Advocacy News and Action Items

 

NIRI Expresses Support for 13F Reform Legislation

On May 5, 2021, NIRI submitted a letter in support of the “Capital Markets Engagement and Transparency Act of 2021,” which would modernize the Section 13(f) ownership disclosure rules. This draft bill was among the bills slated for consideration during the House Financial Services Committee's May 6 hearing on market volatility and short selling. 

The bill would: (1) shorten the Form 13F filing deadline from 45 days to five business days; (2) improve the timeliness of 13F disclosures by requiring monthly disclosure instead of quarterly reporting; (3) require that 13F filers disclose their short positions; (4) require the disclosure of derivative positions that are substantially equivalent economically to direct ownership of a 13F security; and (5) direct the SEC to complete a study of its current standards for granting confidential treatment requests to investment managers who wish to delay specific 13F disclosures.  

NIRI encourages companies and NIRI chapters to contact House lawmakers to voice their support for these much needed reforms. For more information, please contact Niels Holch, NIRI's Vice President for Public Policy and Advocacy

 

NIRI Submits Letter in Response to SEC's Call for Input on Climate Risk Disclosure

NIRI has submitted a comment letter to the SEC in response to the Commission's March 15, 2021 request for investors, companies, and other market participants to share their views on climate change disclosure and reporting frameworks. NIRI encourages companies to also share their views with the SEC. 

"Since 2010, investor demand for, and company disclosure of information about, climate change risks, impacts, and opportunities has grown dramatically," Acting SEC Chair Allison Herren Lee said in a statement. "Consequently, questions arise about whether climate change disclosures adequately inform investors about known material risks, uncertainties, impacts, and opportunities, and whether greater consistency could be achieved."

The agency's request for public input includes 15 separate groups of questions related to dislcosure. Here are three of the question groups that the SEC has included:

  • What are the advantages and disadvantages of permitting investors, registrants, and other industry participants to develop disclosure standards mutually agreed by them? Should those standards satisfy minimum disclosure requirements established by the Commission? How should such a system work? What minimum disclosure requirements should the Commission establish if it were to allow industry-led disclosure standards? What level of granularity should be used to define industries (e.g., two-digit SIC, four-digit SIC, etc.)?
  • What are the advantages and disadvantages of establishing different climate change reporting standards for different industries, such as the financial sector, oil and gas, transportation, etc.? How should any such industry-focused standards be developed and implemented?
  • What are the advantages and disadvantages of rules that incorporate or draw on existing frameworks, such as, for example, those developed by the Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), and the Climate Disclosure Standards Board (CDSB)? Are there any specific frameworks that the Commission should consider? If so, which frameworks and why? 
NIRI members and chapters are also encouraged to submit their thoughts directly to the SEC. NIRI has provided a draft comment letter template to be used as a starting point, available for download here


NIRI Joins Trade Group Letter in Support of Equality Act  

On Feb. 24, 2021, NIRI joined a business trade association letter organized by the National Association of Manufacturers in support of the Equality Act (H.R. 5). The legislation would amend several provisions of the Civil Rights Act of 1964 to provide affirmative, statutory non-discrimination protections for LGBTQ Americans both in the workplace and in the community.  While this bill was approved by the U.S. House of Representatives on a 224-to-206 vote, this legislation faces an uphill fight in the Senate, where 60 votes would be needed to overcome a filibuster by opponents.  
 

Issuer Coalition Urges House to Improve Ownership Transparency 

In advance of the U.S. House Financial Services Committee's February 2021 hearing on GameStop and short selling, the Shareholder Communications Coalition, which includes NIRI, submitted a statement calling for short position transparency and modernization of the 13D and 13F disclosure rules.  

On March 31, Americans for Financial Reform, a coalition of labor pension funds and other investor advocates, wrote a letter to the SEC that urged the agency to modernize the 13F rules by expanding disclosure to include short sales, short option positions, and derivatives. The group also asked the SEC to increase its regulatory scrutiny of "family offices," citing the collapse of Archegos Capital and the efforts of several prominent hedge fund managers to evade oversight by converting to family office structures.

 


NIRI Submits Letter to the FTC on Activism Transparency  

NIRI has submitted a comment letter that opposes a proposal by the Federal Trade Commission to exempt activist fund managers from providing notice to regulators before acquiring significant stakes in public companies. This proposal would have a negative impact on mid-cap and larger issuers, which can learn through the FTC's Hart-Scott-Rodino Act notification process about an activist fund's plans to acquire a significant stake before the activist crosses the 5 percent ownership threshold under the SEC's Schedule 13D rules. NIRI's comment letter was joined by four NIRI chapters and seven issuers.
 

