[Federal Register Volume 67, Number 174 (Monday, September 9, 2002)]
[Rules and Regulations]
[Pages 57276-57297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22572]



[[Page 57275]]

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Part II





Securities and Exchange Commission





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17 CFR Parts 228, 229, et al.



Certification of Disclosure in Companies' Quarterly and Annual Reports, 
Management Investment Company Shareholder Reports and Designation of 
Certified Shareholder Reports as Exchange Act Periodic Reporting Forms; 
Final Rule and Proposed Rule

  Federal Register / Vol. 67, No. 174 / Monday, September 9, 2002 / 
Rules and Regulations  

[[Page 57276]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 228, 229, 232, 240, 249, 270 and 274

[Release Nos. 33-8124, 34-46427, IC-25722; File No. S7-21-02]
RIN 3235-AI54


Certification of Disclosure in Companies' Quarterly and Annual 
Reports

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; request for comments.

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SUMMARY: As directed by Section 302(a) of the Sarbanes-Oxley Act of 
2002, we are adopting rules to require an issuer's principal executive 
and financial officers each to certify the financial and other 
information contained in the issuer's quarterly and annual reports. The 
rules also require these officers to certify that: they are responsible 
for establishing, maintaining and regularly evaluating the 
effectiveness of the issuer's internal controls; they have made certain 
disclosures to the issuer's auditors and the audit committee of the 
board of directors about the issuer's internal controls; and they have 
included information in the issuer's quarterly and annual reports about 
their evaluation and whether there have been significant changes in the 
issuer's internal controls or in other factors that could significantly 
affect internal controls subsequent to the evaluation. In addition, we 
are adopting previously proposed rules to require issuers to maintain, 
and regularly evaluate the effectiveness of, disclosure controls and 
procedures designed to ensure that the information required in reports 
filed under the Securities Exchange Act of 1934 is recorded, processed, 
summarized and reported on a timely basis.

DATES: Effective Date: August 29, 2002.
    Comment Date: Comments on the extension of the certification 
requirement to definitive proxy and information statements should be 
received by October 9, 2002.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, 
NW., Washington, DC 20549-0609. Comments also may be submitted 
electronically at the following electronic mail address: [email protected]. To help us process and review your comments more 
efficiently, comments should be submitted by one method only. All 
comment letters should refer to File No. S7-21-02; this file number 
should be included in the subject line if electronic mail is used. 
Comment letters will be available for public inspection and copying in 
the Commission's Public Reference Room, 450 Fifth Street, NW., 
Washington, DC 20549. Electronically submitted comment letters will be 
posted on the Commission's Internet Web site (http://www.sec.gov).\1\
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    \1\ We do not edit personal identifying information, such as 
names or electronic mail addresses, from electronic submissions. You 
should submit only information that you wish to make available 
publicly.

FOR FURTHER INFORMATION CONTACT: Mark A. Borges, Special Counsel, or 
Elizabeth M. Murphy, Chief, Office of Rulemaking, Division of 
Corporation Finance, at (202) 942-2910, or, with respect to issuers of 
asset-backed securities, Paula Dubberly, Chief Counsel, Division of 
Corporation Finance, at (202) 942-2900, or, with respect to investment 
companies, Tara L. Royal, Attorney, Office of Disclosure Regulation, 
Division of Investment Management, at (202) 942-0721, at the Securities 
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and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting new Item 307 \2\ of 
Regulation S-B,\3\ new Item 307 \4\ of Regulation S-K,\5\ new Rules 
13a-14,\6\ 13a-15,\7\ 15d-14 \8\ and 15d-15 \9\ under the Securities 
Exchange Act of 1934 (``Exchange Act'') \10\ and new Rule 30a-2 \11\ 
under the Investment Company Act of 1940 (``Investment Company 
Act'').\12\ We also are adopting amendments to Rules 12b-15,\13\ 13a-10 
\14\ and 15d-10 \15\ and Forms 10-Q,\16\ 10-QSB,\17\ 10-K,\18\ 10-
KSB,\19\ 20-F \20\ and 40-F \21\ under the Exchange Act, Rule 30b1-3 
under the Investment Company Act,\22\ Rule 302 of Regulation S-T \23\ 
and Form N-SAR \24\ under the Exchange Act and the Investment Company 
Act.
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    \2\ 17 CFR 228.307.
    \3\ 17 CFR 228.10 et seq.
    \4\ 17 CFR 229.307.
    \5\ 17 CFR 229.10 et seq.
    \6\ 17 CFR 240.13a-14.
    \7\ 17 CFR 240.13a-15.
    \8\ 17 CFR 240.15d-14.
    \9\ 17 CFR 240.15d-15.
    \10\ 15 U.S.C. 78a et seq.
    \11\ 17 CFR 270.30a-2.
    \12\ 15 U.S.C. 80a-1 et seq.
    \13\ 17 CFR 240.12b-15.
    \14\ 17 CFR 240.13a-10.
    \15\ 17 CFR 240.15d-10.
    \16\ 17 CFR 249.308a.
    \17\ 17 CFR 249.308b.
    \18\ 17 CFR 249.310.
    \19\ 17 CFR 249.310b.
    \20\ 17 CFR 249.220f.
    \21\ 17 CFR 249.240f.
    \22\ 17 CFR 270.30b1-3.
    \23\ 17 CFR 232.302.
    \24\ 17 CFR 249.330; 17 CFR 274.101.
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I. Introduction

    On July 30, 2002, the Sarbanes-Oxley Act of 2002 (the ``Act'') was 
enacted.\25\ Section 302 of the Act, entitled ``Corporate 
Responsibility for Financial Reports,'' requires the Commission to 
adopt final rules that must be effective by August 29, 2002, 30 days 
after the date of enactment, under which the principal executive 
officer or officers and the principal financial officer or officers, or 
persons providing similar functions, of an issuer each must certify the 
information contained in the issuer's quarterly and annual reports. 
Section 302 also requires these officers to certify that: they are 
responsible for establishing, maintaining and regularly evaluating the 
effectiveness of, the issuer's internal controls; they have made 
certain disclosures to the issuer's auditors and the audit committee of 
the board of directors about the issuer's internal controls; and they 
have included information in the issuer's quarterly and annual reports 
about their evaluation and whether there have been significant changes 
in the issuer's internal controls or in other factors that could 
significantly affect internal controls subsequent to the evaluation.
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    \25\ Pub. L. 107-204, 116 Stat. 745 (2002).
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    On June 14, 2002, we proposed rules that would have required a 
company's principal executive officer and principal financial officer 
to certify the contents of the company's quarterly and annual 
reports.\26\ The June Proposals also would have required companies to 
maintain procedures to provide reasonable assurance that they are able 
to collect, process and disclose the information required in their 
Exchange Act reports. Finally, the June Proposals would have required 
companies to undertake an annual evaluation of these procedures under 
the supervision of management. Shortly after enactment of the Act, we 
provided supplemental information on the Act and the June 
Proposals.\27\
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    \26\ See Release No. 34-46079 (June 14, 2002) [67 FR 41877] (the 
``June Proposals'').
    \27\ See Release No. 34-46300 (Aug. 2, 2002) [67 FR 51508] 
notifying interested parties of the rules that we are required to 
adopt pursuant to Section 302 of the Act and highlighting some of 
the major differences between those rules and the June Proposals.
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    In light of Congress' directive in Section 302 of the Act, we are 
adopting rules that implement the certification mandated by the Act 
instead of the

[[Page 57277]]

certification contained in the June Proposals. We received 102 comment 
letters in response to the June Proposals.\28\ Although responding to 
the form of certification set forth in the June Proposals, a majority 
of the commenters supported a certification requirement for senior 
corporate officers.\29\ In addition, the comment letters we have 
received since the enactment of the Act also express support for a 
certification requirement.\30\ Because Section 302 of the Act 
prescribes the form of certification that we are to adopt, the new 
rules do not reflect many of the comments and suggestions that we 
received on the June Proposals.
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    \28\ The commenters included 56 individual and institutional 
investors, 21 companies and company associations, one domestic 
governmental agency, one foreign governmental agency and 23 members 
of the accounting and legal communities. These comment letters and a 
summary of comments are available for public inspection and copying 
in our Public Reference Room, 450 Fifth Street, NW., Washington, DC 
20549, in File No. S7-21-02. Public comments submitted 
electronically and the summary of comments are available on our Web 
site <http://www.sec.gov.
    \29\ See, for example, the Letter dated June 13, 2002 of Robert 
E. Jones, the Letter dated June 24, 2002 of Dan Jamieson and the 
Letter dated July 5, 2002 of T. Jeffrey Mangin.
    \30\ See, for example, the Letter dated August 9, 2002 of the 
American Society of Corporate Securities and the Letter dated August 
14, 2002 of the National Association of Real Estate Investment 
Trusts.
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    While Section 302 of the Act requires an issuer's principal 
executive and financial officers to make specific certifications 
regarding their responsibilities to establish and maintain internal 
controls, it does not directly address the issuer's responsibility for 
controls and procedures related to the issuer's Exchange Act reporting 
obligations.\31\ The June Proposals included requirements that 
companies maintain sufficient procedures to provide reasonable 
assurances that they are able to collect, process and disclose, within 
the time periods specified in the Commission's rules and forms, the 
information required to be disclosed in their Exchange Act reports.\32\ 
We have adopted this requirement largely as proposed. Because of the 
broad scope of Section 302 of the Act, the new rules are applicable to 
all types of issuers that file reports under Section 13(a) or 15(d) of 
the Exchange Act, including foreign private issuers, banks and savings 
associations, issuers of asset-backed securities, small business 
issuers and registered investment companies.\33\
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    \31\ Separately, Section 404 of the Act directs the Commission 
to prescribe rules for issuers to state in their annual reports 
required by Section 13(a) or 15(d) of the Exchange Act the 
responsibility of management for establishing and maintaining an 
adequate internal control structure and procedures for financial 
reporting.
    \32\ See proposed Exchange Act Rules 13a-15 and 15d-15.
    \33\ See Section IV below for a discussion of registered 
investment companies. Registered investment companies generally are 
required to file periodic reports under Section 13(a) or 15(d) of 
the Exchange Act on Form N-SAR and, therefore, would provide the 
certification required by Section 302 of the Act. However, because 
Section 302 of the Act only applies to issuers that file periodic 
reports under Section 13(a) or 15(d) of the Exchange Act, the rules 
we are adopting today will not apply to registered investment 
companies that do not file periodic reports under either Section 
13(a) or 15(d).
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II. Certification of Quarterly and Annual Reports

A. Rule Requirements

    As adopted, new Exchange Act Rules 13a-14 and 15d-14 require an 
issuer's principal executive officer or officers and the principal 
financial officer or officers, or persons performing similar functions, 
each to certify in each quarterly and annual report, including 
transition reports, filed or submitted by the issuer under Section 
13(a) or 15(d) of the Exchange Act \34\ that:
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    \34\ 15 U.S.C. 78m(a) or 78o(d). Section 13(a) of the Exchange 
Act requires every issuer of a security registered pursuant to 
Section 12 of the Exchange Act [15 U.S.C. 78l] to file with the 
Commission such annual reports and such quarterly reports as the 
Commission may prescribe. Section 15(d) of the Exchange Act requires 
each issuer that has filed a registration statement that has become 
effective pursuant to the Securities Act of 1933 [15 U.S.C. 77a et 
seq.] to file such supplementary and periodic information, documents 
and reports as may be required pursuant to Section 13 in respect of 
a security registered pursuant to Section 12. The duty of an issuer 
to file under Section 15(d) is automatically suspended for any 
fiscal year, other than a fiscal year in which its registration 
statement becomes effective or is required to be updated pursuant to 
Section 10(a)(3) of the Securities Act [15 U.S.C. 77j(a)(3)], if an 
issuer's securities are held of record by less than 300 persons. See 
Exchange Act Rule 12h-3(c) [17 CFR 240.12h-3(c)].
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    [sbull] He or she has reviewed the report;
    [sbull] Based on his or her knowledge, the report does not contain 
any untrue statement of a material fact or omit to state a material 
fact necessary in order to make the statements made, in light of the 
circumstances under which such statements were made, not misleading 
with respect to the period covered by the report; \35\
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    \35\ As permitted under our rules, a registrant may satisfy its 
disclosure obligations under Part III of Forms 10-K and 10-KSB by 
incorporating the required information by reference from its 
definitive proxy or information statement, if that statement 
involves the election of directors and is filed not later than 120 
days after the end of the fiscal year covered by the annual report. 
See General Instruction G(3) to Form 10-K and General Instruction 
E(3) to Form 10-KSB. For purposes of this provision, the 
certification in the annual report on Form 10-K or 10-KSB would be 
considered to cover the Part III information in a registrant's proxy 
or information statement as and when filed.
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    [sbull] Based on his or her knowledge, the financial statements, 
and other financial information included in the report, fairly present 
in all material respects the financial condition, results of operations 
and cash flows of the issuer as of, and for, the periods presented in 
the report;
    [sbull] He or she and the other certifying officers:
    [sbull] Are responsible for establishing and maintaining 
``disclosure controls and procedures'' (a newly-defined term reflecting 
the concept of controls and procedures related to disclosure embodied 
in Section 302(a)(4) of the Act) for the issuer;
    [sbull] Have designed such disclosure controls and procedures to 
ensure that material information is made known to them, particularly 
during the period in which the periodic report is being prepared;
    [sbull] Have evaluated the effectiveness of the issuer's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of the report; and
    [sbull] Have presented in the report their conclusions about the 
effectiveness of the disclosure controls and procedures based on the 
required evaluation as of that date;
    [sbull] He or she and the other certifying officers have disclosed 
to the issuer's auditors and to the audit committee of the board of 
directors (or persons fulfilling the equivalent function):
    [sbull] All significant deficiencies in the design or operation of 
internal controls (a pre-existing term relating to internal controls 
regarding financial reporting) \36\ which could adversely affect the 
issuer's ability to record, process, summarize and report financial 
data and have identified for the issuer's auditors any material 
weaknesses in internal controls; and
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    \36\ See American Institute of Certified Public Accountants 
(``AICPA'') Codification of Statements on Auditing Standards, AU 
Sec.  319.
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    [sbull] Any fraud, whether or not material, that involves 
management or other employees who have a significant role in the 
issuer's internal controls; and
    [sbull] He or she and the other certifying officers have indicated 
in the report whether or not there were significant changes in internal 
controls or in other factors that could significantly affect internal 
controls subsequent to the date of their evaluation, including any 
corrective actions with regard to significant deficiencies and material 
weaknesses.
    For purposes of the new rules, ``disclosure controls and 
procedures'' are defined as controls and other procedures of an issuer 
that are designed to ensure that information required to be disclosed 
by the issuer in the reports filed or submitted by it

[[Page 57278]]

under the Exchange Act \37\ is recorded, processed, summarized and 
reported, within the time periods specified in the Commission's rules 
and forms.\38\ ``Disclosure controls and procedures'' include, without 
limitation, controls and procedures designed to ensure that information 
required to be disclosed by an issuer in its Exchange Act reports is 
accumulated and communicated to the issuer's management, including its 
principal executive and financial officers, as appropriate to allow 
timely decisions regarding required disclosure.
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    \37\ These reports include quarterly reports on Form 10-Q or 10-
QSB, annual reports on Form 10-K, 10-KSB, 20-F or 40-F, current 
reports, definitive proxy materials filed under Section 14(a) of the 
Exchange Act [15 U.S.C. 78n(a)], definitive information statements 
filed under Section 14(c) of the Exchange Act [15 U.S.C. 78n(c)] and 
amendments to any of these reports or documents.
    \38\ See new Exchange Act Rules 13a-14(c) and 15d-14(c).
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B. Discussion of Certification Requirement

