[Federal Register: August 9, 2007 (Volume 72, Number 153)]
[Rules and Regulations]
[Page 44923-44927]
[DOCID:fr09au07-28]

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Part II

Securities and Exchange Commission

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17 CFR Parts 210 and 240

Definition of the Term Significant Deficiency; Final Rule

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210 and 240

[Release Nos. 33-8829; 34-56203; File No. S7-24-06]
RIN 3235-AJ58

Definition of the Term Significant Deficiency

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are defining the term ``significant deficiency'' for
purposes of the Commission's rules implementing Section 302 and Section
404 of the Sarbanes-Oxley Act of 2002.

DATES: Effective Date: September 10, 2007.

FOR FURTHER INFORMATION CONTACT: N. Sean Harrison, Special Counsel,
Division of Corporation Finance, at<PHONE_NUMBER>, or Josh K. Jones,
Professional Accounting Fellow, Office of the Chief Accountant, at
(202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rule 12b-2 \1\
under the Securities Exchange Act of 1934 (the ``Exchange Act'') \2\
and Rule 1-02 \3\ of Regulation S-X.\4\
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    \1\ 17 CFR 240.12b-2.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 210.1-02.
    \4\ 17 CFR 210.1-01 et seq.
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I. Background

    On June 27, 2007, the Commission issued interpretive guidance and
rule amendments to help public companies strengthen their evaluations
and assessments of internal control over financial reporting (``ICFR'')
while reducing unnecessary costs.\5\ The Interpretive Release provides
guidance for management on how to conduct an evaluation of the
effectiveness of a company's ICFR under the Commission's rules
implementing Section 404 of the Sarbanes-Oxley Act of 2002.\6\ The
guidance sets forth an approach by which management can conduct a top-
down, risk-based evaluation of ICFR. The rule amendments, among other
things, provide that an evaluation that complies with the interpretive
guidance is one way to satisfy the annual evaluation requirement in
Exchange Act Rules 13a-15(c) and 15d-15(c).\7\ The Interpretive Release
also added a definition of the term ``material weakness'' to the
Commission's rules. The term is defined as ``a deficiency, or
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of the registrant's annual or interim financial statements
will not be prevented or detected on a timely basis.'' \8\
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    \5\ See Release No. 33-8809 (Jun. 20, 2007) [72 FR 35310, Jun.
27, 2007] and Release No. 33-8810 (Jun. 20, 2007) [72 FR 35324, Jun.
27, 2007] (hereinafter ``Interpretive Release'').
    \6\ 15 U.S.C. 7262.
    \7\ 17 CFR 240.13a-15(c) and 15d-15(c).
    \8\ See Rule 1-02(p) of Regulation S-X [17 CFR 210.1-02(p)] and
Exchange Act Rule 12b-2 [17 CFR 240.12b-2]. In this release, we are
moving the definitions to new paragraph (a)(4) of Rule 1-02.
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    As part of the Commission's efforts to provide more guidance to
management on ICFR, the Commission initially sought comment on both the
terms ``significant deficiency'' and ``material weakness'' in a concept
release on ICFR requirements,\9\ and then proposed and adopted a
definition of the term ``material weakness.'' \10\ Several commenters
pointed out that while the proposing release for the interpretive
guidance \11\ referenced the term ``significant deficiency,'' the
Commission did not include a definition of the term in the
proposal.\12\ Certain commenters indicated that the Commission should
include a definition of significant deficiency in the Interpretive
Release.\13\
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    \9\ Release No. 34-54122 (Jul. 11, 2006) [71 FR 40866, Jul. 18,
2006] available at http://www.sec.gov/rules/concept/2006/34-54122.pdf
.