NIRI Expresses Support for Board Diversity

In December 2020, NIRI submitted a comment letter that expresses support for the goals of Nasdaq's proposed listing standards on board diversity.
 
Nasdaq’s proposed listing rules are subject to the approval of the U.S. Securities and Exchange Commission. NIRI’s letter to SEC praises Nasdaq for encouraging companies to provide more disclosure on board composition while also providing significant flexibility for issuers.
 
The primary intent of Nasdaq’s proposal is to promote more standardized disclosure and engagement with institutional investors, many of which support the appointment of more diverse directors. Under proposed Nasdaq Rule 5606, companies would disclose their diversity data in aggregate form through a “Board Diversity Matrix” within one year of SEC approval of Nasdaq’s proposal.  Under proposed Rule 5605(f)(2), most Nasdaq companies would have four years to appoint at least one female board member and one director from an “underrepresented” minority group (or who self-identifies as LGBTQ+) or publicly disclose their reasons for not doing so. Companies listed on Nasdaq’s Capital Market would receive an additional year.

Nasdaq's board diversity proposal has been supported by many institutional investors and most corporate groups, while a few conservative organizations and Senate Republicans have expressed opposition. For more on this proposal, please visit NIRI's Diversity & Inclusion Resources Library.  

In April 2021, NIRI joined a U.S. Chamber of Commerce-organized business coalition letter in support of House legislation on board diversity disclosure.    

 

 

NIRI, Corporate Groups Defend the SEC's Proxy Advisor Rules

On November 6, NIRI joined with the U.S. Chamber of Commerce and other business organizations in an amici curiae brief that defends the U.S. Securities and Exchange Commission's new regulations on proxy advisory firms. Institutional Shareholder Services (ISS) has filed a federal court lawsuit in an effort to block the SEC's final rules, which are slated to take effect in December 2021. ISS contends that the SEC exceeded its legal authority when it adopted new rules in July 2020 that seek to address conflicts of interest and the accuracy of proxy research. In response, NIRI and the business groups argue that "the SEC has statutory authority to regulate proxy advisory firms that exert enormous influence on shareholder voting" and that "the SEC’s reforms are reasonably designed to facilitate more transparent and better informed shareholder decisionmaking, consistent with the longstanding objectives of the securities laws." 

A federal judge in Washington likely will rule on the ISS lawsuit during the first quarter of 2021. Meanwhile, the U.S. Chamber of Commerce has released a new white paper that defends the SEC's proxy advisor rulemaking. 
 


SEC Chair: No Plans to Finalize 13F Proposal in '20

On November 17, Chairman Jay Clayton confirmed that the U.S. Securities and Exchange Commission has no plans to finalize the SEC's controversial Form 13F proposal before he leaves the agency by the end of the year. Clayton's acknowledgment came during questioning at a hearing before the U.S. Senate Banking Committee. (Clayton's comments on 13F start at 1:48:33). Politico.com also reported on Clayton's remarks.    
 
Bloomberg News, citing people familiar with the matter, reported on October 27 that the SEC was planning to withdraw its proposed amendments to its 13F disclosure rules. 

NIRI is pleased to hear that the SEC has listened to the nearly unanimous views of the hundreds of issuers, investors, and associations that objected to this proposal. Overall, the SEC received more than 2,260 comments and letters on 13F; 99 percent opposed the SEC's proposed amendments, according to Goldman Sachs.   

In particular, NIRI thanks the 250 public companies, 28 counseling firms, and five other associations that signed on to NIRI letters opposing these proposed rules. Those letters can be found here and here. The 250 issuers that participated in this effort have a combined market capitalization of almost $3 trillion. NIRI also was joined by Nareit, the Federation of American Hospitals, the Insured Retirement Institute, the Independent Petroleum Association of America, and the Chief Executives for Corporate Purpose's CEO Investor Forum.

NIRI, which engaged with a wide range of business groups on this issue, was pleased to see many other associations submit their own comment letters, including the Society for Corporate Governance, the U.S. Chamber of Commerce, the National Association of Manufacturers, the Business Roundtable, BIO, AdvaMed, and the Edison Electric Institute. NYSENasdaq, and hundreds of their listed companies also have weighed in against the SEC's 13F proposal. 

NIRI also is grateful that 11 NIRI chapters and dozens of public companies sent in their own letters. (Links to the chapter letters and examples of company letters can be found below.)  