1. Issuers Subject to Certification Requirement
    Section 302 of the Act states that the certification requirement is 
to apply to each company filing periodic reports under Section 13(a) or 
15(d) of the Exchange Act.\39\ Accordingly, new Exchange Act Rules 13a-
14 and 15d-14 apply to the principal executive officers and principal 
financial officers, or persons performing similar functions, of any 
issuer that files quarterly and annual reports with the Commission 
under either Section 13(a) or 15(d) of the Exchange Act, including 
foreign private issuers, banks and savings associations, issuers of 
asset-backed securities and small business issuers.\40\
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    \39\ See Section 302(a) of the Act.
    \40\ The new rules achieve the objective of Section 302(b) of 
the Act, which states that nothing in the provision is to be 
interpreted or applied in any way to allow any issuer to lessen the 
legal force of the certification requirement by an issuer that has 
reincorporated or engaged in any other transaction resulting in the 
transfer of the corporate domicile or offices of the issuer from 
inside of the United States to outside of the United States, because 
they are applicable to all issuers without regard to their 
jurisdiction of incorporation or domicile.
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(a) Foreign Private Issuers
    While the June Proposals would not have applied to foreign private 
issuers, \41\ Section 302 of the Act makes no distinction between 
domestic and foreign issuers and, by its terms, clearly applies to 
foreign private issuers. New Exchange Act Rules 13a-14 and 15d-14, 
therefore, apply the certification requirement to the principal 
executive officers and principal financial officers of foreign private 
issuers that file reports under Section 13(a) or 15(d) of the Exchange 
Act.\42\
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    \41\ For purposes of the Exchange Act, a ``foreign private 
issuer'' is any foreign issuer (other than a foreign government) 
except an issuer meeting the following conditions: (1) More than 50% 
of the issuer's outstanding voting securities are directly or 
indirectly held of record by residents of the U.S.; and (2) the 
majority of the executive officers or directors are U.S. citizens or 
residents; or more than 50% of the assets of the issuer are located 
in the U.S.; or the business of the issuer is administered 
principally in the U.S. See Exchange Act Rule 3b-4(c) [17 CFR 
240.3b-4(c)]. We sought comment on whether to apply a certification 
requirement to foreign private issuers in the June Proposals.
    \42\ The new rules do not apply to foreign private issuers that 
furnish materials to the Commission pursuant to Exchange Act Rule 
12g3-2(b) [17 CFR 240.12g3-2(b)].
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(b) Banks and Saving Associations
    The certification requirement of Section 302 of the Act also 
applies to principal executive officers and principal financial 
officers of banks and savings associations that file periodic reports 
under Section 13(a) or 15(d) of the Exchange Act. The Act amended 
Section 12(i) of the Exchange Act to make it clear that the federal 
banking agencies have the authority to administer and enforce various 
provisions of the Act, including the certification required by Section 
302.\43\
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    \43\ See Section 3(b)(4) of the Act.
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(c) Asset-Backed Securities Issuers
    Issuers of asset-backed securities in public offerings have a 
reporting obligation under either Section 13(a) or 15(d) of the 
Exchange Act, at least for a period of time.\44\ Because of the nature 
of asset-backed issuers, the staff of the Division of Corporation 
Finance has granted requests allowing asset-backed issuers to file 
modified reports under the Exchange Act.\45\
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    \44\ Asset-backed issuers also sometimes voluntarily file 
Exchange Act reports in order to comply with provisions in the 
indenture or pooling and servicing agreements.
    \45\ See, for example, Release No. 34-16520 (Jan. 23, 1980) 
(order granting application pursuant to Section 12(h) of the 
Exchange Act [15 U.S.C. 78l(h)] of Home Savings and Loan 
Association); Release No. 34-14446 (Feb. 6, 1978) (order granting 
application pursuant to Section 12(h) of the Exchange Act of Bank of 
America National Trust and Savings Association); Division of 
Corporation Finance no-action letters to Key Bank USA, N.A. (May 9, 
1997) and Bay View Securitization Corp. (Jan. 15, 1998).
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    The modified reporting structure for asset-backed issuers allows 
issuers or depositors to file modified annual reports on Form 10-K and 
to file reports tied to payments on the underlying assets in the trust. 
These reports include a copy of the servicing or distribution report 
required by the issuer's governing documents and information on the 
performance of the assets, payments on the asset-backed securities and 
any other material developments that affect the issuer. Because the 
reported information for asset-backed issuers differs significantly 
from that for other issuers, the certification requirement of Section 
302 of the Act must be specifically tailored for asset-backed issuers. 
The new rules require asset-backed issuers to certify their reports. 
The staff of the Division of Corporation Finance today is providing 
guidance for asset-backed issuers regarding compliance with the 
certification requirement.
(d) Small Business Issuers
    The June Proposals generally did not distinguish between large and 
small issuers. Similarly, Section 302 of the Act directs that the 
certification requirement apply to any company filing periodic reports 
under Section 13(a) or 15(d) of the Exchange Act. Accordingly, new 
Rules 13a-14 and 15d-14 apply to all issuers that file Exchange Act 
periodic reports regardless of their size. We note, however, that 
because many small business issuers do not file Exchange Act reports, 
not all small business issuers will be subject to the certification 
requirement.
2. Reports Subject to Certification Requirement
    Section 302 of the Act states that the required certification is to 
be included in each annual or quarterly report filed or submitted under 
either Section 13(a) or 15(d) of the Exchange Act.\46\ Accordingly, the 
certification requirement applies to annual reports on Forms 10-K, 10-
KSB, 20-F and 40-F.\47\ The certification requirement also applies to 
quarterly reports on Forms 10-Q and 10-QSB. Finally, the certification 
requirement applies to amendments to, and transition reports on, any of 
the foregoing reports.\48\
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    \46\ See Section 302(a) of the Act.
    \47\ The certification requirement does not apply to annual 
reports on Form 11-K [17 CFR 239.311].
    \48\ See amended Exchange Act Rules 12b-15, 13a-10 and 15d-10. 
In the case of the amendment on or after the compliance date of the 
new rules of a quarterly or annual report filed prior to August 29, 
2002, the certification requirement will apply.
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    Reports that are current reports, such as reports on Forms 6-K \49\ 
and 8-K, rather than periodic (quarterly and annual) reports are not 
covered by the certification requirement.\50\ Disclosure

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controls and procedures, however, are required to be designed, 
maintained and evaluated to ensure full and timely disclosure in 
current reports, as well as definitive proxy materials and definitive 
information statements, even though there is no specific certification 
requirement relating to reports on those forms.\51\
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    \49\ 17 CFR 249.306.
    \50\ A foreign private issuer must furnish under cover of Form 
6-K material information that it makes public or is required to make 
public under its home country laws or the rules of its home country 
stock exchange or that it distributes to security holders. While 
foreign private issuers may submit interim financial information 
under cover of Form 6-K, they do so pursuant to their home country 
requirements and not because of a Commission requirement to submit 
updated financial information for specified periods and according to 
specified standards. Therefore, we do not believe that a Form 6-K 
constitutes a ``periodic'' report analogous to a quarterly report on 
Form 10-Q or 10-QSB for which certification is required.
    \51\ See new Exchange Act Rules 13a-15 and 15d-15.
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    The new rules apply the certification requirement to foreign 
private issuers filing annual reports on Form 20-F and Canadian issuers 
filing annual reports on Form 40-F under our Multi-jurisdictional 
Disclosure System. Although Form 20-F is not required to be signed by 
any specific executive officer of a foreign registrant,\52\ we believe 
that it is the clear intent of Congress to require that the appropriate 
officers execute and submit the required certification in an annual 
report filed under the Exchange Act on Form 20-F or 40-F.
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    \52\ See General Instruction D to Form 20-F.
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    As we first indicated in the June Proposals, we continue to 
consider whether we should extend a certification requirement to other 
documents filed under the Exchange Act, such as registration statements 
on Forms 10 and 10-SB \53\ and definitive proxy and information 
statements. We solicit comment on whether any or all of these 
documents, or any other documents, should be certified by an issuer's 
senior officers.
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    \53\ 17 CFR 249.210 and 249.210b.
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3. Content of Certification
    Section 302 of the Act states that the required certification is to 
made by an issuer's principal executive officer or officers and 
principal financial officer or officers, or persons performing similar 
functions. The required certification contains several statements. The 
certification statement concerning the material accuracy and 
completeness of the periodic reports that are covered by the statement 
mirrors the existing statutory disclosure standards for ``material'' 
accuracy and completeness of information contained in reports.\54\
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    \54\ See Exchange Act Rules 10b-5(b) [17 CFR 230.10b-5(b)] and 
12b-20 [17 CFR 240.12b-20.]. See also Basic, Inc. v. Levinson, 485 
U.S. 224 (1988); TSC Industries, Inc. v. Northway, Inc., 426 U.S. 
(1976).
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    The certification statement regarding fair presentation of 
financial statements and other financial information included in the 
report was not part of the June Proposals. This statement separately 
addresses the presentation of an issuer's financial disclosure. This 
financial disclosure includes financial statements (including footnote 
disclosure), selected financial data, management's discussion and 
analysis of financial condition and results of operations and other 
financial information in a report. The certification, as adopted, 
states that the overall financial disclosure fairly presents, in all 
material respects, the company's financial condition, results of 
operations and cash flows. We have added a specific reference to cash 
flows even though Section 302 of the Act does not include such an 
explicit reference. We believe that it is consistent with Congressional 
intent to include both income or loss and cash flows within the concept 
of ``fair presentation'' of an issuer's results of operations.
    The certification statement regarding fair presentation of 
financial statements and other financial information is not limited to 
a representation that the financial statements and other financial 
information have been presented in accordance with ``generally accepted 
accounting principles'' and is not otherwise limited by reference to 
generally accepted accounting principles. We believe that Congress 
intended this statement to provide assurances that the financial 
information disclosed in a report, viewed in its entirety, meets a 
standard of overall material accuracy and completeness that is broader 
than financial reporting requirements under generally accepted 
accounting principles.\55\ In our view, a ``fair presentation'' of an 
issuer's financial condition, results of operations and cash flows 
encompasses the selection of appropriate accounting policies, proper 
application of appropriate accounting policies, disclosure of financial 
information that is informative and reasonably reflects the underlying 
transactions and events and the inclusion of any additional disclosure 
necessary to provide investors with a materially accurate and complete 
picture of an issuer's financial condition, results of operations and 
cash flows.\56\
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    \55\ Presenting financial information in conformity with 
generally accepted accounting principles may not necessarily satisfy 
obligations under the antifraud provisions of the federal securities 
laws. See United States v. Simon, 425 F.2d 796 (2d Cir. 1969). See 
also In re Caterpillar, Inc., Release No. 34-30532 (Mar. 31, 1992); 
Edison Schools, Inc., Release No. 34-45925 (May 14, 2002).
    \56\ See Exchange Act Rule 12b-20 and the case and proceedings 
referenced in n. 55 above. In addition, both International 
Accounting Standard IAS 1, ] 14 and 15 and AICPA, Codification of 
Statements on Auditing Standards, AU Sec.  411.04 speak to the 
essential elements that must be considered, within the framework of 
generally accepted accounting principles, in evaluating whether an 
issuer's financial statements fairly present its financial condition 
and results of operations. These statements, without being limited 
by reference to generally accepted accounting principles, provide 
guidance as to what elements should be considered in determining 
whether an issuer's financial information, taken as a whole, 
provides a fair presentation of its financial condition and results 
of operations. These elements include, without limitation, whether 
the accounting principles selected are appropriate in the 
circumstances and whether the disclosure is informative and 
reasonably reflects the underlying transactions and events.
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    Both of the foregoing certification statements are to be made based 
on the knowledge of the certifying officer. This is not meant to change 
the current obligations of corporate officers in connection with the 
discharge of their duties. Both of the foregoing statements are also 
made in the context of the requirements of the reports in which they 
are included. In particular, quarterly reports on Forms 10-Q and 10-QSB 
have less extensive disclosure and financial statement and footnote 
requirements than annual reports. The certification requirement is not 
intended to require expansion of quarterly reports to satisfy the 
requirements of annual reports. Rather, completeness of disclosure will 
be determined through application of standards derived from our 
existing rules, forms and interpretations.\57\
---------------------------------------------------------------------------

    \57\ See, for example, In re Caterpillar, Inc., Release No. 34-
30532 (Mar. 31, 1992); Exchange Act Rule 12b-20.
---------------------------------------------------------------------------

    While the certification described in the June Proposals contained a 
statement regarding the completion of a review of an issuer's internal 
procedures and controls aimed at assuring adequate disclosure, the 
certification required by Section 302 of the Act includes several, more 
detailed, statements concerning an issuer's ``internal controls'' and 
the ongoing oversight of these controls. For purposes of the 
certification required by Section 302(a)(4) of the Act, we have defined 
the term ``disclosure controls and procedures'' to incorporate a 
broader concept of controls and procedures designed to ensure 
compliance with disclosure requirements generally. This definition is 
included in new Exchange Act Rules 13a-14 and 15d-14 and applies to the 
portion of the certification required by Section 302(a)(4) of the 
Act.\58\
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    \58\ See new Exchange Act Rules 13a-14(c) and 15d-14(c).
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    We have defined the term ``disclosure controls and procedures'' to 
make it explicit that the controls contemplated

[[Page 57280]]

by Section 302(a)(4) of the Act are intended to embody controls and 
procedures addressing the quality and timeliness of disclosure. We also 
have included this definition to differentiate this concept of 
disclosure controls and procedures from the pre-existing concept of 
``internal controls'' that pertains to an issuer's financial reporting 
and control of its assets, as currently embodied in Section 13(b) of 
the Exchange Act \59\ and as addressed in Sections 302(a)(5) and (a)(6) 
and Section 404 of the Act. We make this distinction based on our 
review of Section 302 of the Act as well as to effectuate what we 
believe to be Congress' intent--to have senior officers certify that 
required material non-financial information, as well as financial 
information, is included in an issuer's quarterly and annual reports. 
Under this interpretation, we maintain the pre-existing concept of 
internal controls without expanding it by relating it to non-financial 
information.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78m(b). See also AICPA Professional Standards AU 
Section 319.06 (``Internal controls is a process--effected by an 
entity's board of directors, management and other personnel--
designed to provide reasonable assurance regarding the achievement 
of objectives in the following categories: (a) Reliability of 
financial reporting, (b) effectiveness and efficiency of operations 
and (c) compliance with applicable laws and regulations.'').
---------------------------------------------------------------------------

    As discussed in the June Proposals, we are not requiring any 
particular procedures for conducting the required review and 
evaluation. Instead, we expect each issuer to develop a process that is 
consistent with its business and internal management and supervisory 
practices. We do recommend, however, that, if it has not already done 
so, an issuer create a committee with responsibility for considering 
the materiality of information and determining disclosure obligations 
on a timely basis.\60\ As is implicit in Section 302(a)(4) of the Act, 
such a committee would report to senior management, including the 
principal executive and financial officers, who bear express 
responsibility for designing, establishing, maintaining, reviewing and 
evaluating the issuer's disclosure controls and procedures.
---------------------------------------------------------------------------

