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  1. The SEC published, here, proposed rules required by §952 of Dodd-Frank regarding compensation committee independence standards and compensation consultant independence and conflict disclosure. In its proposal, the SEC
  • punts to exchanges the task of defining "independence" for compensation committee members and instructs the exchanges to "consider" only what Congress told the SEC to tell the exchanges to consider;
  • tells exchanges to adopt the compensation committee charter requirements mandated by Congress (again, with no SEC additions), including that the committee "consider" enumerated consultant independence factors before hiring a consultant; and
  • requires additional proxy statement disclosures about compensation consultants, including whether a consultant was hired, the scope of the assignment and material instructions, whether the consultant’s work raised any conflicts of interest and how they were resolved, and the total fees if non-compensation consulting fees paid to the consultant exceed $120,000.

You must feel some sympathy for the SEC as it implements rules it too must find somewhat ridiculous (honestly, who other than a large shareholder do you want deciding how much of the company’s money to pay executives?), which could explain its minimalist approach. (Also, don’t fret too much about timing and deadlines—although Dodd-Frank says the SEC’s rules must be adopted by July 16, the SEC recently, and quietly, extended its anticipated adoption timeline to August-December (here) and, in any case, the exchanges have 90 days after that to propose rules and one year to issue listing standards.)

  1. The SEC, along with six other government agencies, proposed rules on "incentive-based compensation arrangements" at covered financial institutions, here. These have been kicking around for a while, but as a reminder, the rules would require disclosure of "excessive" compensation and compensation that could expose the institution to "inappropriate risks."
  1. For those who have been eagerly awaiting news on the fate of the SEC’s proxy access rules, a few morsels to tide you over, from last week’s D.C. Circuit Court hearing, are here and here.
  1. The SEC updated its Financial Reporting Manual on April Fool’s Day, here. Don’t get your hopes up, though, because I’m pretty sure there’s nothing amusing in the revisions. (No one at the SEC has exhibited a sense of humor since it was blamed for the Bernie Madoff scandal.)
  1. The SEC’s proposal to "readopt" beneficial ownership disclosure rules 13d-3 and 16a-1, here, may leave you thinking: "Doesn’t it have better things to do with its time?" The proposal confirms the status quo treatment of security-based swaps after §766 of Dodd-Frank becomes effective July 16, 2011 and dispels any thoughts that an SEC failure to enact rules before July 16 renders the beneficial ownership rules inapplicable to investors that buy or sell security-based swaps.
  1. In its periodic tally of say-on-pay happenings, notes that, as of April 8, company recommendations for say-on-pay frequency among 1,698 companies ran:
  • 51% Annuald
  • 43% Triennial
  • 3% Biennial
  • 3% No recommendation

However, of the 132 companies that recommended say-on-pay votes be held every three years (and for which meeting results are available), 43% have seen their shareholders indicate a preference for annual votes. And a fifth company, Ameron International Corporation, joined the ranks of those whose shareholders rejected pay policies. Fueling the ire of shareholders may be the "I’m not responsible for economic downturns but I am for economic upturns" phenomenon that (may) have led to big pay bumps for CEO pay over the last year, see here and here. The SEC published its "small entity compliance guide" on say-on-pay rules, here, noting the say-on-pay and frequency rules don’t apply to smaller issuers until meetings held on or after January 21, 2013, but that golden parachute voting rules apply in forms filed on or after April 25, 2011.

  1. Finally, and as a cautionary note, PWC released its 15th annual Securities Litigation Study, here, and suggested that we’re at the precipice of a "new era" as Dodd-Frank rules take effect and enforcement activities increase as the SEC casts its net broader ("oversight will expand to include market participants") and wider ("[p]rovisions of Dodd-Frank also increase . . . extraterritorial jurisdiction in actions alleging violations of US antifraud provisions"), and as its whistleblower system and the promise of riches seeks to expand reporting of securities violations.

This update is edited monthly by James M. Kearney and is a publication of Stoel Rives LLP for the benefit and information of our clients and friends. This update is not legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. This email may be deemed a solicitation or advertisement under federal law. Copyright 2011 Stoel Rives LLP.