On the shareholder side, the Council of Institutional InvestorsCalPERS, the Investment Company Institute, university investment officials, the CFA Institutelabor unions, the Consumer Federation of America, and hundreds of retail investors also voiced opposition to the SEC's 13F proposal. 

NIRI also thanks the lawmakers who opposed this rulemaking, including U.S. Rep. Maxine Waters (D-CA), who chairs the House Financial Services Committee, and U.S. Senators Tammy Baldwin (D-WI), Sherrod Brown (D-OH), Jack Reed (D-RI), and Chris Van Hollen (D-MD). 

Comment Letters from NIRI Chapters

Examples of Comment Letters from Public Companies

Comment Letters From Investors and Investment Organizations

Letters from Business, Legal, Industry, and Professional Organizations 


Commentaries and Letters from Consultants and Service Providers
News Articles and Blog Posts

 

Ask the SEC to Improve Short-Selling Disclosure

In February 2020, Columbia University Law Professors John C. Coffee and Joshua Mitts and a group of well-known law professors filed a rulemaking petition that asks the Securities and Exchange Commission to take action to address "short and distort" tactics by negative activists. Former Commissioner Robert Jackson Jr. also has endorsed this petition.  NIRI has written a comment letter that supports this petition and urges the SEC to adopt broader rules to require monthly short-position disclosure by all 13(f) institutions. NIRI encourages companies and NIRI chapters to write comment letters to the SEC that detail how they have been harmed by misleading information spread by anonymous short sellers. 

In 2015, NIRI and the NYSE Group filed a rulemaking petition that asks the SEC to require 13(f) institutions to publicly report their short positions. Nasdaq submitted a similar rulemaking petition, which was endorsed by the Biotechnology Innovation Organization (BIO), a trade association that represents biotech companies. In an August 2018 NIRI survey, 94 percent of IR practitioner respondents said they agree that the SEC should adopt new rules to improve short-position disclosure. 

In its 2017 and 2018 reports, the SEC’s Government Business Forum on Small Business Capital Formation urged the Commission adopt a short disclosure mandate; this recommendation was a top priority for smaller reporting companies. In April 2018, a coalition of eight business organizations, including the U.S. Chamber of Commerce, Sifma, and TechNet, voiced concern about the impact of “short and distort” campaigns on newly public companies and said the SEC needs to ensure “there is sufficient public information about potential market manipulation.”   

More recently, European authorities have taken action to protect companies from short abuses. In March 2020, the European Securities and Markets Authority tightened its disclosure rules for short positions in response to the COVID-19 pandemic. Under the new rules, investors who have a net short position of more than 0.1 percent of a public company's issued shares would have to disclose their positions to their national securities regulator.  

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 links to letters from public companies can be found on NIRI's Short Selling page. More than 15 companies have submitted letters so far. In addition, the NIRI Capital Area chapter has submitted a letter in August 2018 on behalf of its members who include IR officers at 20 public companies. The NIRI DFW chapter also has submitted a letter of behalf of its members, who include IR officers at 14 companies. 

In addition, Nasdaq and BIO wrote a commentary in May 2019 that makes a strong case for short-position disclosure.  

Ask Lawmakers to Improve Transparency Around Hedge Fund Activism 

In 2017, U.S. Senator Tammy Baldwin (D-Wisconsin) introduced bi-partisan legislation (S. 1744) to modernize the 13D disclosure rules that apply to activist investors who obtain more than a 5 percent stake in a public company. Under current 13D 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. This legislation would reduce this reporting period to four days and broaden 13(d) disclosure to include derivatives and other instruments. In an August 2018 NIRI survey, 95 percent of respondents agreed that the 13D rules need to be updated.

NIRI encourages all members and NIRI chapters to contact their home state senators and express support for 13D modernization. Senator Baldwin plans to reintroduce this bill in early 2021. 

Here is a link to a July 2018 NIRI statement that urges the Senate to support 13D reform. The NIRI Houston chapter submitted letters in support of S. 1744 to Senators Ted Cruz and John Cornyn. A letter template for public companies that wish to write in support of 13D reform can be found here. A list of suggested talking points on 13D can be found here. For a listing of U.S. senators and their office addresses, please visit this link

 

Learn More About NIRI's Advocacy Agenda 

NIRI encourages members to review its updated Financial Regulatory Reform Issues agenda, which was approved by NIRI's Board of Directors in June 2019.  Members also should review this "Advocacy 101" presentation, which was updated in January 2021. For any questions on advocacy issues, please contact NIels Holch.  

Members also are encouraged to read NIRI's IR Update Weekly newsletter, which 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 magazine has a "Spotlight on Advocacy" section where you can find articles on regulatory trends that impact IR professionals.   
 

