
[Federal Register: October 2, 2008 (Volume 73, Number 192)]
[Rules and Regulations]               
[Page 57237-57238]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02oc08-4]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 229

[Release Nos. 33-8961; 34-58656]

 
Technical Amendment to Item 407 of Regulation S-K

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; technical amendment.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
making a technical amendment to Item 407 of Regulation S-K. The 
technical amendment updates a reference to Independence Standards Board 
Standard No. 1 (``ISB No. 1''), which was previously adopted by the 
Public Company Accounting Oversight Board (``PCAOB'') as an interim 
standard but has been superseded by the PCAOB's newly adopted Ethics 
and Independence Rule 3526, Communication with Audit Committees 
Concerning Independence. The reference is being updated to refer to the 
``applicable requirements of the Public Company Accounting Oversight 
Board regarding the independent accountant's communications with the 
audit committee concerning independence.''

DATES: Effective Date: September 30, 2008.

FOR FURTHER INFORMATION CONTACT: Melanie Jacobsen, Special Counsel, at 
202-551-5300, Office of the Chief Accountant, Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-5041.

SUPPLEMENTARY INFORMATION:

I. Background

    We are amending Item 407 of Regulation S-K \1\ to update a 
reference as a result of the adoption of a new Public Company 
Accounting Oversight Board (``PCAOB'') rule. Item 407 is being amended 
to update the following reference:
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    \1\ 17 CFR 229.407.
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    Old Reference: 
    ``Independence Standards Board Standard No. 1 (Independence 
Standards Board Standard No. 1, Independence Discussions with Audit 
Committees), as adopted by the Public Company Accounting Oversight 
Board in Rule 3600T''
    New Reference: 
    ``applicable requirements of the Public Company Accounting 
Oversight Board regarding the independent accountant's communications 
with the audit committee concerning independence''
    Independence Standards Board Standard No. 1 (``ISB No. 1'') was 
part of the interim standards previously adopted by the PCAOB on April 
16, 2003.\2\ It required an auditor annually to discuss with the audit 
committee its independence and to provide written disclosures of all 
relationships between the auditor and the company that may reasonably 
be thought to bear on independence and a letter confirming the 
auditor's independence.\3\
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    \2\ PCAOB Rule 3600T.
    \3\ ISB No. 1.
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    Effective on September 30, 2008, PCAOB Rule 3526 supersedes ISB No. 
1 regarding the annual discussion and disclosure the auditor must make 
to the audit committee.\4\ Rule 3526 was adopted by the PCAOB on April 
22,

[[Page 57238]]

2008 and approved by the Commission on August 22, 2008.
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    \4\ Rule 3526 also superseded ISB Interpretation 00-1, The 
Applicability of ISB Standard No. 1 When ``Secondary Auditors'' are 
Involved in the Audit of a Registrant, and ISB Interpretation 00-2, 
The Applicability of ISB Standard No. 1 When ``Secondary Auditors'' 
Are Involved in the Audit of a Registrant, An Amendment of 
Interpretation 00-1.
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    Under existing Item 407 of Regulation S-K, an issuer's audit 
committee must state that it has received from the independent 
accountants the written disclosures and letter required by ISB No. 1. 
As revised, Item 407 requires the audit committee to state that it has 
received the disclosure and letter required by the applicable PCAOB 
requirements for independent accountant communications with audit 
committees concerning auditor independence because ISB No. 1 has been 
superseded by PCAOB Rule 3526. To avoid the need to update a specific 
reference in the future if subsequently changed, we are revising the 
reference in Item 407 Regulation S-K so that it refers to the written 
disclosures and the letter from the independent accountants required by 
``applicable requirements of the Public Company Accounting Oversight 
Board regarding the independent accountant's communications with the 
audit committee concerning independence.''
    We are not revising Item 407 of Regulation S-B in the same manner 
as we are revising Item 407 of Regulation S-K due to amendments that we 
made in December 2007 to expand the number of smaller reporting 
companies that qualify for our scaled disclosure requirements under the 
Securities Act and the Securities Exchange Act of 1934.\5\ To 
streamline and simplify regulation, the amendments moved the scaled 
disclosure requirements from Regulation S-B into Regulation S-K. While 
Regulation S-B will remain in effect for transition purposes until 
March 15, 2009, it will be removed from the Code of Federal Regulations 
in its entirety after that date. We therefore are not revising 
Regulation S-B, but we intend to interpret existing Regulation S-B Item 
407 consistently with the technical changes that we are making to the 
comparable Regulation S-K item. Accordingly, we expect companies 
complying with Regulation S-B after the effective date of these 
amendments, but before March 15, 2009, to follow the applicable PCAOB 
requirements for independent accountant auditor independence.
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    \5\ 15 U.S.C. 78a et seq.
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II. Certain Findings

