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25 Jan. 2010 | Comments (0)

As President Obama continues to propose more stringent bank regulations in light of the financial crisis – a hefty tax on 50 of the largest banks and a plan to allow regulators to limit the size and scope of those banks’ risk-taking activities (Read press release, Jan. 21) –  it’s hard to imagine those gaining in any traction based on what has happened in the Senate. The election of Scott Brown to the late Sen. Ted Kennedy’s seat gives the Republicans the power to filibuster since the Democrats will have only 59 votes, one vote short of what they need. With that said, many on the Hill believe it will be difficult, if not impossible, to approve such legislation as the financial reform package. And when you consider the proponent of the companion Senate bill, Sen. Chris Dodd, is now a lame duck, prospects for passage wane. The uncertainty of any Obama proposal that needs Congressional approval leaves the SEC as the major corporate regulatory rule-maker for at least this year. So that is why I think it is prudent for directors and corporate management to keep an eye on the body’s rule-making and regulatory decisions over the next six-to-nine months. Here are the most important SEC proposed and final rules I think many of you should be concerned with in 2010: Public Comment date: Expired on Jan. 19, 2010. SEC Action: Proposed rule. Comment period was extended after more than 500 comment letters received. No vote announced. Description: The Commission proposed changes to the federal proxy rules that would require a company, under certain circumstances, to include in the company’s proxy statement disclosure concerning a shareholder’s, or group of shareholders’, nominees for director and to include on the company proxy card the names of those nominees. In addition, the proposed rules would require companies to include in their proxy materials, under certain circumstances, shareholder proposals that would amend, or that request an amendment to, a company’s governing documents regarding nomination procedures or disclosures related to shareholder nominations, provided the shareholder proposal does not conflict with the Commission’s disclosure rules, including the proposed new rules. One alternative to the SEC proposal that was recommended among the comment letters was private ordering. Effective date: Feb. 28, 2010. SEC Action: Final rule issued on Dec. 16. Description: The proxy disclosure enhancements (Read my post from Dec. 18) would require disclosures in the proxy and financial statements on:
  1. The relationship of a company’s compensation policies and practices to risk management.
  2. The background and qualifications of directors and nominees.
  3. Legal actions involving a company’s executive officers, directors and nominees.
  4. The consideration of diversity in the process by which candidates for director are considered for nomination.
  5. Board leadership structure and the board’s role in risk oversight.
  6. Stock and option awards to company executives and directors.
  7. Potential conflicts of interests of compensation consultants as well as the fees paid to consultants and their affiliates.
Effective date: Feb. 18, 2010 SEC Action: Final rule approved on Dec. 15, 2009. Description: Under new Rule 14a-20, registrants that are TARP (Troubled Asset Relief Program) recipients will be required to provide the separate shareholder vote to approve the compensation of executives, as required by Section 111(e)(1) of the Emergency Economic Stabilization Act, in proxies solicited during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding. Rule 14a-20 clarifies that the separate shareholder vote required by Section 111(e)(1) of the EESA will only be required on a proxy solicited for an annual (or special meeting in lieu of the annual) meeting of security holders for which proxies will be solicited for the election of directors. The purpose of the instruction remains to clarify that smaller reporting companies will not be required to provide a compensation discussion and analysis in order to comply with the requirements of Rule 14a-20. Public Comment Date: March 29, 2010. SEC Action: Proposed rule. Description: The SEC proposed a new rule that would effectively prohibit broker-dealers from providing customers with "unfiltered" or "naked" access to an exchange or alternative trading system. It also would require brokers with market access, including those who sponsor customers' access to an exchange, to put in place risk management controls and supervisory procedures. The broker or dealer would be required to review, no less frequently than annually and in accordance with written procedures, the business activity of the broker or dealer in connection with market access to assure the overall effectiveness of such risk management controls and supervisory procedures, and document that review. In addition, the CEO (or equivalent officer) of the broker or dealer would be required, on an annual basis, to certify that such risk management controls and supervisory procedures comply with Proposed Rule 15c3-5.
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin


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