Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 3,500 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization.

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NIRI Speaks on Dark Pool Transparency and Proxy Advisory Services

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NIRI Speaks on Dark Pool Transparency and Proxy Advisory Services

Weather woes in D.C. continued last week with the federal government closed for four days due to unprecedented and record setting snowfalls. Congress postponed hearings and votes, but political heat kept the city active. I noted last week that disagreement between ranking Democrats and Republicans in the Senate Banking Committee seemed to indicate two reform bills would be forthcoming. However, Republican Senator Corker appears to have broken ranks to work with Chairman Dodd in developing a bipartisan financial reform bill. The freshman Corker has been itching to take the lead and we will see if he and Dodd can agree, and if he can also bring a majority of Republicans along. Needless to say, things are in flux.

Things were much quieter at the SEC with only a couple of updates:

• In what seems like a logical move, the SEC is transferring responsibility for XBRL taxonomy maintenance to FASB and FAF.

• The SEC has indicated companies are asking questions about the new disclosure rules regarding directors. The SEC has said it is most interested in the director selection process rather than a great deal of information on each director. IR professionals should be ready to explain this process to investors.

• As the SEC moves closer to a vote on new short selling rules, the Managed Funds Association (MFA) released the results of a survey indicating negative effects of public short-sale disclosure in the U.K. The MFA urges daily short selling information should be provided strictly to regulators due to concerns among hedge funds that public disclosure would divulge competitive information creating market inefficiencies and making trading more expensive. I find it encouraging, however, that there seems to be a distinct softening of objection to a 13F and 13D type of short disclosure. NIRI has been advocating for this type of disclosure, and I am pleased to see others supporting this position.

Speaking of advocacy, NIRI filed a comment letter with the SEC today on increased pre- and post-trade transparency for darkpools and other ATS’s. I encourage you to read this short letter to see how NIRI is representing your unique view as investor relations professionals.

Also in the area of advocacy, NIRI and the Society of Corporate Secretaries and Governance Professionals have been developing a discussion paper on proxy advisory service reform. The draft will be released soon and focuses on the following:

• All proxy advisory firms to be required to register as investment advisers, and the SEC to develop a unique regulatory framework for these firms under the Investment Advisers Act of 1940.

• Proxy advisory firms to be required to publicly disclose their internal procedures, guidelines, standards, methodologies, and assumptions for developing voting recommendations and voting decisions.

• The SEC and the Labor Department should prescribe a more robust due diligence process for institutional investors and those investors should disclose their methodologies (including any voting guidelines provided to a proxy advisory firm).

• Proxy advisory firms to be required to maintain a public record of all their voting recommendations and voting decisions.

• All institutional investors using proxy advisory services - including pension funds, hedge funds, and private equity funds - to be required to publicly disclose the actual proxy votes cast by them (or on their behalf).

• Sufficient opportunity for public companies to review draft reports of proxy advisory firms for accuracy and to respond to comments or recommendations with which they do not agree.

• Proxy advisory firms also should be required to disclose any public company's response to their voting recommendations or analysis.

• Proxy advisory firms should be required to publicly disclose any voting errors made in executing or processing voting instructions.

I hope you received and read NIRI’s Executive Alert on the ”SEC’s Climate Change Disclosure Guidance.” We will host a webinar on this and the broader topic of CSR on March 2nd. Finally, with all the snow on the ground here in the capitol, it is hard to believe that we are only a few weeks away from the early bird deadline for the NIRI Annual Conference. Registration has been strong with the need to be up to speed on all the issues swirling around IR professionals. Don’t delay – register today to reserve your spot to be part of the education, networking and rewarding times at annual conference.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

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National Investor Relations Institute

NIRI Speaks on Dark Pool Transparency and Proxy Advisory Services