The Securities and Exchange Commission has proposed amendments to its rules to "enhance the compensation and corporate governance disclosures registrants are required to make" about their "overall compensation policies and their impact on risk taking; stock and option awards of executives and directors; director and nominee qualifications and legal proceedings; company leadership structure; the board's role in the risk management process; and potential conflicts of interest of compensation consultants that advise companies."

The proposed amendments would apply to proxy and information statements, annual reports and registrations statements filed under the Securities Exchange Act of 1934, and registration statements filed under the Securities Act of 1933, as well as the Investment Company Act of 1940. The SEC also proposes to transfer to Form 8-K, the reporting of voting results that have been reported under Forms 10-Q and 10-K. Certain other essentially procedural revisions are proposed. The SEC anticipates that if the proposed amendments are adopted, they will be effective for the 2010 proxy season. The comment period for the proposed amendments expires on September 15, 2009.

Among other changes, the SEC is proposing to amend its compensation discussion and analysis disclosure requirements to broaden their scope. It contemplates a ". . . new section that will provide information about how the company's overall compensation policies for employees create incentives that can affect the company's risk and management of that risk."

The proposed rules raise the bar for required disclosures for the election of nominees to serve on a company's board of directors. The new rules would apply to operating companies and registered investment companies "to determine whether and why a nominee is a good fit for a particular company," going "beyond the five-year requirement of [Regulation S-K] Item 401." Nominee involvement in any legal proceeding would be extended from the current five, to ten years "in order to give investors more extensive information regarding an individual's competence and character," if "material to an evaluation of the director or director nominee." The expanded disclosures covering director qualifications and past directorships would also apply to all directors, nominees and executive officers of registered investment companies, as set forth in proposed amendments to registration Forms N-1A, N-2 and N-3.

New disclosure requirements also are being proposed to Schedule 14A, applicable to proxy statements, that would require disclosure of "why the company believes [that its leadership structure] is the best structure for it at the time of the filing." If the board chair of a management investment company is an "interested person" under Section 2(a)(19) of the 1940 Act, a registered fund would be required to disclose whether it has a "lead independent director" and if so, the role he or she plays "in the leadership of the fund."

In general, the "enhancements" proposed by the Commission call for judgments, evaluations and, essentially, projections of a fairly high qualitative nature that are, one is tempted to say, in the nature of "show cause." In the context of documents that expose issuers and their directors and officers to potential legal liabilities for disclosures, or the absence thereof, the materiality of which may only be in the "eye of the beholder," the potential for adverse consequences to issuers and members of management is real. The proposed amendments are set forth and discussed in the SEC's Release Nos. 33-9052, 34-60280 and IC-28817, dated July 10, 2009.