Blog: What’s Happening With Those SEC Proposals For Dodd-Frank Clawbacks And Disclosure Of Pay For Performance And Hedging? Apparently, Not Much.

by Cooley LLP
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As noted in this article from Law360, the SEC’s latest Regulatory Flexibility Agenda, which identifies those regs that the SEC intends to propose or adopt in the coming year— and those deferred for a later time—has now been posted.  The Agenda shifts to the category of long-term actions most of the Dodd-Frank compensation-related items that had previously been on the short-term agenda—not really a big surprise given the deregulatory bent of the new administration.  Keep in mind, however, that the Agenda has no binding effect and, in this case, could be even less prophetic than usual; the Preamble to the SEC’s Agenda indicates that it reflects “only the priorities of the Acting Chairman [Michael Piwowar], and [does] not necessarily reflect the view and priorities of any individual Commissioner.”  It also indicates that information in the Agenda was accurate as of March 29, 2017.  As a result, it does not necessarily reflect the views of the new SEC Chair, Jay Clayton, who was not confirmed in that post until May.

SideBar: Notably, there’s no mention anywhere on the Agenda of revisions to the Dodd-Frank pay-ratio rules.  You will recall that, in February, Piwowar issued a statement requesting “public input on any unexpected challenges that issuers have experienced as they prepare for compliance with the rule and whether relief is needed” and directing the Corp Fin staff to revisit the pay-ratio disclosure rules based on these comments “to determine as promptly as possible whether additional guidance or relief may be appropriate.” (See this PubCo post.) That was followed a few days later by a reminder from Acting Corp Fin Director Shelley Parratt that, notwithstanding the request for public comment and all of the Executive Orders aimed at deregulation, the pay-ratio disclosure rules continued in effect. (See this PubCo post.) However, it’s been radio silence from Corp Fin since then, and, given that the first disclosure for calendar-year companies will be in the 2018 proxy statement, companies have lately been gearing up for all of the work involved in the analysis and disclosure.

More specifically, now relegated to the back burner are regulations related to pay for performance (see this Cooley Alert), listing standards related to clawbacks for erroneously awarded comp (see this PubCo post), hedging disclosure (see this PubCo post), incentive compensation arrangements at certain financial institutions and disclosure of payments by resource extraction issuers. (The resource extraction rules, you may recall, were repealed in February under the Congressional Review Act, which means that, in the absence of repeal of the original Dodd-Frank mandate, the SEC has a year to issue a new rule on the same topic because the regulation was mandated by Congressional statute. See this PubCo post.)  Also deferred to the long-term column are proposals regarding the use of universal proxies (see this PubCo post), as well as a topic in which former Chair Mary Jo White expressed a particular interest, board diversity (see this PubCo post).

Additional matters deferred to the long-term Agenda are some rule and form amendments proposed in 2013 to enhance the SEC’s ability to evaluate the development of market practices in offerings under Rule 506 of Regulation D and address concerns that may arise in connection with general solicitation under new paragraph (c) of Rule 506, as well as potential rules designed to address the conflicts of interest associated with the issuer-pay business model used by credit-rating agencies.

On the Agenda for more near-term action are the proposal related to inline XBRL (see this PubCo post), the request for comment regarding the financial disclosure requirements in Reg S-X that obligate public companies to provide financial information about entities other than the reporting company (see this PubCo post), the concept release related to modernization of the Reg S-K business and financial disclosure requirements (see this PubCo post), the concept release regarding audit committee disclosures (see this PubCo post), and implementation of the FAST Act report recommendations (see this PubCo post).  Also on the 12-month Agenda are adoption of the Reg S-K disclosure update and simplification amendments (see this PubCo post), and final rules on simplification of disclosure requirements for EGCs and forward incorporation on Form S-1 for smaller reporting companies (see this PubCo post), 10-K summaries (see this PubCo post), and changes to the definition of smaller reporting company (see this PubCo post).

The Agenda also indicates that the SEC is considering reproposing rule amendments implementing section 951 of Dodd-Frank related to the requirement that institutional investment managers report how they voted on say on pay, say on frequency and say on golden parachutes.  These rules were previously proposed in 2010.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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