Tuesday, December 20, 2011

Schapiro: SEC to Focus on Proxy Advisory Firms and Beneficial Ownership Rules

In her December 15, 2011 address before the Transatlantic Corporate Governance Dialogue, SEC Chairman, Mary L. Schapiro, stated that in response to comments received on the Commission's Proxy Plumbing concept release, the Commission is seriously considering providing guidance on how the federal securities laws should regulate the activities of proxy advisory firms. According to Schapiro, commenters on the concept release suggested that proxy advisory firms may interfere with, rather than enhance, the communication at the heart of effective engagement. The comments also reflect a level of frustration with the influence these firms have, accompanied by worries that they may not be accountable for, or even concerned with, the quality of the information on which they make voting recommendations.

The Commission will also be making efforts to modernize the beneficial ownership rules, in particular with regard to broadening the definition of beneficial ownership to include interests held by persons who use derivative instruments, and shortening the current 10 day filing requirements for reporting beneficial ownership under Regulation 13D-G. Schapiro announced that, given controversy surrounding some of the underlying issues, the Commission's first step will likely be a concept release. In addition to proxy advisory firms and beneficial ownership rules, Schapiro mentioned that the Commission is still deeply concerned with proxy access, vote confirmation, and say on pay, and these items remain on the Commission's agenda.

The full text of Schapiro's address may be read at: http://www.sec.gov/news/speech/2011/spch121511mls.htm