SEC to Have ‘Shorter’ Rulemaking Agenda, Chairman Says

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By Andrew Ramonas and Andrea Vittorio

The SEC has prepared a near-term regulatory agenda that’s “shorter than in the recent past,” Chairman Jay Clayton said Nov. 8.

The smaller docket is “rooted in a commitment to increase transparency and accountability,” giving the public information about work the agency has a “reasonable expectation” of finishing in the coming year, Clayton said in New York at a Practising Law Institute gathering.

“For understandable reasons, the SEC’s near-term agenda has swelled over the years,” he said. “The commission has limited resources.”

The Trump administration will release the Securities and Exchange Commission’s rulemaking priorities in the coming months as part of a semi-annual roundup of agencies’ regulatory dockets. Clayton, a political independent appointed by Donald Trump, is poised to follow the example of Republican Commissioner Michael Piwowar, who ushered in a smaller SEC rulemaking agenda as acting chairman earlier in 2017. Piwowar oversaw the drafting of a list of regulatory priorities that was about half the size of the rulemaking docket the commission issued in late 2016 under former Chairman Mary Jo White, a President Barack Obama appointee.

Clayton discussed few specifics of the new short-term agenda in remarks to securities lawyers, and declined to elaborate on the rules list to Bloomberg Law. Instead, he detailed how the SEC is staying busy despite a smaller docket, saying the commission proposed rules intended to streamline disclosure in October and is looking at long-term rulemaking on the proxy process in public company governance.

Shrinking Agenda

Missing from the agency’s near-term rulemaking agenda released in July was action on Dodd-Frank Act proposals on the orderly liquidation of large broker-dealers and disclosure of the relationship between executive compensation and a company’s financial showing, also known as pay versus performance. They were among 62 items in the pre-rule, proposed rule, and final rule stages on the fall 2016 agenda.

This summer’s docket had 33 items in the proposed and final rule stages. An exchange transaction-fee pilot program and rulemaking to simplify Regulation S-K governing non-financial disclosures were among the only six matters that didn’t appear on earlier agendas. Clayton said rulemaking mandated under Dodd-Frank is “top of mind” as he looks at the SEC’s longer-term agenda.

“It’s not something he’s going to ignore,” Lona Nallengara, a New York-based Shearman & Sterling LLP partner and former chief of staff to White, said at the conference. “He’s got a mandate from Congress.”

Proxy Process Discussion

Another area “worthy of discussion” for long-term rulemaking is the system that lets shareholders advocate on and vote on various issues at companies’ annual meetings, Clayton said.

Business groups have been pushing for tighter limits on the proxy process, which they say has strayed from its corporate governance roots and been taken over by “gadflies” and other shareholders raising social or environmental concerns. Investors, who have notched unprecedented voting victories this year at companies such as Exxon Mobil Corp. and Occidental Petroleum Corp., say such concerns are overblown.

“While I am supportive of rules that allow shareholder proposals, I am searching for a way to reconcile the multiple positions and find some common ground,” Clayton said.

The last time the commission asked for feedback on its “proxy plumbing” was in 2010. He said the SEC should consider doing that again.

Clayton also expressed concern about the lack of participation in the process by individual investors as opposed to institutions. Retail shareholders own 30 percent of shares in the nation’s public companies, but only 29 percent of those shares voted in the most recent proxy season, according to a ProxyPulse analysis.

Brian O’Shea, senior director of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said his organization welcomes an initiative that advances the interests of shareholders in the proxy system.

“When it comes to proxy participation, the interests of retail shareholders are often forgotten,” O’Shea said in a statement to Bloomberg Law. “Good governance should be to ensure the interests of all investors are equally considered, especially those of retail shareholders who are often investing for their long-term financial needs.”

To contact the reporters on this story: Andrew Ramonas in Washington at aramonas@bna.com; Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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