December 11, 2006
The “Scott” Report: The Aftermath So Far
In the wake of the issuance of an Interim Report from the Committee on Capital Markets Regulation on November 30th, there has been quite a bit of commentary and follow-up. Here is a list:
– Incoming House Financial Services Committee Chairman, Congressman Barney Frank (D-Mass.) intends to hold hearings on the Interim Report early next year – see this Washington Post article.
– Last week, the Committee issued a statement to clarify its position on the NYSE’s recently proposed elimination of broker non-votes, from urging the NYSE to reconsider its proposal to supporting it (except asking the NYSE to reconsider how proposal applies to mutual funds). I hear that the language on this issue was slipped into the report after two of the more investor friendly Committee members had reviewed the final draft; hence the change. The Interim Report was amended for this change.
– Some have dubbed the Interim Report as the “Greenberg” report after noting the Committee’s ties to ousted AIG Chair Hank Greenberg and acceptance of financing from two Committee members. See this related Washington Post article.
– A search of articles on the Interim Report show that those who have been critical include former Treasury Secretary Larry Summers, former SEC Chairmen Richard Breeden and Arthur Levitt, former SEC Commissioner Harvey Goldschmid, NY Attorney General – NY Governor Elect Elliot Spitzer, the Council for Institutional Investors, and current SEC Commissioner Roel Campos. In addition, Senator Dodd and former SEC Chief Accountant Donald Nicholiasen have expressed concerns over the approach to regulation advocated by the Committee.
– Quite a few members responded to my blog on principles-based regulation – here is one response: Materiality is gauged using a principled approach set forth by the US Supreme Court years ago, as supplemented by additional SEC guidance; the Committee asks for a more principled approach to regulation, but then turns around and asks for more rules on materiality. It makes one wonder if what they are really saying is that they favor rules when it favors their special interests, and principles when they might not.
– Here are other thoughts from various members: Even though its an “interim” report, I thought it needed more empirical data and legal/financial analyses in certain areas to support the recommendations; it was sort of a stab at SEC Chairman Cox who already put these things on the Commission’s agenda for ’07; seemed a bit like a “get your act together SEC and do something pronto” message in some spots; certain recommendations could create bureaucratic burdens for the SEC which probably are counterproductive; we certainly do need to attract FPI listings and foreign capital lost post-SOX and we should harmonize our regime a bit more with Western EU on accounting, principles-based rules and corporate governance, but we have to make sure not to erode investor protections at the same time; the interplay of SROs, SEC, state AGs, Delaware vs. the less common law-oriented states, etc. makes all of this complex and time consuming stuff.
– November was the best month for IPOs in the US in years – see this related article.
– Of course, the highlight of the Interim Report is footnote 105, where yours truly is cited…
The “Scott” Report: The Bloggers Speak
As predicted, the legal blogging community has plenty to say about the Scott Interim Report. Here are some of those musings:
– 10b-5 Daily – “The Public Value of Securities Class Actions”
– AAO Weblog – “Report: The Committee on Capital Markets Regulation”
– The D&O Diary – “Looking at The Paulson Committee’s Proposed Litigation Reforms”
– Business Associations Blog – “Interim Report of the Paulson Committee”
Shareholder Access and By-Law Amendments: What to Expect Now
We have posted the transcript from our recent webcast: “Shareholder Access and By-Law Amendments: What to Expect Now.”