SEC Priorities

You’re reading this because you’re interested in improving corporate governance. It’s also pretty safe to believe that you are pleased with the sections of the almost final financial regulation bill that are intended to improve proxy access for minority shareholders. I hope that this means that you are also bemused and concerned by the recent pronouncement of SEC Chairman Schapiro (at the Society of Corporate Secretaries and Governance Professionals, no less) that the agency intends to take a close look at the rules for risk disclosure by registered companies (WSJ, Johnson, 7-10-10, SEC to Act Quickly on Risk Disclosure Issues).

I’m not against better risk disclosure by any means, but with everything the SEC now has on its plate on account of the new bill and otherwise, not the least of which is writing regulations to implement the new proxy access rules, (WSJ, Scannell, 7-12-10, SEC Enters Overdrive to Prepare for Overhaul) it makes little sense for it to voluntarily assume additional burdens. I’m also not sure that there is much wrong with the existing rules. Anyone who reads corporate disclosure documents can readily get a feel for the risk profile of the registrant right now. Perhaps the existing rules encourage or require overly detailed disclosure, which impairs the value of the material to the non-professional investor, but the information is still there for anyone who wants it and cares enough to sift through it. The plain English rules also facilitate use of the information. Ultimately, I don’t think the existing rules for disclosure of risks or other things are a serious problem or should be a high priority at this time.

I’d much rather see the SEC devote its scarce resources to what it states in the Scannell article are its top priorities – proxy access and market stability (not to mention prevention of Madoff-style fraud):

Agency officials, however, say they remain committed to completing two sets of high-profile rules: one that will allow shareholders to directly nominate director candidates using company ballots, known as proxy access; and several rules aimed at leveling the playing field in the stock market and shoring up perceived holes, such as banning so-called flash orders and creating a better way to track stock-trading information.

Now that so much headway has been made legislatively toward better governance, let’s hope the SEC keeps its eye on the ball during implementation. Some pithy comments to this effect from readers of this site to Chairman Mary Schapiro via e-mail, other Commissioners and staff would likely to go a long way toward making this the case.

Publisher’s Note: Thanks for guest post from Martin B. Robins, an adjunct professor in the Law School of Northwestern University. He is presently, and for the past 10 years has been, the principal of the Law Office of Martin B. Robins where his practice emphasizes acquisitions and financings, technology procurement and licensing, executive employment and business start-ups. The firm represents clients of all sizes, from multinational corporations to medium sized businesses to start-ups and individuals.

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