September 20, 2010

Dodd-Frank: SEC Releases Tentative Rulemaking Schedule

As noted by Mark Borges in his “Proxy Disclosure Blog” on Saturday:

One of the more challenging aspects of analyzing the executive compensation provisions of the Dodd-Frank Act has been trying to predict how the SEC would approach its rulemaking obligations. As we know, many of the provisions are to become effective only upon the completion of SEC (and, in some cases, national securities exchange) rulemaking. While I’ve always expected that the SEC’s rulemaking activities would stretch into 2011 and, possibly, beyond, in the absence of any formal announcement I’ve had to caution clients that it was possible some of the rules would be in place for the 2011 proxy season.

Well, the SEC has just posted a tentative schedule for its Dodd-Frank Act rulemaking and, as I suspected, most of the executive compensation-related rules won’t be ready until next year. Here’s the schedule by provision:

1. Section 951 – Shareholder Approval of Executive Compensation

– Proposed rules: October – December 2010
– Final rules: January – March 2011

2. Section 952 – Compensation Committee Independence

– Proposed rules: October – December 2010
– Final rules: April – July 2011

3. Section 953 – Executive Compensation Disclosure

– Proposed rules: April – July 2011

4. Section 954 – Recovery of Erroneously Awarded Compensation

– Proposed rules: April – July 2011

5. Section 955 – Disclosure Regarding Employee and Director Hedging

– Proposed rules: April – July 2011

6. Section 957 – Voting by Brokers

– Proposed rules: April – July 2011

Mark includes preliminary observations at the bottom of his blog, which I’m sure he’ll discuss today during the “How the Dodd-Frank Developments Impact You: All the Latest” panel that opens our “5th Annual Proxy Disclosure Conference.”

Today: “Tackling Your 2011 Compensation Disclosures: The 5th Annual Proxy Disclosure Conference”

Today is the “Tackling Your 2011 Compensation Disclosures: The 5th Annual Proxy Disclosure Conference“; tomorrow is the “7th Annual Executive Compensation Conference.” Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.

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Short-Term Borrowings: SEC Proposes Rules and Issues Interpretive Guidance

On Friday, the SEC proposed new rules to elicit disclosures for short-term borrowings (here’s Chair Schapiro’s remarks).

In addition, the SEC issued an interpretive release providing guidance on existing MD&A requirements for liquidity and funding disclosures. Since this interpretive release will become effective immediately upon publication in the Federal Register, companies will need to review it now as it will apply to their next periodic filing. The interpretive release:

– Reiterates long-standing MD&A principles as they apply to disclosure of critical liquidity matters, so that MD&A disclosure keeps pace with the increasingly diverse and complex financing alternatives available to companies.

– Make clears that a registrant cannot use financing structures (whether “on-balance sheet” or “off-balance sheet”) designed to mask the registrant’s reported financial condition – transparent disclosure is required.

– Emphasizes that leverage ratios and other financial measures included in filings with the SEC must be calculated and presented in a way that does not obscure the company’s leverage profile or reported results.

– Addresses divergent practices that have arisen in the context of tabular disclosure of contractual obligations, to focus companies on providing informative and meaningful disclosure about their future payment obligations.

– Broc Romanek