03-7680. Disclosure Required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002; Correction

AGENCY:

Securities and Exchange Commission.

ACTION:

Corrections to final regulations.

SUMMARY:

We are making technical corrections to rules adopted in Release No. 33-8177 (January 23, 2003), which were published in the Federal Register on January 31, 2003 (68 FR 5110). The rules implement sections 406 and 407 of the Sarbanes-Oxley Act of 2002 by requiring disclosures regarding audit committee financial experts and codes of ethics. This document amends an instruction to the rule to clarify that disclosures regarding audit committee financial experts are required only in annual reports.

EFFECTIVE DATE:

March 31, 2003.

FOR FURTHER INFORMATION CONTACT:

Ray Be, Special Counsel, Office of Rulemaking, Division of Corporation Finance, at [phone], U.S. Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0312.

SUPPLEMENTARY INFORMATION:

I. Background

On January 23, 2003, the Commission adopted,^[1] among other things, amendments to item 401 of Regulations S-K and S-B.^[2] These rules require disclosure of whether a company has an audit committee financial expert, as defined in the rule, serving on its audit committee.

Subsequent to the adoption of the amendments, questions arose regarding whether the disclosures required by the new disclosure item must be provided in registration statements under the Securities Act of 1933 ^[3] and the Securities Exchange Act of 1934.^[4] Although the discussion of these provisions in the adopting release makes clear that such disclosure is required only in a company's annual report, the new disclosure item did not clearly state that such disclosure is required only in annual reports.

Accordingly, the amendments set forth in this document clarify that the rules require disclosure of whether a company has an audit committee financial expert serving on its audit committee only in an annual report. Although this disclosure is not required in any document other than the annual report, a company may, at its discretion, include the audit committee financial expert disclosure in its proxy or information statement and incorporate that disclosure into its annual report if it complies with applicable rules for incorporation by reference. The changes are technical corrections to clarify the rules as described in the original adopting release, and do not alter the forms in which the disclosure is required as described in the original adopting release.

II. Need for Correction

As published, the final regulations contain errors which are in need of clarification.

III. Correction of Publication

Accordingly, the publication on January 31, 2003, of the final rules (Release No. 33-8177) relating to the disclosure of whether a company has an audit committee financial expert serving on its audit committee and whether a company has adopted a code of ethics for its principal executive officer, principal financial officer, principal accounting officer and controller, which were the subject of FR Doc. 03-2018, is corrected as follows:

§ 228.401

[Corrected]

On page 5126, in the first column, paragraph 1 to Instructions to Item 401(e) of § 228.401 is corrected to read as follows:

* * * * *

Instructions to Item 401(e)

1. The disclosure under Item 401(e) is required only in a small business issuer's annual report. The small business issuer need not provide the disclosure required by this Item 401(e) in a proxy or information statement unless that small business issuer is electing to incorporate this information by reference from the proxy or information statement into its annual report pursuant to general instruction E(3) to Form 10-KSB.

* * * * *

§ 229.401

[Corrected]

On page 5127, in the third column, paragraph 1 to Instructions to Item 401(h) of § 229.401 is corrected to read as follows:

* * * * *

Instructions to Item 401(h)

1. The disclosure under Item 401(h) is required only in a registrant's annual report. The registrant need not provide the disclosure required by this Item 401(h) in a proxy or information statement unless that registrant is electing to incorporate this information by reference from the proxy or information statement into its annual report pursuant to general instruction G(3) to Form 10-K.

* * * * *

Dated: March 26, 2003.

Jill M. Peterson,

Assistant Secretary.

Footnotes

1.  See Release No. 33-8177 (Jan. 23, 2003) (68 FR 5110).

2.  17 CFR 229.401; 17 CFR 228.401.

3.  15 U.S.C. 77a et seq.

4.  15 U.S.C. 78a et seq.