November 2016

Internet Archive Book Images
Internet Archive Book Images

As noted in a recent post, the future of SEC regulation – and perhaps even of the SEC itself – is uncertain in the wake of Donald Trump’s election.  However, the SEC Staff, a smart, decent and hardworking group, continues to stick to its knitting despite the turmoil.

The most recent example of the Staff’s diligence is a “Report on Modernization and Simplification of Regulation S-K – As Required by Section 72003 of the Fixing America’s Surface Transportation Act”.  The Report was issued on Thanksgiving Eve, and it’s no turkey.  Don’t be put off by the incredibly long title or by the fact that SEC regulations have nothing to do with Surface Transportation.  The Report provides a good summary of some actions impacting Reg S-K that have been taken to date, and the Staff’s recommendations for actions down the road (assuming there is a road).

Here are some of the highlights of things that may be on the come:
Continue Reading SEC Staff’s Thanksgiving Gift: No Turkey

It remains to be seen whether the new administration will actually drain the swamp or do away with political correctness, but one hope that some of us have – regardless of our views on the election – is that the SEC may finally get around to some issues that have been on the back burner for years.

One such issue is a long-overdue overhaul of the rules surrounding shareholder proposals, including the submission and resubmission thresholds for proposals under SEC Rule 14a-8.  Many organizations, including the Society for Corporate Governance, have repeatedly urged the SEC to update these rules, which have been in place for many years.  However, the SEC has been reluctant to plunge into the area due to the likely political firestorm that would result.

Now, another organization has jumped in.  At the end of October, the Business Roundtable published “Modernizing the Shareholder Proposal Process”, a rational and well thought-out series of suggestions for bringing shareholder proposals into the 21st Century.Continue Reading A modest proposal about more modest proposals

3102056181_031bf572a9_zIn the wake of the election of Donald Trump as the next President, there has been a lot of speculation about the effect of a Trump administration on securities law and corporate governance.  Looking into a crystal ball is always risky, but here are some observations.

Conflict Minerals:  It’s too soon to tell whether Dodd-Frank will be repealed in its entirety, if it will die the death of 1,000 cuts, or if it will stay pretty much as is.  What I will say is that few will cry if the conflict minerals provisions are eliminated (and I will not be among those few).  Complying with the conflict minerals rules is time-consuming  (and therefore costly), and it’s questionable whether many people care.  Perhaps of equal or greater importance is that there is some evidence that the conflict minerals requirements are actually hurting the people they were supposed to help.

Pay Ratio: More of the same here.  There is some support for pay ratio disclosure among labor pension funds, but that’s about it.  Companies don’t like it (duh…), and mainstream investors have no use for it.  Given how the Democrats seem to have fared in the industrial states, it’s not clear that they would fall on their collective sword to save this one.
Continue Reading The SEC’s brave new (Trump) world

The morning after a surprising election outcome seems as good a time as any to bear in mind the old saw that the more things change the more they stay the same.

And so it goes with corporate governance trends.  Lost in the piles of paper and ink (real and virtual) expended on the Wells Fargo scandal is an article that appeared in The Wall Street Journal a few weeks ago suggesting that the beleaguered bank will benefit from its post-oops decision to separate the positions of CEO and Chairman of the Board.

I’ve studied this issue for several years, and I can state with confidence that there is no proof that separating the positions or having an independent Board Chair does anything to improve performance or to avoid problems.  The most that can be said is that the studies are inconclusive.Continue Reading CEO/Chair separation — the more things change…

6650058825_a23c5c0d35_qIn the midst of the chaos of the presidential election, vicious attacks from Senator Warren, and goodness knows what else, the SEC continues to crank out requests for comment, rules and interpretations.

It’s the latter category that has attracted our attention lately, as the Staff has focused on some technical matters that securities counsel have been pondering for a while.

401(k) plans with a self-directed “brokerage window”

First, in September, the SEC published updated Compliance and Disclosure Interpretations, including one on 401(k) plans that feature a so-called “brokerage window”.  It’s been generally assumed that if a plan does not include an employer stock fund in which employee funds can be invested, Securities Act registration is not required.  This CDI says “maybe not” – if the plan (a) permits employer and employee contributions to be invested through a self-directed “brokerage window”, and (b) the plan does not prohibit investments in employer stock through the window, registration may be required.Continue Reading The SEC Keeps On Keeping On