Advocacy News and Action Items

Bloomberg News: SEC Plans to Drop Its 13F Proposal

On October 27, Bloomberg News, citing people familiar with the matter, reported that the U.S. Securities and Exchange Commission was planning to withdraw its proposed amendments to its Form 13F disclosure rules. The SEC has not officially confirmed that it plans to abandon this proposal. 

Assuming that this Bloomberg News story is accurate, NIRI is pleased to hear that the SEC has listened to the nearly unanimous views of the hundreds of issuers, investors, and assocations that objected to this proposal. Overall, the SEC received more than 2,260 comments and letters on 13F; 99 percent oppposed 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. 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 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 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 learning more about NIRI's advocacy priorities, please contact your chapter's advocacy ambassador, and/or Ted Allen, NIRI's vice president for communications and member engagement, 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.  Here is an updated fact sheet on the advocacy ambassador position

 

Regulatory News

 

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.