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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IR Weekly - January 31, 2012

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IR Weekly - January 31, 2012

President’s Note

Change and Frustration

The last change to NYSE Rule 452 was in 2010 when the SEC approved an amendment eliminating broker discretionary voting on director elections. New 452 changes surprised issuers last week when the NYSE implemented another change to Rule 452 eliminating discretionary broker voting on corporate governance matters without specific client instructions.

NYSE points to Washington as the reason for the move, “In light of these and other recent congressional and public policy trends disfavoring broker voting of uninstructed shares, the Exchange has determined that it will no longer continue its previous approach under Rule 452 of allowing member organizations to vote on such proposals without specific client instructions. Accordingly, proposals that the Exchange previously ruled as “Broker May Vote” including, for example, proposals to de-stagger the board of directors, majority voting in the election of directors, eliminating supermajority voting requirements, providing for the use of consents, providing rights to call a special meeting, and certain types of anti-takeover provision overrides, that are included on proxy statements going forward will be treated as “Broker May Not Vote” matters.”

While broker discretionary voting is still helpful in ensuring quorum at annual meetings (through auditor ratification for example), use beyond this function has been dramatically curtailed over the last few years. If you follow NIRI’s advocacy efforts, you will recall the SEC eventually plans to further examine proxy mechanics. Specific issues include considering improvements to shareholder communications, evaluating OBO/NOBO after decades of market evolution, efforts to improve retail investor voting and contemplating client directed voting. The SEC has put these ideas out for discussion but has not yet moved on any of them.

In my opinion, this latest 452 change shows the challenges in our regulatory system, not the least of which is that Dodd-Frank rulemaking is overwhelming the agenda. Regulatory actions that might create a better system between investors, companies and other market participants are being sidelined if not part of Dodd-Frank. In this case, the change was made without a public comment period – or a public SEC approval process. Issuers had no opportunity to make any public case regarding the change.

As your advocate, I want not only to share the news but also a bit of my frustration. I hope tomorrow will be a better day.

Until next week,

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

Sponsored By:

Headlines

Annual Conference Update

Alert: Possible Hotel Reservation Scam

Professional Development

Finance Essentials for Banking & Financial Services Industry – March 19 & 20 in New York, NY
The New Capital Markets – March 21 in New York, NY
Writing Workshop for Investor Relations – June 2 in Seattle, WA

Member Services

NIRI Career Center
NIRI Annual Meeting Survey

Industry Events

This Week in the Boardroom

Chapter News

Upcoming Chapter Events

The Buzz

"Employee-to-CEO Pay Ratio Disclosure Takes More Heat"
"A Glimpse of Murdoch Unbound"
"Regulators Eye Exchange Technology"
"SEC Rolls Out First iPhone App"
"F.B.I. Looks Into Adviser on Chinese Reverse Mergers"
"FASB, IASB to Work on Classification and Measurement for Financial Instruments"
"Political Disclosure Proxy Proposals Hit New High"
"Carlyle Curbing Shareholder Rights Irritates Lawmakers Who See Precedent"
"Clash on Dodd-Frank 'Conflict Minerals'"
"Four Settle SEC Insider Trading Charges in Case Involving Expert Networking Firm"
"Bridging the Gap"
"Shake-Up in US Fixed Income Research Rules"
"Companies Set to Unleash the (Cash) Hoards: Survey"

Sponsored By:

Annual Conference Update

Alert: Possible Hotel Reservation Scam

Protect Yourself and Your Company
NIRI has received complaints regarding a company falsely stating affiliation with NIRI and the NIRI Annual Conference, and/or making reference to the Conference.

The organization, Convention Housing Services, has been contacting members to make hotel reservations for Conference. They often state an offer of cut-rate hotel prices. Be aware that Convention Housing Services is not affiliated with NIRI or the NIRI Annual Conference.

The Seattle Convention and Visitors Bureau reports that others who have dealt with Convention Housing Services have ended up in sub-par hotels miles from the ones promised, or did not have reservations at all, and were unable to obtain a refund.

Important Note
No one affiliated with the NIRI team will ever contact you in an attempt to sell hotel rooms. Hotel reservations for the NIRI Annual Conference block only are made at https://resweb.passkey.com/Resweb.do?mode=welcome_gi_new&groupID=6920222 or directly with the NIRI-affiliated Seattle Housing Bureau at 888.877.0255 [+1.206.461.5881] or hotelres@visitseattle.org.

