May 17, 2012

Chaos in the SEC’s Inspector General’s Office: “He Said, They Said”

For a long time I’ve been outspoken about how the SEC’s former Inspector General – David Kotz – took advantage of his position to make a “name” for himself (here is one example). Then suddenly he left in January under a cloud of ethical questions about his own activities as noted in this blog (and I also noted other questionable activity in this blog; Kotz has not yet been replaced as the IG position remains open – here is the job posting). Last week, Bloomberg reported that the SEC was hiring an outside investigator to look into Kotz’s conduct during his tenure at the agency – including allegations of sexual misconduct in the office per this WSJ article.

Looks like there could be a bizarre culture in that small SEC office. According to this Reuters article, one of the newer members of that office – David Weber, assistant inspector general – has been placed on admin leave after “talking openly about wanting to carry a concealed firearm at work and some employees complained he was a physical threat.” And this guy’s lawyer claims that he is the victim of retaliation because he had previously complained about alleged misconduct in the IG’s office. This Huffington Post has more details in this blog. Although I think we will find out still more juicy details about this office’s culture soon enough as the investigation into it develops…

NYSE Proxy Fee Advisory Committee’s Report: Recommends Fee Drop of 4% on Average

After 18 months of work, the NYSE Proxy Fee Advisory Committee released its report yesterday with recommendations for changes to the fees that banks and brokers charge companies for forwarding proxy materials to shareholders who hold stock in “street name.” This is the process by which the fees that Broadridge charges gets set for work on behalf of their broker clients. Under NYSE Rule 465, any fee changes must be approved by the SEC – fee rates were last changed a decade ago.

Here’s an excerpt from Davis Polk’s Ning Chiu’s blog on the topic:

The Report painstakingly describes the careful work by PFAC in considering each of the four different type of proxy fee designed to compensate brokers for different services, an examination of the existing rationale based on the work involved and an evaluation of whether a change in fee is warranted based on recent developments, such as a move toward less paper distributions. According to the Report, it is expected that overall fees paid by companies will decrease by about 4% under the revised structure.

PFAC’s recommendations include several changes to the existing fees and also streamlining the proxy fee categories to increase transparency. In addition, PFAC supported allowing companies to ask brokers for a list of the identity of non-objecting beneficial owners (NOBO) based on number of shares held or of those that have not yet voted proxies, without needing to pay for an entire list of all NOBOs. In order to encourage further retail investor voting, PFAC also recommended that the NYSE broach with the SEC the idea of a fee to pay for an “investor mailbox,” through which investors can access proxy materials and voting forms through their brokers’ website. For those interested in learning more, here’s an archived version of a webcast sponsored by the NYSE.

PFAC’s work is only the beginning. The NYSE indicated that it will initiate discussions regarding the PFAC’s recommendations with the SEC, after which the NYSE would expect to submit a rule change proposal to the SEC reflecting the outcome of these discussions. Any rule filing proposal would be published for public comment prior to SEC approval.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Unintended Consequences of the STOCK Act
– The iPad and the Law
– 7th Circuit Ruling Expands Rights of Whistleblowers to RICO
– Delaware Weighs In: Indemnification and Advancement of Expenses
– Boards Trends in the S&P 1500

– Broc Romanek