Those of you who’ve been following my postings know that I’m not a fan of Congressional interference in the workings of the SEC. Well, those same wonderful folks who’ve garnered the lowest opinion ratings in history are at it again.
First, you may recall that Congress acted a few weeks ago to avoid another federal government shutdown. Well, a few interesting provisions were added to that legislation and – you guessed it – one of them was precisely the kind of thing that sets me off; in this case, it was a prohibition against any SEC rulemaking requiring disclosure of political contributions.
Lest you be confused, I do not support mandatory disclosure of political contributions, particularly if it would be required in periodic reports under the Exchange Act, such as 10-Ks and 10-Qs. Even if political contributions were deemed of interest, why not develop standards for voluntary disclosure or, if disclosures are mandated, why not do so by means of exchange listing standards rather than subjecting the disclosures to Exchange Act liability?
It’s worth noting that the SEC has demonstrated a total lack of interest in any such requirement, despite the filing of rulemaking petitions and numerous shareholder proposals. So while the provision has no practical impact, it still sticks in my craw – so much so that when I got a note from Lucian Bebchuk of Harvard Law School, who supports political contributions disclosure, expressing his dismay about the law, I told him I sympathize with his concerns if not his goal. (I got a very nice “thank you” note in return. Lucian, you’re a gentleman.)
Second, more recently, I saw a story that the Senate is considering legislation that would require public companies to disclose whether their boards include (or lack) anyone with cybersecurity expertise. (By the way, this bill has bipartisan sponsorship.) This reminds me of the disclosure hysteria about Y2K that arose as we approached the new millennium a few short years ago. (OK, that wasn’t prompted by Congressional action, but if Congress behaved then as it does now, it would have been.) In other words, proposals like this will lead to endless disclosures that will have zero impact and will obscure disclosures on things that matter.
Congress, get off our backs. The SEC has a very robust process for rulemaking that includes deliberating whether rules are needed in the first place. And as far as cybersecurity is concerned, we know that we need to consider cybersecurity issues as we prepare our companies’ and our clients’ disclosures, and we’re thinking about the subject carefully and responsibly rather than by having politically motivated knee-jerk reactions.
Happy New Year!