    \60\ Officers and employees of an issuer who have an interest 
in, and the expertise to serve on, the committee could include the 
principal accounting officer (or the controller), the general 
counsel or other senior legal official with responsibility for 
disclosure matters who reports to the general counsel, the principal 
risk management officer, the chief investor relations officer (or an 
officer with equivalent responsibilities) and such other officers or 
employees, including individuals associated with the issuer's 
business units, as the issuer deems appropriate.
---------------------------------------------------------------------------

    We believe that the concept of ``internal controls'' contemplated 
by Sections 302(a)(5) and (6) of the Act concern an issuer's controls 
and procedures for financial reporting purposes as required by Section 
13(b) of the Exchange Act. They also relate to the ``internal 
controls'' addressed in Section 404 of the Act.\61\ The certification 
required by new Exchange Act Rules 13a-14 and 15d-14 makes reference to 
certain disclosures regarding both disclosure controls and procedures 
and internal controls that must be made in the reports in which the 
certification is contained. These disclosure requirements appear in new 
Item 307 of Regulation S-K, Item 307 of Regulation S-B, Item 15 of Form 
20-F and General Instruction B(6) of Form 40-F.
---------------------------------------------------------------------------

    \61\ The rules called for under Section 404 of the Act will be 
the subject of separate Commission rulemaking. See n. 75 below.
---------------------------------------------------------------------------

    Because the statements involving disclosure controls and procedures 
and internal controls require the certifying officers to take certain 
specified actions, such as evaluating the effectiveness of the 
disclosure controls and procedures prior to the date of the report to 
which the certification relates, these statements will be required as 
part of the certification only with respect to any reports that cover 
periods ending on or after August 29, 2002, the effective date of the 
rules required by Section 302 of the Act.\62\
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    \62\ See Section V below.
---------------------------------------------------------------------------

4. Form of Certification
    The certification required by new Exchange Act Rules 13a-14 and 
15d-14 must be in the exact form set forth in the amendments to the 
affected reports. The wording of the required certification may not be 
changed in any respect (even if the change would appear to be 
inconsequential in nature).\63\
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    \63\ To further emphasize the importance of the required 
certification, a principal executive officer or principal financial 
officer is not permitted to have the certification signed on his or 
her behalf pursuant to a power of attorney or other form of 
confirming authority. See new Exchange Act Rules 13a-14(d) and 15d-
14(d).
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5. Location of Certification
    Section 302 of the Act states that the required certification is to 
be included ``in'' each quarterly or annual report filed or submitted 
under either Section 13(a) or 15(d) of the Exchange Act. To implement 
this directive, we have amended Forms 10-Q, 10-QSB, 10-K, 10-KSB, 20-F 
and 40-F under the Exchange Act to require that the certifications 
follow immediately after the signature sections of these reports.
    The required certification is in addition to, and, thus, does not 
alter, the current signature requirements for quarterly and annual 
reports filed under the Exchange Act. The signatures required by the 
certifications will be part of these reports, and, therefore, also will 
be subject to the signature requirement of our rules.\64\ We have 
amended Rule 302 of Regulation S-T \65\ to make it clear that its 
requirements apply to the signatures appearing in these certifications.
---------------------------------------------------------------------------

    \64\ See Exchange Act Rule 12b-11(d) [17 CFR 240.12b-11(d)].
    \65\ 17 CFR 232.302.
---------------------------------------------------------------------------

6. Liability for False Certification
    An issuer's principal executive and financial officers already are 
responsible as signatories for the issuer's disclosures under the 
Exchange Act liability provisions \66\ and can be liable for material 
misstatements or omissions under general antifraud standards \67\ and 
under our authority to seek redress against those who cause or aid or 
abet securities law violations.\68\ An officer providing a false 
certification potentially could be subject to Commission action for 
violating Section 13(a) or 15(d) of the Exchange Act and to both 
Commission and private actions for violating Section 10(b) of the 
Exchange Act \69\ and Exchange Act Rule 10b-5.\70\
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    \66\ See Sections 13(a) and 18 of the Exchange Act [15 U.S.C. 
78m(a) and 78r].
    \67\ See, for example, Howard v. Everex Systems, Inc. 228 F.3d 
1057 (9th Cir. 2000) (a corporate officer who signs a Commission 
filing containing representations ``makes'' the statement in the 
filing and can be liable as a primary violator of Section 10(b) of 
the Exchange Act).
    \68\ See Sections 20, 21, 21C and 21D of the Exchange Act [15 
U.S.C. 78t, 78u, 78u-3 and 78u-4].
    \69\ 15 U.S.C. 78j(b).
    \70\ A false certification also may have liability consequences 
under Sections 11 and 12(a)(2) of the Securities Act [15 U.S.C. 77k 
and 77l(a)(2)] where a quarterly or annual report is incorporated by 
reference into a registration statement on Form S-3 [17 CFR 239.13] 
or F-3 [17 CFR 239.33] or into a prospectus filed pursuant to 
Securities Act Rule 424(b) [17 CFR 230.424(b)].
---------------------------------------------------------------------------

III. Disclosure Controls and Procedures

A. Rule Requirements

    As adopted, new Exchange Act Rules 13a-15 and 15d-15 require each 
issuer filing reports under Section 13(a) or Section 15(d) of the 
Exchange Act to maintain disclosure controls and procedures (as defined 
in new Exchange Act Rules 13a-14(c) and 15d-14(c)). We believe that, to 
assist principal executive and financial officers in the discharge of 
their responsibilities in making the required certifications, as well 
as to discharge their responsibilities in providing accurate and 
complete information to security holders, it is necessary for companies 
to ensure that their internal

[[Page 57281]]

communications and other procedures operate so that important 
information flows to the appropriate collection and disclosure points 
in a timely manner.

B. Discussion of Disclosure Controls and Procedures

    New Exchange Act Rules 13a-15 and 15d-15 complement existing 
requirements for reporting companies to establish and maintain systems 
of internal controls with respect to their financial information.\71\ 
They are intended to ensure that an issuer maintains commensurate 
procedures for gathering, analyzing and disclosing all information that 
is required to be disclosed in its Exchange Act reports.
---------------------------------------------------------------------------

    \71\ See Section 13(b)(2) of the Exchange Act [15 U.S.C. 
78m(b)(2)] and Rules 13b2-1 and 13b2-2 [17 CFR 240.13b2-1 and 
240.13b2-2].
---------------------------------------------------------------------------

    As discussed in the June Proposals, these procedures are intended 
to cover a broader range of information than is covered by an issuer's 
internal controls related to financial reporting. For example, the 
procedures should ensure timely collection and evaluation of 
information potentially subject to disclosure under the requirements of 
Regulation S-X,\72\ Regulation S-K or S-B and Forms 20-F and 40-F. The 
procedures should capture information that is relevant to an assessment 
of the need to disclose developments and risks that pertain to the 
issuer's businesses.\73\ They also should cover information that must 
be evaluated in the context of the disclosure requirement of Exchange 
Act Rule 12b-20. We believe that the new rules will help to ensure that 
an issuer's systems grow and evolve with its business and are capable 
of producing Exchange Act reports that are timely, accurate and 
reliable.\74\
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    \72\ 17 CFR 210.1-01 et seq.
    \73\ For example, for some businesses, an assessment and 
evaluation of operational and regulatory risks may be necessary.
    \74\ Accordingly, a company that failed to maintain adequate 
procedures, review them and otherwise comply with the rule could be 
subject to Commission action for violating Section 13(a) of the 
Exchange Act even where the failure did not lead to flawed 
disclosure.
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    New Exchange Act Rules 13a-15 and 15d-15 also are entirely 
complementary to the objectives of Section 302 of the Act. While 
Section 302 requires an issuer's principal executive and financial 
officers to make specific statements in their certifications and to 
take the actions satisfying the representations made in the statements 
as to the issuer's disclosure controls and procedures, it does not 
directly address the issuer's obligations with respect to these 
controls and procedures. The new rules will ensure that an issuer also 
has a responsibility to maintain adequate disclosure controls and 
procedures, so that its principal executive and financial officers can 
supervise and review these periodic evaluations and report the results 
to security holders through the issuer's Exchange Act reports.\75\
    New Exchange Act Rules 13a-15 and 15d-15 also require the issuer, 
under the supervision of the principal executive and financial 
officers, to conduct an evaluation of the effectiveness of the design 
and operation of the issuer's disclosure controls and procedures within 
90 days of the filing date of any quarterly or annual report filed 
under the Exchange Act. While the new rules do not provide detailed 
procedures for such an evaluation, the evaluation must, at a minimum, 
address the matters specified by the rules. We expect that this 
evaluation would be carried out in a manner that would form the basis 
for the certification statements required by Section 302 of the Act 
regarding disclosure controls and procedures required by new Exchange 
Act Rules 13a-14(b)(4)(ii)-(iii) and 15d-14(b)(4)(ii)-(iii) in an 
issuer's quarterly and annual reports.
---------------------------------------------------------------------------

    \75\ We note that Section 404 of the Act directs us to prescribe 
rules requiring each annual report filed under Section 13(a) or 
15(d) of the Exchange Act to contain an internal control report, 
which shall: (1) State the responsibility of management for 
establishing and maintaining an adequate internal control structure 
and procedures for financial reporting: and (2) contain an 
assessment, as of the end of the most recent fiscal year of the 
issuer, of the effectiveness of the internal control structure and 
procedures of the issuer for financial reporting. These rules will 
be the subject of a separate rulemaking project.
---------------------------------------------------------------------------

    We noted in the June Proposals that mandatory requirements 
regarding disclosure controls and procedures may raise several issues 
for foreign private issuers. Section 302 of the Act, however, does not 
provide any exception to the certification requirement for foreign 
private issuers. Because we believe that the maintenance of disclosure 
controls and procedures is an important part of satisfying the 
certification requirement, it is appropriate to require foreign private 
issuers to comply with new Exchange Act Rules 13a-15 and 15d-15 with 
respect to the implementation of the controls and procedures outlined 
in Section 302(a)(4) of the Act.

IV. Certification of Registered Investment Company Annual and Semi-
Annual Reports

    We are implementing Section 302 of the Act with respect to 
registered investment companies by adopting new Investment Company Act 
Rule 30a-2. This rule requires a registered investment company that 
files periodic reports under Section 13(a) or 15(d) of the Exchange Act 
(that is, Form N-SAR) to include the certification specified by Section 
302 in those periodic reports. We are also amending the instructions to 
Form N-SAR, the annual and semi-annual reporting form for registered 
investment companies, to require the specified certification to be 
filed as an exhibit to Form N-SAR.\76\
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    \76\ 17 CFR 249.330; 17 CFR 274.101; Item 133 and Instructions 
to Items 77Q3, 102P3 and 133 of Form N-SAR.
---------------------------------------------------------------------------

    Section 302 requires the specified certification to be included in 
``each annual or quarterly report filed or submitted'' under either 
Section 13(a) or 15(d) of the Exchange Act.\77\ Form N-SAR is the form 
designated for registered investment companies to comply with their 
reporting requirements under Sections 13(a) and 15(d) of the Exchange 
Act, as well as periodic reporting requirements under Sections 30(a) 
and 30(b)(1)\78\ of the Investment Company Act.\79\ Registered 
management investment companies are required to file annual and semi-
annual reports on Form N-SAR not more than 60 calendar days after the 
close of each fiscal year and fiscal second quarter.\80\ Registered 
unit investment trusts are required to file annual reports on Form N-
SAR with respect to each calendar year, not more than 60 calendar days 
after the close of each year.\81\
    Unlike Forms 10-K and 10-Q, Form N-SAR does not require the filing 
of financial statements. However, Form N-SAR requires management 
investment companies to provide certain financial information based on 
the financial statements as of the same date contained in the 
investment company's annual and semi-annual reports to 
shareholders.\82\ Therefore, we are

[[Page 57282]]

requiring the signing officers of a registered management investment 
company to certify under new Investment Company Act Rule 30a-2(b)(3) 
that the financial information included in the report and the financial 
statements on which the financial information is based fairly present, 
in all material respects, the financial condition, results of 
operations, changes in net assets and cash flows (if the financial 
statements are required to include a statement of cash flows) of the 
investment company.\83\ We have added a specific reference to changes 
in net assets and cash flows even though Section 302 of the Act does 
not include such an explicit reference. We believe that it is 
consistent with Congressional intent to include both income or loss, 
and changes in net assets and, in the case where the financial 
statements are required to include a statement of cash flows, within 
the concept of ``fair presentation'' of an investment company's results 
of operations.
---------------------------------------------------------------------------

    \77\ See n. 34 above. Because Section 302 of the Sarbanes-Oxley 
Act only applies to companies that file periodic reports under 
Section 13(a) or 15(d) of the Exchange Act, the rules we are 
adopting today will not apply to registered investment companies 
that do not file periodic reports under Section 13(a) or 15(d).
    \78\ 15 U.S.C. 80a-30(a) and (b)(1).
    \79\ General Instruction A to Form N-SAR. See Release No. IC-
14299 (Jan. 4, 1985) [50 FR 1442] (release adopting Form N-SAR).
    \80\ Investment Company Act Rule 30b1-1 [17 CFR 270.30b1-1]; 
General Instruction C to Form N-SAR.
    \81\ Investment Company Act Rule 30a-1 [17 CFR 270.30a-1]; 
General Instruction C to Form N-SAR. A unit investment trust is ``an 
investment company which (A) is organized under a trust indenture, 
contract of custodianship or agency, or similar instrument, (B) does 
not have a board of directors, and (C) issues only redeemable 
securities, each of which represents an undivided interest in a unit 
of specified securities; but does not include a voting trust.'' 
Section 4(2) of the Investment Company Act [15 U.S.C. 80a-4(2)].
    \82\ See Items 72 and 74 of Form N-SAR and the Instructions to 
those items.
    \83\ In the case of a master-feeder fund, the report of the 
master fund on Form N-SAR would be expected to include a 
certification based upon the financial statements of the master fund 
included in the report to shareholders of the feeder fund.
---------------------------------------------------------------------------

    The certification required by new Investment Company Act Rule 30a-2 
must be in the exact form set forth in the amendments to Form N-
SAR.\84\ The wording of the required certification may not be changed 
in any respect (even if the change would appear to be inconsequential 
in nature).
---------------------------------------------------------------------------

    \84\ The certification must be filed as an exhibit to the report 
on Form N-SAR. The EDGAR document type must be EX-99.77Q3 CERT for 
an Exhibit filed in response to the instructions to sub-item 77Q3, 
EX-99.102P3 CERT for an Exhibit filed in response to the 
instructions to sub-item 102P3 and EX-99.133 CERT for an Exhibit 
filed in response to the instructions to item 133 of this form.
---------------------------------------------------------------------------

    Investment companies filing reports on Form N-SAR under Sections 
13(a) and 15(d) of the Exchange Act will also be required to maintain 
disclosure controls and procedures under new Exchange Act Rules 13a-15 
and 15d-15.\85\ New Rules 13a-15 and 15d-15 also require an investment 
company, under the supervision and with the participation of the 
principal executive and financial officers, to conduct an evaluation of 
the effectiveness of the design and operation of the investment 
company's disclosure controls and procedures within 90 days of the 
filing date of each report requiring certification under new Investment 
Company Act Rule 30a-2. We expect that this evaluation would be carried 
out in a manner that would form the basis for the certification 
statements required by Section 302 of the Act regarding disclosure 
controls and procedures required by new Investment Company Act Rule 
30a-2(b)(4)(i)-(iii) in an investment company's Form N-SAR.\86\
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    \85\ New Exchange Act Rule 13a-15 applies to every issuer that 
has a class of securities registered pursuant to Section 12 of the 
Exchange Act. New Exchange Act Rule 15d-15 applies to every issuer 
that is required to file reports pursuant to Section 15(d) of the 
Exchange Act.
    \86\ New Investment Company Act Rule 30a-2(c) incorporates the 
definition of ``disclosure controls and procedures'' contained in 
new Exchange Act Rules 13a-14(c) and 15d-14(c). We recognize that, 
in the case of a series fund or family of investment companies, the 
disclosure controls and procedures for each fund in the series or 
family may be the same. Therefore, for purposes of new Investment 
Company Act Rule 30a-2(b)(4)(ii) and (iii), a single evaluation of 
the effectiveness of the disclosure controls and procedures for the 
series or family could be used in multiple certifications for the 
funds in the series or family, as long as the evaluation has been 
performed within 90 days of the date of the report on Form N-SAR.
---------------------------------------------------------------------------

