The Magazine of Corporate Responsibility

SEC Seeks Comments on New Financial Rules

by James Hyatt

The Securities and Exchange Commission wants some help with its bulging agenda.

The agency faces a deluge of new rule-making tasks, many tied to the recently enacted Dodd-Frank financial reform legislation.

SEC Chairman Mary Schapiro

SEC Chairman Mary Schapiro

To jump-start the process, SEC Chairman Mary Schapiro is loosening up the procedures to gather public comment. “We are expanding our process beyond what is legally required,” she said in a July address to the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness. “We are inviting public comment even before the various rules are proposed and before the official comment periods have begun.

“We have created a series of e-mail inboxes—that can be accessed at www.sec.gov -- so that anyone interested can easily weigh in.”

All submissions on the comment system will be posted on the Commission’s web site with personal identifying information included.

The new arrangement comes with some ground rules, which the SEC chairman called “best practices.”  The SEC staff will “try to meet with any interested parties who seek to meet with us,” she said, but it may have to limit the number of meetings and will limit multiple meetings with the same party.  The staff will ask persons requesting meetings to provide in advance an agenda of intended topics for discussion; participants will be encouraged to submit written comments to the public file.  And,  she said,“I expect we will hold public hearings on selected topics.”

Chairman Schapiro highlighted five areas among the “many topics on our plate”:

OTC Derivatives. The new law brings oversight to the over-the-counter derivatives market, and new rules will address capital and margin requirements, mandatory clearing, operation of executive facilities, business conduct standards for swap dealers and public transparency for transactional information.

Fiduciary Duty. The new law calls for a study of existing standards of care for broker-dealers and investment advisers. Currently, she noted, “there’s a difference between a broker and an adviser” and an investor “can be treated differently based on who they’re getting their investment advice from.”  Advisers are supposed to put the interest of clients before their own, while broker-dealers are supposed to make “suitable” recommendations.

After the study is finished, she noted, “we will have the authority to write rules that would create a uniform standard of conduct for professionals who provide personalized investment advice to retail customers.”

Hedge Funds advisers will have to register with the SEC.

Corporate Disclosure. “We will be adopting many rules in this area – especially in the area of executive compensation.” Under the new act, advisory say-on-pay votes will be required at all companies at least once every three years. And shareholders will also have a say on golden parachute payments to executives.

Companies will be required to calculate and disclose median total compensation of all employees and the ratio of CEO compensation to that of employees

New rules will address standards of independence for compensation committees and for conflict of interest standards when retaining compensation consultants. And rules will establish that brokers cannot vote on compensation matters.

Chairman Schapiro said she intends to have new rules concerning shareholders’ ability to nominate director candidates in effect “in time for the 2011 proxy season.”

Credit Rating Agencies. The new law requires rulemaking on disclosure, controls, conflicts of interest and analyst training, as well as on preventing sales and marketing considerations from influencing credit ratings.

Photo by talkradionews, via Flickr

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