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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Now the FinReg Heavy Lifting Begins

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Now the FinReg Heavy Lifting Begins

It appears to have been a week of nearly unprecedented significance for the SEC: a landmark $550 million settlement with Goldman Sachs - the largest SEC penalty ever assessed against any Wall Street firm; congressional passage of the mammoth “Dodd-Frank Wall Street Reform and Consumer Protection Act” replete with its major rulemaking implications; and the long-awaited issuance of its 151 page “Concept Release on the U.S. Proxy System.” And while the first item is simply interesting, regular readers know that it is the second and third items that have important implications for NIRI members and their companies.

In what is being described as the greatest legislative change to financial supervision since the 1930’s, the Dodd-Frank Act will affect all U.S. public companies. Passed by the Senate last week, it is currently on President Obama’s desk awaiting his signature. The White House has announced that the president will sign it into law tomorrow, and NIRI will release an Executive Alert later today outlining investor relations considerations. The regulatory implications are significant – I have seen reports that the bill requires nearly 250 rulemakings and nearly 70 studies. To give you a perspective on its size, the Dodd-Frank Act is 2,319 pages, while Sarbanes-Oxley legislation was only 61 pages. The SEC gets its fair share of studies and new rulemaking from the new legislation, particularly as it relates to public company corporate governance. So now the hard work of regulatory implementation begins and we must wait and watch. The legislation sets up a defined timeline for some items, but in many cases it is left up to the rulemaker such as the SEC.

Despite this significant new workload, the SEC to its credit pushed forward last week with its “proxy plumbing” concept release. NIRI responded by issuing a press release supporting this effort. As you know, on its own and through the Shareholder Communications Coalition, NIRI has long advocated for improvements to the proxy system and related issues including greater proxy advisory service regulatory oversight and transparency and a stronger institutional share ownership disclosure regime. I think any improvements can only serve to increase public confidence in the integrity of our markets. The key will be for public companies to take advantage of the SEC’s 90 day comment period to submit specific problems they have had with proxy mechanics and suggest improvements.

While this action was unfolding in Washington, I was in São Paulo, Brazil for the week as a guest of IBRI (the Brazilian equivalent to NIRI) speaking at their annual conference. Other than our neighbor Canada, Brazil has the largest number of non-U.S. NIRI members. They also have the second largest non-U.S. NIRI conference attendance. I was delighted to have the opportunity to spend time there and want to share several observations with you.

I believe Brazil has about 400 public companies, yet there were 800 people attending the conference! Brazilian public companies are required by law to have someone in an investor relations capacity and so they take IR very seriously. So seriously, in fact, that many send the entire IR team including the CFO to the conference. Plus, Brazil’s SEC equivalent, the CVM, is an active participant in the conference and sat through sessions to hear about problems and challenges of IR professionals. Lastly, they invite the analyst association – ABRASCA – to be active partners in the conference making for a very positive experience.

One thing Brazilian IR professionals don’t have to worry about is shareholder ID and a detailed understanding of who owns their shares. Trade data (as I understand it) is reported daily to the CVM so companies have a continuous shareholder base update. Those with U.S. ADR’s are understandably as frustrated as American companies with the lack of U.S. ownership transparency. Needless to say, I was impressed and it reaffirmed for me how much we can all learn from each other.

Finally this week, let me remind you about our upcoming “Introduction to Investor Relations” on September 12-15 in Boston. NIRI offers this comprehensive program twice a year and it is an excellent place to begin your career development in the field of investor relations. Alternatively, if you have a full week to devote to IR professional development, registration ends shortly for the University of Michigan IR Certificate program, “Theory and Practice of Investor Relations” on August 15-20.

Until next week,

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

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National Investor Relations Institute

Now the FinReg Heavy Lifting Begins