    Under the Administrative Procedure Act, a notice of proposed 
rulemaking is not required when the agency, for good cause, finds that 
notice and public comment are impracticable, unnecessary, or contrary 
to the public interest.\6\ The amendment to Item 407 of Regulation S-K 
is a technical change to update an outdated reference. Because no one 
is likely to want to comment on such a non-substantive, technical 
amendment, the Commission finds that it is unnecessary to publish 
notice of this amendment.\7\
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    \6\ 5 U.S.C. 553(b).
    \7\ For similar reasons, the amendment does not require analysis 
under the Regulatory Flexibility Act or analysis of major rule 
status under the Small Business Regulatory Enforcement Fairness Act. 
See 5 U.S.C. 601(2) (for purposes of Regulatory Flexibility Act 
analysis, the term ``rule'' means any rule for which the agency 
publishes a general notice of proposed rulemaking); and 5 U.S.C. 
804(3)(C) (for purposes of Congressional review of agency 
rulemaking, the term ``rule'' does not include any rule of agency 
organization, procedure or practice that does not substantially 
affect the rights or obligations of non-agency parties).
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    The Administrative Procedure Act also requires publication of a 
rule at least 30 days before its effective date unless the agency finds 
otherwise for good cause.\8\ Due to the need to coordinate the 
effectiveness of the amendment with the effective date of the PCAOB's 
new Rule 3526 (which is to take effect on September 30, 2008) and for 
the same reasons described with respect to opportunity for notice and 
comment, the Commission finds there is good cause for the amendments to 
take effect on September 30, 2008.
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    \8\ See 5 U.S.C. 553(d)(3).
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III. Consideration of Competitive Effects of Amendment

    Section 23(a)(2) of the Exchange Act requires the Commission, in 
adopting rules under the Exchange Act, to consider the competitive 
effects of such rules, if any, and to refrain from adopting a rule that 
would impose a burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.\9\ Because this 
amendment merely makes technical changes to update references to 
applicable PCAOB requirements, we do not anticipate any competitive 
advantages or disadvantages would be created.
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    \9\ 15 U.S.C. 78w(a)(2).
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IV. Statutory Authority and Text of Amendments

    We are adopting this technical amendment under the authority set 
forth in Section 19(a) of the Securities Act \10\ and Section 23(a) of 
the Exchange Act.\11 \
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    \10\ 15 U.S.C. 77s(a).
    \11\ 15 U.S.C. 78w(a).
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List of Subjects in 17 CFR Part 229

    Reporting and recordkeeping requirements, Securities.

Text of Amendments

0
For the reasons set out in the preamble, Title 17, Chapter II of the 
Code of the Federal Regulations is amended as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 
78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-
38(a), 80(a)-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, 
unless otherwise noted.
* * * * *


0
2. Section 229.407 is amended by revising paragraph (d)(3)(i)(C) to 
read as follows:


Sec.  229.407 (Item 407)  Corporate governance.

* * * * *
    (d) * * *
    (3) * * *
    (i) * * *
    (C) The audit committee has received the written disclosures and 
the letter from the independent accountant required by applicable 
requirements of the Public Company Accounting Oversight Board regarding 
the independent accountant's communications with the audit committee 
concerning independence, and has discussed with the independent 
accountant the independent accountant's independence; and
* * * * *

    By the Commission.

    Dated: September 26, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23057 Filed 9-30-08; 11:15 am]

BILLING CODE 8011-01-P