    \10\ See Release No. 33-8809 (Jun. 20, 2007) [72 FR 35310, Jun.
27, 2007].
    \11\ Release No. 33-8762 (Dec. 20, 2006) [71 FR 77635, Dec. 27,
2006].
    \12\ See, for example, letters from Cardinal Health, Inc.
(``Cardinal''), Edison Electric Institute, and Protiviti to Release
No. 33-8762, File No. S7-24-06.
    \13\ See, for example, letters from Cardinal and Protiviti to
Release No. 33-8762, File No. S7-24-06.
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    In light of the comments received in response to the proposed
interpretive guidance, and because Commission rules implementing
Section 302(a) of the Sarbanes-Oxley Act require senior management to
certify they have communicated significant deficiencies to the audit
committee and the external auditors, the Commission solicited
additional comment on a definition for ``significant deficiency.'' In a
release issued on June 27, 2007, the Commission requested additional
comment on the following definition of the term ``significant
deficiency:'' \14\
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    \14\ Release No. 33-8811 (Jun. 20, 2007) [72 FR 35346, Jun. 27,
2007].

    A deficiency, or a combination of deficiencies, in internal
control over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those
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responsible for oversight of a registrant's financial reporting.

    We received 22 comment letters in response to the request for
additional comment.\15\ These letters came from accounting firms,
professional associations, corporations and other interested parties.
We have reviewed and considered all of the comments that we received on
the proposed definition. We discuss our conclusions with respect to the
comments in more detail in this release.
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    \15\ The comment letters are available for inspection in the
Commission's Public Reference Room at 100 F Street, NE., Washington,
DC 20549 in File No. S7-24-06, or may be viewed at http://www.sec.gov/comments/s7-24-06/s72406.shtml
.

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II. Discussion

    A company's principal executive officer and principal financial
officer must certify that they have disclosed significant deficiencies
in the design or operation of ICFR that are reasonably likely to
adversely affect the company's ability to record, process, summarize
and report financial information, to the external auditor and the audit
committee, with the intended result that these parties can more
effectively carry out their respective responsibilities with regard to
the company's financial reporting.\16\ Including a definition of
``significant deficiency'' in Commission rules, in addition to the
definition of ``material weakness,'' will enable management to refer to
Commission rules and guidance for information on the meaning of these
terms rather than referring to the auditing standards.
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    \16\ See Section 302(a)(4) of the Sarbanes-Oxley Act (requiring
signing officers to certify that they are responsible for
establishing and maintaining internal controls and have designed the
internal controls to ensure that material information relating to
the issuer is made known to the signing officers, and have disclosed
any significant deficiencies in internal control to the independent
auditors and audit committee) [15 U.S.C 7241].
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    In developing the definition of ``significant deficiency,'' we
considered comments received in response to the Public Company
Accounting Oversight Board's proposed auditing standard for audits of
internal control over financial reporting. In its proposed auditing
standard, the PCAOB proposed to define significant deficiency as ``a
control deficiency, or combination of control deficiencies such that
there is a reasonable possibility that a significant misstatement of
the company's annual or interim financial statements will not be
prevented or detected.'' \17\ Further,

the PCAOB proposed to define a significant misstatement as ``a
misstatement that is less than material yet important enough to merit
attention by those responsible for oversight of the company's financial
reporting.'' In response to the comments received on its proposal, the
PCAOB, working with the Commission staff, decided to modify its
proposed definition to focus the auditor on the communication
requirement surrounding the term ``significant deficiency'' and to
clarify that auditors should not scope their audit procedures to search
for deficiencies that are less severe than a material weakness.
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    \17\ See PCAOB Proposed Auditing Standard, An Audit of Internal
Control Over Financial Reporting that is Integrated with an Audit of
Financial Statements and Related Other Proposals (PCAOB Release No.
2006-007, Dec. 19, 2006).
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    In proposing the definition, we believed that the focus of the term
``significant deficiency'' should be on the communications required to
take place among management, audit committees and independent auditors.
Therefore, we believed that the framework for the definition of
``significant deficiency'' should vary from that recently adopted for
``material weakness.'' Unlike the definition of the term ``material
weakness,'' we did not believe it was necessary for the proposed
definition of ``significant deficiency'' to include a likelihood
component (that is, reasonable possibility). Rather, we believed that a
definition focused on matters that are important enough to merit
attention would allow for, and indeed encourage, sufficient and
appropriate judgment by management to determine the deficiencies that
need to be reported to the independent auditor and the audit committee.