Please report any suspicious activity to NIRI by calling +1.703.562.7700 or via e-mail at niri@niri.org.

Return to Headlines

Professional Development

Finance Essentials for Banking & Financial Services Industry – March 19 & 20 in New York, NY

Let the experts help you understand the essentials of finance and communicate your company’s financial story.

Web Link | Return to Headlines

The New Capital Markets – March 21 in New York, NY

In this one-day seminar, we’ll make sense out of all the recent changes in the capital markets and drill down to what it all means to the practice of investor relations.

Web Link | Return to Headlines

Writing Workshop for Investor Relations – June 2 in Seattle, WA

Learn fresh tips for writing the annual chairman's letter to stockholders, conference call scripts, internal memos, and earnings releases.

Web Link | Return to Headlines

Member Services

NIRI Career Center

NIRI's Career Center is a highly valued member resource that is one of the most frequently visited web pages on the NIRI Web site. Members can search job listings and post resumes confidentially. Employers and recruiters can post a job for a 30-day period for a $350 fee, and search resumes.

Web Link | Return to Headlines

NIRI Annual Meeting Survey

A sample of NIRI corporate members have been invited to participate in a survey regarding annual shareholder meeting practices. If you received an invitation, please take a few minutes to participate! This is NIRI's first look at annual meeting practices in quite a while and will establish a baseline for understanding future trends.

Return to Headlines

Industry Events

This Week in the Boardroom

Watch NIRI Board Member and SVP, Investor Relations, Barbara L. Gasper, and Mark Schwartz, Board Member, MasterCard Inc. as they discuss the importance of the Board/IR link with TK Kerstetter.

Web Link | Return to Headlines

The Buzz

Employee-to-CEO Pay Ratio Disclosure Takes More Heat
Wall Street Journal (01/24/12) Chasan, Emily

Companies are gearing up to fight federal regulators over a Dodd-Frank Act provision that asks public companies to reveal the ratio of median employee pay to CEO compensation as the Securities and Exchange Commission (SEC) works on writing rules for that section of the law. A group of 23 business organizations, including the National Investor Relations Institute, recently sent a letter to the SEC saying they would like the SEC to hold roundtables on the proposed rule and have the rule undergo a formal cost-benefit analysis. The SEC, which expects to propose rules on the pay ratio in the next six months, is hoping to adopt a final rule by the end of the year. One large company says it may cost $7.6 million and take about 26 weeks to gather the information needed for the rule. Meanwhile, Rep. Nan Hayworth (R-N.Y.) is sponsoring legislation that seeks to repeal the Dodd-Frank section in question.

| Web Link - May Require Paid Subscription | Return to Headlines

A Glimpse of Murdoch Unbound
New York Times (01/29/12) Carr, David

News Corp. Chief Executive Rupert Murdoch began posting to the microblogging site Twitter at the end of last year, spouting off about a wide variety of topics in 140 character bursts. Among the topics Murdoch has discussed in his Twitter postings is the anti-piracy legislation that was recently considered by Congress. Murdoch criticized President Obama in those posts for not supporting the legislation, saying that he was siding with the "Silicon Valley paymasters who threaten all software creators with piracy, plain thievery." Another post by Murdoch lavished praised on New York Mayor Michael Bloomberg's teacher proposals and referred to New York Gov. Andrew Cuomo as a "chicken." Murdoch's posts have been criticized by some as being boring, while others have expressed doubt that the 80-year-old executive is actually the person writing them. Although a highly opinionated executive like Murdoch taking to Twitter to share his thoughts about hot-button issues might seem like it would be something to be avoided from a public relations perspective, some say the posts have served Murdoch's interests and those of his company because they have mixed personal and political topics with propaganda. Other executives, meanwhile, have begun using Twitter to promote themselves and their companies, including Martha Stewart and Richard Branson.

