January 5, 2012 | Blog

SEC Pushes for More “Effective Engagement” of Shareholders by Corporate America

Mary Shapiro, head of the SEC, published an interesting dialogue last week that continues to reinforce the regulators push for greater corporate disclosure.  For an SEC document, this is a fairly easy and straight forward read.  Two really interesting items on the ticket for 2012 included 1) a deeper examination of proxy advisory servicers; and 2) some possible new reporting rules for 13D/13G filers.  In my nearly 20 years of consulting in this arena, at least twice a year I have had a client complain about the business model of proxy advisors.  There’s no question that proxy advisors provide a very valuable service, but their business model has looked very conflicted to us on the outside, and I’ll be interested to see what comes next here.  (PS – It’s great to see NIRI’s support of the investigation into the proxy advisory model too, which you can find in many of their recent memorandums.  Many industry thought groups claim to be independent, yet struggle to live up to that promise when they have to pay the bills.  Thus, it’s great to see that our industry advocate is credible and truly autonomous.)

With respect to the new 13D/13G disclosure ideas, they include possibly speeding up the 10-day filing requirement of those investors who purchase over 5% of the stock of a public company.  What I really like about this investigation is that the SEC is going to consider the inclusion of cash-settled equity swaps and other derivative instruments.  Given the sophistication and sheer number of hedge funds out there today, there is no question that these vehicles have to be included within the spirit of the original rule.