SEC Chair Jay Clayton recapped the agency's 2018 rulemaking-related achievements relative to its Fall 2017 Reg-Flex agenda (see "SEC Posts Shorter, Realistic Rulemaking (Reg-Flex) Agenda") and highlighted 2019 priorities relative to its Fall 2018 Reg-Flex agenda (see: "SEC Posts Updated Rulemaking (Reg-Flex) Agenda") in this engaging speech Thursday: "SEC Rulemaking Over the Past Year, the Road Ahead and Challenges Posed by Brexit, LIBOR Transition and Cybersecurity Risks."
Among other noteworthy remarks, Clayton identified the need for - and intent to prioritize - proxy process reforms in each of the three areas addressed at the SEC's recent Proxy Process Roundtable:
(i) Proxy Voting Mechanics & Technology (Proxy "Plumbing"): He instructed that the focus should be on interim improvements to the system pending a major overhaul, which - albeit necessary - could take (considerable) time.
(ii) Shareholder Proposals: He supports a review of the proposal ownership submission and resubmission thresholds - which have remain unchanged for decades, with due consideration for long-term retail investors, whose interests may differ from those of shareholder proposal proponents.
(iii) Proxy Advisory Firms: He noted the need for greater role clarity, process transparency, and other long sought-after reforms in the proxy advisor arena, as follows:
For proxy advisory firms, I believe there is growing agreement that some changes are warranted. For example, there should be greater clarity regarding the division of labor, responsibility and authority between proxy advisors and the investment advisers they serve. We also need clarity regarding the analytical and decision-making processes advisers employ, including the extent to which those analytics are company- or industry-specific. On this last point, it is clear to me that some matters put to a shareholder vote can only be analyzed effectively on a company-specific basis, as opposed to applying a more general market or industry-wide policy.
Finally, there were other issues raised at the roundtable that we should consider, including: (1) the framework for addressing conflicts of interests at proxy advisory firms and (2) ensuring that investors have effective access to issuer responses to information in certain reports from proxy advisory firms.
Importantly, Clayton indicated that he has requested Staff recommendations for the Commission's consideration on these issues, and intends to move forward with them.
Notably, he also reiterated (see: "SEC Looking for Better Brexit/Cyber/Libor-Related Risk Disclosure") the SEC's concerns about the potential impacts on companies and attendant disclosure obligations relating to Brexit, LIBOR transition, and cybersecurity-related risks.