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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March Arrives Like a Lamb or Was It a Lion

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March Arrives Like a Lamb or Was It a Lion

March arrived lamb-like in Washington as we await Senate Banking Committee Chairman Dodd’s draft financial regulatory legislation and wonder if it will ultimately have the bite of a lion. Republican Senators Shelby and Corker continue their dance with Dodd trying to create a bipartisan effort. However, others are already lining up at the SEC’s door to urge new corporate disclosure in advance of potential new regulation. The current corporate governance philosophy seems to be that if you can’t pass legislation requiring companies to implement a particular practice, you can have the SEC require companies to disclose why they haven’t implemented it. Expect additional disclosure to be an SEC focus for many months, with possible new disclosures including why companies don’t have majority voting, say-on-pay, or even political contributions to name a few.

This past week I attended the SEC’s meeting to approve a new short sale circuit breaker/uptick requirement. While compliance won’t be required until six months from the effective date (i.e. sometime this fall), the new rule is being met with heavy criticism. The new alternative uptick rule (in a 331 page adopting release) specifies that short selling will only be allowed at a price above the national best bid. The press release states, “the circuit breaker would be triggered for a security any day in which the price declines by 10 percent or more from the prior day's closing price. Once the circuit breaker has been triggered, the alternative uptick rule would apply to short sale orders in that security for the remainder of the day as well as the following day.” The criticisms are numerous with many focusing on unintended consequences and the lack of evidence to support this action. SEC staff indicated their rationale was largely based upon the crush of pro-regulation comment letters.

The Commission also reconfirmed it would consider IFRS adoption in 2011 to address claims that it was waffling. However, according to the press release, “the Commission also directed its staff to execute a Work Plan, the results of which will aid the Commission in its evaluation of the impact that the use of IFRS by U.S. companies would have on the U.S. securities market. Included in this Work Plan will be consideration of IFRS, as it exists today and after the completion of various "convergence projects" currently underway between U.S. and international accounting standards-setters. By 2011, assuming completion of these convergence projects and the staff's Work Plan, the Commission will decide whether to incorporate IFRS into the U.S. financial reporting system, and if so, when and how.” It certainly doesn’t sound like a sure thing.

I participated on an industry call with the SEC last week to discuss retail investor education related to proxy voting. To help investors understand the importance of their participation, the SEC is urging companies to post educational information to their corporate websites such as links to the SEC’s new “Spotlight on Proxy Matters,” and “New Shareholder Voting Rules for 2010 Proxy Season” web pages. NIRI expects to release an Executive Alert tomorrow that provides more information on this issue including SEC approved e-proxy changes.

Also under the heading of education, the SEC announced an upcoming public seminar on March 23rd to help companies and preparers comply with XBRL rules.

Moving to NIRI activities this week, I am participating today in a Chicago Chapter “Capital Markets Mini-Workshop,” and later in the week I look forward to visiting the Charlotte and Triangle Chapters. Finally, don’t forget today’s NIRI webinar, “Why CSR is Compelling for IROs.”

Until next week,

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

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National Investor Relations Institute

March Arrives Like a Lamb or Was It a Lion