Capital Markets, Corporate Governance, and Securities Regulation

Policy Accomplishments for 2011

D.C. Circuit Vacated the SEC’s Rule on Proxy Access

• The result of the Chamber and Business Roundtable litigation was a vacated proxy access rule that would have allowed shareholders to nominate directors. The decision was a decisive blow to the Securities and Exchange Commission’s (SEC’s) first attempt at rulemaking under Dodd-Frank, reiterating the importance for regulators to demonstrate that the benefits of regulation outweigh the costs. It is unlikely that the SEC will re-propose the rule, and it has indicated that it will not challenge the ruling. This case has been widely viewed as setting a precedent for legal challenges to Dodd-Frank rulemakings.

Consumer Financial Protection Bureau (CFPB)

• The Chamber has been a strong, public advocate for structural changes at the CFPB. The Chamber’s Center for Capital Markets Competitiveness (CCMC) lobbied successfully to pass House legislation that would replace the single director with a five-person commission and allow the Financial Stability Oversight Council (FSOC) to overrule the CFPB by a simple majority vote, instead of a two-thirds vote. The Chamber’s support for these reforms helped Senate Republicans hold a filibuster against the president’s nominee for CFPB director.

Derivatives

• The Coalition for Derivatives End-Users, led by the Chamber, lobbied heavily for three derivatives bills: H.R. 2779, H.R. 2586, and H.R. 2682, which cleared the House Financial Services Committee with strong bipartisan support. These bills would preserve businesses’ ability to use derivatives to manage day-to-day business risks.

Capital Formation

• Due to Chamber lobbying and outreach, the House passed four bills that support private sector job growth:
  • H.R. 1965 would raise the Exchange Act’s shareholder cap from 499 to 1,999 shareholders for banks and permit banks with fewer than 1,200 shareholders to cease their reporting requirements under the Exchange Act. The Chamber strongly supports this legislation because it increases banks’ ability to raise capital from a larger shareholder base, creating a level playing field for smaller community banks.
  • H.R. 2167 would raise the Exchange Act’s cap on shareholders from 499 to 999 and provide accredited investors and employees that received securities pursuant to an employee compensation plan to not count toward the cap. The Chamber strongly supports this legislation because it increases all companies’ ability to raise capital from a larger base of shareholders and facilitates investments by employees and accredited investors that do not need heightened protections from the Exchange Act’s provisions.
  • H.R. 2930 would establish a new Securities Act exemption for small investments in small issuances, regardless of investors’ accredited status, and would exclude investors in such issuances from the Exchange Act’s 499 shareholder cap. The Chamber strongly supports this legislation because it would open up opportunities for small investors to make investments in small businesses.  
  • H.R. 2940 would remove the prohibition against general solicitation or general advertising for certain small issuances, provided that all purchasers of the securities are accredited investors. The Chamber strongly supports this legislation because it gives flexibility to companies to raise capital from accredited investors that do not need heightened protections from the Exchange Act’s provisions.

Corporate Governance

• Following meetings and discussions with Africa, Global Health, and Human Rights Subcommittee Chair Chris Smith’s (R-NJ) staff and the House Financial Services Committee staff, Rep. Smith agreed to pull an amendment to H.R. 2830 that would have mandated SEC corporate disclosures of human trafficking policies. Instead, a substitute amendment was negotiated allowing voluntary disclosure to the State Department. These disclosures are not mandatory.
• Due to Chamber lobbying and outreach, the SEC hosted a public roundtable to discuss its required rulemaking under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which relates to reporting requirements regarding conflict minerals originating in the Democratic Republic of the Congo and adjoining countries. This has delayed the issuance of final rules. 
• Due to Chamber lobbying and outreach, Senator Carl Levin dropped plans to offer  S.1483, the Incorporation Transparency and Law Enforcement Assistance Act as an amendment to the Homeland Security Authorization bill. This bill would place additional regulatory disclosure requirements on all business entities in the United States.
• The Subcommittee on Capital Markets and Government Sponsored Enterprises passed H.R. 2483, the Whistleblower Improvement Act of 2011. This bill, drafted with the help of the Chamber, is expected to be taken up by the full committee and House early this year.

Regulatory Reform

• The SEC announced that it will abide by Executive Orders 13563 and 13579 and perform a look back on existing regulations to determine if obsolete regulations need to be taken off the books. The Chamber sent letters to SEC Chair Mary Schapiro on February 7, 2011, and on July 18, 2011, requesting the SEC to engage in such a look back and comply with the executive orders. The SEC is the first independent agency to do so.

Fiduciary Duty

• The Department of Labor (DOL) was scheduled to finalize rules that would change the definition of a fiduciary under ERISA by the end of 2011; however, the Chamber successfully advocated for the re-proposal of the entire rule with a thorough economic impact analysis and appropriate modifications. The current proposal by the department was a broad overreach that would cripple activities at many financial services firms and other companies, significantly impairing their ability to provide retirement planning services in a cost-effective manner to employers and workers. 

While the Chamber supports updating the regulation on the definition of a fiduciary to reflect modern realities, it believes a balance needs to be struck that protects plans and participants while enabling the free flow of information and services. The Chamber will continue to advocate before DOL and the SEC. Providing additional time for analysis, information gathering, and comment will help ensure that the re-proposed rule does not have unintended consequences that could adversely impact plans and participants.

Systemic Risk

• Successfully advocated for a re-proposal of the Financial Stability Oversight Council’s (FSOC’s) rules on the systemically important financial institution (SIFI) designation process. In November 2010 and again in February 2011, the Chamber sent comment letters to the FSOC regarding the advance notice of public rulemaking (ANPR) and notice of public rulemaking (NPRM) citing the overly broad nature of the proposals, the lack of clarity or metrics from which companies are designated, and a lack of cost-benefit analysis examining consequences of such designation. A second NRPM was issued by the FSOC on October 18, 2011, in an attempt to address some of these issues. 

FAS 5/Loss Contingencies Accounting Standard

• The Chamber helped secure a decision by the Financial Accounting Standards Board (FASB) to indefinitely delay the issuance of final rules implementing proposed changes to FAS 5.

Financial Reporting

• The time for considering the accounting convergence projects was extended following lobbying of the G-20, FASB, and the International Accounting Standards Board (IASB) by Chamber-led accounting coalitions.

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