    The certification required by new Investment Company Act Rule 30a-2 
makes reference to certain disclosures regarding both disclosure 
controls and procedures and internal controls that must be made in the 
reports in which the certification is contained. These disclosure 
requirements appear in the new instructions to Form N-SAR.\87\
---------------------------------------------------------------------------

    \87\ Instructions (a)(i) and (ii) to sub-item 77Q3 of Form N-
SAR.
---------------------------------------------------------------------------

    Unit investment trusts will be required to provide the specified 
certification with respect to the items of Form N-SAR specific to them, 
which include very limited financial information.\88\ We recognize that 
unit investment trusts, which are unmanaged, fixed portfolios of 
securities, have no corporate management structure and hence will not 
have a principal executive officer or principal financial officer. 
Therefore, in the case of a unit investment trust, the required 
certification should be signed by personnel of the sponsor, trustee, 
depositor or custodian who perform functions similar to those of a 
principal executive officer and principal financial officer on behalf 
of the trust.\89\
---------------------------------------------------------------------------

    \88\ See Items 111 to 132 of Form N-SAR.
    \89\ Signing officers could include, for example, the officers 
of the depositor required to sign a registration statement on Form 
N-4 [17 CFR 239.17b; 17 CFR 274.11c] or N-6 [17 CFR 239.17c; 17 CFR 
274.11d], or the officers of the depositor, trustee or custodian 
required to sign a registration statement on Form N-8B-2 [17 CFR 
274.12].
---------------------------------------------------------------------------

    Unit investment trusts and small business investment companies are 
not required to transmit reports to their shareholders containing their 
financial statements, and Form N-SAR does not require unit investment 
trusts and small business investment companies to report financial 
information based on their financial statements.\90\ Therefore, the 
certification requirement applicable to these investment companies does 
not include the requirement of new Investment Company Act Rule 30a-
2(b)(3) that the signing officers certify that the financial 
information included in the periodic report and the financial 
statements on which it is based fairly present, in all material 
respects, the financial condition, results of operations, changes in 
net assets and cash flows (if the financial statements are required to 
include a statement of cash flows) of the investment company.\91\
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    \90\ Cf. Investment Company Act Rule 30e-2 [17 CFR 270.30e-2] 
(requiring registered unit investment trusts substantially all of 
the assets of which consist of securities issued by a management 
investment company to transmit to their shareholders semi-annually a 
report containing all of the applicable information and financial 
statements or their equivalent required to be included in reports of 
the management investment company for the same fiscal period).
    \91\ Instruction to item 133 of Form N-SAR.
---------------------------------------------------------------------------

    Business development companies and face-amount certificate 
companies file periodic reports on Forms 10-K and 10-Q under the 
Exchange Act, and they are required to comply with the certification 
requirements applicable to these forms.\92\
---------------------------------------------------------------------------

    \92\ Business development companies are a category of closed-end 
investment company that are not required to register under the 
Investment Company Act. See 15 U.S.C. 80a-2(a)(48) (defining 
business development companies). A face-amount certificate company 
is an investment company that engages or proposes to engage in the 
business of issuing certain face amount certificates. See 15 U.S.C. 
80a-4(1). See Release No. IC-14080 (Aug. 6, 1984) [49 FR 32370, 
32372] (business development companies and face-amount certificate 
companies are required to file reports on other forms prescribed 
under the Exchange Act rather than Form N-SAR).
---------------------------------------------------------------------------

    We note that, in a companion release, we are proposing to require 
registered management investment companies to file certified 
shareholder reports with the Commission on new Form N-CSR and would 
designate these certified shareholder reports as reports that are 
required under Sections 13(a) and 15(d) of the Exchange Act. For 
registered management investment companies, the required reports to 
shareholders, rather than Form N-SAR, are the primary vehicle for 
providing financial statements to investors. We believe that the 
information in these reports to shareholders should be certified. In 
addition, we are proposing an amendment to Form N-SAR that would 
uniformly apply to all registered investment companies, and not just 
those subject to Section 13(a) or 15(d) of the Exchange Act, the 
requirement to include in Form N-SAR the certification required by 
Section 302 of the Act. We are also proposing a new rule to apply 
disclosure controls and procedures requirements, similar to those 
contained

[[Page 57283]]

in Exchange Act Rules 13a-15 and 15d-15, uniformly to all registered 
investment companies.

V. Transition Provisions

    Paragraphs (b)(1), (2) and (3) of new Exchange Act Rules 13a-14 and 
15d-14 apply to quarterly and annual reports, including transition 
reports, filed after the Effective Date. Paragraphs (b)(4), (5) and (6) 
of Rules 13a-14 and 15d-14 apply to quarterly and annual reports, 
including transition reports, filed for periods ending after the 
Effective Date. Paragraph (a) of Item 307 of Regulations S-B and S-K 
and paragraph (b) of new Exchange Act Rules 13a-15 and 15d-15 apply to 
quarterly and annual reports, including transition reports, filed for 
periods ending after the Effective Date.
    Paragraphs (b)(1), (2) and (3) of new Investment Company Act Rule 
30a-2 apply to annual and semi-annual reports, including transition 
reports, on Form N-SAR filed after the Effective Date. Paragraphs 
(b)(4), (5) and (6) of Rule 30a-2 apply to annual and semi-annual 
reports, including transition reports, filed for periods ending after 
the Effective Date. Paragraph (a)(i) of the Instruction to sub-item 
77Q3 of Form N-SAR and paragraph (b) of new Exchange Act Rules 13a-15 
and 15d-15 apply to annual and semi-annual reports, including 
transition reports, on Form N-SAR filed for periods ending after the 
Effective Date.

VI. Paperwork Reduction Act

    The new rules and amendments to existing rules and forms contain 
``collection of information'' requirements within the meaning of the 
Paperwork Reduction Act of 1995 (``PRA'').\93\ We published a notice 
requesting comment on the collection of information requirements in the 
June Proposals, and submitted these requirements to the Office of 
Management and Budget (``OMB'') for review in accordance with the 
PRA.\94\ The titles for those collections of information are ``Form 10-
K,'' ``Form 10-KSB,'' ``Form 10-Q'' and ``Form 10-QSB.'' \95\
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    \93\ 44 U.S.C. 3501 et seq.
    \94\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
    \95\ The burden hour and cost estimates for these collections of 
information are as follows: with respect to Form 10-K (OMB Control 
No. 3235-0063) an increase in annual reporting and recordkeeping 
burden hours and cost of 35,190 hours and $3,519,000, respectively; 
with respect to Form 10-KSB (OMB Control No. 3235-0420) an increase 
in annual reporting and recordkeeping burden hours and cost of 
14,209 hours and $1,421,000, respectively; with respect to Form 10-Q 
(OMB Control No. 3235-0070) an increase in annual reporting and 
recordkeeping burden hours and cost of 100,298 hours and 
$10,030,000, respectively; and respectively; with respect to Form 
10-QSB (OMB Control No. 3235-0416) an increase in annual reporting 
and recordkeeping burden hours and cost of 43,530 hours and 
$4,353,000, respectively.
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    While we received only one comment letter specifically remarking on 
our PRA estimates included in the June Proposals,\96\ we revised the 
proposed amendments in response to the directives in Section 302 of the 
Act. The revisions made to the rules and amendments do not alter the 
burden estimates for Forms 10-K (OMB Control No. 3235-0063), 10-KSB 
(OMB Control No. 3235-0420), 10-Q (OMB Control No. 3235-0070) and 10-
QSB (OMB Control No. 3235-0416) previously submitted to and approved by 
OMB.
---------------------------------------------------------------------------

    \96\ See the Letter dated August 2, 2000 of Bernard E. Klein.
---------------------------------------------------------------------------

    The new rules and form amendments that we are adopting cover the 
more expansive reach of Section 302 of the Act and contain additional 
``collection of information requirements'' within the meaning of the 
PRA. Accordingly, we submitted additional materials to OMB for 
emergency review in accordance with the PRA.\97\ The titles for these 
collections of information are ``Form 20-F'' (OMB Control No. 3235-
0288), ``Form 40-F'' (OMB Control No. 3235-0381) and ``Form N-SAR'' 
(OMB Control No. 3235-0330). An agency may not conduct or sponsor, and 
a person is not required to respond to, an information collection 
unless it displays a currently valid OMB control number.
---------------------------------------------------------------------------

    \97\ 44 U.S.C. 3507(j) and 5 CFR 1320.13.
---------------------------------------------------------------------------

    Form 10-K prescribes information that registrants must disclose 
annually to the market about its business. Form 10-KSB prescribes 
information that registrants that are ``small business issuers'' as 
defined under our rules must disclose annually to the market about its 
business.
    Form 10-Q prescribes information that registrants must disclose 
quarterly to the market about its business. Form 10-QSB prescribes 
information that registrants that are ``small business issuers'' as 
defined under our rules must disclose quarterly to the market about its 
business.
    Form 20-F is used by foreign private issuers to either register a 
class of securities under the Exchange Act or provide an annual report 
required under the Exchange Act. Form 40-F is used by foreign private 
issuers to file reports under the Exchange Act after having registered 
securities under the Securities Act and by certain Canadian 
registrants. Form N-SAR is used by registered investment companies to 
file annual and semi-annual reports under the Exchange Act and the 
Investment Company Act.
    New Exchange Act Rules 13a-14 and 15d-14\98\ require an issuer's 
principal executive and financial officers to certify the information 
contained in the issuer's quarterly and annual reports and that they 
have taken certain actions with respect to the issuer's internal 
controls for the collection and reporting of financial and other 
information that is subject to disclosure in the issuer's quarterly and 
annual Exchange Act reports. This certification requirement would 
become part of the ``collection of information'' required in each 
quarterly and annual report.
---------------------------------------------------------------------------

    \98\ References to new Exchange Act Rule 13a-14 in this section 
also refer to new Exchange Act Rule 15d-14.
---------------------------------------------------------------------------

    New Exchange Act Rules 13a-15 and 15d-15\99\ require an issuer to 
maintain disclosure controls and procedures to provide reasonable 
assurance that the issuer is able to record, process, summarize and 
report the information required in the issuer's Exchange Act reports. 
These procedures would become part of the ``collection of information'' 
required in these reports.
---------------------------------------------------------------------------

    \99\ References to new Exchange Act Rule 13a-15 in this section 
also refer to new Exchange Act Rule 15d-15.
---------------------------------------------------------------------------

    New Investment Company Act Rule 30a-2 requires an investment 
company's principal executive and financial officers to certify the 
information contained in the investment company's annual and semi-
annual reports on Form N-SAR and that they have taken certain actions 
with respect to the investment company's internal controls for the 
collection and reporting of financial and other information that is 
subject to disclosure in the investment company's reports on Form N-
SAR. This certification requirement would become part of the 
``collection of information'' required in each report on Form N-SAR.
    The purpose of the certification and disclosure controls and 
procedures requirements is to ensure that the information that is 
collected and disclosed in Exchange Act reports is complete and 
accurate. Consequently, the senior officer certification, as well as 
the periodic evaluations of internal reporting systems, required by the 
rules and amendments will become part of the process in which issuers 
engage to comply with the reporting requirements of the affected forms.
    The compliance burden estimates for the collections of information 
are based on several assumptions.\100\ The number

[[Page 57284]]

of foreign private issuers that file annual reports on Form 20-F or 40-
F is approximately 1,300 entities.\101\ The number of registered 
investment companies that file Form N-SAR is approximately 4,450 
entities.\102\
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    \100\ We have based our estimates of the effects that the new 
rules and amendments to existing rules and forms will have on these 
information collections primarily on our review of actual filings of 
these forms and the forms' requirements.
    \101\ This estimate is based on 1,200 foreign private issuers 
that file annual reports on Form 20-F and 100 Canadian issuers that 
file annual reports on Form 40-F.
    \102\ This estimate is based on 3,650 registered management 
investment companies and 800 registered unit investment trusts that 
file reports under Section 13(a) or 15(d) of the Exchange Act.
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    New Exchange Act Rule 13a-14 and new Investment Company Act Rule 
30a-2 require an issuer's principal executive and financial officers to 
certify the information contained in the issuer's periodic reports. The 
compliance burden associated with new Exchange Act Rule 13a-14 and new 
Investment Company Act Rule 30a-2 is the burden associated with reading 
and thinking critically about each quarterly and annual report to be 
filed by the issuer so that the certifying officers can make the 
required certification. For purposes of the PRA, we estimate that the 
new certification requirement will result in an increase of five burden 
hours \103\ per issuer in connection with preparing each annual report 
on Form 20-F or 40-F and an increase of five burden hours per issuer in 
connection with preparing each report on Form N-SAR.
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    \103\ This estimate is based on consultations with several law 
firms and other persons who regularly assist registrants in 
preparing and filing quarterly and annual reports with the 
Commission.
---------------------------------------------------------------------------

