August 21, 2009

Comment Letter Troubles

Yesterday, the SEC announced that it had experienced problems receiving electronically submitted comment letters on a number of proposing releases, most notably the shareholder access proposals and the proposed amendments to Regulation SHO. The problems occurred during a “brief time” on August 17, although it is not clear from the notice when that brief time occurred. Some folks who attempted to submit comments got e-mails from the Secretary’s office following up, while others did not.

The notice indicates that the Staff believes all comments have been identified, but that commenters might want to contact the Office of the Secretary (202-551-5400) or check under the comment file for the particular release to confirm receipt of their comments. It is always a good idea to check the online comment file in any event to make sure that your comment letter got through.

The Small Business Voice on Shareholder Access

Some of the comment letters that did manage to get through earlier this week on the shareholder access proposals seem to represent an interesting new trend. Over the last few years, there has developed quite the cottage industry in letter writing campaigns on SEC proposals. In many cases, these coordinated comment responses have come as “form” letters. The Staff has wisely adopted a practice of categorizing the form letters by type, and thereby taking them out of the list of commenters, while still providing the text of the letters. The prevalence of these letter writing campaigns has skyrocketed the comment letter count to numbers in the tens of thousands, which certainly makes the job of putting together a comment summary seem like a daunting task!

With this latest round of shareholder access proposals, we are seeing a wave of individualized letters from small business owners. And here we are talking very small businesses, not, e.g., smaller reporting companies. So, for example, in this letter, Noreka Taylor from Mama’s Kitchen in Kinston, NC writes:

Being a good cook alone is not going to help me make it through the recession. My country and my government should be helping me and my business succeed, not intentionally doing it more harm! Now that I have finally seen an increase in customers and income, my country has decided to try to hurt the economy again. These changes just do not make sense. Putting unqualified appointees into corporate chairs to peddle their own agenda and special interest could not possibly help anyone or anything except lining their own pockets. My restaurant cannot afford these changes and most other small businesses cannot either.

Meanwhile, at Don’s Tractor Repair in Wakefield, KS, Tim Zumbrunn worries that the access rule will put him out of business if his suppliers get caught up in expensive proxy contests. Tim states “[o]ur federal government should not intrude on publicly traded corporations, and corporate state laws should remain intact.” Proxy access is even on the mind of Teresa Liddell at Dust 2 Dust ATV Track and Trails in Thackerville, OK, stating that “[t]he recent proposal by the SEC to change shareholder proxy access and give the government greater access to businesses and their decisions would only hurt us and many other businesses.”

Each of these letters is personalized and describes different ways in which the proxy access proposals might cause harm, so they can’t be easily categorized into “form” letter categories. It is hard to say how much sway these letters will have with the Staff and the SEC as compared to, say, the Seven Firms letter or the letter from the Council of Institutional Investors, but they certainly indicate the lengths to which those opposed to access will go in seeking to undercut the SEC’s proposals.

Robert Khuzami: Breaking the Ice

In a speech before the New York City Bar on his first 100 days as the Director of Enforcement, Robert Khuzami got things started off with this joke:

All that being said, I’m pretty proud of my own 100-day accomplishments. So how have things changed? Before I joined the Division in March, the Dow was struggling around 6500 points. Now the Dow is over 9200. So am I really responsible for a 41% increase in the Dow? I am, and I’d explain it, but it’s very complicated. It involves algorithms, and calculus, and a black box and other … stuff. Now, when I ran this speech by my wife, she looked (kind of like some of you out there) a little incredulous. She said, “you’re not claiming credit for the stock market, are you? While you’re at it, are you also taking credit for the mild hurricane season or the sharp decrease in lethal shark attacks world-wide.” Well I am, and I’d explain it, but it’s very complicated. It involves algorithms, and calculus, and a black box and other … stuff.

The speech went on to note the significant changes being implemented in Enforcement, including the organization of specialized units, the streamlining of management and internal processes, the creation of an Office of Market Intelligence, an effort to foster cooperation by individuals and the expansion of resources throughout the Division, including adding staff to the Trial Unit and hiring a Chief Operating Officer.

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– Dave Lynn