On February 19, 2016, in New York, SEC Chair White provided a glimpse of the SEC’s top priorities for 2016. A copy of the Chair’s full address can be accessed here with a summary of this year’s agenda below.
1. Complete remaining Dodd-Frank mandates
- Finalize proposals made in 2015 for the remaining executive compensation rulemakings required by the Dodd-Frank Act, including disclosure of whether a company allows executives to hedge the company’s stock, disclosure of pay versus performance measures of executive compensation, and new disclosures and rules for clawing back incentive compensation erroneously awarded. See Release No. 33-9723.
- Finalize the remaining security-based swap rules required by Title VII of the Dodd-Frank Act.
- Finalize the substantive requirements for security-based swap dealers including the rules governing their business conduct and the requirements for their capital, margin and asset segregation.
2. Finalize and advance rules for the asset management industry
- Approve proposals from May 2015 for enhanced reporting for investment advisers and mutual funds to improve the quality of information that the SEC and investors receive. Funds would be required to report basic risk metrics, and new information would be required about their use of derivatives, securities lending activities and liquidity of their holdings. The rules would also impose limits on derivatives and minimum requirements on liquidity. See Release Nos. IA-4091 and 33-9776.
- Approve proposals from September 2015 designed to promote stronger and more effective liquidity risk management across open-end funds and limit the adverse effects that liquidity risk can have on investors and potentially the broader markets. See Release No. 33-9922.
- Advance proposals for transition planning and stress testing.
- Finalize proposals for clearing agencies that would impose new standards for their governance and operation. See Release No. 34-71699.
- Develop support for a uniform fiduciary duty for investment advisers and broker-dealers.
- Bring forward a workable program for third party reviews to enhance the compliance of registered investment advisers.
3. Continue rulemaking to enhance supervision over equity market structure
- Finalize two rules proposed in 2015 to enhance the SEC’s supervision of markets by (i) broadening the oversight of active proprietary traders, including high-frequency traders and (ii) updating regulations for alternative trading systems for the SEC to supervise changes in their operation. The rules would require new detailed disclosures about the operation of these platforms and create new oversight processes for the SEC. See Release Nos. 34-74581 and 76474.
- Advance rules to enhance order routing disclosures and risk controls on trading algorithms.
- Follow-up on the SEC’s advance notice in December 2015 of proposed rulemaking on transfer agents. See Release No. 34-76743.
- Publish notice for comment on the stock exchange’s submission of their plan for the consolidated audit trail.
- Evaluate the Tick Size Pilot for smaller public companies, which stock exchanges have scheduled to begin in the fall of this year. See Release Nos. 34-74892, 76484 and 76483.
4. Actively review effectiveness of existing mandatory disclosure regime
- Review responses from request for comment published in 2015 regarding the form and content of financial statement disclosures by entities other than the registrant under Regulation S-X. See Release No. 33-9929.
- Implement the mandates received in 2015 under the FAST Act to simplify and modernize the SEC’s disclosure requirements for public companies. See Release No. 33-10003.
5. Target enforcement towards complex financial instruments
- Focus on financial reporting, market structure and the structuring, disclosure and sales of complex financial instruments.
6. Other regulatory objectives for 2016
- Shorten the settlement cycle from T+3 to T+2 to support industry efforts and reduce a potential source of systemic risk.
- Further enhance filings through the expanded use of structured data.
- Finalize rules updating the intrastate offering exemption. See Release No. 33-9973.
- Consider recommendations for a universal proxy card for all investors.
- Review final rules for resource extraction. See Release No. 34-7720.
- Consider changes to the “accredited investor” definition.
Chair White’s agenda spans the SEC’s regulatory spectrum. For issuers and investors, the most relevant initiatives this year would address additional disclosure matters such as new executive compensation and clawback information in annual proxy statements and a new look at disclosure simplification for issuers, evaluate an expansion of the “accredited investor” definition and touch on stockholder voting by investors (potentially in contested elections) with universal proxy vote cards.
PartnerArmed with more than three decades of capital market experience, Spencer represents smaller publicly traded companies, and often underwriters and investment funds, in public and private securities offerings. He focuses ...