Regulatory News

House Committee Approves Financial CHOICE Act
During a party-line vote on May 4, the U.S. House Financial Services Committee approved the Financial CHOICE Act of 2017, a wide-ranging bill that seeks to repeal significant portions of the Dodd-Frank Act. While most of the CHOICE Act relates to the financial sector, the 591-page bill includes various sections that would impact the disclosure or corporate governance practices of most public companies. The CHOICE Act is likely to pass the Republican-controlled House, but appears to have little chance of advancing in the U.S. Senate, where Republicans would need to win support from at least eight Democrats to overcome a likely filibuster.

For a summary of the bill's key corporate disclosure and governance provisions, please review this NIRI Executive Alert

Meanwhile, Nasdaq has published a blueprint for market reform that includes a number of recommendations that are consistent with NIRI's views. Here is an op-ed in The Wall Street Journal that summarizes Nasdaq's recommendations. 

Clayton Sworn in as SEC Chair
On May 4, Jay Clayton was sworn in as chairman of the Securities and Exchange Commission. The U.S. Senate voted 61-37 to approve his nomination on May 2. Here is a link to a NIRI press release that congratulates Clayton. 

 

Advocacy Action Items

Express Your Views on the CEO Pay Ratio Rule
The SEC has asked issuers to submit comments on the challenges and costs they face in preparing for the agency's CEO pay ratio rule and whether this mandate should be delayed. This Dodd-Frank rule would require most U.S. public companies to disclose the ratio between the total compensation received by their CEO and that earned by the issuer's median employee. Companies with December 31 fiscal years would have to make their first disclosures in the spring of 2018.

NIRI, which has urged the SEC to reduce the compliance burdens of this rule, encourages members to ask their companies to express their views on this mandate. Here are links to some of the comment letters that have been submitted to the SEC by issuers with NIRI members:

In addition, the Society for Corporate Governance and the Corporate Governance Coalition for Investor Value have submitted letters that ask for relief from this burdensome mandate.

The Financial CHOICE Act includes language that would repeal this mandate. 

 

Urge the SEC to Take Action to Improve Short-Selling Disclosure
In October 2015, NIRI joined with the NYSE Group in a rulemaking petition that asks the SEC to require 13(f) institutions to publicly report their short positions. In December 2015, Nasdaq submitted a similar rulemaking petition, which has been endorsed by the Biotechnology Innovation Organization, a trade association that represents biotech companies. In a May 2016 NIRI survey, 95 percent of U.S. IR practitioners said they agree that the SEC should adopt new rules to improve short-position disclosure.    

NIRI encourages members to ask their companies (or clients) to write comment letters to the SEC that support this much-needed reform to improve equity ownership transparency. A briefing paper, comment letter templates, and letters from a growing list of companies can be found on NIRI's Short Selling page

NIRI, the NYSE, and the Society also have asked the SEC to modernize the outdated 13(f) rules that govern long-position reporting. The current rules, which have not been updated since 1979, require institutions to report their long positions 45 days after the end of each quarter. NIRI and the NYSE have called for a monthly reporting regime with a 15-day filing period that would generate more timely information about institutional holdings while accomodating investment managers' concerns about protecting their trading strategies.      

 

Write Your Lawmakers in Support of Proxy Advisor Oversight Legislation
NIRI is asking members to write their U.S. House and Senate lawmakers in support of the Corporate Governance Reform and Transparency Act, which would direct the SEC to regulate proxy advisory firms. This bill was approved by the House Financial Services Committee with bipartisan support in June 2016, and this legislation is included in the 2017 version of the Financial CHOICE Act.

The Society for Corporate Governance, Nasdaq, the U.S. Chamber of Commerce, and the Business Roundtable all have expressed support for this proxy advisor legislation, which would mandate a draft review process and require proxy firms to improve disclosure of their conflicts of interest. In a NIRI survey in May 2016, 87 percent of U.S. IR practitioners agreed that proxy firms should be required to provide proxy report drafts to all issuers. 

To find the name of the U.S. House member who represents your area, please visit this link. For a listing of U.S. senators and their office addresses, please visit this link. A formal letter is not required; members and their companies are welcome to e-mail or call to voice their concerns.     


Support the "Brokaw Act" to Improve Transparency Around Hedge Fund Activism
U.S. Senator Tammy Baldwin of Wisconsin is seeking bipartisan support for her "Brokaw Act" bill, which seeks to modernize the 13(d) disclosure rules that apply to activist hedge funds that obtain more than a 5 percent stake in a public company. Under current 13(d) rules, which have not been substantially updated in more than 40 years, activist funds don't have to disclose their stakes and intentions until 10 days until after they cross the 5 percent threshold, which allows these funds and their allies to continue to accumulate shares in secret. Baldwin's legislation would reduce this reporting period to two days and broaden 13(d) disclosure to include derivatives, short positions, and other instruments. In a May 2016 NIRI survey, 92 percent of U.S. IR practitioners said they support these reforms.

NIRI encourages members to contact their home state senators and express support for the Brokaw Act. For a listing of U.S. senators and their office addresses, please visit this link. A formal letter is not required; individuals and their companies are welcome to e-mail or call to express their views.       

 

Reach Out to Your Chapter Advocacy Ambassador
If you are interested in learning more about NIRI's advocacy priorities, please contact your chapter's advocacy ambassador, and/or Ted Allen, NIRI's vice president for strategic communications, at tallen@niri.org. If your chapter doesn't yet have an advocacy ambassador and you would like to take on that role, please contact the president of your chapter.


Read IR Weekly and IR Update to Follow New Developments
NIRI's IR Weekly newsletter includes a "Regulatory Update" section with summaries and links to new SEC rules and guidance, as well as news about legislative developments in Congress. IR Update has a new "Spotlight on Advocacy" section where you can find articles on regulatory trends that impact IR professionals.   


Need Help?
If you have any questions on these issues or other advocacy matters, please contact Ted Allen, NIRI's vice president for strategic communications, at tallen@niri.org.