SEC addresses short-term borrowing disclosure and director nominations by shareholders: nominees of significant, long-term shareholders now must be included in proxy materials alongside the nominees of management

Citation metadata

Date: Dec. 2010
From: Bank Accounting & Finance(Vol. 24, Issue 1)
Publisher: CCH, Inc.
Document Type: Report
Length: 2,530 words
Lexile Measure: 1660L

Document controls

Main content

Article Preview :

The Securities and Exchange Commission (SEC) proposed amendments to its rules that would require a registrant to provide, in a separately captioned subsection of Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), a comprehensive explanation of its short-term borrowings, including both quantitative and qualitative information. The SEC notes that the proposed amendments would be applicable to annual and quarterly reports, proxy or information statements that include financial statements, registration statements under the Securities Exchange Act of 1934 ("Exchange Act") and registration statements under the Securities Act of 1933 ("Securities Act"). The SEC also issued interpretative guidance to improve the overall discussion of liquidity and capital resources in MD&A in order to facilitate investors' understanding of the liquidity and funding risks facing the registrant.

The SEC adopted the new rules to enable shareholders, who otherwise are provided the opportunity to nominate directors at a shareholder meeting under applicable state or foreign law, to have their nominees included in the company proxy materials sent to all shareholders. In addition, under the new rules, shareholders will have the ability to use the shareholder proposal process to establish procedures for the inclusion of shareholder director nominations in company proxy materials.

Short-Term Borrowing Disclosure

The SEC notes that the proposed amendments to Item 303 of Regulation S-K and to Form 8-K and Form 20-F under the Exchange Act include the following:

* A new disclosure requirement in MD&A relating to short-term borrowings that would be designated as Item 303(a)(6) of Regulation S-K

* Revisions to Item 303(b) of Regulation S-K that would require interim-period disclosure of short-term borrowings with the same level of detail as is proposed for annual presentation

* Conforming changes to Item 5 of Form 20-F to add short-term borrowings disclosure requirements

* Conforming changes to the definition of "direct financial obligations" in Items 2.03 and 2.04 of Form 8-K

* Revisions to Item 303 of Regulation S-K and Item 5 of Form 20-F to update the references to U.S. generally accepted accounting principles (U.S. GAAP) to reflect the release by the Financial Accounting Standards Board (FASB) of its FASB Accounting Standards Codification (FASB Codification)

The SEC states that the proposed amendments are intended to provide investors with a better understanding of a company's actual funding needs and financing activities. The SEC believes the proposed amendments will help investors evaluate the liquidity risks faced by companies during each reporting period. The SEC states that by providing transparency about variations in borrowing levels during the reporting period, the proposed disclosure requirements should help address concerns that companies may mask their actual liquidity positions by reducing short-term borrowings shortly before reporting dates. The SEC notes that the proposed requirements should enhance disclosure about the short-term borrowings line items in a company's balance sheet.

The SEC also notes that the proposed requirements define short-term borrowings to mean amounts payable for short-term obligations that are:

* federal funds purchased and securities sold under agreements to repurchase; * commercial paper; * borrowings from banks; * borrowings from factors or...

Source Citation

Source Citation   

Gale Document Number: GALE|A248093676