Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 4,000 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization.

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Special Elections and a Busy SEC

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Special Elections and a Busy SEC

Today all interested in politics, as well as most in Washington, turn their eyes north to Massachusetts and the outcome of the special election to replace the recently deceased Senator Ted Kennedy. Though it once seemed like an easy victory for the Democratic candidate, everyone is now holding their breath to see if the critical 60 seat Democratic majority will be maintained in the Senate. Without this 60th vote, issues like health care and financial reform may undergo significant changes as the Republicans would break the veto-proof Democratic “supermajority” and some bipartisanship would have to occur.

Speaking of bipartisanship, it appears Senate Banking Chair Dodd is considering conceding some parts of the Senate financial reform, (such as the Consumer Financial Protection Agency), in order to win support of Republicans and conservative Democrats for other changes. This bill will be released in the next few weeks and I will be watching for portions that might affect IR and corporate governance. Reform proposals like say-on-pay, proxy access and majority voting are the ones I think are most likely to make it into the discussion.

Activities get into full motion today in Washington as Congress and Senate are now in session, back from the holiday recess. Unlike our elected officials, regulators returned to work like all of us, just after the New Years holiday, and were very busy last week. Here are some of their activities:

The SEC released updated interpretive guidance on the use of non-GAAP financial measures, and I recommend reading and understanding this new information. These C&DI’s consist of 32 questions and answers covering topics including: business combinations, nonrecurring charges and limits of use of “free cash flow” information, among other things.

- The SEC proposed a rule on “naked access” to markets that ultimately prohibit high frequency traders and others from avoiding risk management controls and supervision. While this doesn’t directly affect IR professionals, reports indicate that somewhere between 38 and 50 percent of daily equity volume comes from naked access accounts. On the surface, the proposed additional safeguards seem to make good sense.

- In the area of enforcement, the SEC announced guidelines for those who cooperate and provide information to the SEC. These guidelines, which include provisions for immunity and leniency, will allow the SEC to pursue cases with new abilities and tools similar to those available to the Justice Department.

- The SEC also announced a concept release on market structure. Similar to a discussion paper, the full release is an excellent primer on some of the challenges in our financial market structure. I found some of the market activity data particularly interesting. For instance, here is the September 2009 estimated volume by trading center:

Registered Exchanges:
NASDAQ 19.4%
NYSE 14.7%
NYSE Arca 13.2%
BATS 9.5%
NASDAQ OMX BX 3.3%
Other 3.7%
Total Exchanges 63.8%

ECNs:
2 Direct Edge 9.8%
3 Others 1.0%
Total ECNs 10.8%
Total Displayed Trading Center 74.6%
Dark Pools:
Approximately 32 dark pools 7.9%

Broker-Dealer Internalization:
More than 200 broker-dealers 17.5%
Total Undisplayed Trading Center 25.4%
Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

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National Investor Relations Institute

Special Elections and a Busy SEC