    New Exchange Act Rule 13a-15 requires an issuer to maintain 
sufficient procedures to collect, process and disclose the information 
required in its Exchange Act reports. We expect that issuers already 
maintain procedures, whether formal or informal, to comply with their 
Exchange Act disclosure obligations and for their own internal 
purposes. We do not believe that this requirement will result in any 
change in either the reporting or cost burden associated with preparing 
annual reports on Forms 20-F and 40-F or reports on Form N-SAR.
    Based on a burden hour estimate of five hours per respondent per 
year, we estimate that the total burden hours of complying with Form 
20-F and Form 40-F, revised to include the burden hours expected from 
the new rules, is estimated to be 586,248 hours for Form 20-F, an 
increase of 4,500 hours \104\ from the current annual burden of 581,748 
hours, and 525 hours for Form 40-F, an increase of 475 hours \105\ from 
the current annual burden of 50 hours. The total burden hours of 
complying with Form N-SAR, revised to include the burden hours expected 
from the new rules, is estimated to be 154,450 hours,\106\ an increase 
of 52,702 hours \107\ from the current annual burden of 101,748 hours.
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    \104\ This estimate is based on the current annual burden per 
filing for each foreign private issuer. The estimate of 4,500 hours 
is calculated by 1,200 foreign private issuers x one filing per year 
x five burden hours x .75).
    \105\ This estimate is based on the current annual burden per 
filing for each Canadian issuer. The estimate of 475 hours is 
calculated by 100 Canadian issuers x one filing per year x five 
burden hours x .75 + 100 hours to reflect an adjustment in the 
distribution of burden hours and associated costs). The estimate has 
then been increased by 100 hours due to an adjustment to reflect a 
revised burden hour/cost allocation (75%/25%) for the report.
    \106\ This estimate is based on the current annual burden per 
filing for each investment company. With regard to Form N-SAR, the 
current estimated average burden hours per response for registered 
management investment companies and registered small business 
investment companies is 14.75 hours and the current estimated 
average burden hours per response for registered unit investment 
trusts is six hours. The estimated average burden hours per 
response, if new Investment Company Act Rule 30a-2 is adopted, for 
Form N-SAR would increase the average burden hours per response by 
five hours per filing that is required to be certified. We estimate 
that 50 registered management investment companies are not subject 
to Section 13(a) or 15(d) of the Exchange Act and hence would not be 
required to include the certification. Therefore, the estimate of 
154,450 hours is calculated by: (3,650 registered management 
investment companies x two filings per year x 19.75 burden hours) + 
(50 registered management investment companies not subject to 
Section 13(a) or 15(d) of the Exchange Act x two filings per year x 
14.75 burden hours) + (800 registered unit investment trusts x one 
filing per year x 11 burden hours).
    \107\ The increase in burden hours is attributed to an increase 
of 400 registered management investment companies and 67 registered 
unit investment trusts that are required to file reports pursuant to 
the Exchange Act from the previous number of these issuers 
calculated for the current annual burden, and the certification 
requirement required by the new rule.
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    The total burden hours of complying with Forms 10-Q and 10-QSB, 
revised to include the burden hours expected from the new rules, is 
estimated to be 3,129,283 hours for Form 10-Q, an increase of 100,298 
hours \108\ from the current annual burden of 3,028,985 hours, and 
1,288,488 hours for Form 10-QSB, an increase of 43,530 hours \109\ from 
the current annual burden of 1,244,958 hours. The total burden hours of 
complying with Forms 10-K and 10-KSB, revised to include the burden 
hours expected from the new rules, is estimated to be 12,344,652 hours 
for Form 10-K, an increase of 35,190 hours \110\ from the current 
annual burden of 12,309,462 hours, and 3,438,518 hours for Form 10-KSB, 
an increase of 14,209 hours \111\ from the current annual burden of 
3,424,309 hours.
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    \108\ The estimate of 100,298 hours is calculated by 26,746 
quarterly reports x five burden hours x .75.
    \109\ The estimate of 43,350 hours is calculated by 11,608 
quarterly reports x five burden hours x .75.
    \110\ The estimate of 35,190 hours is calculated by 9,384 annual 
reports x five burden hours x .75.
    \111\ The estimate of 14,209 hours is calculated by 3,789 annual 
reports x five burden hours x .75.
---------------------------------------------------------------------------

    In addition to the internal hours they will expend to comply with 
Forms 20-F and 40-F, we expect that respondents will retain outside 
professionals to assist in compliance with the information collection 
requirements. The total dollar cost of complying with Forms 20-F and 
40-F, revised to include outside professional costs expected from the 
new rules, is estimated to be $523,596,000 for Form 20-F, an increase 
of $450,000 \112\ from the current annual burden of $523,146,000, and 
$52,500 for Form 40-F, an increase of $26,500 \113\ from the current 
annual burden of $26,000.
---------------------------------------------------------------------------

    \112\ This estimate is based on the current annual burden per 
filing for each foreign private issuer. The estimate of $450,000 is 
calculated by 1,200 foreign private issuers x one filing per year x 
five burden hours x .25 x $300.00).
    \113\ This estimate is based on the current annual burden per 
filing for each foreign private issuer. The estimate of $26,500 is 
calculated by 100 foreign private issuers x one filing per year x 
five burden hours x .25 x $300.00). The estimate has then been 
reduced by $11,000 due to an adjustment to reflect a revised burden 
hour/cost allocation (75%/25%) for the report.
---------------------------------------------------------------------------

    The total dollar cost of complying with Forms 10-Q and 10-QSB, 
revised to include outside professional costs expected from the new 
rules, is estimated to be $312,929,000 for Form 10-Q, an increase of 
$10,030,000 \114\ from the current annual burden of $302,899,000, and 
$128,849,000 for Form 10-QSB, an increase of $4,353,000 \115\ from the 
current annual burden of $124,496,000. The total dollar cost of 
complying with Forms 10-K and 10-KSB, revised to include outside 
professional costs expected from the new rules, is estimated to be 
$1,234,465,000 for Form 10-K, an increase of $3,519,000 \116\ from the 
current annual burden of $1,230,946,000, and $343,852,000 for Form 10-
KSB, an increase of $1,421,000 \117\ from the current annual burden of 
$342,431,000.
---------------------------------------------------------------------------

    \114\ The estimate of $10,030,000 is calculated by 26,746 
quarterly reports x five burden hours x .25 x $300.00.
    \115\ The estimate of $4,353,000 is calculated by 11,608 
quarterly reports x five burden hours x .25 x $300.00.
    \116\ The estimate of $3,519,000 is calculated by 9,384 annual 
reports x five burden hours x .25 x $300.00.
    \117\ The estimate of $1,421,000 is calculated by 3,789 annual 
reports x five burden hours x .25 x $300.00.
---------------------------------------------------------------------------

    Comments concerning the accuracy of these burden estimates, and any 
suggestions for reducing the burden, should be directed to the 
Commission.

[[Page 57285]]

Compliance with the new rules is mandatory. Under our rules for the 
retention of manual signatures, issuers will be required to maintain 
the certifications for five years.\118\ The information required by the 
new rules will not be kept confidential.
---------------------------------------------------------------------------

    \118\ See the amendment to Rule 302(b) of Regulation S-T [17 CFR 
232.302(b)].
---------------------------------------------------------------------------

VII. Cost-Benefit Analysis

    The certification requirement that we are adopting today implements 
a Congressional mandate. We recognize that any implementation of the 
Sarbanes-Oxley Act will likely result in costs as well as benefits and 
have an effect on the economy. We are sensitive to the costs and 
benefits of our adoption of a rule that requires issuers to maintain 
disclosure controls and procedures. We discuss these costs and benefits 
below.
    The new certification requirement may lead to some additional costs 
for issuers. The new rules require an issuer's principal executive and 
financial officers to review the issuer's periodic reports and to make 
the required certification. To the extent that corporate officers would 
need to spend additional time thinking critically about the overall 
context of their company's disclosure, issuers would incur costs 
(although investors would benefit from improved disclosure). The 
certification requirement creates a new legal obligation for an 
issuer's principal executive and financial officers, but does not 
change the standard of legal liability.
    Issuers are already required to maintain reporting controls and 
procedures for identifying and processing the information needed to 
satisfy their disclosure obligations under the Exchange Act. The new 
rules do not dictate that issuers follow any particular procedure. By 
allowing issuers to determine what procedures are necessary to meet the 
obligation of the rules, we are mitigating the costs associated with 
compliance. Some issuers may need to institute appropriate controls and 
procedures. Other issuers may need to enhance existing informal or ad 
hoc controls and procedures. These incremental costs are difficult to 
quantify. While we requested comment and supporting data in connection 
with the June Proposals on the cost of implementing, or upgrading and 
strengthening existing, reporting controls and procedures, we received 
no specific comment letters in response to that request.
    The required periodic evaluation of reporting controls and 
procedures likely will result in costs for issuers. The new 
certification requirement likely will require issuers to create or 
strengthen internal controls to enable their senior executive officers 
to meet their certification obligations under the new rules. Many 
issuers already regularly monitor and evaluate their controls and 
procedures. Because the size and scope of these internal reporting 
systems is likely to vary among issuers, it is difficult to provide an 
accurate cost estimate.
    Conversely, the new rules are likely to provide significant 
benefits by ensuring that information about an issuer's business and 
financial condition is adequately reviewed by the issuer's principal 
executive and financial officers and the issuer's internal systems keep 
pace with the growth of the business.
    We believe that investor confidence in corporate disclosure has 
suffered, in part, because of a belief that corporate officers may not 
devote sufficient attention to the preparation of their companies' 
periodic reports and to the disclosure controls and procedures that 
generate the data from which they are prepared.
    The new rules should help to ensure that issuers maintain 
sufficient internal reporting controls and procedures to provide 
reasonable assurance that they can record, process, summarize and 
report the information that is required in all Exchange Act reports. To 
the extent that issuers do not maintain adequate controls and 
procedures, the new rules should lead to the development, or 
enhancement and modernization, of these controls and procedures. The 
required periodic evaluation of these controls and procedures should 
ensure that issuers devote adequate resources and attention to the 
maintenance of their internal reporting systems. Additionally, the 
required evaluation should help to identify potential weaknesses and 
deficiencies in advance of a system breakdown, thereby ensuring the 
continuous, orderly and timely flow of information within the company 
and, ultimately, to investors and the marketplace.

VIII. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis, or FRFA, has been 
prepared in accordance with the Regulatory Flexibility Act.\119\ The 
FRFA pertains to new Exchange Act Rules 13a-15 and 15d-15 adopted for 
operating companies, for which we gave notice and sought comment. The 
Sarbanes-Oxley Act of 2002 directs us to adopt rules for registered 
investment companies. Because we find good cause to adopt those rules 
without notice and comment, we do not analyze them in the FRFA. New 
Exchange Act Rules 13a-15 and 15d-15 require an issuer to maintain 
disclosure controls and procedures to provide reasonable assurance that 
the issuer is able to record, process, summarize and report the 
information required in their Exchange Act reports.\120\
---------------------------------------------------------------------------

    \119\ 5 U.S.C. 603.
    \120\ The Initial Regulatory Flexibility Analysis (``IRFA'') 
prepared in connection with the June Proposals also involved 
proposed rules under the Exchange Act that would have required an 
issuer's principal executive officer and principal financial officer 
to certify the information contained in their quarterly and annual 
reports That proposal has been superseded by the statutory mandate 
of Section 302 of the Act. The Act's directive to adopt rules for 
all issuers makes no distinction based on the size of the issuer. 
We, therefore, do not analyze the new rules adopted under the 
Exchange Act requiring certifications by an issuer's principal 
executive and financial officers.
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, New Rules

    New Exchange Act Rules 13a-15 and 15d-15 complement existing 
requirements for reporting companies to establish and maintain systems 
of internal controls with respect to their financial information. They 
are intended to ensure that an issuer maintains commensurate procedures 
for gathering, analyzing and disclosing all information that is 
required to be disclosed in its Exchange Act reports.

B. Legal Basis

    We are adopting the new rules under the authority set forth in 
Sections 10(b), 13, 15(d) and 23(a) of the Exchange Act and Sections 
3(a) and 302 of the Act.

C. Small Entities Subject to the Final Rules

    The new rules will affect small entities that are subject to the 
reporting requirements of Section 13(a) or 15(d) of the Exchange Act. 
For purposes of the Regulatory Flexibility Act, the Exchange Act \121\ 
defines the term ``small business,'' other than an investment company, 
to be an issuer that, on the last day of its most recent fiscal year, 
has total assets of $5 million or less.\122\ We estimate that there are 
approximately 2,500 companies subject to the reporting requirements of 
Section 13(a) or 15(d) of the Exchange Act that

[[Page 57286]]

are not investment companies and that have assets of $5 million or 
less.\123\
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    \121\ 17 CFR 240.0-10(a).
    \122\ A similar definition is provided under Securities Act Rule 
157 [17 CFR 230.157].
    \123\ This estimate is based on filings with the Commission.
---------------------------------------------------------------------------

D. Significant Issues Raised by Public Comment

    The IRFA appeared in the June Proposals.\124\ We requested comment 
on any aspect of the IRFA, including the number of small businesses 
that would be affected by the proposals, the nature of the impact, how 
to quantify the number of small entities that would be affected and how 
to quantify the impact of the proposals. We received one comment letter 
responding to that request.\125\ This commenter recommended that we 
provide a transition period for small businesses and that we clarify 
the need for small businesses to audit their internal controls 
quarterly. This release contains a transition provision that delays 
compliance with the certification requirement as it relates to 
disclosure controls and procedures and internal controls.\126\ The 
requirements for periodic audit of an issuer's internal controls will 
be considered at a future date.
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    \124\ See the June Proposals at Section V.
    \125\ See the Letter dated August 19, 2002 of the Office of the 
Chief Counsel for Advocacy of the U.S. Small Business 
Administration.
    \126\ See Section V above.
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E. Reporting, Recordkeeping and Other Compliance Requirements

    The new rules require issuers, including ``small businesses,'' to 
maintain sufficient procedures to provide reasonable assurance that the 
issuer is able to record, process, summarize and report the information 
required in their Exchange Act reports filed with the Commission, and 
to periodically review and evaluate these procedures. We do not dictate 
the specifics of these procedures. The new rules may increase the costs 
associated with compliance with issuers' Exchange Act reporting 
obligations.

F. Duplicative, Overlapping or Conflicting Federal Rules

    Section 13(b)(2)(B) of the Exchange Act \127\ requires issuers that 
are subject to the reporting requirements of Section 13(a) or 15(d) to 
devise and maintain a system of internal accounting controls sufficient 
to provide reasonable assurances that the transactions and information 
are recorded as necessary to permit the preparation of the issuer's 
financial statements. New Exchange Act Rules 13a-15 and 15d-15 are 
intended to address the issuer's controls and procedures for recording, 
processing summarizing and reporting the information that is required 
to be disclosed in Exchange Act reports.
---------------------------------------------------------------------------

    \127\ 15 U.S.C. 78m(b)(2)(B).
---------------------------------------------------------------------------

G. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objectives, while 
minimizing any significant adverse impact on small entities. In that 
regard, we considered the following alternatives: (a) Establishing 
different compliance or reporting requirements that take into account 
the resources of small entities, (b) clarifying, consolidating or 
simplifying compliance and reporting requirements under the rules for 
small entities and (c) exempting small entities from all or part of the 
proposed rules. We solicited comment as to whether small business 
issuers should be excluded from the new rules. We received no comment 
letters responding to that request.
    The periodic review and evaluation of information collection and 
reporting procedures required by the new rules involves a performance 
standard. The new rules do not mandate how issuers should conduct this 
review and evaluation. This flexibility will enable small and large 
entities to develop approaches for the review and evaluation that are 
appropriate to their individual circumstances. Because Congress has 
directed the senior officers of all issuers, regardless of size, to 
certify issuers' quarterly and annual reports, we do not believe it is 
consistent with that mandate to exempt small issuers from the new 
rules. We are not aware of any way to further clarify or simplify 
compliance for small entities.

IX. Consideration of Burden on Competition and Promotion of Efficiency, 
Competition and Capital Formation

    Section 23(a)(2) of the Exchange Act \128\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. Section 3(f) of the Exchange Act \129\ and Section 
2(c) of the Investment Company Act \130\ requires us, when engaging in 
rulemaking where we are required to consider or determine whether an 
action is necessary or appropriate in the public interest, to consider, 
in addition to the protection of investors, whether the action will 
promote efficiency, competition and capital formation.
---------------------------------------------------------------------------

    \128\ 15 U.S.C. 78w(a)(2).
    \129\ 15 U.S.C. 78c(f).
    \130\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The new rules are intended to enhance investor confidence in the 
quality of the information available to them in quarterly and annual 
reports filed under the Exchange Act. We believe that by requiring an 
issuer's principal executive and financial officers to provide the 
required certification, investor confidence in the securities markets 
will be enhanced, thereby leading to a more efficient market.
    We do not believe that the new rules will impose any burden on 
competition. Issuers will incur some costs in complying with the new 
rules. These costs will include conducting periodic evaluations of the 
issuer's internal controls and procedures to record, process, summarize 
and report, on a timely basis, the information required in periodic and 
current reports filed by the issuer under the Exchange Act. We 
requested comment in connection on the June Proposals on whether the 
proposed rules, if adopted, would impose a burden on competition. We 
received no comment letters in response to that request.

