SEC official braces NIRI attendees for raft of regulatory changes

Jun 07, 2010
<p>Companies should be prepared to comment on SEC proposals potentially at short notice.</p>

Issuers should be prepared for a substantial amount of regulatory change, warned Meredith Cross, director, corporation finance division US Securities and Exchange Commission, at today's first general session of the 2010 NIRI conference in San Diego.

Cross predicted that forthcoming SEC proposals would aid communication with investors, especially on the issue of proxy mechanics, which is currently under review by the SEC. 'We know you struggle to identify investors and that you are dealing with declining retail participation so we are working on proxy plumbing projects,' she explained.

Issuers should be prepared for a forthcoming concept release from the SEC that will invite comment from market participants on a wide range of issues. 'The concept release will be quite sweeping, Cross noted. 'We are talking about looking at ways to ensure the accuracy of vote tabulation and considering whether we will address empty voting and over voting. We are also looking at ways to deal with declining retail vote, retaining OBO and NOBO distinction and the role of proxy advisory firms.'

Cross warned that the comment periods and short implementation dates on some of the discussion coming out of Washington might be relatively short because of the high volume of regulatory proposals. But she expects the concept release to have a customary comment period of 60 days. 'Some papers have very short implementation dates. We very much want your comments to the extent it is possible to get them in within the dates,' she added.

Cross also expressed concern that E proxy rules may be reducing participation at companies. 'It saves money and trees but evidence shows that voting rates are going down at companies that use E proxy.'

The commission hopes its efforts to educate investors on the importance of proxy voting will go some way to mitigating this declining trend in participation. Cross also touched on the controversial issue of the posting of material information on a company's website instead of using a conventional wire release. But she refused to be drawn on what would constitute best practice. 'Companies must select the distribution that suits their investor base. If they [investors] are unhappy with how they learn about material information like earnings, we need to address it to help restore investor confidence.'

Moderator Brad Wilks, Chicago CEO and managing director at Sard Verbinnen, raised the difficulties many issuers have in identifying current shareholders, something Cross confirmed will not be addressed by the SEC without a change to statutory law: 'The requirement to file 13Ds and Gs are creations of statute. We understand this needs updating and we've been looking at ways to make it better. The UK has already updated its rules on derivatives, for example, and we are updating now. On the topic of what the triggers are and how often investors should report, that is in the statute and so up to Congress.'

The session provoked some antipathy amongst the IR community who fear the changes will be burdensome for investor relations departments.

'When Congress passes this legislation it's going to hit us like a ton of bricks,' NIRI CEO Jeff Morgan tells IR Magazine.

'Next year is going to be a real challenge, particularly for small and mid cap companies if they have a composition of ownership. Really the train is on the tracks and it's just a matter of seeing what happens when it comes into the station.'

Morgan thinks it could be completed as early as July 4.

Organizers claim conference attendance is up over 10 percent from last year at over 1,200 attendees.  Around 10 percent of this year's attendees hailed from outside the US.

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