifications effectively. Second, by subjecting the Section certifications to the signature requirements of Regulation S-T, companies are required to retain a manually signed signature page or other authenticating document for a five-year period.

This requirement helps to preserve evidential matter in the event of prosecution. There are important distinctions to be made between Sections and of the Sarbanes-Oxley Act. Unlike the Section certifications, the Section certifications are required only in periodic reports that contain financial statements. Therefore, amendments to periodic reports that do not contain financial statements would not require a new Section certification, but would require a new Section certification to be filed with the amendment.

Effect on Interim Guidance Regarding Filing Procedures We provided interim guidance regarding voluntary filing procedures for Section certifications. In the event that the EDGAR system is not updated by the effective date, companies should submit the required certifications as Exhibit Form of Section Certifications We proposed several amendments to the form of certifications to be provided pursuant to Section of the Sarbanes-Oxley Act.

In particular, we proposed the following: The addition of a statement that principal executive and financial officers are responsible for designing internal controls and procedures for financial reporting or having such controls and procedures designed under their supervision; The clarification that disclosure controls and procedures may be designed under the supervision of principal executive and financial officers; and The revision of the statement as to the effectiveness of disclosure controls and procedures and internal controls and procedures for financial reporting would be as of the end of the period.

We have adopted the proposals referred to above substantially as proposed. In addition, we have made the following changes: We have incorporated the term "internal control over financial reporting" into the certification; We have amended the provision of the certification relating to changes in internal control over financial reporting, consistent with the final rules discussed above regarding evaluation and disclosure, so that it refers to changes that have materially affected or are reasonably likely to materially affect internal control over financial reporting; We have clarified that the statement as effectiveness of disclosure controls and procedures be as of the end of the period, but that the date of the evaluation is not specified; and We have made minor changes in the organization of the certification.

Transition Period The final rules regarding filing of certifications under Sections and , for companies other than registered investment companies, will be effective on August 14, The compliance dates applicable to registered investment companies are described in Section II.

We believe that changes in the form of Section certification described above are beneficial to both registrants and investors because they clarify the provisions of the certification. With one exception, discussed below, the changes are also not related to our new requirements regarding management's internal control report.

With that one exception, appropriateness of the modified certification is thus not affected by the extended compliance period we are providing in connection with management's internal control report and the related attestation. Our rules adopted today also therefore provide that the form of Section certification will be modified, with that one exception, in accordance with these rules effective on August 14, We are applying the extended compliance period to the portion of the introductory language in paragraph 4 of the Section certification that refers to the certifying officers' responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4 b , which must be provided in the first annual report required to contain management's internal control report and thereafter.

As noted above, this extended compliance period does not in any way affect the provisions of our other rules and regulations regarding internal controls that are in effect. Background Certain provisions of our final amendments contain "collection of information" requirements within the meaning of the Paperwork Reduction Act of "PRA". The regulations set forth the disclosure requirements for periodic reports, registration statements and proxy and information statements filed by companies to ensure that investors are informed.

The hours and costs associated with preparing, filing and sending these forms constitute reporting and cost burdens imposed by each collection of information.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Compliance with the requirements is mandatory. Under our rules for the retention of manual signatures, companies must retain, for a period of five years, an original signature page or other document authenticating, acknowledging or otherwise adopting the certifying officers' signatures that appear in their electronically filed periodic reports.

Responses to the information collections are not kept confidential. Summary of the Final Rules The final rules require the annual report of every company that files periodic reports under Section 13 a or 15 d of the Exchange Act, other than reports by registered investment companies, to contain a report of management that includes: A statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting for the company; A statement identifying the framework used by management to evaluate the effectiveness of the company's internal control over financial reporting; Management's assessment of the effectiveness of the company's internal control over financial reporting, as of the end of the most recent fiscal year; and A statement that the registered public accounting firm that audited the financial statements included in the annual report has issued an attestation report on management's evaluation of the company's internal control over financial reporting.

We are adding these requirements pursuant to the legislative mandate in Section of the Sarbanes-Oxley Act. Under our final rules, a company also will be required to evaluate and disclose any change in its internal control over financial reporting that occurred during the fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting. We are also adopting amendments to require companies to file the certifications mandated by Sections and of the Sarbanes-Oxley Act as exhibits to their annual, semi-annual and quarterly reports.

These amendments will enhance the ability of investors, the Commission staff, the Department of Justice and other interested parties to easily and efficiently access the certifications through our Electronic Data Gathering, Analysis and Retrieval "EDGAR" system and facilitate better monitoring of a company's compliance with the certification requirements. With respect to our PRA estimates for the rules implementing Section of the Sarbanes-Oxley Act, eight commenters thought that our PRA estimates significantly understated the actual time and costs that companies would have to expend evaluating and reporting on their internal control over financial reporting.

