July 13, 2009

Obama/Treasury Propose New Regulatory Reform Legislation: A Few Oddities

On Friday, the White House and the Treasury Department released proposed legislation – the “Investor Protection Act of 2009” – to effectuate some of the regulatory reforms that had been mentioned in their White Paper last month. Here is the proposed legislation and the related fact sheet. We’ll be posting memos analyzing this proposed legislation in our “Regulatory Reform” Practice Area.

These proposals seem to focus on the “consumer protection” part of the reforms noted in the White Paper – although the various provisions are essentially a hodge-podge of proposals, including the SEC obtaining the power to review and ban compensation arrangements at brokers, dealers and investment advisers.

Here is my take on what I consider a few oddities in the legislation:

Consumer Testing of Disclosures and Rules: One part of the proposal would bolster the “SEC’s authority to conduct consumer testing.” Consumers? I think they mean investors? The SEC’s stated mission is investor protection and I don’t recall the term “consumer” being mentioned in any of the existing statutes that give the SEC some sort of authority nor any of the agency’s rules and regulations.

Expand Protections for Whistleblowers: Under the proposed legislation, the SEC would gain authority to establish a fund to pay whistleblowers. Although perhaps inviting in concept, this could be tricky to implement. If the SEC Staff dislikes being a referee in the shareholder proposal process, how will they enjoy a process that involves them potentially taking sides more clearly against companies and actually having to dispense money? If adopted, I would consider becoming a bounty hunter because I’ve always wanted to wear big hats…

Establish a Permanent Investor Advisory Committee: How many federal agencies have permanent advisory committees? This could set a bad precedent – and even though investors may have been under-represented by those that regularly approach the SEC in the past, the SEC has heard plenty from investors over the past few years. The creation of a permanent committee may swing the pendulum the other way so that the investor perspective dominates the SEC’s view of the world.

In the long run, the much more likely result is that regularly meeting with an advisory committee would simply be a waste of time. I like the idea of roundtables on specific issues where all sides are represented – as well as the normal comment process on rule proposals – for the SEC to obtain all the outside input it needs. I’m not a big believer in conducting more meetings as a way to find solutions to problems.

Posted: SEC’s Executive Compensation/Corporate Governance Proposing Release

On Friday, the SEC posted a 137-page proposing release regarding changes in its executive compensation rules and other corporate governance enhancements. In his “Proxy Disclosure Blog,” Mark Borges already has blogged some analysis of the compensation proposals.

While we were tickled to see our March-April issue of The Corporate Counsel cited in footnote 44 of the release, we were even more excited that the SEC is soliciting comments on a number of important areas of the executive compensation rules, such as whether boards consider internal pay equity when they set the amounts of executive compensation. Here is a discussion of this fix – and others – that we urge you to consider when drafting your comment letters for the SEC on the executive compensation proposals.

Our “4th Annual Proxy Disclosure Conference“: Now that the SEC’s proposals are out – and broker nonvotes are gone – you need to register now to attend our popular conferences and get prepared for a wild proxy season:
4th Annual Proxy Disclosure Conference” & “6th Annual Executive Compensation Conference.” You automatically get to attend both Conferences for the price of one; they will be held November 9-10th in San Francisco and via Live Nationwide Video Webcast. Here is the agenda for the Proxy Disclosure Conference. Register now.

Alternative Fee Arrangements for Deals: Little Less Talk and Lot More Action?

Tune in tomorrow for this webcast – “Alternative Fee Arrangements for Deals: Little Less Talk and Lot More Action?” – to hear Wilson Chu of K&L Gates; Scott Depta of Dell and Lance Jones of Trilogy talk about how the ways that deal fees are being restructured, a trend hastened by a down economy.

– Broc Romanek