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On Friday, Corp Fin updated another set of its phone interps, this set relating to the Trust Indenture Act.

Another SEC Rule Vacated

On Friday, the SEC continued its losing streak in the courts when the DC Circuit Court of Appeals – in Financial Planning Association v. SEC – vacated Rule 202(a)(11), a rule adopted in 2005 which deems certain broker-dealers not to be investment advisers. The Court held that the ’40 Act does not authorize the SEC to except from the ’40 Act any group that is already covered by another exception.

“Say on Pay” Bill Moves Forward

From Mark Borges’ “Proxy Disclosure Blog” on CompensationStandards.com: On Wednesday, H.R. 1257 (the “Shareholder Vote on Executive Compensation Act“) was approved by the House Financial Services Committee on a vote of 37-29. The bill, which would give shareholders an annual non-binding advisory vote on executive pay, now moves to the House floor for consideration. According to media reports, no date has been set for a vote by the full House.

One of the more interesting aspects of the bill is exactly what shareholders would be voting on. The approved bill text indicates that the vote would be based on the compensation discussion and analysis and the compensation tables. This approach could be problematic, however, given the length and complexity of these disclosures.

To address potential liability concerns, the bill was amended to make it clear that private rights of action are prohibited if the board of directors fails or refuses to comply with the shareholder vote. Again, this is fairly ambiguous language. I’m not sure how one responds when shareholders indicate that they don’t agree with a company’s compensation program as reflected in its proxy disclosure. Presumably, it means that the board (or compensation committee) needs to talk with shareholders. That’s what the bill is trying to encourage.

And from yesterday’s WSJ article: Even if the bill passes the House (which seems likely), its prospects in the Senate are uncertain. It could wind up sitting for a while, although I expect that Representative Frank, the bill’s sponsor, will continue to push this initiative forward over the next several months.

The next step is a vote in the full House, and Rep. Barney Frank (D., Mass.), chairman of the committee and sponsor of the bill, says that the House leadership has promised that they will make time available on the floor for a vote, although a date hasn’t been set. The prospects of the advisory-vote bill are uncertain, especially since the Senate Banking Committee’s chairman, Christopher Dodd (D., Conn.), hasn’t indicated plans to push a similar measure through his panel.

And lastly, some information from ISS’ “Corporate Governance Blog.”

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