As negotiations resumed today on U.S. financial reform legislation, the two lead negotiators--Rep. Barney Frank and Senator Christopher Dodd--both said they hoped that the conference committee would wrap up their work by the end of the day on Thursday.
One of the contentious issues to be resolved this week by the 43-member committee is whether the legislation should restrict the SEC’s ability to adopt a proxy access rule to allow investors to nominate board candidates. The bills passed by the House and Senate left those details up to the SEC, but Senate conferees have called for a 5 percent minimum ownership stake and a two-year holding period. Activist investors, including the Council of Institutional Investors, argue that the 5 percent threshold would “essentially gut” proxy access.
The New York Times reported that House members had agreed to drop an amendment to authorize investors to bring securities class-action lawsuits against bankers, lawyers, auditors, and other “secondary actors.” The House has acceded to the Senate’s suggestion to have a federal study of the issue, according to the Times.
Prior to the resumption of negotiations, the House Financial Services Committee released a list of issues that conferees had agreed on. They include:
• Public companies will be required to adopt policies to recoup executive compensation if it was based on inaccurate financial statements that don’t comply with accounting standards.
• The SEC will be directed to clarify corporate disclosures on compensation, including requiring companies to provide charts that compare their executive compensation with stock performance over a five-year period.
• Listing standards for companies will require that compensation committees include only independent directors and have authority to hire consultants in order to strengthen their independence from the executives they are rewarding or punishing.
• A new whistleblower program will be created within the SEC to encourage people to report securities violations, creating rewards of up to 30 percent of funds recovered for information provided.
• An outside consultant will conduct a comprehensive study of the SEC, and an annual assessment of the SEC’s internal supervisory controls.
• The bill would authorize the SEC’s existing Investment Advisory Committee and create the Office of Investor Advocate to identify areas where investors have problems dealing with the SEC.
There are other investor-related issuers where there still are differences between lawmakers. The House and Senate are divided on whether broker-dealers and insurance agents should be subject to the same fiduciary duty to their clients as financial planners. The House bill calls for extending that duty, while the Senate bill would direct the SEC to study the issue.