| Web Link | Return to Headlines

Regulators Eye Exchange Technology
Wall Street Journal (01/27/12) Bunge, Jacob

The Securities and Exchange Commission (SEC) is working on new technology standards that would give the agency more power to step in when problems occur at stock exchanges. The current guidelines set by the SEC in the late 1980s are only voluntary, although exchanges and alternative trading platforms tend to treat them as rules, but the agency says they are difficult to enforce and trading has become far more sophisticated since then. The technology guidelines cover computer operations, telecommunication networks, data security, and backup systems in case of a disaster. A rule on the books would lay out clear standards for the 13 exchanges and smaller trading venues, which use different technologies, as well as make it more straightforward for authorities to review a major outage and potentially take action, according to a person close to the process. Such a rule would be supported by both Democratic and Republican members of the commission. The May 2010 flash crash prompted the agency to focus more on technology, although big technology glitches have occurred on the exchanges run by Nasdaq OMX and Direct Edge over the past year, and minor problems are more common. Separately, the SEC wants to build an electronic system to track trading on all domestic markets.

| Web Link - May Require Paid Subscription | Return to Headlines

SEC Rolls Out First iPhone App
Compliance Week (01/27/12) Carton, Bruce

In late January, the Securities and Exchange Commission (SEC) quietly released its first iPhone app. The app is very simple, but for an agency that has often struggled to keep up with evolving social media, it is a step in the right direction. The app has four tabs: News, Video, Events, and Contact Us. The tab that may be the most useful is the News tab, where individuals can view a regularly updated feed of the SEC's press releases. The SEC says the new app is still a work-in-progress, and that other tabs may be added in the future.

| Web Link - May Require Paid Subscription | Return to Headlines

F.B.I. Looks Into Adviser on Chinese Reverse Mergers
New York Times DealBook Blog (01/27/12) Barboza, David

The Federal Bureau of Investigation has run a search of the offices of corporate advisory firm New York Global Group, which has a reputation for helping midsize Chinese companies go public in the United States through reverse mergers. The investigation strongly suggests that federal investigators may be targeting the advisers and promoters who helped create a prosperous business in backdoor listings of Chinese companies. Shareholders have seen billions of dollars lost on Chinese reverse mergers over the last year, after some of the firms were charged with accounting fraud and distorting the quality and size of their holdings. Since the shell of a defunct company is used in a reverse merger, the listing is less costly and less rigorous than a conventional initial public offering. Many Chinese companies obtained a shell company, placed their China operations within it, and then reported strong earnings growth, which frequently drove up their share value. U.S. officials are currently pressuring China to accelerate its enforcement of securities statutes and to improve accounting standards, while analysts say Chinese investigators also are probing whether consultants in China were helping companies exaggerate or fabricate their holdings and accounts to attract global investors.

| Web Link | Return to Headlines

FASB, IASB to Work on Classification and Measurement for Financial Instruments
Journal of Accountancy (01/12) Tysiac, Ken

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have announced they are jointly working on a project that would lessen the differences between their classification and measurement models for financial instruments. The boards plan to explore these models together as part of the FASB's reconsideration of a Proposed Accounting Standards Update on financial instruments that was issued in May 2010. The IASB, meanwhile, plans to take the talks with the FASB into account as it works on its project to make a limited number of changes to IFRS 9, Financial Instruments. Amendments were made to that project in 2010 following efforts to develop a new IFRS on insurance contracts and amid feedback about how IFRS 9 affects certain instruments. Following talks about the FASB and IASB models, the two boards will decide whether or not to propose amendments to IFRS and U.S. GAAP. Meanwhile, the FASB and IASB are working on a separate project to come up with a common method for the impairment of financial assets. The FASB has made proposals for improving disclosures about interest rate risk and liquidity, both of which are covered under IFRS 7, Financial Instruments: Disclosures.

| Web Link | Return to Headlines

Political Disclosure Proxy Proposals Hit New High
Wall Street Journal (01/26/12) Chasan, Emily

