law, SEC reporting, External reporting, financial reporting, market capital, SEC regulation

1. SEC Compliance and Disclosure-
(series 6)
(Form 8-K and events that triggers 8-K
filing)
By
Arthur Mboue
Research conducted by Arthur Mboue

2. What is Form 8-K?
• The Form 8-K is the filing that companies make to
announce current occurrence of significant corporate
events that stakeholders need to know before making
business decision related to the company
• The US reporting company is responsible for the filing
of 8-K while FPI uses 6-K
• Events leading to the filing of Form 8-K filing
– Bankruptcy
– Departure of key executive (such as CEO, CFO,…)
– Notice of delisting
– Change in Accountant
– Announcement of new appointment,…
Research conducted by Arthur Mboue

3. SEC staff comment
Forms Percentages
S- 81%
F-1 11%
10-K 7%
S-4 0.4%
8-K 0.4%
1-A 0.2%
Research conducted by Arthur Mboue

4. Historic Evolution of Form 8-K
• Created in 1936
• Big implementation in 1977
• Differences between 1977 (6 categories with
12 items) and actual (9 sections with 30 items)
Research conducted by Arthur Mboue

5. Hidden slides

6. Managing external Reporting Form
8-K
Research conducted by Arthur Mboue
Transactions
Corporate
reporting
Management
Reporting
External reporting

7. The nature of Accounting Policies
Consolidate financial statement
reporting and disclosure policy
sales and goods policy
Revenues recognition policy
Methods of Depreciation and
Amortization policies
Cash and equivalent policy
Investments securities policy
Inventories (classification) policy
fixed assets policy
contingent liabilities policy
Intangibles assets policy
financial instrument policy
shared based payments policy
retirement benefits policy
Fair value Measurement policy
Investment in debt and Equity securities
policy
Derivative and Loan (obligation) policy
Long term Assets (obligations) policy
Retained Investment (in formerly
consolidated) policy
Accounting changes
Current assets (restrictions) policy
Research conducted by Arthur Mboue

8. System of control for financial reporting
Use of Form 8-K
checklist
Prepare supporting
documentation for triggering
events
Assess and verify
triggering events
Prepare disclosures
memo
Verify that
triggering events
matches Form 8-K
report
Issue version to
the CEO for
comments
Initiate Filing
process
Create a draft of
report
Verify accounts of
triggering events
Prepare disclosure
Review content of
Form 8-K report
Issue form-K
report
Require approval for key for
Form 8-K filing
Conduct analytical
review of these events
Prepare disclosure support
documentation
Match SEC report to
documented triggering events
Encourage peers, directors,
executives to submit comments
Summarize transactions
to Form 8-K filingResearch conducted by Arthur Mboue

9. Form 8-K Checklists
• Write Form 8-K report
• Double check content of the Form 8-K report
• Make needed corrections
• Complete remaining required disclosures
• Prepare supporting documents for your action plan of Form 8-K
disclosures
• Prepare analysis, track and assemble documents requested for
your action plan
• Obtain legal and non-legal reviews of Form 8-K report
• Obtain executives and board reviews and comments
• Prepare report for submission to the SEC
• Obtain final approval from the committee
• File the report with the SEC’s EDGAR system
Research conducted by Arthur Mboue

10. Example of Risk
• Accounting processes
• Auditing matters
• Compliance with regulatory issues: missed deadlines
• Falsification of financial and managerial data
• Contractual fraud
• Improper allocation of gifts for tax credits, contract…
• Improper vendor or contractor activity
• Misinterpretation of triggering events
• Poor analysis of materiality of the triggering events
Research conducted by Arthur Mboue

11. Types of Controls
• Preventive Controls
– Only minimize errors and missed filed Form 8-K and
thereby avoid the cost of correction, litigation and
reputation
– Discourage and deter fraud and penalize laziness
– Put new tools and staff before any shortage problems
– Minimize legal costs
• Detective Controls
– Measure the effectiveness of preventive and deterring
controls
– Uncover errors and missed filed form 8-K
– Uncover misinterpreted triggering events filing
– Provide the means to establish accountability
– Maximize human capital value
Research conducted by Arthur Mboue

12. Global HR Models
• Different Channels for talented staff
– In house corporate department
– Co-sourcing
– Outsourcing
– Contract personnel
– Shared service centers
– Centers of excellence
Research conducted by Arthur Mboue