One commenter believed that, based on its experience, we understated the burden estimate by at least a factor of D below. We have made a substantive modification to the proposed rules in response to the cost concerns expressed by commenters. Specifically, the final rules require companies to undertake a quarterly evaluation only of any change occurring during the fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

This change should substantially mitigate some of the costs and burdens associated with the proposed requirements. We have made additional substantive changes to the proposed rule as well. First, the final rules require management to evaluate the company's internal control over financial reporting using a suitable framework, such as the COSO Framework. Second, the final rules expand the list of information that must be included in the management report and specify that management cannot conclude that a company's internal control over financial reporting is effective if there are one or more material weaknesses in such control.

Under the final rules, management must identify the framework used to evaluate the company's internal control over financial reporting and disclose any material weaknesses in the company's internal control over financial reporting discovered through the evaluation.

We do not believe that these changes significantly alter the burdens imposed on companies resulting from the required assessment of internal control over financial reporting. Revisions to PRA Reporting and Cost Burden Estimates As discussed above, in consideration of commenters' remarks, we are revising our PRA burden and cost estimates for the rules pertaining to Section that we originally submitted to the OMB in connection with the proposed rules.

We derived our new burden hour estimates for the annual report forms by estimating the total amount of time that it will take a company's management to conduct the annual evaluation of its internal control over financial reporting and to prepare the required management report. First, we assumed that the annual number of responses for each form would be consistent with the number of filings that we received in fiscal year We believe that there will be a marked disparity of burdens and costs resulting from the new internal control requirements between the largest and smallest reporting companies.

Our estimates reflect an average burden for all sizes of companies. Third, we assumed that the first-year burden would be greater than that for subsequent years, as a portion of the costs will reflect one-time expenditures associated with complying with the rule, such as compiling documentation, implementing new processes, and training staff.

We also adjusted the second and third year estimates to account for the fact that management should become more efficient at conducting its internal control assessment and preparing the disclosure after the first year as the process becomes more routine.

For large corporations, we expect that this burden will be substantially higher. Indeed, we received estimates in the thousands of hours for some large and complex companies. Conversely, we expect small companies to find their burden to be less than this average. We also believe that many companies will experience costs well in excess of this average in the first year of compliance with the final rules.

We believe that costs will decrease in subsequent years. This burden will also vary among companies based on the complexity of their organization and the nature of their current internal control procedures.

We therefore calculated our estimates by averaging the estimated burdens over a three-year period. We derived our burden estimates for the quarterly report forms by estimating the total amount of time that it will take a company's management to conduct the quarterly evaluation of material changes to the company's internal control over financial reporting and for the company to prepare the required disclosure about such changes.

We believe that these quarterly evaluations will impose little additional burden, as much of the structure to conduct these evaluations will be established in connection with the annual evaluations.

We estimate that the quarterly reporting will impose an additional burden of five hours per company in connection with each quarterly report. Accordingly, we did not revise our original burden hour estimates for the quarterly report forms. We calculated the burden by multiplying the estimated number of affected responses by the estimated average number of hours that management will spend conducting its assessment of the company's internal control over financial reporting and preparing the related disclosure.

There is no change to the estimated burden of the collections of information entitled "Regulation S-K," "Regulation S-B" and "Regulation S-X" because the burdens that these regulations impose are reflected in our revised estimates for the forms. Table 1 : Incremental Paperwork Burden for the rules implementing Section We do not believe that the amendments with respect to the Section certifications result in a need to alter the burden estimates that we previously submitted to OMB because they merely relocate the certifications from the text of quarterly and annual reports filed or submitted under Section 13 a or 15 d of the Exchange Act to the "Exhibits" section of the reports.

We are, however, revising the burden estimates for quarterly and annual reports and for Form N-CSR based on the amendment with respect to the Section certification. With respect to semi-annual reports on Form N-CSR, because the financial statements of registered management investment companies are not as complex as those of operating companies, we estimate that the amendments relating to the Section certifications would result in an increase of one burden hour per portfolio.

We recognize that implementation of the Sarbanes-Oxley Act will likely result in costs and benefits to the economy. We are sensitive to the costs and benefits imposed by our rules, and we have considered costs and benefits of our amendments.

Benefits One of the main goals of the Sarbanes-Oxley Act is to enhance the quality of reporting and increase investor confidence in the financial markets. Recent market events have evidenced a need to provide investors with a clearer understanding of the processes that surround the preparation and presentation of financial information.

These amendments are intended to accomplish the Act's goals by improving public company disclosure to investors about the extent of management's responsibility for the company's financial statements and internal control over financial reporting and the means by which management discharges its responsibility.

The establishment and maintenance of internal control over financial reporting has always been an important responsibility of management. An effective system of internal control over financial reporting is necessary to produce reliable financial statements and other financial information used by investors. By requiring a report of management stating management's responsibility for the company's financial statements and internal control over financial reporting and management's assessment regarding the effectiveness of such control, investors will be able to better evaluate management's performance of its stewardship responsibilities and the reliability of a company's financial statements and other unaudited financial information.

