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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Washington’s Impact on Fragile Financial Markets

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Washington’s Impact on Fragile Financial Markets

Last week Washington and politics showed their influence on the markets. The impact began with the win by Massachusetts Republican Brown for the late Ted Kennedy’s Senate seat, shocking all who follow politics. The resulting loss of the Democratic supermajority in the Senate forces a bit more Republican input into upcoming legislation. Things seemed to completely unravel as the week progressed after President Obama announced a proposal that would prohibit banks from taking ownership in proprietary trading, private equity and hedge funds. Without any definition of these items, many wondered if this was a political move due to the Democratic loss in Massachusetts, and whether this could eliminate key risk management abilities for bank clients. While this discussion will take months of debate, other things in Washington are more certain.

President Obama will deliver his State of the Union speech tomorrow, and it will give some indication of his priorities. Though his Senate confirmation is uncertain (although I still believe very likely) with many in Washington politicking on both sides, Ben Bernanke’s continuing status as Federal Reserve Chairman should be determined late this week. What does seem certain is that Treasury Secretary Tim Geithner is currently being marginalized while the voice of Obama advisor, and former Federal Reserve Chair Paul Volcker, is increasing. Geithner’s moderate views are being pushed aside for a more aggressive stance on reform. Some have said this policy change has a direct correlation with Brown’s win in Massachusetts. Regardless, markets don’t like uncertainty and this past week we all saw the impact of Washington on a fragile financial market.

Some items with a more immediate IR focus include:

• The SEC will meet tomorrow and one of the agenda items is to “consider a recommendation to publish an interpretive release to provide guidance to public companies regarding the Commission's current disclosure requirements concerning matters relating to climate change.” NIRI will bring you more information as this discussion develops.

• According to the Wall Street Journal, RiskMetrics Group Inc. has put the company on the auction block. Rumors are that Bloomberg and Thomson Reuters are among those interested. I have to wonder whether current SEC analysis of proxy advisory services plays a role in this decision by the seller and also by potential buyers.

• Rumors have been circulating that the SEC will implement an alternative uptick rule in February. Reports indicate the alternative uptick rule would require trades to be executed above the best existing bid when shares fall 10% in a day.

• Barney Frank held hearings last week on executive compensation for the financial services industry. If you get questions from investors on your executive compensation plan, I suggest your review the testimony of Nell Minow with The Corporate Library to see where the fingers are being pointed on current compensation practices.

• The Supreme Court made a ruling last week that now allows companies, labor unions and other organized interest groups to spend unlimited sums on political advertising. I would not be surprised to see Congress discuss trying to increase more disclosure of political spending for companies or even move this to a proxy vote for company shareholders in the near future.

In NIRI news, if you missed the webinar last week on the new SEC disclosure requirements that go into effect February 28, I encourage you to listen to the replay at your leisure. Finally, I appreciate all of you who are participating in the recently launched NIRI eGroups. This is a great way to communicate with other members and share practices and information – join in today!

Until next week,

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

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National Investor Relations Institute

Washington’s Impact on Fragile Financial Markets