13. Issues facing companies
Process barrier Technology barrier People barrier Regulatory barrier
• Multiple triggering
events
• Manual processes
resulting in delays and
errors
• Weak collection trails
• Delay variances
• Reconciliation of
management and
statutory reporting
• Data collection errors
and high volumes of
late adjustments
• Complex triggering
events handled with
non standard
procedures and
significant judgment
• Limited time for
analysis
• Lack of documentation
• Different time zones,
cultures and languages
• Lack of access to critical
data (CAT- consolidated
audit trail & MIDAS
(market information data
analytics system)
• Data transmission
problems because of
market fragmentation,
foreign operation and rise
of electronic trading
• Lack of automation
• Lack of integration with
source systems and
manual data input
• Poor performance of
triggering events collection
applications
• Limited capabilities to
support increasing data
volumes, system disparity,
and data inconsistencies
arising from company
growth, mandatory
regulation and acquisition
w/o real integration
• Lack of a clearly
defined accountability
framework
• Lack of clear
understanding of roles
and responsibilities
• Lack of proper training
on managerial policies
and analytical methods
• Internal politic
problems between HQ
and subsidiaries over
triggering events
material for disclosure
• Late delivery from
reporting units
• Lack of staff
experience with
systems and regulation
processes
• Constant changing
staff with a little
acculturation
• Lack of visibility into
tasks and activities
across multiple locations
and systems
• Differing interpretations
of triggering events (HQ,
subsidiaries,…)
• Added pressure of
adopting new
regulations and
accounting standards
• Resource intensive
manual internal control
activities
• Lack of internal policies
of control deficiencies,
decentralization,
delegation of decision
making (materiality,…)
• Increasing complex
statutory, regulatory
and internal demands
for disclosure coupled
with poor delegation
Research conducted by Arthur Mboue

14. Best Practices• Strategic initial steps
1. Getting Top executive involved
2. If it does not exist, form a disclosure control committee
3. Educate the board about 8-K triggering events
4. Review existing disclosure procedures
5. Review the company existing DCP program
6. Make sure that multiple staff and directors learn about the occurrence of a triggering event and
what it means for the company
7. Select a good team to track and document all triggering events
• Necessary management to achieve a timely disclosure
1. implement an early warning system for Form 8-K reporting, press releases and other events
2. Put a look back process to search and review whether the company has missed required Form
filing and file amendment or update 10-K and 10-Q
3. Enforce deadline
4. Track resignation and other officers and directors changes
5. Track all relevant unregistered sales of securities
6. Consider what is material
7. Promote the awareness of new rules, forms changes and interpretative guidance
• Leading toward a reliable and accurate disclosure
1. Prepare reporting timetable
2. Implement procedures for drafting press releases and form 8-Ks
3. Install tools for gathering needed and crucial information
4. Focus on segregated duties and responsibilities accountable to specified and talented staff and
management
5. Prepare the disclosure in the periodic reportResearch conducted by Arthur Mboue

15. Hidden slides

16. Form 8-K disclosure worksheet
(good strategy to control timely filing)
• Names of director, executive or staff and their
actions
• Reference action words:
1. Received
2. Verified
3. Certified
4. Filed
5. WIP
6. Exempted
7. Cancelled
8. Forwarded
Research conducted by Arthur Mboue

17. Form 8-K
Item
number
Triggering Event requiring disclosures Director
in charge
Executive
in charge
Staff in
charge
status
Section I. Registrant’s business and operations
1.01 Entry into ‘material definitive’ agreement that provides for rights or
obligations material to and enforceable by or against the
agreement
1.02 Termination of material definitive agreement
1.03 Bankruptcy or receivership
1.04 Mine safety reporting of shutdowns and patterns of violations
SECTION II. Financial Information
2.01 Completion of acquisition or disposition of significant amounts of
assets (other than ordinary course of business)
2.02 Disclosure of material non public information regarding a
completed fiscal year or quarter (Results of operation and financial
condition)
2.03 Creation of direct financial obligation or an obligation under an off
balance sheet arrangement
2.04 Triggering events that accelerate or increase a direct financial
obligation or an obligation under an off balance sheet arrangement
2.05 Costs associated with exit or disposal activities
2.06 Material impairments
SECTION III. Securities and Trading Markets
3.01 Notice of delisting or failure to satisfy a continued listing rule or
standard, transfer of listing
Research conducted by Arthur Mboue