Comments on the Proposal

    A majority of commenters expressed their support for the proposed
definition,\18\ noting that it would further the Commission's objective
of improving implementation of the provisions of the Sarbanes-Oxley Act
of 2002. These commenters also noted that the definition would permit
the exercise of appropriate judgment by management and independent
auditors to determine those deficiencies in ICFR that are important
enough to merit attention by those responsible for oversight of
financial reporting. In addition, they noted that a consistent
definition of significant deficiency in the Commission's rules and in
the PCAOB's standards was imperative to promoting effective and
efficient compliance by management and auditors with respect to their
responsibilities to communicate and respond to significant deficiencies
in internal control. Some of these commenters also supported the
Commission's inclusion of the term within its rules so that management
could look to the Commission's rules for the definition.\19\
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    \18\ See, for example, letters from BDO Seidman, LLP; Center for
Audit Quality; Committees on Federal Regulation of Securities and
Law and Accounting of the Section of Business Law of the American
Bar Association; Deloitte & Touche LLP; Ernst & Young LLP; Financial
Executives International--Small Public Company Task Force; Grant
Thornton LLP; KPMG LLP; PepsiCo; PricewaterhouseCoopers LLP; The
Internal Auditors Division of the Securities Industry and Financial
Markets Association; Sprint Nextel Corporation; and The Institute of
Internal Auditors.
    \19\ See, for example, letters from BDO Seidman LLP; Center for
Audit Quality; Committees on Federal Regulation of Securities and
Law and Accounting of the Section of Business Law of the American
Bar Association; Deloitte & Touche LLP; Ernst & Young LLP; Grant
Thornton LLP; KPMG LLP; and PricewaterhouseCoopers LLP.
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    A number of commenters agreed that the proposed definition of
``significant deficiency'' should not include a likelihood
component.\20\ However, a few commenters stated the definition should
include a likelihood component because they believed that the addition
of such a component would enhance management's ability to evaluate
deficiencies that need to be communicated to the audit committee.\21\
We agree with the commenters who stated that it was not necessary for
the definition to include a likelihood component, as it could have the
unintended effect of diminishing the use of appropriate judgment by
management and independent auditors in performing the evaluation. We
believe that excluding a likelihood component from the definition
reduces the chance that management or independent auditors will design
and implement evaluations or audits for the purpose of identifying
deficiencies that are less severe than material weaknesses. Further, we
believe the guidance provided in our Interpretive Release and in the
PCAOB's Auditing Standard No. 5, An Audit of Internal Control Over
Financial Reporting that is Integrated with an Audit of the Financial
Statements (``Auditing Standard No. 5''), appropriately outlines that
the scope of each evaluation is to detect material weaknesses, which is
also consistent with comments the Commission received related to
Auditing Standard No. 5.\22\ Therefore, we decided not to add a
likelihood component to the definition as adopted.
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    \20\ See, for example, letters from BDO Seidman, LLP; Committees
on Federal Regulation of Securities and Law and Accounting of the
Section of Business Law of the American Bar Association; Deloitte &
Touche LLP; Ernst & Young LLP; Grant Thornton LLP; PepsiCo; Society
of Corporate Secretaries and Governance Professionals; U.S Chamber
Center for Capital Market Competitiveness; and The Institute of
Internal Auditors.
    \21\ See, for example, letters from Financial Executives
International--Small Public Company Task Force;
PricewaterhouseCoopers LLP; and Simone Heidema and Erick Noorloos.
    \22\ See comments received for Releases 34-55912 and 34-55876.
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    Many commenters believed the definition allowed for the appropriate
exercise of management and auditor judgment regarding what is important
enough to merit attention based on each company's particular facts and
circumstances, and that some variability in the nature of items
reported to the audit committee and auditors may result.\23\ However,
these commenters believed that this would be acceptable based on the
specific facts and circumstances of the individual registrants, and the
fact that significant deficiencies are not required to be disclosed
publicly.
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    \23\ See, for example, letters from BDO Seidman, LLP; Deloitte &
Touche LLP; Ernst & Young LLP; Financial Executives International--
Small Public Company Task Force; Grant Thornton LLP; PepsiCo; and
PricewaterhouseCoopers LLP.
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    Some commenters also requested that further clarification be
provided by the Commission related to the proposed definition. One
commenter suggested that it should be clarified to allow for
management, at its discretion, to communicate deficiencies to the audit
committee and the auditor that it does not believe are significant
deficiencies in order to provide management with the appropriate
flexibility to communicate other matters as it deems appropriate.\24\
Other commenters requested additional guidance on determining whether a
deficiency is a significant deficiency.\25\ Some of these commenters
suggested that additional guidance such as providing qualitative and
quantitative thresholds to consider in the evaluation, would provide
management and auditors a basis to agree on whether a deficiency is a
significant deficiency and would minimize unnecessary costs.\26\ One of
these commenters noted that further guidance with regards to
materiality generally was important to provide management and auditors
with more clarity when evaluating deficiencies, which would enable a
more effective and efficient process.
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    \24\ See letter from The Society of Corporate Secretaries and
Governance Professionals.
    \25\ See, for example, letters from Keith Bishop; New York State
Society of Certified Public Accountants; Sprint Nextel Corporation;
and U.S. Chamber Center for Capital Market Competitiveness.
    \26\ See, for example, letters from New York State Society of
Certified Public Accountants; U.S. Chamber Center for Capital Market
Competitiveness.
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    With respect to the communication requirements associated with
significant