X. Administrative Procedure Act

    The Administrative Procedure Act, or APA, generally requires an 
agency to publish notice of a proposed rulemaking in the Federal 
Register.\131\ The APA's notice and comment requirement does not apply, 
however, if the agency ``for good cause finds * * * that notice and 
public procedure are impracticable, unnecessary, or contrary to the 
public interest.''\132\ The Commission believes that it is appropriate 
to waive notice and comment for the portions of the new rules that were 
not included in the June Proposals and for the application of the new 
rules to investment companies. Congress has directed the Commission to 
implement Section 302 of the Act by rule within 30 days after the date 
of enactment.\133\ It is impractical to provide notice and comment 
within the statutory deadline. It would be

[[Page 57287]]

unnecessary and against the public interest to provide notice and 
opportunity for comment on a directive from Congress to implement 
specific rules. Accordingly, the Commission for good cause finds that 
delaying adoption of these rules until after a notice and comment 
period would be impractical, unnecessary and contrary to the public 
interest.
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    \131\ See 5 U.S.C. 553(b).
    \132\ Id. The Commission previously published notice and sought 
comment on a certification proposal that was somewhat similar to, 
but different in several material respects, from the new rules we 
are adopting today to implement Section 302 of the Sarbanes-Oxley 
Act. We did not propose rules that would apply to investment 
companies or foreign private issuers (although we sought comment on 
the latter).
    \133\ See Section 302 (a) and (c) of the Act.
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    The APA also generally requires that an agency publish an adopted 
rule in the Federal Register 30 days before it becomes effective.\134\ 
This requirement, however, does not apply if the agency finds good 
cause for making the rule effective sooner.\135\ For the same reasons 
as it is waiving notice and comment, the Commission finds good cause to 
make the new Exchange Act Rules 13a-14 and 15d-14 and new Investment 
Company Act Rule 30a-2, and the amendments to related rules and forms, 
effective immediately. In addition, because new Exchange Act Rules 13a-
15 and 15d-15 effectuate the purpose of the Section 302 certification 
requirement and might create a hardship if they did not become 
effective simultaneously with new Exchange Act Rules 13a-14 and 15d-14, 
the Commission finds good cause to make the rules effective immediately 
as to all issuers filing reports under Section 13(a) or 15(d) of the 
Exchange Act.\136\
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    \134\ See 5 U.S.C. 553(d).
    \135\ Id.
    \136\ This finding also satisfies the requirements of 5 U.S.C. 
808(2), allowing the rules to become immediately, effective 
notwithstanding the requirements of 5 U.S.C. 801 (if agency finds 
that notice and public comment procedure are ``impractical, 
unnecessary, or contrary to the public interest,'' a rule ``shall 
take effect at such time as the Federal agency promulgating the rule 
determines'').
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XI. Statutory Authority

    The rules and amendments contained in this release are being 
adopted under the authority set forth in Sections 10(b), 13, 15(d) and 
23(a) of the Exchange Act, Section 8, 30 and 38 of the Investment 
Company Act and Sections 3(a) and 302 of the Sarbanes-Oxley Act of 
2002.

List of Subjects in 17 CFR Parts 228, 229, 232, 240, 249, 270 and 
274

    Securities, Investment Companies, Reporting and recordkeeping 
requirements.

Text of Final Rules and Amendments

    In accordance with the foregoing, Title 17, Chapter II, of the Code 
of Federal Regulations is amended as follows:

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    1. The authority citation for part 228 is revised to read 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, 77jjj, 77nnn, 
77sss, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-29, 
80a-30, 80a-37 and 80b-11.

    Section 228.307 is also issued under secs. 3(a) and 302, Pub.L. No. 
107-204, 116 Stat. 745.

    2. By adding Sec.  228.307 to read as follows:


Sec.  228.307  (Item 307) Controls and procedures.

    (a) Evaluation of disclosure controls and procedures. Disclose the 
conclusions of the small business issuer's principal executive officer 
or officers and principal financial officer or officers, or persons 
performing similar functions, about the effectiveness of the small 
business issuer's disclosure controls and procedures (as defined in 
Sec. Sec.  240.13a-14(c) and 240.15d-14(c) of this chapter) based on 
their evaluation of these controls and procedures as of a date within 
90 days of the filing date of the quarterly or annual report that 
includes the disclosure required by this paragraph.
    (b) Changes in internal controls. Disclose whether or not there 
were significant changes in the small business issuer's internal 
controls or in other factors that could significantly affect these 
controls subsequent to the date of their evaluation, including any 
corrective actions with regard to significant deficiencies and material 
weaknesses.
    (c) Asset-Backed Issuers. A small business issuer that is an Asset-
Backed Issuer (as defined in Rule 13a-14(g) and Rule 15d-14(g) under 
the Securities Exchange Act of 1934 (17 CFR 240.13a-14(g) and 17 CFR 
240.15d-14(g) of this chapter) is not required to disclose the 
information required by this Item.

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

    3. The authority citation for part 229 is revised to read 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(d), 78mm, 79e, 79n, 79t, 80a-8, 80a-29, 80a-30, 80a-31(c), 80a-
37, 80a-38(a) and 80b-11, unless otherwise noted.

    Section 229.307 is also issued under secs. 3(a) and 302, Pub.L.No. 
107-204, 116 Stat. 745.

    4. By adding Sec.  229.307 to read as follows:


Sec.  229.307  (Item 307) Controls and procedures.

    (a) Evaluation of disclosure controls and procedures. Disclose the 
conclusions of the registrant's principal executive officer or officers 
and principal financial officer or officers, or persons performing 
similar functions, about the effectiveness of the registrant's 
disclosure controls and procedures (as defined in Sec. Sec.  240.13a-
14(c) and 240.15d-14(c) of this chapter) based on their evaluation of 
these controls and procedures as of a date within 90 days of the filing 
date of the quarterly or annual report that includes the disclosure 
required by this paragraph.
    (b) Changes in internal controls. Disclose whether or not there 
were significant changes in the registrant's internal controls or in 
other factors that could significantly affect these controls subsequent 
to the date of their evaluation, including any corrective actions with 
regard to significant deficiencies and material weaknesses.
    (c) Asset-Backed Issuers. A registrant that is an Asset-Backed 
Issuer (as defined in Sec.  240.13a- 14(g) and Sec.  240.15d-14(g) of 
this chapter) is not required to disclose the information required by 
this Item.

PART 232--REGULATION S-T-GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

    5. The authority citation for part 232 is revised to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30 and 80a-37.

    Section 232.302 is also issued under secs. 3(a) and 302, Pub.L. No. 
107-204, 116 Stat. 745.

    6. By amending Sec.  232.302 by revising paragraphs (a) and (b) to 
read as follows:


Sec.  232.302  Signatures.

    (a) Required signatures to, or within, any electronic submission 
(including, without limitation, signatories within the certifications 
required by Sec. Sec.  240.13a-14, 240.15d-14 and 270.30a-2 of this 
chapter) must be in typed form rather than manual format. Signatures in 
an HTML document that are not required may, but are not

[[Page 57288]]

required to, be presented in an HTML graphic or image file within the 
electronic filing, in compliance with the formatting requirements of 
the EDGAR Filer Manual. When used in connection with an electronic 
filing, the term ``signature'' means an electronic entry in the form of 
a magnetic impulse or other form of computer data compilation of any 
letters or series of letters or characters comprising a name, executed, 
adopted or authorized as a signature. Signatures are not required in 
unofficial PDF copies submitted in accordance with Sec.  232.104.
    (b) Each signatory to an electronic filing (including, without 
limitation, each signatory to the certifications required by Sec. Sec.  
240.13a-14, 240.15d-14 and 270.30a-2 of this chapter) shall manually 
sign a signature page or other document authenticating, acknowledging 
or otherwise adopting his or her signature that appears in typed form 
within the electronic filing. Such document shall be executed before or 
at the time the electronic filing is made and shall be retained by the 
filer for a period of five years. Upon request, an electronic filer 
shall furnish to the Commission or its staff a copy of any or all 
documents retained pursuant to this section.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    7. The authority citation for Part 240 is amended by revising the 
sectional authority citation for Sec.  240.15d-10 and adding the 
following additional citations in numerical order to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4 and 80b-11, unless otherwise noted.

* * * * *
    Section 240.12b-15 is also issued under secs. 3(a) and 302, 
Pub.L. No. 107-204, 116 Stat. 745.
* * * * *
    Section 240.13a-10 is also issued under secs. 3(a) and 302, 
Pub.L. No. 107-204, 116 Stat. 745.
    Section 240.13a-14 is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 240.13a-15 is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
* * * * *
    Section 240.15d-10 is also issued under 15 U.S.C. 80a-20(a) and 
80a-37(a), and secs. 3(a) and 302, Pub. L. No. 107-204, 116 Stat. 
745.
    Section 240.15d-14 is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 240.15d-15 is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
* * * * *


    8. By revising Sec.  240.12b-15 to read as follows:


Sec.  240.12b-15  Amendments.

    All amendments must be filed under cover of the form amended, 
marked with the letter ``A'' to designate the document as an amendment, 
e.g., ``10-K/A,'' and in compliance with pertinent requirements 
applicable to statements and reports. Amendments filed pursuant to this 
section must set forth the complete text of each item as amended. 
Amendments must be numbered sequentially and be filed separately for 
each statement or report amended. Amendments to a statement may be 
filed either before or after registration becomes effective. Amendments 
must be signed on behalf of the registrant by a duly authorized 
representative of the registrant. In addition, each principal executive 
officer and principal financial officer of the registrant must provide 
a new certification as specified in Sec.  240.13a-14 or Sec.  240.15d-
14. The requirements of the form being amended will govern the number 
of copies to be filed in connection with a paper format amendment. 
Electronic filers satisfy the provisions dictating the number of copies 
by filing one copy of the amendment in electronic format. See Rule 309 
of Regulation S-T (Sec.  232.309 of this chapter).

    9. By amending Sec.  240.13a-10 to redesignate the ``Note'' at the 
end of the section as ``Note 1'' and a ``Note 2'' to read as follows:


Sec.  240.13a-10  Transition reports.

* * * * *

    Note 2: The report or reports to be filed pursuant to this 
section must include the certification required by Sec.  240.13a-14.


    10. By adding Sec.  240.13a-14 to read as follows:


Sec.  240.13a-14  Certification of disclosure in annual and quarterly 
reports.

    (a) Each report, including transition reports, filed on Form 10-Q, 
Form 10-QSB, Form 10-K, Form 10-KSB, Form 20-F or Form 40-F (Sec. Sec.  
249.308a, 249.308b, 249.310, 249.310b, 249.220f and 249.240f of this 
chapter) under section 13(a) of the Act (15 U.S.C. 78m(a)), other than 
a report filed by an Asset-Backed Issuer (as defined in paragraph (g) 
of this section), must include a certification containing the 
information set forth in paragraph (b) of this section in the form 
specified in the report. Each principal executive officer or officers 
and principal financial officer or officers of the issuer, or persons 
performing similar functions, at the time of filing of the report must 
sign the certification.
    (b) The certification included in each report specified in 
paragraph (a) of this section must be in the form specified in the 
report and consist of a statement of the certifying officer that:
    (1) He or she has reviewed the report being filed;
    (2) Based on his or her knowledge, the report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by the report;
    (3) Based on his or her knowledge, the financial statements, and 
other financial information included in the report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the issuer as of, and for, the periods presented in 
the report;
    (4) He or she and the other certifying officers are responsible for 
establishing and maintaining disclosure controls and procedures (as 
such term is defined in paragraph (c) of this section) for the issuer 
and have:
    (i) Designed such disclosure controls and procedures to ensure that 
material information relating to the issuer, including its consolidated 
subsidiaries, is made known to them by others within those entities, 
particularly during the period in which the periodic reports are being 
prepared;
    (ii) Evaluated the effectiveness of the issuer's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of the report (``Evaluation Date''); and
    (iii) Presented in the report their conclusions about the 
effectiveness of the disclosure controls and procedures based on their 
evaluation as of the Evaluation Date;
    (5) He or she and the other certifying officers have disclosed, 
based on their most recent evaluation, to the issuer's auditors and the 
audit committee of the board of directors (or persons fulfilling the 
equivalent function):
    (i) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the issuer's ability to 
record, process, summarize and report financial data and have

[[Page 57289]]

identified for the issuer's auditors any material weaknesses in 
internal controls; and
    (ii) Any fraud, whether or not material, that involves management 
or other employees who have a significant role in the issuer's internal 
controls; and
    (6) He or she and the other certifying officers have indicated in 
the report whether or not there were significant changes in internal 
controls or in other factors that could significantly affect internal 
controls subsequent to the date of their most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.
    (c) For purposes of this section and Sec.  240.13a-15 of this 
chapter, the term ``disclosure controls and procedures'' means controls 
and other procedures of an issuer that are designed to ensure that 
information required to be disclosed by the issuer in the reports that 
it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, 
processed, summarized and reported, within the time periods specified 
in the Commission's rules and forms. Disclosure controls and procedures 
include, without limitation, controls and procedures designed to ensure 
that information required to be disclosed by an issuer in the reports 
that it files or submits under the Act is accumulated and communicated 
to the issuer's management, including its principal executive officer 
or officers and principal financial officer or officers, or persons 
performing similar functions, as appropriate to allow timely decisions 
regarding required disclosure.
    (d) A person required to provide the certification specified in 
paragraph (a) of this section may not have the certification signed on 
his or her behalf pursuant to a power of attorney or other form of 
confirming authority.
    (e) Each annual report filed by an Asset-Backed Issuer (as defined 
in paragraph (g) of this section) under section 13(a) of the Act (15 
U.S.C. 78m(a)) must include a certification addressing the following 
items:
    (1) Review by the certifying officer of the annual report and other 
reports containing distribution information for the period covered by 
the annual report;
    (2) The absence in these reports, to the best of the certifying 
officer's knowledge, of any untrue statement of material fact or 
omission of a material fact necessary to make the statements made, in 
light of the circumstances under which such statements were made, not 
misleading;
    (3) The inclusion in these reports, to the best of the certifying 
officer's knowledge, of the financial information required to be 
provided to the trustee under the governing documents of the issuer; 
and
    (4) Compliance by the servicer with its servicing obligations and 
minimum servicing standards.
    (f) With respect to Asset-Backed Issuers, the certification 
required by paragraph (e) of this section must be signed by the trustee 
of the trust (if the trustee signs the annual report) or the senior 
officer in charge of securitization of the depositor (if the depositor 
signs the annual report). Alternatively, the senior officer in charge 
of the servicing function of the master servicer (or entity performing 
the equivalent functions) may sign the certification.
    (g) For purposes of this section, the term Asset-Backed Issuer 
means any issuer whose reporting obligation results from the 
registration of securities it issued that are primarily serviced by the 
cash flows of a discrete pool of receivables or other financial assets, 
either fixed or revolving, that by their terms convert into cash within 
a finite time period plus any rights or other assets designed to assure 
the servicing or timely distribution of proceeds to security holders.

    11. By adding Sec.  240.13a-15 to read as follows:


Sec.  240.13a-15  Issuer's disclosure controls and procedures related 
to preparation of required reports.

    (a) Every issuer that has a class of securities registered pursuant 
to section 12 of the Act (15 U.S.C. 78l), other than an Asset-Backed 
Issuer (as defined in Sec.  240.13a-14(g) of this chapter), must 
maintain disclosure controls and procedures (as defined in Sec.  
240.13a-14(c) of this chapter).
    (b) Within the 90-day period prior to the filing date of each 
report requiring certification under Sec.  240.13a-14 and Sec.  
270.30a-2 of this chapter, an evaluation must be carried out under the 
supervision and with the participation of the issuer's management, 
including the issuer's principal executive officer or officers and 
principal financial officer or officers, or persons performing similar 
functions, of the effectiveness of the design and operation of the 
issuer's disclosure controls and procedures.

