Tag Archives: SEC’s Investor Advisory Committee

SEC committee discusses multi-class common with unequal voting rights

by Cydney Posner

An interesting topic of discussion at a meeting last week of the SEC’s Investor Advisory Committee was “unequal voting rights of common stock” — the trend over the last decade (plus) for a small number of IPO companies, particularly tech companies, to offer low-vote or, more recently, no-vote common shares to the public. (Of course, the concept of dual class common with unequal voting rights is not novel at all.  Many companies, particularly some that are family run, have in decades past had a class of common shares with 10:1 voting rights, not to mention the highly respected Berkshire Hathaway with a class holding voting rights of 10,000:1.)  The debate centered around whether these measures are a legitimate effort to protect companies from the pressures of short-termism exerted by hedge fund activists or are a mechanism that causes shareholders to cede power without providing accountability.  Of course, the answer depends on where you sit. Continue reading

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T+2?

by Cydney Posner

At an open meeting this morning, the SEC voted to propose shortening the standard settlement cycle for most broker-dealer transactions from three business days after the trade date to two business days after the trade date, i.e., T+2.  The SEC’s mandatory settlement cycle (Rule 15c6-1) was first established in 1993 and, since that time, there have been numerous developments in technology and processes, in particular, according to SEC Chair Mary Jo White, “further immobilization and dematerialization of securities, and enhanced institutional trade matching utilities, that have laid the foundation for a shorter settlement cycle.” Notably, the UK and a significant number of European countries already use T+2. The commissioners believe that shortening the cycle will reduce credit, market and liquidity risk exposure, encourage greater efficiency in the clearance and settlement process, and reduce systemic risk.  Although it was acknowledged that even the current proposal will require a significant undertaking, the proposing release also requests comment on alternatively migrating to T+1 or T+0.  Here is the SEC’s press release and the proposing release. Continue reading

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Study shows that investment in material sustainability issues yields higher performance

by Cydney Posner

With the SEC asking proactively in its concept release (see this PubCo post) whether to mandate sustainability disclosure, the question of the relevance to investors of sustainability issues has assumed a new prominence.  According to the SEC, some investors have requested more disclosure of a variety of public policy and sustainability matters, including climate change, resource scarcity, corporate social responsibility and good corporate citizenship, contending that this information is significant to their voting and investment decisions. Others, however, have expressed concern “that adopting sustainability or policy-driven disclosure requirements may have the goal of altering corporate behavior, rather than producing information that is important to voting and investment decisions.” So the question becomes whether this disclosure is important to the general population of “reasonable investors” or is only “of interest” to a narrow segment of investors? In that context, this study, performed by academics at the Harvard Business School, is of particular interest: it showed that companies that made investments in material environmental, social responsibility and governance issues outperformed peers with poor ratings on these issues. Continue reading

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SEC’s Investor Advisory Committee takes on Nasdaq

by Cydney Posner

At the January meeting of the SEC’s Investor Advisory Committee, two Nasdaq representatives made a presentation regarding the recent Solicitation of Comments by the Nasdaq Listing and Hearing Review Council, a standing independent advisory committee, regarding some of the Nasdaq shareholder approval rules.  The reaction of the Committee was, shall we say, largely skeptical, if not downright cynical. Continue reading

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SEC’s Investor Advisory Committee takes on FASB

by Cydney Posner

At Thursday’s meeting of the SEC’s Investor Advisory Committee, the Committee approved the submission of a comment letter urging FASB to reconsider its proposal to make changes to the concept of “materiality” embodied in FASB’s Conceptual Framework for Financial Reporting and FASB’s guidance on Notes to Financial Statements. See this PubCo postContinue reading

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