deficiencies, we note that the definition of significant deficiency is
used in the context of evaluating the minimum required communications
under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002. Neither
this definition nor the Commission's rules preclude management from
communicating additional deficiencies to the audit committee or the
independent auditor. Finally, with regards to requests for additional
guidance noted above, including on materiality when evaluating the
significance of deficiencies and quantitative and qualitative guidance,
we believe that the definition allows management and auditors to
appropriately utilize their judgment in determining those deficiencies
that are important enough to merit the attention of those responsible
for oversight based on their individual facts and circumstances.
Further, we do not believe that the definition of significant
deficiency is the appropriate forum to address broader questions about
materiality, which are fundamental to the federal securities laws.

Final Rule

    We are adopting the definition of ``significant deficiency''
substantially as proposed. We believe the definition appropriately
emphasizes the communication requirements between management, the audit
committee and independent auditors on those matters that are important
enough to merit attention and will allow management to use its judgment
to determine the deficiencies that need to be reported to the audit
committee and the independent auditor. In addition, we believe that it
is important that management and auditors use the same definition of
``significant deficiency.'' Therefore, our final rules define a
significant deficiency as:
    A deficiency, or a combination of deficiencies, in internal control
over financial reporting that is less severe than a material weakness,
yet important enough to merit attention by those responsible for
oversight of the registrant's financial reporting.\27\
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    \27\ Rule 1-02(a)(4) of Regulation S-X [17 CFR 210.1-02(a)(4)].
We are adding a new paragraph (a)(4) to the rule to define both the
terms ``material weakness'' and ``significant deficiency.''
``Material weakness'' was previously added to paragraph (p) of Rule
1-02.
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III. Paperwork Reduction Act

    Certain provisions of our ICFR requirements contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA''). We submitted these collections of
information to the Office of Management and Budget (``OMB'') for review
in accordance with the PRA and received approval for the collections of
information. We do not believe the adoption of the definition of
``significant deficiency'' will impose any new recordkeeping or
information collection requirements, or other collections of
information requiring OMB's approval.