    12. By amending Sec.  240.15d-10 to redesignate the ``Note'' at the 
end of the section as ``Note 1'' and add a ``Note 2'' to read as 
follows:


Sec.  240.15d-10  Transition reports.

* * * * *

    Note 2: The report or reports to be filed pursuant to this 
section must include the certification required by Sec.  240.15d-14.


    13. By adding Sec.  240.15d-14 to read as follows:


Sec.  240.15d-14  Certification of disclosure in annual and quarterly 
reports.

    (a) Each report, including transition reports, filed on Form 10-Q, 
Form 10-QSB, Form 10-K, Form 10-KSB, Form 20-F or Form 40-F (Sec. Sec.  
249.308a, 249.308b, 249.310, 249.310b, 249.220f and 249.240f of this 
chapter) under section 15(d) of the Act (15 U.S.C. 78o(d)), other than 
a report filed by an Asset-Backed Issuer (as defined in paragraph (g) 
of this section), must include a certification containing the 
information set forth in paragraph (b) of this section in the form 
specified in the report. Each principal executive officer or officers 
and principal financial officer or officers of the issuer, or persons 
performing similar functions, at the time of filing of the report must 
sign the certification.
    (b) The certification included in each report specified in 
paragraph (a) of this section must be in the form specified in the 
report and consist of a statement of the certifying officer that:
    (1) He or she has reviewed the report being filed;
    (2) Based on his or her knowledge, the report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by the report;
    (3) Based on his or her knowledge, the financial statements, and 
other financial information included in the report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the issuer as of, and for, the periods presented in 
the report;
    (4) He or she and the other certifying officers are responsible for 
establishing and maintaining disclosure controls and procedures (as 
such term is defined in paragraph (c) of this section) for the issuer 
and have:
    (i) Designed such disclosure controls and procedures to ensure that 
material information relating to the issuer, including its consolidated 
subsidiaries, is made known to them by others within those entities, 
particularly during the period in which the periodic reports are being 
prepared;
    (ii) Evaluated the effectiveness of the issuer's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of the report (the ``Evaluation Date''); and
    (iii) Presented in the report their conclusions about the 
effectiveness of the disclosure controls and procedures

[[Page 57290]]

based on their evaluation as of the Evaluation Date;
    (5) He or she and the other certifying officers have disclosed, 
based on their most recent evaluation, to the issuer's auditors and the 
audit committee of the board or directors (or persons fulfilling the 
equivalent function):
    (i) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the issuer's ability to 
record, process, summarize and report financial data and have 
identified for the issuer's auditors any material weaknesses in 
internal controls; and
    (ii) Any fraud, whether or not material, that involves management 
or other employees who have a significant role in the issuer's internal 
controls; and
    (6) He or she and the other certifying officers have indicated in 
the report whether or not there were significant changes in internal 
controls or in other factors that could significantly affect internal 
controls subsequent to the date of their most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.
    (c) For purposes of this section and Sec.  240.15d-15 of this 
chapter, the term ``disclosure controls and procedures'' means controls 
and other procedures of an issuer that are designed to ensure that 
information required to be disclosed by the issuer in the reports that 
it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, 
processed, summarized and reported, within the time periods specified 
in the Commission's rules and forms. Disclosure controls and procedures 
include, without limitation, controls and procedures designed to ensure 
that information required to be disclosed by an issuer in the reports 
that it files or submits under the Act is accumulated and communicated 
to the issuer's management, including its principal executive officer 
or officers and principal financial officer or officers, or persons 
performing similar functions, as appropriate to allow timely decisions 
regarding required disclosure.
    (d) A person required to provide the certification specified in 
paragraph (a) of this section may not have the certification signed on 
his or her behalf pursuant to a power of attorney or other form of 
confirming authority.
    (e) Each annual report filed by an Asset-Backed Issuer (as defined 
in paragraph (g) of this section) under section 13(a) of the Act (15 
U.S.C. 78m(a)) must include a certification addressing the following 
items:
    (1) Review by the certifying officer of the annual report and other 
reports containing distribution information for the period covered by 
the annual report;
    (2) The absence in these reports, to the best of the certifying 
officer's knowledge, of any untrue statement of material fact or 
omission of a material fact necessary to make the statements made, in 
light of the circumstances under which such statements were made, not 
misleading;
    (3) The inclusion in these reports, to the best of the certifying 
officer's knowledge, of the financial information required to be 
provided to the trustee under the governing documents of the issuer; 
and
    (4) Compliance by the servicer with its servicing obligations and 
minimum servicing standards.
    (f) With respect to Asset-Backed Issuers, the certification 
required by paragraph (e) of this section must be signed by the trustee 
of the trust (if the trustee signs the annual report) or the senior 
officer in charge of securitization of the depositor (if the depositor 
signs the annual report). Alternatively, the senior officer in charge 
of the servicing function of the master servicer (or entity performing 
the equivalent functions) may sign the certification.
    (g) For purposes of this section, the term Asset-Backed Issuer 
means any issuer whose reporting obligation results from the offering 
of securities it issued that are primarily serviced by the cash flows 
of a discrete pool of receivables or other financial assets, either 
fixed or revolving, that by their terms convert into cash within a 
finite time period plus any rights or other assets designed to assure 
the servicing or timely distribution of proceeds to security holders.

    14. By adding Sec.  240.15d-15 to read as follows:


Sec.  240.15d-15  Issuer's disclosure controls and procedures related 
to preparation of required reports.

    (a) Every issuer that files reports under section 15(d) of the Act 
(15 U.S.C. 78o(d)), other than an Asset-Backed Issuer (as defined in 
Sec.  240.15d-14(g) of this chapter), must maintain disclosure controls 
and procedures (as defined in Sec.  240.15d-14(c) of this chapter).
    (b) Within the 90-day period prior to the filing date of each 
report requiring certification under Sec.  240.13a-14 and Sec.  
270.30a-2 of this chapter, an evaluation must be carried out under the 
supervision and with the participation of the issuer's management, 
including the issuer's principal executive officer or officers and 
principal financial officer or officers, or persons performing similar 
functions, of the effectiveness of the design and operation of the 
issuer's disclosure controls and procedures.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    15. The authority citation for part 249 is amended by revising the 
sectional authority for Sec. 249.310 and adding the following 
additional citations in numerical order to read as follows:

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted.

* * * * *
    Section 249.308a is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 249.308b is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 249.310 is also issued under 15 U.S.C. 78m, 78o(d) and 
78w(a), and secs. 3(a) and 302, Pub. L. No. 107-204, 116 Stat. 745.
    Section 249.310b is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 249.220f is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
    Section 249.240f is also issued under secs. 3(a) and 302, Pub. 
L. No. 107-204, 116 Stat. 745.
* * * * *


    16. By amending Form 10-Q (referenced in Sec.  249.308a) by 
revising General Instruction G, by adding new Item 4 to ``Part I--
Financial Information'' and by adding a ``Certifications'' section 
after the ``Signatures'' section to read as follows:

    Note: The text of Form 10-Q does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-Q

* * * * *

General Instructions

* * * * *

G. Signature and Filing of Report

    If the report is filed in paper pursuant to a hardship exemption 
from electronic filing (see Item 201 et seq. of Regulation S-T (17 CFR 
232.201 et seq.), three complete copies of the report, including any 
financial statements, exhibits or other papers or documents filed as a 
part thereof, and five additional copies which need not include 
exhibits must be filed with the Commission. At least one complete copy 
of the report, including any financial statements, exhibits or other 
papers or documents filed as a part thereof, must be filed with each 
exchange on which any class of securities of the registrant is 
registered. At least one complete copy of the report filed with the 
Commission and one such

[[Page 57291]]

copy filed with each exchange must be manually signed on the 
registrant's behalf by a duly authorized officer of the registrant and 
by the principal financial or chief accounting officer of the 
registrant. (See Rule 12b-11(d) (17 CFR 240.12b-11(d).) Copies not 
manually signed must bear typed or printed signatures. In the case 
where the principal executive officer, principal financial officer or 
chief accounting officer is also duly authorized to sign on behalf of 
the registrant, one signature is acceptable provided that the 
registrant clearly indicates the dual responsibilities of the 
signatory. In addition, each principal executive officer and principal 
financial officer of the registrant must provide the certification 
required by Rule 13a-14 (17 CFR 240.13a-14) or Rule 15d-14 (17 CFR 
240.15d-14) exactly as specified in this form.
* * * * *

Part I--Financial Information

* * * * *

Item 4. Controls and Procedures

    Furnish the information required by Item 307 of Regulation S-K 
(Sec.  229.307 of this chapter).
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this quarterly report on Form 10-Q of [identify 
registrant];
    2. Based on my knowledge, this quarterly report does not contain 
any untrue statement of a material fact or omit to state a material 
fact necessary to make the statements made, in light of the 
circumstances under which such statements were made, not misleading 
with respect to the period covered by this quarterly report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this quarterly report, fairly present 
in all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this quarterly report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
we have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this quarterly report 
is being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this quarterly report (the ``Evaluation Date''); and
    (c) Presented in this quarterly report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (or persons 
performing the equivalent function):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this quarterly report whether or not there were significant changes 
in internal controls or in other factors that could significantly 
affect internal controls subsequent to the date of our most recent 
evaluation, including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    * Provide a separate certification for each principal executive 
officer and principal financial officer of the registrant. See Rules 
13a-14 and 15d-14. The required certification must be in the exact 
form set forth above.

    17. By amending Form 10-QSB (referenced in Sec.  249.308b) by 
revising General Instruction F, by adding new Item 3 to ``Part I--
Financial Information'' and by adding a ``Certifications'' section 
after the ``Signatures'' section to read as follows:


    Note: The text of Form 10-QSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-QSB

* * * * *

General Instructions

* * * * *

F. Signature and Filing of Report

    1. If the report is filed in paper pursuant to a hardship exemption 
from electronic filing (see Item 201 et seq. of Regulation S-T (17 CFR 
232.201 et seq.), file three ``complete'' copies and five 
``additional'' copies of the report with the Commission and file at 
least one complete copy with each exchange on which any class of 
securities of the small business issuer is registered. A ``complete'' 
copy includes financial statements, exhibits and all other papers and 
documents. An ``additional'' copy excludes exhibits.
    2. Manually sign at least one complete copy of the report filed 
with the Commission and with each exchange; other copies should have 
typed or printed signatures. (See Rule 12b-11(d) (17 CFR 240.12b-
11(d).) In the case where the principal executive officer, principal 
financial officer or chief accounting officer is also duly authorized 
to sign on behalf of the small business issuer, one signature is 
acceptable provided that the issuer clearly indicates the dual 
responsibilities of the signatory. Each principal executive officer and 
principal financial officer of the small business issuer must provide 
the certification required by Rule 13a-14 (17 CFR 240.13a-14) or Rule 
15d-14 (17 CFR 240.15d-14) exactly as specified in this form.
* * * * *

Part I--Financial Information

* * * * *

Item 3. Controls and Procedures

    Furnish the information required by Item 307 of Regulation S-B 
(Sec.  228.307 of this chapter).
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this quarterly report on Form 10-QSB of 
[identify registrant];
    2. Based on my knowledge, this quarterly report does not contain 
any untrue statement of a material fact or omit to state a material 
fact necessary to make the statements made, in light of the 
circumstances under which such

[[Page 57292]]

statements were made, not misleading with respect to the period covered 
by this quarterly report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this quarterly report, fairly present 
in all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this quarterly report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this quarterly report 
is being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this quarterly report (the ``Evaluation Date''); and
    (c) Presented in this quarterly report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (or persons 
performing the equivalent functions):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this quarterly report whether or not there were significant changes 
in internal controls or in other factors that could significantly 
affect internal controls subsequent to the date of our most recent 
evaluation, including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    [sbull] Provide a separate certification for each principal 
executive officer and principal financial officer of the registrant. 
See Rules 13a-14 and 15d-14. The required certification must be in 
the exact form set forth above.
* * * * *

    18. By amending Form 10-K (referenced in Sec.  249.310):
    a. By revising General Instruction D(2)(a),
    b. By redesignating Item 14 as Item 15 in Part IV,
    c. Adding new Item 14 to Part III, and
    d. By adding a ``Certifications'' section after the ``Signatures'' 
section and before the reference to ``Supplemental information to be 
Furnished With Reports Filed Pursuant to Section 15(d) of the Act by 
Registrants Which Have Not Registered Securities Pursuant to Section 12 
of the Act.''
    The revisions read as follows:

    Note: The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 10-K

* * * * *

General Instructions

* * * * *

D. Signature and Filing of Report

    (1) * * *
    (2)(a) The report must be signed by the registrant, and on behalf 
of the registrant by its principal executive officer or officers (who 
also must provide the certification required by Rule 13a-14 (17 CFR 
240.13a-14) or Rule 15d-14 (17 CFR 240.15d-14) exactly as specified in 
this form), its principal financial officer or officers (who also must 
provide the certification required by Rule 13a-14 (17 CFR 240.13a-14) 
or Rule 15d-14 (17 CFR 240.15d-14) exactly as specified in this form), 
its controller or principal accounting officer, and by at least the 
majority of the board of directors or persons performing similar 
functions. Where the registrant is a limited partnership, the report 
must be signed by the majority of the board of directors of any 
corporate general partner who signs the report.
* * * * *

Annual Report Pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

* * * * *

Part III

* * * * *

Item 14. Controls and Procedures

    Furnish the information required by Item 307 of Regulation S-K 
(Sec.  229.307 of this chapter).
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this annual report on Form 10-K of [identify 
registrant];
    2. Based on my knowledge, this annual report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by this annual report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this annual report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this annual report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this annual report is 
being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this annual report (the ``Evaluation Date''); and
    (c) Presented in this annual report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (or persons 
performing the equivalent functions):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the

[[Page 57293]]

registrant's ability to record, process, summarize and report financial 
data and have identified for the registrant's auditors any material 
weaknesses in internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this annual report whether there were significant changes in 
internal controls or in other factors that could significantly affect 
internal controls subsequent to the date of our most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    *Provide a separate certification for each principal executive 
officer and principal financial officer of the registrant. See Rules 
13a-14 and 15d-14. The required certification must be in the exact 
form set forth above.
* * * * *

    19. By amending Form 10-KSB (referenced in Sec.  249.310b):
    a. By revising General Instruction C.2.,
    b. By adding new Item 14 to Part III, and
    c. By adding a ``Certifications'' section after the ``Signatures'' 
section and before the reference to ``Supplemental information to be 
Furnished With Reports Filed Pursuant to Section 15(d) of the Exchange 
Act By Non-reporting Issuers.'' The revisions read as follows:

    Note: The text of Form 10-KSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 10-KSB

* * * * *

General Instructions

* * * * *

C. Signature and Filing of Report

    1. * * *
    2. Who must sign. The small business issuer, its principal 
executive officer or officers (who also must provide the certification 
required by Rule 13a-14 (17 CFR 240.13a-14) or Rule 15d-14 (17 CFR 
240.15d-14) exactly as specified in this form), its principal financial 
officer (who also must provide the certification required by Rule 13a-
14 (17 CFR 240.13a-14) or Rule 15d-14 (17 CFR 240.15d-14) exactly as 
specified in this form), its controller or principal accounting officer 
and at least a majority of the board of directors or persons performing 
similar functions. If the small business issuer is a limited 
partnership, then the general partner and a majority of its board of 
directors if a corporation must sign the report. Any person who 
occupies more than one of the specified positions must indicate each 
capacity in which he or she signs the report. See Rule 12b-11 
concerning manual signatures under powers of attorney.
* * * * *

