Tag: SEC’s Investor Advisory Committee

SEC’s Investor Advisory Committee adopts “proxy plumbing” recommendations

Yesterday morning, at a telephonic meeting of the SEC’s Investor Advisory Committee, the Committee voted to adopt revised recommendations addressing “proxy plumbing”—the panoply of problems associated with the infrastructure supporting the proxy voting system. (See this PubCo post.) The recommendations were originally presented at a meeting of the Committee in late July, but the Committee elected to study the proposal further and offer revisions before voting.  The changes are fairly nuanced, now also including some minority views. For the most part, the recommendations would not “reinvent” the proxy voting system, instead targeting improvements that are considered essentially “low-hanging fruit.” However, there appeared to be a consensus that eventually more would need to be done. The recommendations were adopted by a majority of the Committee with two dissents. Will the SEC pay attention?

SEC’s Investor Advisory Committee considers “proxy plumbing” recommendations

At a meeting on Thursday of the SEC’s Investor Advisory Committee, a subcommittee reported on its recommendations addressing the “proxy plumbing” conundrum—not the Roto Rooter variety, but rather the panoply of problems associated with the infrastructure supporting the proxy voting system.  Shareholder voting is viewed as fundamental to keeping boards and managements accountable, and according to the recommendations, every year, over 600 billion shares are voted at more than 13,000 shareholder meetings.  However, there is broad agreement that the current system of proxy plumbing is inefficient, opaque and, all too often, inaccurate.  As the recommendations observe, under the current system, shareholders “cannot determine if their votes were cast as they intended; issuers cannot rapidly determine the outcome of close votes; and the legitimacy of corporate elections, which depend on accurate, reliable, and transparent vote counts, is routinely called into doubt.” In 2010, the SEC issued a concept release soliciting public comment on whether the SEC should propose revisions to its proxy rules to address these issues, but to no avail.  (See this Cooley News Brief.) However, in the last year or so, proxy plumbing has reemerged as a serious problem to be addressed. The Committee took up this issue almost a year ago and, at the SEC’s proxy process roundtable last year, proxy voting mechanics was actually a hot topic—described by one panelist as “the most boring, least partisan and, honestly, the most important” of the roundtable topics.

Cybersecurity risk disclosure remains at relatively low levels, but for how long?

Even though, in the wake of recent events, cybersecurity is a very hot topic, only 38% of U.S. public companies cite cybersecurity as a risk factor in their annual and quarterly SEC filings, according to a recent study from Intelligize.  The study showed that, while only 426 public companies cited cybersecurity as a risk in 2012, that number grew to 1,662 in 2016.  However, so far in 2017, the number has been relatively flat at 1,680. But the question remains, how long will that continue?

Major indices announce decisions to exclude companies with multi-class share structures

Earlier this week, the S&P Dow Jones Indices announced that the S&P Composite 1500 and its component indices (the S&P 500, S&P MidCap 400 and S&P SmallCap 600) will no longer add companies with “multiple share class structures.” Existing index constituents will be grandfathered in.  This decision follows a similar, but less sweeping proposal announced last week by FTSE Russell,  with FTSE focused on multiple classes with limited or no voting rights. (The proposal is expected to be published, subject to any further feedback, as changes to the “ground rules” on August 25.) Another index, MSCI, has made a similar proposal. While these changes in methodology are imposed against the backdrop of an ongoing conversation about voting rights, the S&P confirmed to me informally that the change in methodology for the S&P Composite 1500 applies to multiple classes of listed or unlisted outstanding common equity, regardless of whether any class has limited or no voting rights. The S&P also confirmed that the phrase “multiple class share structures” is not intended to capture any class of preferred stock. Why do these changes in methodology matter?  As described in this article from Reuters, “[i]nclusion in a stock index has been an important milestone for young companies, bringing their shares into many passive funds and others that closely follow indexes like the S&P 500, a guide for trillions of dollars of capital worldwide.”

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 […]

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 […]

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 […]