IV. Cost-Benefit Analysis

    A detailed analysis of the benefits and costs was included in our
releases proposing and adopting amendments to rules regarding
management's reports on ICFR.\28\ The amendments that we are adopting
in this release define the term ``significant deficiency.'' We
requested comment on whether the amendments would impose any additional
benefits or costs on public companies or small entities. No commenter
identified any additional costs or burdens that would result from the
proposed definition.
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    \28\ See Release No. 33-8762 (December 20, 2006) [71 FR 77635,
Dec. 27, 2006] and Release No. 33-8809 (Jun. 20, 2007) [72 FR 35310,
Jun. 27, 2007].
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    Three commenters suggested that the definition would not result in
any additional costs,\29\ while a number of commenters suggested that
the definition may reduce the amount of time needed by management and
auditors to evaluate whether or not deficiencies are significant.\30\
Several commenters also noted that one of the significant benefits of
the proposed definition was the flexibility provided, which allows
management and auditors to utilize their judgment to focus on those
matters that are important enough to merit attention by those
responsible for oversight of financial reporting.\31\
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    \29\ See, for example, letters from BDO Seidman, LLP; Committees
on Federal Regulation of Securities and Law and Accounting of the
Section of Business Law of the American Bar Association; and
Deloitte & Touche LLP.
    \30\ See, for example, letters from BDO Seidman, LLP; PepsiCo;
Society of Corporate Secretaries and Governance Professionals; and
The Institute of Internal Auditors.
    \31\ See, for example, letters from BDO Seidman, LLP; Grant
Thornton LLP; PricewaterhouseCoopers LLP; and The Institute of
Internal Auditors.
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    Two commenters expressed concern that companies would have
difficulty in applying the definition because they believed more
guidance was necessary to allow management and independent auditors to
define and calibrate their procedures in order to minimize any
unnecessary costs.\32\ Most commenters, however, noted that the
definition would permit the exercise of appropriate judgment by
management and independent auditors to determine those deficiencies in
ICFR that are important enough to merit attention by those responsible
for oversight of financial reporting. We believe that, on balance, the
amendments will allow management to use sufficient and appropriate
judgment to determine whether any identified deficiencies need to be
reported to the auditor and the audit committee. The flexibility
allowed by the definition will enable management and auditors to more
efficiently and effectively perform their evaluations based on a
company's individual facts and circumstances. In addition, many
commenters noted that a consistent definition between the Commission's
rules and the PCAOB's standards was imperative to promote effective and
efficient compliance by management and auditors with respect to their
responsibility to communicate and respond to significant deficiencies
in internal control over financial reporting.\33\ A consistent
definition between the Commission's rules and the PCAOB's audit
standards will enable management and independent auditors to more
efficiently and effectively perform their responsibilities to
communicate significant deficiencies in internal control over financial
reporting. Finally, eight commenters expressed their view that the
definition would not have any special impact on smaller public
companies.\34\ We do not believe that these amendments will have much,
if any, added impact on the costs to public companies or small
entities.
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    \32\ See letter from U.S. Chamber Center for Capital Market
Competitiveness and New York State Society of Certified Public
Accountants.
    \33\ See, for example, letters from BDO Seidman, LLP; Center for
Audit Quality; Deloitte & Touche LLP; Ernst & Young LLP; Grant
Thornton LLP; PepsiCo; PricewaterhouseCoopers LLP; and Sprint Nextel
Corporation.
    \34\ See, for example, letters from BDO Seidman, LLP; Committees
on Federal Regulation of Securities and Law and Accounting of the
Section of Business Law of the American Bar Association; Deloitte &
Touche LLP; Ernst & Young LLP; Grant Thornton LLP; PepsiCo;
PricewaterhouseCoopers LLP; and The Institute of Internal Auditors.
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V. Effect on Efficiency, Competition and Capital Formation