Part III

* * * * *

Item 14. Controls and Procedures

    Furnish the information required by Item 307 of Regulation S-B 
(Sec.  228.307 of this chapter).
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this annual report on Form 10-KSB of [identify 
registrant];
    2. Based on my knowledge, this annual report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by this annual report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this annual report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this annual report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this annual report is 
being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this annual report (the ``Evaluation Date''); and
    (c) Presented in this annual report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (or persons 
performing the equivalent functions):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this annual report whether there were significant changes in 
internal controls or in other factors that could significantly affect 
internal controls subsequent to the date of our most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    *Provide a separate certification for each principal executive 
officer and principal financial officer of the registrant. See Rules 
13a-14 and 15d-14. The required certification must be in the exact 
form set forth above.
* * * * *

    20. By amending Form 20-F (referenced in Sec.  249.220f):
    a. By adding a new paragraph (e) to General Instruction B,
    b. By adding new Item 15, and
    c. By adding a ``Certifications'' section after the ``Signatures'' 
section and before the section referencing ``Instructions as to 
Exhibits.''
    The revisions read as follows:

    Note: The text of Form 20-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 20-F

* * * * *

General Instructions

* * * * *

[[Page 57294]]

B. General Rules and Regulations That Apply to This Form

* * * * *
    (e) Where the Form is being used as an annual report filed under 
Section 13(a) or 15(d) of the Exchange Act, provide the certification 
required by Rule 13a-14 (17 CFR 240.13a-14) or Rule 15d-14 (17 CFR 
240.15d-14) exactly as specified in this form.
* * * * *

Part II

* * * * *

Item 15. Controls and Procedures

    (a) Where the Form is being used as an annual report filed under 
Section 13(a) or 15(d) of the Exchange Act, disclose the conclusions of 
the registrant's principal executive officer or officers and principal 
financial officer or officers, or persons performing similar functions, 
about the effectiveness of the registrant's disclosure controls and 
procedures (as defined in Sec. Sec.  240.13a-15(c) and 240.15d-15(c)) 
based on their evaluation the controls and procedures as of a date 
within 90 days prior to the filing date of the report.
    (b) Where the Form is being used as an annual report filed under 
Section 13(a) or 15(d) of the Exchange Act, disclose whether or not 
there were significant changes in the registrant's internal controls or 
in other factors that could significantly affect these controls 
subsequent to the date of their evaluation, including any corrective 
actions with regard to significant deficiencies and material 
weaknesses.
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this annual report on Form 20-F of [identify 
registrant];
    2. Based on my knowledge, this annual report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by this annual report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this annual report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this annual report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this annual report is 
being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this annual report (the ``Evaluation Date''); and
    (c) Presented in this annual report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (or persons 
performing the equivalent function):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this annual report whether or not there were significant changes in 
internal controls or in other factors that could significantly affect 
internal controls subsequent to the date of our most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    * Provide a separate certification for each principal executive 
officer and principal financial officer of the registrant. See Rules 
13a-14 and 15d-14. The required certification must be in the exact 
form set forth above.
* * * * *

    21. By amending Form 40-F (referenced in Sec.  249.240f) by adding 
a new paragraph (6) to General Instruction B and by adding a 
``Certifications'' section after the ``Signatures'' section to read as 
follows:

    Note: The text of Form 40-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 40-F

* * * * *

General Instructions

* * * * *

B. Information To Be Filed on this Form

* * * * *
    (6) Where the Form is being used as an annual report filed under 
Section 13(a) or 15(d) of the Exchange Act:
    (a) Provide the certification required by Rule 13a-14 (17 CFR 
240.13a-14) or Rule 15d-14 (17 CFR 240.15d-14) exactly as specified in 
this form.
    (b) Disclose the conclusions of the registrant's principal 
executive officer or officers and principal financial officer or 
officers, or persons performing similar functions, about the 
effectiveness of the registrant's disclosure controls and procedures 
(as defined in Sec. Sec.  240.13a-15(c) and 240.15d-15(c)) based on 
their evaluation the controls and procedures as of a date within 90 
days prior to the filing date of the report.
    (c) Disclose in the report whether or not there were significant 
changes in the registrant's internal controls or in other factors that 
could significantly affect these controls subsequent to the date of 
their evaluation, including any corrective actions with regard to 
significant deficiencies and material weaknesses.
* * * * *

Signatures

* * * * *

Certifications*

    I, [identify the certifying individual], certify that:
    1. I have reviewed this annual report on Form 40-F of [identify 
registrant];
    2. Based on my knowledge, this annual report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by this annual report;
    3. Based on my knowledge, the financial statements, and other 
financial information included in this annual report, fairly present in 
all material respects the financial condition, results of operations 
and cash flows of the registrant as of, and for, the periods presented 
in this annual report;

[[Page 57295]]

    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and 
have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this annual report is 
being prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this annual report (the ``Evaluation Date''); and
    (c) Presented in this annual report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of registrant's board of directors (and persons 
performing the equivalent function):
    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this annual report whether there were significant changes in 
internal controls or in other factors that could significantly affect 
internal controls subsequent to the date of our most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    * Provide a separate certification for each principal executive 
officer and principal financial officer of the registrant. See Rules 
13a-14 and 15d-14. The required certification must be in the exact 
form set forth above.

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

    22. The authority citation for part 270 is amended by adding the 
following citation in numerical order to read as follows:

    Authority: 15 U.S.C. 80a-1, et seq., 80a-34(d), 80a-37, 80a-39, 
unless otherwise noted;

* * * * *
    Section 270.30a-2 is also issued under 15 U.S.C. 78m, 78o(d), 
and 80a-29, and secs. 3(a) and 302, Pub. L. No. 107-204, 116 Stat. 
745.
* * * * *


    23. By adding Sec.  270.30a-2 to read as follows:


Sec.  270.30a-2  Certification of disclosure in annual and semi-annual 
reports.

    (a) Each report, including transition reports, filed on Form N-SAR 
(referenced in Sec. Sec.  249.330 and 274.101) by a registered 
management investment company or unit investment trust must include a 
certification containing the information set forth in paragraph (b) of 
this section in the form specified in the report, except that a report 
of a unit investment trust or small business investment company on Form 
N-SAR may omit paragraph (b)(3) of this section. Each principal 
executive officer or officers and principal financial officer or 
officers of the investment company, or persons performing similar 
functions, at the time of filing of the report must sign the 
certification.
    (b) The certification included in each report specified in 
paragraph (a) of this section must be in the form specified in the 
report and consist of a statement of the certifying officer that:
    (1) He or she has reviewed the report being filed;
    (2) Based on his or her knowledge, the report does not contain any 
untrue statement of a material fact or omit to state a material fact 
necessary to make the statements made, in light of the circumstances 
under which such statements were made, not misleading with respect to 
the period covered by the report;
    (3) Based on his or her knowledge, the financial information 
included in the report, and the financial statements on which the 
financial information is based, fairly present in all material respects 
the financial condition, results of operations, changes in net assets, 
and cash flows (if the financial statements are required to include a 
statement of cash flows) of the investment company as of, and for, the 
periods presented in the report;
    (4) He or she and the other certifying officers are responsible for 
establishing and maintaining disclosure controls and procedures (as 
such term is defined in paragraph (c) of this section) for the 
investment company and have:
    (i) Designed such disclosure controls and procedures to ensure that 
material information relating to the investment company, including its 
consolidated subsidiaries, is made known to them by others within those 
entities, particularly during the period in which the periodic reports 
are being prepared;
    (ii) Evaluated the effectiveness of the investment company's 
disclosure controls and procedures as of a date within 90 days prior to 
the filing date of the report (the ``Evaluation Date''); and
    (iii) Presented in the report their conclusions about the 
effectiveness of the disclosure controls and procedures based on their 
evaluation as of the Evaluation Date;
    (5) He or she and the other certifying officers have disclosed, 
based on their most recent evaluation, to the investment company's 
auditors and the audit committee of the board of directors (or persons 
fulfilling the equivalent function):
    (i) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the investment company's 
ability to record, process, summarize, and report financial data and 
have identified for the investment company's auditors any material 
weaknesses in internal controls; and
    (ii) Any fraud, whether or not material, that involves management 
or other employees who have a significant role in the investment 
company's internal controls; and
    (6) He or she and the other certifying officers have indicated in 
the report whether or not there were significant changes in internal 
controls or in other factors that could significantly affect internal 
controls subsequent to the date of their most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.
    (c) For purposes of this section, the term ``disclosure controls 
and procedures'' means controls and other procedures of an investment 
company that are designed to ensure that information required to be 
disclosed by the investment company in the reports that it files or 
submits under the Securities Exchange Act of 1934 is recorded, 
processed, summarized, and reported, within the time periods specified 
in the Commission's rules and forms. Disclosure controls and

[[Page 57296]]

procedures include, without limitation, controls and procedures 
designed to ensure that information required to be disclosed by an 
investment company in the reports that it files or submits under the 
Securities Exchange Act of 1934 is accumulated and communicated to the 
investment company's management, including its principal executive 
officer or officers and principal financial officer or officers, or 
persons performing similar functions, as appropriate to allow timely 
decisions regarding required disclosure.
    (d) A person required to provide the certification specified in 
paragraph (a) of this section may not have the certification signed on 
his or her behalf pursuant to a power of attorney or other form of 
confirming authority.

    24. Section 270.30b1-3 is amended by adding a sentence at the end 
of the section to read as follows:


Sec.  270.30b1-3  Transition reports.

    * * * A report filed pursuant to this section must include the 
certification required by Sec.  270.30a-2.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

    25. The authority citation for Part 274 is revised to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, and secs. 3(a) and 
302, Pub. L. No. 107-204, 116 Stat. 745, unless otherwise noted.


    26. By amending Form N-SAR (referenced in Sec. Sec.  249.330 and 
274.101) by:
    a. Revising the reference ``132'' in item 6 to read ``133'';
    b. Adding item 133;
    c. Revising the reference ``132'' in the fifth paragraph of General 
Instruction A to read ``133'';
    d. Revising General Instructions D and G, and the Instructions to 
sub-items 77Q3 and 102P3;
    e. Adding an Instruction to item 133; and
    f. Revising the reference ``132'' in the Instructions to the 
Signature Page to read ``133.''
    These additions and revisions read as follows:

    Note: The text of Form N-SAR does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-SAR

* * * * *
    133. Include the certifications required by rule 30a-2 under the 
Investment Company Act (17 CFR 270.30a-2).
* * * * *

General Instructions

* * * * *

D. Preparation of Report

    (1) No item of the form except items 77 and 102 shall be answered 
by incorporating any information by reference. No exhibits or 
supplemental information are required or permitted, except in response 
to these items and item 133.
* * * * *

G. Submitting an Amendment to Form N-SAR on Paper or Electronically

* * * * *
    (5) In an exhibit to the amendment, each principal executive 
officer and principal financial officer must provide the certification 
required by Item 133, instruction (a) for sub-item 77Q3, and 
instruction (a) for sub-item 102P3. A registrant that is a unit 
investment trust or a small business investment company may omit 
paragraph 3 of the certification required by instruction 77Q3(a)(iii).
* * * * *

Instructions to Specific Items

* * * * *

Sub-Item 77Q3

    Subject to Rule 201.24 of the General Rules of Practice regarding 
incorporation by reference, the rules applicable to electronic 
submission of filings, and General Instruction F of this form, the 
following exhibits shall be filed as part of this form, if not 
previously filed:
    (a) If the form is filed under Section 13(a) or 15(d) of the 1934 
Act, include the following information:
    (i) Disclose the conclusions of the registrant's principal 
executive officer or officers and principal financial officer or 
officers, or persons performing similar functions, about the 
effectiveness of the registrant's disclosure controls and procedures 
(as defined in rule 30a-2(c) under the Act (17 CFR 270.30a-2(c)) based 
on their evaluation of these controls and procedures as of a date 
within 90 days of the filing date of the report that includes the 
disclosure required by this paragraph.
    (ii) Disclose whether or not there were significant changes in the 
registrant's internal controls or in other factors that could 
significantly affect these controls subsequent to the date of their 
evaluation, including any corrective actions with regard to significant 
deficiencies and material weaknesses.
    (iii) Include the certification of each principal executive officer 
and principal financial officer required by Rule 30a-2 under the Act 
(17 CFR 270.30a-2). Provide a separate certification for each principal 
executive officer and principal financial officer, or person performing 
similar functions, in the exact form set forth below:

Certifications

    I, [identify the certifying individual], certify that:
    1. I have reviewed this report on Form N-SAR of [identify 
registrant];
    2. Based on my knowledge, this report does not contain any untrue 
statement of a material fact or omit to state a material fact necessary 
to make the statements made, in light of the circumstances under which 
such statements were made, not misleading with respect to the period 
covered by this report;
    3. Based on my knowledge, the financial information included in 
this report, and the financial statements on which the financial 
information is based, fairly present in all material respects the 
financial condition, results of operations, changes in net assets, and 
cash flows (if the financial statements are required to include a 
statement of cash flows) of the registrant as of, and for, the periods 
presented in this report;
    4. The registrant's other certifying officers and I are responsible 
for establishing and maintaining disclosure controls and procedures (as 
defined in rule 30a-2(c) under the Investment Company Act) for the 
registrant and have:
    (a) Designed such disclosure controls and procedures to ensure that 
material information relating to the registrant, including its 
consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this report is being 
prepared;
    (b) Evaluated the effectiveness of the registrant's disclosure 
controls and procedures as of a date within 90 days prior to the filing 
date of this report (the ``Evaluation Date''); and
    (c) Presented in this report our conclusions about the 
effectiveness of the disclosure controls and procedures based on our 
evaluation as of the Evaluation Date;
    5. The registrant's other certifying officers and I have disclosed, 
based on our most recent evaluation, to the registrant's auditors and 
the audit committee of the registrant's board of directors (or persons 
performing the equivalent functions):

[[Page 57297]]

    (a) All significant deficiencies in the design or operation of 
internal controls which could adversely affect the registrant's ability 
to record, process, summarize, and report financial data and have 
identified for the registrant's auditors any material weaknesses in 
internal controls; and
    (b) Any fraud, whether or not material, that involves management or 
other employees who have a significant role in the registrant's 
internal controls; and
    6. The registrant's other certifying officers and I have indicated 
in this report whether or not there were significant changes in 
internal controls or in other factors that could significantly affect 
internal controls subsequent to the date of our most recent evaluation, 
including any corrective actions with regard to significant 
deficiencies and material weaknesses.

Date:------------------------------------------------------------------
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[Signature]
[Title]


    (b) Furnish any other information required to be included as an 
exhibit pursuant to such rules and regulations as the Commission may 
prescribe.
* * * * *

Sub-Item 102P3

    See instructions for sub-item 77Q3. The registrant may omit 
paragraph 3 of the certification required by instruction (a)(iii).
* * * * *

Item 133

    Include the exhibit required by instruction (a) for sub-item 77Q3. 
The registrant may omit paragraph 3 of the certification required by 
instruction (a)(iii).

    By the Commission.

    Dated: August 28, 2002.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22572 Filed 9-4-02; 8:45 am]
BILLING CODE 8010-01-P