1. The SEC published proposed bounty program rules that provide, among other things, guidelines to potential whistleblowers on what the awards might be under the Dodd-Frank mandated bounty program. The SEC's press release is here and its proposed rules are here. A summary of the proposed rules is here. To its credit, the SEC tries to address some obvious pitfalls; e.g., that monetary rewards mean the death of internal reporting, at least absent matching company bounty programs, and that advisers will try to cash in on clients' missteps. We'll see how these play out and whether the rules will spawn a new industry à la the Section 16 bounty program, but it's perhaps telling that the SEC has established a $452 million whistleblower fund to pay out claims, see here. Good luck to the SEC in separating the "there's a serious securities law violation" wheat from the "I hate my boss" chaff as its reporting system rolls out.
  1. The SEC also proposed rules for "say on pay," which, recall, must be included in upcoming proxy statements irrespective of whether final rules are adopted. The proposed rules, here:
  • Require an advisory vote on executive compensation disclosed under Regulation S-K, Item 402, including the Compensation Disclosure and Analysis section. (The SEC doesn't require a particular form of shareholder resolution.) CD&A would require discussion of how or whether the advisory vote guides compensation policies.
  • Require an advisory vote, at least every six years, on whether the say on pay should occur every one, two, or three years. Most companies, we suspect, will recommend an advisory vote every third year to avoid short-termism and expense, but must make clear that the vote is not an up or down say on the recommendation; ISS's draft policy recommends an annual vote, see here, purportedly to increase accountability and communication and to avoid confusion on what shareholders are voting on. Shareholders must be given four choices on the proxy card—one year, two, three, or abstain. The frequency must be announced in the first 10-Q following the advisory vote.
  • Require an advisory vote on golden parachute arrangements with named executive officers under new Regulation S-K Item 402(t), which looks a lot like Item 402(j), but which must include tabular disclosure. The advisory vote isn't required if the arrangement was previously approved by shareholders. On a somewhat related note, check out Frederic W. Cook's survey of the evolution of change-in-control practices, here, which it attributes to pressure from shareholder activists.
  • Clarify that including the say on pay does not necessitate filing a preliminary proxy statement.
  1. In a related release, the SEC also proposed rules, here, that would require institutional investment managers subject to Section 13(f) of the Securities Exchange Act to report annually how they voted proxies on executive compensation matters.
  2. Among other Dodd-Frank (see the SEC's scorecard, here) and non-Dodd-Frank related activities the SEC also:
  • Proposed rules intended to curb fraud, manipulation, and deception in connection with securities-based swaps, here, which certainly sounds like a good idea on its face.
  • Proposed rules to require an issuer registering the offer and sale of an asset-backed security to perform a review of the assets underlying the securities, here.
  • Sought comment on ways to reduce the burden of complying with the auditor attestation requirements of SOX 404(b), here.
  • Extended until February 4, 2011 compliance with short sale rules (Regulation SHO), here.
  • Adopted rules, here, requiring brokers and dealers with access to trading securities to establish, document, and maintain a system of risk management controls.
  1. The ICYMI staff, which recently requested confidential treatment of information in a filing with the SEC, found itself pondering: "You need a more detailed justification for why the client's bank account number should be kept confidential? Seriously?!?" With the release of the SEC Inspector General's report last month, here, and its admonishment that the Division of Corporation Finance's review of confidential treatment requests is not "robust" enough, the focus by the SEC on CTRs is understandable. (But guys, seriously, a bank account number?)
  2. It is worth being reminded, as we occasionally are by SEC enforcement actions, that the SEC takes Regulation FD violations seriously. The SEC enforcement action against Office Depot and its CEO and CFO, described here, also reminds us that disclosure through a wink and a nod is still disclosure. So don't be cute. Among other useful tips: company-initiated, private calls with analysts are risky; calls at the end of a quarter, when data appears firm, are even riskier; stock price movement following the contact will draw the attention of regulators and is compelling evidence that the information was material.
  3. The Business Roundtable and Department of Commerce and the SEC's joint motion in the D.C. Circuit Appeals Court for expedited consideration of the challenge to the SEC's proxy access rules, here, notes that the proposed timeline in the case "necessarily means" that the SEC's proxy access rules "will not be available for use by shareholders during the 2010-2011 proxy season." The delay has also provided a "useful natural experiment" that allowed researchers to assess share value changes resulting from the delay. Their study, here, suggests the financial markets place a positive value on shareholder access. Because we're nothing if not fair and balanced, except when we don't want to be, a discussion of the proxy access debate, with links to studies suggesting proxy access decreases shareholder value, is here. At least one study, available here, suggests all the debate on proxy access isn't really worth it because the effect of proxy access will be insignificant.
  4. ISS is soliciting public views on its proxy voting policies, here; it also posted feedback from its 2010 survey on corporate governance issues, here. (With the recent sale of RiskMetrics to MCSI, Inc., it looks like we'll start calling it "ISS" again.) Just for fun, here is a point and here is a counterpoint on the usefulness of proxy advisory services. See also the commentary on the SEC's proxy plumbing rules, here, where commentators battle over appropriate regulation of advisory services.
  5. The SEC recently posted a form letter to CFOs, here; a reminder that material risks related to real estate foreclosures have always needed to be disclosed and, apparently, are still manifest enough to warrant the SEC's form letter.
  6. The FASB will delay implementing its controversial loss contingency rules, see discussion here, which were slated to apply at year-end.
  7. The U.S. Sentencing Commission's sentencing guidelines, here, took effect November 1, 2010. Of import, of course, is consideration of whether changes to your compliance program are merited based on the USSC's views of what an effective compliance program that will reduce penalties looks like (as ICYMI reported back in May 2010, no surprises here—but note, again, that direct reporting by the compliance officer to the board or audit committee is a plus).
  8. Lexis/Nexis announced its Top 25 Business Law Blogs of 2010 here.
  9. Korn/Ferry International's report on board practices at the 100 largest market cap companies in the U.S., as a bellwether of "emerging best practices," is here.