Shareholders have already submitted 100 proxy proposals seeking more disclosures on corporate political activities, up from the previous record of 88 in 2011, according to figures from Institutional Shareholder Services (ISS). Only 55 of the political proxy proposals last year went to shareholder votes, but investors on a recent call organized by ISS said the goal is often to get management attention on their concerns. Shareholder support for political disclosure proposals averaged 33 percent last year, says ISS, and investors on the ISS call expect support to remain at that level or increase this year, as bigger institutions have submitted more proposals. "As investors become more aware of this issue, we believe the proposals should attract broad support," said John Keenan, a corporate governance analyst at the American Federation of State, County, and Municipal Employees, on the ISS call. Some pension funds have made commitments to support enhanced disclosures, and ISS says it would advise shareholders to support them this year. About half of the proposals are seeking political disclosure and oversight, but 40 focus on lobbying expenses and trade association participation. About eight proposals seek a say-on-political spending vote, and a handful ask companies to refrain from making political contributions.

| Web Link - May Require Paid Subscription | Return to Headlines

Carlyle Curbing Shareholder Rights Irritates Lawmakers Who See Precedent
Bloomberg (01/26/12) Weiss, Miles

The buyout firm Carlyle Group recently amended a regulatory filing by adding a requirement that future shareholders use arbitration rather than the court system to resolve any claims against the company. The move is designed to protect Carlyle from class-action lawsuits and to force shareholders to use a process that is typically less confidential, allows less discovery by plaintiffs, and includes fewer ways for plaintiffs to appeal than legal proceedings. However, the rule could run afoul of Securities and Exchange Commission (SEC) regulations that forbid companies from going public with language in their governing documents that places limits on the ability of investors to use the rights granted to them under federal securities laws to resolve disputes. Carlyle could sue the SEC should the agency take steps to block its rule. Some experts say the case could end up before the U.S. Supreme Court, which has never ruled on the issue of whether or not public companies can require shareholders to use the arbitration process to resolve disagreements. Assuming the case is ultimately heard by the Supreme Court, some say the justices would almost certainly strike down the SEC's policy, in part because the court under Chief Justice John Roberts has issued a number of decisions that promote arbitration as the preferred method for bringing an end to disagreements. In addition, Carlyle has more freedom to restrict its fiduciary duties to its shareholders because it is considered to be a limited partnership rather than a corporation under Delaware law. If Carlyle is successful in implementing its rule, closely held firms that manage hedge and buyout firms and are structured as limited partnerships could adopt similar mandatory arbitration requirements.

| Web Link | Return to Headlines

Clash on Dodd-Frank 'Conflict Minerals'
Politico (01/26/2012) Mak, Tim

The Securities and Exchange Commission will soon decide how to interpret a provision in the Dodd-Frank Act that requires companies to track the use of “conflict minerals” from the Democratic Republic of the Congo in their production of some consumer products, and business groups are clashing with faith leaders over the issue. In a recent conference call with faith leaders, Rep. Jim McDermott (D-Wash.) said as many as seven million people have been killed and the Dodd-Frank provision “could cut off the flow of money to the rebels [who are] controlling mines and selling minerals on the black market.” Some business groups say the rule would increase compliance costs unnecessarily, but human rights group Global Witness is concerned pressure from businesses will lead lawmakers to water down the law so much it becomes ineffective. Joining the human rights groups are religious groups such as the Religious Action Center of Reform Judaism, whose director, Rabbi David Saperstein, says “there is broad consensus in the religious community that transparency of minerals coming from conflict regions is a vital responsibility … we’re all concerned with trying to get conflict minerals out of the system.” Among the minerals the law requires to be tracked are tin, which is used in circuit boards; tantalum, used in electronic capacitors; tungsten, which allows mobile phones to vibrate; and gold, which is used to coat wires.

| Web Link | Return to Headlines

Four Settle SEC Insider Trading Charges in Case Involving Expert Networking Firm
Bloomberg BNA Securities Law Daily (01/25/12)

On Jan. 25 the Securities and Exchange Commission (SEC) declared that three individuals and a hedge fund managed by one of them have agreed to pay a $4.6 million settlement in disgorgement plus prejudgment interest in a case involving charges of insider trading by an expert networking company. The core of the insider scheme, according to the commission, was the independent investment research firm Primary Global Research (PGR). Last February PGR employee Bob Nguyen and five other expert network consultants and PGR employees were accused by the SEC of tipping hedge funds and other shareholders to insider information, producing almost $6 million in illegal profits. Noah Freeman and Barai Capital Management manager Samir Barai were charged later that month by both the SEC and the Justice Department, and the SEC added Barai's hedge fund as a defendant. Nguyen pleaded guilty to securities fraud in January, and Barai pleaded guilty to criminal charges in May. According to the SEC, Barai, Barai Capital, and Freeman consented to permanent injunctions against future securities law violations, while Barai will pay $190,890.04 disgorgement and $11,449.16 prejudgment interest. Freeman will pay $833,480 disgorgement and $180,548 prejudgment interest, while Barai and Barai Capital will hold joint liability for $3 million disgorgement and $434,225.47 prejudgment interest.