    Section 3(f) of the Exchange Act \35\ requires the Commission,
whenever it engages in rulemaking and is required to consider or
determine if an action is necessary or appropriate in the public
interest, also to consider whether the action will promote efficiency,
competition and capital formation. Section 23(a)(2) of the Exchange Act
\36\ also requires the Commission, 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 the Commission from adopting any rule that
would impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.
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    \35\ 15 U.S.C. 78c(f).
    \36\ 15 U.S.C. 78w(a)(2).
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    The Commission's releases proposing and adopting amendments to
rules regarding management's reports on ICFR contained a detailed
discussion of the effects of the rule amendments on efficiency,
competition and capital formation.\37\ We received some comments on the
effects of the rule on efficiency. Four commenters on the proposal
believed the proposed definition of ``significant deficiency'' would
facilitate more efficient certifications of quarterly and annual
reports by allowing management to use its judgment in evaluating the
severity of an identified deficiency.\38\ The flexibility allowed by
the definition will enable management and auditors to more efficiently
and effectively perform their evaluations based on a company's
individual facts and circumstances, which will promote efficiency. In
addition, a consistent definition between the Commission's rules and
the PCAOB's audit standards will enable management and independent
auditors to more efficiently perform their responsibilities to
communicate significant deficiencies in internal control over financial
reporting. We did not receive any comments on capital formation or
competition. We do not believe that the rule amendment will impact
capital formation or competition.
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    \37\ See Release No. 33-8762 (December 20, 2006) [71 FR 77635,
Dec. 27, 2006] and Release No. 33-8809 (Jun. 20, 2007) [72 FR 35310,
Jun. 27, 2007].
    \38\ See, for example, letters from BDO Seidman, LLP; Grant
Thornton LLP; PepsiCo; and PricewaterhouseCoopers LLP.
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VI. Regulatory Flexibility Act Certification

    The Commission hereby certifies pursuant to 5 U.S.C. 605(b) that
the definition of ``significant deficiency'' will not have a
significant economic impact on a substantial number of small entities.
We requested comments on the anticipated impact and seven commenters
stated that the definition would not have any special impact on smaller
public companies.\39\ No commenter suggested that there would be a
significant impact on any small entities.
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    \39\ See for example, letters from BDO Seidman, LLP; Deloitte &
Touche LLP; Ernst & Young LLP; Grant Thornton LLP; PepsiCo;
PricewaterhouseCoopers LLP; and The Institute of Internal Auditors.
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VII. Statutory Authority and Text of Rule Amendments

    The amendments described in this release are being adopted under
the authority set forth in Sections 12, 13, 15, 23 of the Exchange Act,
and Sections 3(a) and 404 of the Sarbanes-Oxley Act.

List of Subjects

17 CFR Part 210

    Accountants, Accounting, Reporting and recordkeeping requirements,
Securities.

17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.

Text of Amendments

0
For the reasons set out in the preamble, the Commission amends title
17, chapter II, of the Code of Federal Regulations as follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, AND ENERGY
POLICY AND CONSERVATION ACT OF 1975

0
1. The authority citation for Part 210 continues to read as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77aa(25), 77aa(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5,
78w(a), 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 80a-31, 80a-
37(a), 80b-3, 80b-11, 7202 and 7262, unless otherwise noted.

0
2. Amend Sec.  210.1-02 by:
0
a. Adding paragraph (a)(4);
0
b. Removing paragraph (p); and
0
c. Redesignating paragraphs (q) through (cc) as paragraphs (p) through
(bb).
    The addition reads as follows:

Sec.  210.1-02  Definitions of terms used in Regulation S-X (17 CFR
part 210).

* * * * *
    (a) * * *
    (4) Definitions of terms related to internal control over financial
reporting. Material weakness means a deficiency, or a combination of
deficiencies, in internal control over financial reporting (as defined
in Sec.  240.13a-15(f) or 240.15d-15(f) of this chapter) such that
there is a reasonable possibility that a material misstatement of the
registrant's annual or interim financial statements will not be
prevented or detected on a timely basis. Significant deficiency means a
deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet
important enough to merit attention by those responsible for oversight
of the registrant's financial reporting.
* * * * *

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

0
3. The authority citation for Part 240 continues to read, in part, 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, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq., and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *

0
4. Amend Sec.  240.12b-2 by adding the definition of ``Significant
deficiency'' in alphabetical order to read as follows:

Sec.  240.12b-2  Definitions.

* * * * *
    Significant deficiency. The term significant deficiency is a
deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet
important enough to merit attention by those responsible for oversight
of the registrant's financial reporting.
* * * * *

    By the Commission.

    Dated: August 3, 2007.
Nancy M. Morris,
Secretary.
[FR Doc. E7-15556 Filed 8-8-07; 8:45 am]

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