Capital Markets, Corporate Governance, and Securities Regulation

Policy Priorities for 2012

Lead the Offensive Charge to Address Critical Areas Within the Regulatory Structure

• Regulatory Structure—Promote a forward-looking, coherent regulatory structure that closes gaps, minimizes future systemic risk, and ends duplicative rules while guarding against senseless regulations that will wrongly attempt to eliminate risk taking and innovation from the capital formation process. Work with regulators and Congress as they implement the Dodd-Frank Act to ensure a more prudent approach to oversight and enforcement.
• Capital Formation—Advocate for and promote legislation and regulations that facilitate capital formation for American businesses. Push back against legislation and regulations that hinder business’ ability to raise capital or mitigate risk.
• SEC Reform and Efficiency—Continue to work with the Securities and Exchange Commission and Congress to recommend ways to improve the commission’s regulatory oversight and management process to better promote innovation and competitiveness in the capital markets.
• SEC Enforcement—Support reforms that will help combat fraud, increase investor protections, and reinstall confidence in our markets. Urge the commission to take additional steps to build and maintain a culture of compliance between the SEC and regulated entities. 
• Self-Regulatory Agencies and Standard Setters—Ensure that self-regulatory organizations and non-governmental standard setters that operate with explicit or implicit authority from the government have to use the same standards of transparency and due process followed by federal regulators when proposing new rules.

Dodd-Frank Implementation: Engage Regulators to Ensure Sensible Rules and Proposals

• Systemic Risk and Resolution Authority—Support stronger and more comprehensive oversight of the financial system to identify systemic risk that may have significant impact on the financial markets and the appropriate actions to mitigate them. Oppose a new systemic authority that taxes the industry to create a resolution fund, duplicates existing regulation, or permanently designates, formally or informally, specific financial institutions or nonfinancial companies as systemically significant, thereby expanding “too big to fail” policies.
• Consumer Protection—Continue to support legislative reforms of the Consumer Financial Protection Bureau (CFPB) to ensure greater governance and funding accountability. Support the CFPB’s efforts to increase the transparency of consumer financial products, while ensuring that new regulations do not limit access to credit in the marketplace for consumers and small businesses or unnecessarily extend new regulations to small and nonfinancial businesses.
• Derivatives Regulation—Support efforts to bring transparency to the over-the-counter (OTC) derivatives market and implement measures aimed at reducing systemic risk while preserving the ability of commercial end users to employ customizable OTC derivatives at a reasonable price and without the burden of margin requirements.
• Office of Financial Research—Ensure that the Office of Financial Research coordinates its data requests from companies to prevent asking for data that are already in the possession of the entity’s financial regulator. Prevent “fishing expeditions” and further layering of regulations and examinations. Ensure the confidentiality of proprietary information gathered from data requests and the Financial Stability Oversight Council (FSOC) agency examinations. 
• Fiduciary Duty—Support sensible legislative and regulatory approaches to harmonize regulation of investment advisers and broker-dealers. Oppose overly broad application of ERISA fiduciary duty to broker-dealers and other stakeholders. Oppose measures that would eliminate mandatory arbitration clauses in brokerage agreements, which would flood our courts with frivolous claims and create a windfall for the trial bar.
• Mutual Fund Regulatory Reform—Monitor and address anticipated proposals that would change the rules governing mutual fund fees. Oppose changes to money market fund regulations that fundamentally alter the nature and structure of the funds, including proposals discussed in the Report of the President’s Working Group on Financial Markets on Money Market Fund Reform Options. Advocate against the Floating-NAV and other proposals that would limit a company’s cash management options.
• Executive Compensation and Corporate Governance—Ensure careful and sensible rulemaking and implementation by the SEC where needed and preserve the state-based system permitting decisions to be made through directors and shareholders. Reasonable policies must allow pay for performance and promote long-term shareholder value and profitability but not constrain reasonable risk taking and innovation. A one-size-fits-all approach mandated by federal regulators or proxy advisers is not good governance and would undermine shareholder interests.
• Volcker Rule—Ensure that implementation of the Volcker Rule is a workable, rational regulation that will not damage the U.S. financial system or stop the flow of liquidity and capital for the American business community.
• Financial Transaction Tax—Oppose legislative actions that would impose a tax on financial transactions. Engage experts to conduct and promote a research study showing how the evolution of our markets has benefited Main Street investors and our broader economy and the negative impacts of the tax.

Engage Financial Reporting Policymakers to Develop Systems That Effectively Report Economic Activity

• International Financial Reporting Standards (IFRS)—Advocate for convergence of global accounting standards to reduce complexity and duplication. Urge the SEC to recognize, address, and minimize the transitional difficulties before committing to a road map that permits or mandates the use of IFRS by U.S. issuers.
• Auditing Profession—Help ensure a sustainable environment for the auditing profession by recommending ways to improve auditing and accounting practices and by encouraging a greater focus on long-term performance metrics, rather than meaningless reforms, such as mandatory firm rotation. Promote the establishment of an international set of auditing standards.

Push Back on Special Interests and Activists to Promote Long-term Interests
of All Investors

• Activist Investor Agenda—Push back against the activist agenda that seeks to use the corporate governance process to gain benefit for minority shareholders with a political agenda at the expense of a majority of stakeholders. In particular, urge the Institutional Shareholder Services (ISS) to move toward a more transparent and evidence-based policymaking process while eliminating core conflicts of interest.
• Retail Shareholders—Encourage the SEC to take greater steps to enfranchise retail shareholders by giving guidance that would allow them to provide standing instructions to vote their shares.
   

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