| Link to Full Text Unavailable | Return to Headlines

Bridging the Gap
Traders Magazine (01/12) Schroeder, Mary

Traders are always looking for data that helps them understand the impact of various factors on trading costs, and transaction-cost analysis (TCA) has recently matured into a powerful set of tools that offers real-time information and decision support that helps cut execution costs. But not all firms are using it the same way—the biggest and most sophisticated are using it to enhance trading performance, while smaller firms are merely using it because they are required to for board compliance obligations. But now there are some off-the-shelf solutions that can help smaller firms get the same kinds of benefits bigger firms get from the customized systems they have built. Markit, for example, has already released a tool that allows traders to find the best broker algorithm for an order based on past trades, and ITG has a similar decision support tool. Both are also planning to release real-time pre-trade systems this year that will deliver cost estimates based on same-day information rather than the previous day. Mike Googe of Bloomberg's TCA product says the technology will help automate the trade execution process in the future, helping to determine, for example, steady-state orders for automated routing and freeing traders to focus on adding value to more difficult trades. In a Greenwich Associates survey last year, about 68 percent of equity investors said they used TCA. Their concerns about the tool include data accuracy and whether it gives traders an edge that will make them better investors.

| Web Link - May Require Free Registration | Return to Headlines

Shake-Up in US Fixed Income Research Rules
Financial Times (01/24/12) Demos, Telis

The Financial Industry Regulatory Authority (FINRA) is gearing up to propose a set of rules that would eliminate some of the differences that exist between the regulation of bond market coverage and the regulation of equity analysis. The rules aim to address the conflicts of interest that exist in fixed income research by calling for analysts who write fixed-income reports that are sent out to retail investors to follow the same rules that equity analysts are required to follow. However, there would be exceptions for swaps research and discussions about a company's creditworthiness. Finally, the rules will call for additional warnings to be included in research for institutional clients. A number of financial industry groups oppose the rules, saying that voluntary guidelines for fixed income analysts are already in place. In addition, some opponents of the rules say they address a problem that does not exist, and they will have a number of negative consequences. Opposition to the rules could also come from President Obama and other politicians. A group that includes both Democratic and Republican senators has already proposed a bill that calls for exemptions for equity analyst restrictions on small companies.

| Web Link - May Require Paid Subscription | Return to Headlines

Companies Set to Unleash the (Cash) Hoards: Survey
CFO (01/12) Johnson, Sarah

A survey of 940 business professionals by Deloitte has found that a large number of companies are planning to deploy at least some of the cash they are keeping in reserve this year. Among those who took part in the survey, most of whom worked in the firms' finance department, roughly 40 percent said their companies planned to take funds out of their cash reserves in 2012. Nearly 28 percent of respondents said they would likely make acquisitions in the next 12 months, while more than 21 percent planned to boost their capital budgets. Stock buy-backs and dividends were the choice of 11.9 percent and 5.4 percent of respondents, respectively, while roughly 33 percent said they did not know whether their companies would do any of these things. The survey also asked respondents why their companies were hoarding cash. A third said their companies were concerned about uncertainty and market volatility. A lack of attractive investment options was the second most popular reason. Non-financial companies in the United States are currently sitting on almost $2 trillion in cash reserves.

| Web Link | Return to Headlines

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January 31, 2012

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NIRI is dedicated to advancing the practice of investor relations and professional competency and stature of its members.

IR Weekly , distributed every Tuesday, is an executive summary of upcoming NIRI professional development programs, timely member services information and noteworthy articles pertaining to investor relations and public company disclosure current issues and best practices. Our editorial staff monitors nearly 11,000 newspapers, business publications, Web sites, national and international wire services, and other periodicals and summarizes significant articles into an easy-to-read executive summary.

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IR Weekly - January 31, 2012