SEC Issues Final Rules on Disclosure of Audit Committee Financial Experts and Codes of Ethics

CLIENT MEMORANDUM SEC ISSUES FINAL RULES ON DISCLOSURE OF AUDIT COMMITTEE FINANCIAL EXPERTS AND CODES OF ETHICS 1Last week, the Securities and Exchange Commission (“SEC”) issued final rules to implement Sections 406 and 407 of the Sarbanes-Oxley Act of 2002 (the “Act”) that require public companies to disclose in their annual reports filed with the SEC under the Securities Exchange 2Act of 1934 (the “Exchange Act”) : that the board of directors of the company has determined whether or not (and if not, why not) it has at least one “audit committee financial expert” and if so, the name of the expert and whether he is independent of management; and whether or not (and if not, why not) the company has adopted a code of ethics for its 3chief executive officer and senior financial officers. These disclosures will not be required in companies’ upcoming annual reports, but will be required beginning with annual reports filed for fiscal years ending on or after July 15, 2003. Foreign companies will generally be subject to the new disclosure requirements. Asset-backed issuers will be exempt. Registered investment companies will be subject to the new requirements, as further described in a separate SEC release. Audit Committee Financial Experts Disclosure Requirement The final rules implementing Section 407 of the Act require a company to disclose in its annual reports that its board of directors has determined that the company either ...