September 26, 2006

Postponed: Decision to Kill Broker Non-Votes

As reported by, it appears the NYSE is postponing amending Rule 452 to eliminate broker non-voting in order to allow companies additional time to prepare for implementation. According to the article, the rule won’t be changed any earlier than mid-2007 -and probably wouldn’t go into effect before 2008.

Not too surprising given that we haven’t heard much on this since the NYSE’s Proxy Working Group issued recommendations in June – and the postponement is definitely a good idea given the wide scope and magnitude of change taking place right now with respect to director elections (egs. new SEC proxy rules; ASFCME case; majority vote movement, etc.).

Senate Passes Bill for SEC to Regulate Credit Rating Agencies

On Friday, the US Senate passed a bill in a voice vote – “The Credit Rating Agency Reform Act of 2006” – which would give explicit authority to the SEC to regulate credit rating agencies, including resolving conflicts of interest and challenging practices that may be abusive or anticompetitive. The bill establishes standards, including a three-year track record, for agencies seeking to be designated as “nationally recognized” rating firms and allows the SEC to deny designating agencies that can’t consistently do a high-quality job of evaluating debt. This Senate bill now has to be reconciled with a House-passed bill (which would give the SEC oversight over credit rating agencies but doesn’t have all of the requirements called for by the Senate bill). Learn more in this WSJ article from Saturday.

These bills stem from a SEC concept release issued three years ago, which itself emanated from Section 702 of Sarbanes-Oxley (which required the SEC to submit a report to Congress on the role of credit rating agencies).

XBRL Modernization of SEC’s EDGAR to Begin

Yesterday, the SEC announced the winner of its $48 million EDGAR contract competition (ie. Keane Federal Systems, with other partners such as Microsoft, Bearingpoint, Rivet Software, EMC and Akamai) in this press release. The SEC also announced the winner of a much smaller contract to build an XBRL viewer/analytical tool for the SEC’s website.

More interesting is that the SEC is spending $5.5 to XBRL US (which I believe is also working with the FASB on a similar project) to improve and extend XBRL taxonomies. This development is what you should watch out for the most, as taxonomies are critical because that’s how investors will be reading your financials. The SEC also announced an upcoming roundtable that will focus on new XBRL software, which will include demonstrations of the latest XBRL software.

By the way, I hear that some people are confused and think that the SEC already has mandated XBRL; that’s not accurate. This is merely a baby step to get EDGAR ready in case the SEC someday mandates XBRL…