The SEC’s 2020 spring agenda of its rulemaking actions under the Regulatory Flexibility Act (RFA) has been posted. The agenda, commonly referred to as the “Reg Flex Agenda,” is published semiannually and reflects the actions the SEC Chairman anticipates the agency will complete in the short term (within a year and almost all items are listed in the “Proposed Stage” or “Final Rule Stage”) or the long term (longer than a year and the items are listed as “Long-Term Actions”). Under Chairman Jay Clayton’s leadership the agenda is meant to be viewed as a transparency and accountability tool of the agency’s initiatives, as opposed to a list of merely aspirational goals. The latest agenda has little in terms of new topics. Rather, the agenda, if accurate, provides helpful updated priorities and target dates, including for certain highly watched rule adoptions of amendments to the proxy rules relating to (1) shareholder proposals, including eligibility standards for submission and resubmission and (2) proxy advisory services. Potential rule amendments may also be forthcoming this October for universal proxies.
The RFA mandates that each federal agency semiannually publish in the Federal Register an agenda identifying rules that the agency expects to consider in the next 12 months that are likely to have a significant economic impact on a substantial number of small entities. The RFA expressly states that an agency is not required to consider or act on any agenda item. In fact, an agency may also consider or act on items that are not included on the agenda. Lastly, the SEC Reg Flex Agenda reflects solely the priorities of the Chairman based on information compiled by SEC staff as of March 31, 2020 and does not necessarily reflect the position of any other Commissioner.
Worth noting is that the potential rulemaking related to universal proxies, proxy process amendments (a.k.a. “proxy plumbing”) and mandated electronic filings have moved up to the short-term agenda; formerly these were on the 2019 fall long-term agenda. The universal proxy is a proxy voting method meant to simplify the proxy process in a contested election and increase, as much as possible, the voting flexibility that is currently only afforded to shareholders who attend the meeting. Shareholders attending a meeting can select a director regardless of the slate the director’s name comes from, either the company’s or activist’s. The universal proxy card gives shareholders, who vote by proxy, the same flexibility. The proxy process topic is a very large-complicated topic that involves voting mechanics and technology, including issues such as those associated with the complex system of share ownership and intermediaries. As customary, the Reg Flex Agenda provides no details; however, given the complexity of the issues, it is most likely that “low hanging fruit” will be addressed. Some of these were identified by the SEC Investor Advisory Committee Recommendation issued in September 2019, which included the use of universal proxies and were previously discussed in our blog. Lastly, the item concerning mandated electronic filings are proposed amendments to Regulation S-T to require additional filings.
Also, some agenda items that remain on the short-term agenda list have new target dates. Notably, the following agenda items are scheduled for a final rule (or some other final action) by October 2020:
- Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8;
- Amendments to Exemptions From the Proxy Rules for Proxy Voting Advice;
- Disclosure of Payments by Resource Extraction Issuers;
- Amendments to Financial Disclosures About Acquired Businesses;
- Amendments to Certain Provisions of the Auditor Independence Rules; and
- Amendments to the Commission’s Whistleblower Program Rules (now July 2020 instead of November 2019).
The proposed amendments relating to the modernization and simplification regarding Management’s Discussion & Analysis, selected financial data and supplementary financial information is scheduled for finalization next year. Proposed rulemakings for clawbacks and amendments to the Form 13F filer threshold that relate to certain institutional investment managers who must disclose their security holdings are scheduled to be issued by October 2020. Proposed rules are scheduled to be issued next year regarding earning releases/quarterly reports.
The 2020 fall long-term agenda continues to include corporate board diversity, conflict mineral amendments, and pay versus performance.
Given that the agenda solely reflects the views of the Chairman, the agenda will undoubtedly change if a new administration takes office as a result of the upcoming election.