Proposed Rule: Executive Compensation and Related Party ...

1 SECURITIES AND EXCHANGE COMMISSION 17 CFR PARTS 228, 229, 239, 240, 245, 249 AND 274 RELEASE NOS. 33-8655; 34-53185; IC-27218; FILE NO. S7-03-06 RIN 3235-AI80 Executive Compensation AND Related Party DISCLOSURE AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission is proposing amendments to the disclosure requirements for Executive and director Compensation , Related Party transactions, director independence and other corporate governance matters and security ownership of officers and directors. These amendments would apply to disclosure in proxy and information statements, periodic reports, current reports and other filings under the Securities Exchange Act of 1934 and to registration statements under the Exchange Act and the Securities Act of 1933.

2 We also propose to require that disclosure under the amended items generally be provided in plain English. The Proposed amendments are intended to make proxy statements, reports and registration statements easier to understand. They are also intended to provide investors with a clearer and more complete picture of the Compensation earned by a company s principal Executive officer, principal financial officer and highest paid Executive officers and members of its board of directors. In addition, they are intended to provide better information about key financial relationships among companies and their Executive officers, directors, significant shareholders and their respective immediate family members. 2 DATES: Comments should be received on or before April 10, 2006.

3 ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments: Use the Commission s Internet comment form ( ); or Send an e-mail to Please include File Number S7-03-06 on the subject line; or Use the Federal Rulemaking Portal ( ). Follow the instructions for submitting comments. Paper Comments: Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-9303. All submissions should refer to File Number S7-03-06. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission s Internet Web site ( ).

4 Comments are also available for public inspection and copying in the Commission s Public Reference Room, 100 F Street, NE, Washington, DC 20549. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. 3 FOR FURTHER INFORMATION CONTACT: Anne Krauskopf, Carloyn Sherman, or Daniel Greenspan, at (202) 551-3500, in the Division of Corporation Finance, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-3010 or, with respect to questions regarding investment companies, Kieran Brown in the Division of Investment Management, at (202) 551-6784. SUPPLEMENTARY INFORMATION: We propose to amend: Items 201,1 306,2 401,3 402,4 4035 and 4046 of Regulations S-K7 and S-B,8 Item 6019 of Regulation S-K, Item 110710 of Regulation AB,11 and Rule 10012 of Regulation We also propose to add new Item 407 to Regulations S-K and S-B.

5 In addition, we propose to amend rules 13a-11,14 14a-6,15 14c-5,16 15d-1117 and 16b-318 under the Securities Exchange Act of We propose to add rules 13a-20 and 15d-20 under the Exchange Act. We 1 17 CFR and 17 CFR 2 17 CFR and 17 CFR 3 17 CFR and 17 CFR 4 17 CFR and 17 CFR 5 17 CFR and 17 CFR 6 17 CFR and 17 CFR 7 17 CFR et seq. 8 17 CFR et seq. 9 17 CFR 10 17 CFR 11 17 CFR et seq. 12 17 CFR 13 17 CFR et seq. 14 17 CFR 15 17 CFR 16 17 CFR 17 17 CFR 18 17 CFR 19 15 78a et seq. 4 further propose to amend Schedule 14A20 under the Exchange Act, as well as Exchange Act Forms 8-K,21 10,22 10SB,23 10-Q,24 10-QSB,25 10-K,26 10-KSB27 and Finally, we propose to amend Forms SB-2,29 S-1,30 S-3,31 S-432 and S-1133 under the Securities Act, Forms N-1A,34 N-2,35 and N-336 under the Securities Act and the Investment Company Act of 1940,37 and Form N-CSR38 under the Investment Company Act and the Exchange Act.

6 20 17 CFR 21 17 CFR 22 17 CFR 23 17 CFR 24 17 CFR 25 17 CFR 26 17 CFR 27 17 CFR 28 17 CFR 29 17 CFR 30 17 CFR 31 17 CFR 32 17 CFR 33 17 CFR 34 17 CFR and 35 17 CFR and 36 17 CFR and 37 15 80a-1 et seq. 38 17 CFR and 5 Table of Contents I. Background and Overview of the Proposals II. Executive and Director Compensation Disclosure A. Compensation Discussion and Analysis 1. Intent and Operation of the Proposed Compensation Discussion and Analysis 2. Proposed Instructions to Compensation Discussion and Analysis 3.

7 Filed Status of Compensation Discussion and Analysis 4. Proposed Elimination of the Performance Graph and the Compensation Committee Report B. Compensation Tables 1. Compensation to Named Executive Officers in the Last Three Completed Fiscal Years -- The Summary Compensation Table and Related Disclosure a. Total Compensation Column b. Salary and Bonus Columns c. Plan-Based Awards i. Stock Awards and Option Awards Columns ii. Non-Stock Incentive Plan Compensation Column d. All Other Compensation Column i. Earnings on Deferred Compensation ii.

8 Increase in Pension Value iii. Perquisites and Other Personal Benefits iv. Additional All Other Compensation Column Items e. Captions and Table Layout 2. Supplemental Annual Compensation Tables a. Grants of Performance-Based Awards Table b. Grants of All Other Equity Awards Table 3. Narrative Disclosure to Summary Compensation Table and Supplemental Tables 4. Exercises and Holdings of Previously Awarded Equity a. Outstanding Equity Awards at Fiscal Year-End b. Option Exercises and Stock Vesting 5. Post-Employment Compensation a. Retirement Plan Potential Annual Payments and Benefits Table b. Nonqualified Defined Contribution and Other Deferred Compensation Plans Table c.

9 Other Potential Post-Employment Payments 6. Officers Covered a. Named Executive Officers 6 b. Identification of Most Highly Compensated Officers; Dollar Threshold for Disclosure 7. Interplay of Items 402 and 404 8. Other Proposed Changes 9. Compensation of Directors C. Treatment of Specific Types of Issuers 1. Small Business Issuers 2. Foreign Private Issuers 3. Business Development Companies D. Conforming Amendments E. General Comment Requests on the Item 402 Proposals III. Proposed Revisions to Form 8-K and the Periodic Report Exhibit Requirements A.

10 Proposed Revisions to Items and of Form 8-K B. Proposed Extension of Limited Safe Harbor under Section 10(b) and Rule 10b-5 to Item (e) of Form 8-K and Exclusion of that Item from Form S-3 Eligibility Requirements C. General Instruction D to Form 8-K D. Foreign Private Issuers IV. Beneficial Ownership Disclosure V. Certain Relationships and Related Transactions Disclosure A. Transactions with Related Persons 1. Broad Principle for Disclosure a. Indebtedness b. Definitions 2. Disclosure Requirements 3. Exceptions B. Procedures for Approval of Related Person Transactions C.