The required annual evaluation of internal control over financial reporting will encourage companies to devote adequate resources and attention to the maintenance of such control. Additionally, the required evaluation should help to identify potential weaknesses and deficiencies in advance of a system breakdown, thereby facilitating the continuous, orderly and timely flow of information within the company and, ultimately, to investors and the marketplace.

Improved disclosure may help companies detect fraudulent financial reporting earlier and perhaps thereby deter financial fraud or minimize its adverse effects. All of these benefits will increase market efficiency by improving investor confidence in the reliability of a company's financial disclosure and system of internal control over financial reporting.

These benefits are not readily quantifiable. Commenters overwhelmingly supported the benefits of the amendments. The amendments related to Section of the Sarbanes-Oxley Act relocate the certifications required by Exchange Act Rules 13a and 15d from the text of quarterly and annual reports filed or submitted under Section 13 a or 15 d of the Exchange Act to the "Exhibits" section of these reports.

The amendments related to Section of the Sarbanes-Oxley Act require that the certifications required by Section of Title 18 of the United States Code, added by Section of the Act, accompany the periodic reports to which they relate as exhibits.

These changes will enhance the ability of investors and the Commission staff to verify that the certifications have, in fact, been submitted with the Exchange Act reports to which they relate and to review the contents of the certifications to ensure compliance with the applicable requirements.

In addition, the changes will enable the Department of Justice, which has responsibility for enforcing Section , to review effectively the form and content of the certifications required by that section. Costs The final rules related to Section of the Sarbanes-Oxley Act require companies, other than registered investment companies, to include in their annual reports a report of management on the company's internal control over financial reporting. The management report on internal control over financial reporting must include: a statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting; a statement identifying the framework used to evaluate the effectiveness of the company's internal control over financial reporting; management's assessment of the effectiveness of the company's internal control over financial reporting as of the end of the company's most recent fiscal year; and a statement that the registered public accounting firm that audited the company's financial statements included in the annual report has issued an attestation report on management's evaluation of the company's internal control over financial reporting.

The final rules will increase costs for all reporting companies. These costs are mitigated somewhat because companies have an existing obligation to maintain an adequate system of internal accounting control under the FCPA. Moreover, one commenter noted that some companies already voluntarily include management reports on their internal controls in their annual reports. The preparation of the management report on internal control over financial reporting will likely involve multiple parties, including senior management, internal auditors, in-house counsel, outside counsel and audit committee members.

Many commenters believed that our proposal to require quarterly evaluations of a company's internal control over financial reporting would significantly increase the costs of preparing periodic reports. Several commenters also were concerned that the proposals would result in increased audit fees. We have limited data on which to base cost estimates of the final rules.

We originally proposed to require a company to include an internal control report in its annual report for fiscal years ending on or after September 15, Under the final rules, a company that is an "accelerated filer" under the definition in Exchange Act Rule 12b-2 must begin to comply with the internal control report requirement in its annual report for its first fiscal year ending on or after June 15, All other companies must begin to comply with the requirement in their annual reports for their first fiscal year ending on or after April 15, A longer transition period will help to alleviate the immediate impact of any costs and burdens imposed on companies.

A longer transition period may even help to reduce costs as companies will have additional time to develop best practices, long-term processes and efficiencies in preparing management reports. Also, a longer transition period will expand the period of availability of outside professionals that some companies may wish to retain as they prepare to comply with the new requirements. The PRA burden estimate, however, excludes several costs attributable to Section The estimate does not include the costs associated with the auditor's attestation report, which many commenters have suggested might be substantial.

It also excludes estimates of likely "indirect" costs of the final rules. For instance, the final rules increase the cost of being a public company; therefore the final rules may discourage some companies from seeking capital from the public markets. Moreover, the final rules may also discourage non-U. The incremental costs of the amendments related to Section of the Sarbanes-Oxley Act are minimal.

Since companies must already include the certifications required by Exchange Act Rules 13a and 15d in their quarterly and annual reports, there should be no incremental cost to relocating the certifications from the text of the reports to the "Exhibits" section of these reports. Requiring the Section certifications to be included as an exhibit to the periodic reports to which they relate will lead to some additional costs for companies that currently are submitting the certifications to the Commission in some other manner.

Thus, the amendments should mitigate this potential indirect cost of compliance. The proxy solicitation and disclosure rules under Section 14 of the Exchange Act. The insider reporting requirements under Section 16 of the Exchange Act.

The fair disclosure requirements under Regulation FD. The requirements are designed to address antifraud policy concerns similar to those underlying the prohibition on insider trading that all reporting companies must comply with. Selective disclosure could result in antifraud liability under Rule 10b-5 under the Exchange Act.

This Toolkit includes links to a number of resources designed to assist FPIs and their counsel and securityholders in complying with the periodic reporting requirements and disclosure obligations of the Exchange Act and the rules and regulations of the national securities exchanges.

Periodic Reporting and Disclosure Obligations: Overview. Annual Report on Form F.