Reach Out to Your Chapter Advocacy Ambassador

If you are interested in supporting NIRI's advocacy priorities, please contact your chapter's advocacy ambassador. 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.  Here is an updated fact sheet on the advocacy ambassador position.  

Here is a listing of NIRI's chapter advocacy ambassadors (in alphabetical order by chapter): 

  • Dan Aldridge, Atlanta
  • Miranda Weeks, Capital Area
  • David Dragics, Capital Area
  • Barbara Noverini, Chicago
  • John Chevalier, Cincinnati 
  • Christina Kmetko, Cleveland
  • Lisa Rose, Cleveland
  • Shannon Gaycheck, Cleveland
  • James Bragg, CT/Westchester
  • Hala Elsherbini, D*FW
  • Wesley Harris, Houston
  • Terri MacInnis, Los Angeles
  • Laura Kiernan, New York
  • Mark Donohue, Philadelphia
  • Allison Wey, San Diego
  • Edelita Tichepco, San Francisco
  • Kelly Reisdorf, Twin Cities
  • Mark Collinson, Orange County
  • Moriah Shilton, N. California
  • Deb Pawlowski, Virtual

In addition, NIRI's Board of Directors has convened an Advocacy Committee to help guide NIRI's regulatory efforts and answer questions from members. The 2021 Advocacy Committee includes:

  • Pat Davidson, Chair
  • Lisa Rose
  • Deb Wasser
  • Kelly Reisdorf
  • David Dragics
  • David Dixon  
     

Regulatory News 

Gensler Sworn in as SEC Chair

Gary Gensler was sworn in on April 17 as chair of the Securites and Exchange Commission. He was confirmed by the U.S. Senate by a 53-45 vote.

Gensler likely wll continue the SEC’s recent focus on climate risk disclosure. The SEC, with a 3-2 Democratic majority, will now be able to propose new reporting rules, perhaps as early as Fall 2021. In March, the SEC requested public input on climate change disclosures. NIRI encourages public companies to share their views on the challenges they would face if the SEC were to impose mandatory disclosure rules.

 

SEC Updates Rules on Shareholder Proposals

On September 23, 2020, the SEC voted 3-2 to modernize its rules on shareholder proposals.

The amendments to Rule 14a-8, which will take effect in 2022, should reduce the number of special interest resolutions that reappear on corporate proxy statements each year despite receiving minimal support. The rules also will require resolution proponents to hold a larger economic stake or continuously own their shares for at least three years. The updated rules also should promote more engagement between public companies and resolution proponents. 

“NIRI welcomes the SEC’s efforts to modernize the shareholder proposal rules,” said NIRI President and CEO Gary A. LaBranche. “We believe the SEC has struck the right balance between preventing abuses and ensuring that long-term investors can still use the shareholder proposal process to raise important corporate governance issues.”   

NIRI and other corporate organizations supported the SEC’s modernization of Rule 14a-8, while governance activists opposed these changes.   

For more details, please review this NIRI Executive Alert

 

The SEC Approves Final Proxy Advisor Rules

In a long-awaited victory for public companies, the U.S. Securities and Exchange
Commission voted 3-1 on July 22, 2020, to approve new regulations on proxy advisory firms
and to issue additional guidance for the institutional investors who hire them.

While the SEC did not mandate a formal pre-publication draft review process, the final
rules will require a proxy firm to provide all issuers a copy of its proxy voting advice, at
no charge, no later than the time it is disseminated to the proxy firm's clients. The rules
also will require proxy advisors to provide notice to their clients that an issuer has filed,
or has informed the proxy advisor, that it intends to submit a response to that proxy
advice.

These new standards are a significant improvement over current practice, whereby one
of the major proxy advisory firms (ISS) provides a review opportunity only to S&P 500
companies, while the other major proxy advisor (Glass Lewis) has charged issuers for
access to its proxy voting advice. 

"After more than a decade of advocacy work by dozens of members, NIRI applauds the
SEC's rulemaking to modernize proxy advisor regulation and to provide institutional
investors with more transparent and complete information," said NIRI President and
CEO Gary LaBranche. "This landmark decision will ensure that all issuers
and their IR teams will receive appropriate access to proxy reports before proxy firm
clients vote and will be able to provide responses that will be shared with those clients." 

For more on these reforms, please see this Executive Alert and visit NIRI's Proxy Advisory Firms and Proxy Systems Reform page.  
 

SEC Publishes a Report on Algo Trading 

In August 2020, the SEC published a report on algorithmic trading. The SEC was required to prepare this report for Congress by the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018.