Monday, October 5, 2009

SEC To Release Draft Strat Plan For Public Comment

SEC staff told the SEC's Investor Advisory Committee (IAC) earlier today that the SEC will publish its draft Strategic Plan (SP) for public comment - likely for a 3o day comment period - as soon as the draft is approved for release by the Commission.

Four Goals
The draft SP - similar to the 2004-09 SP - contains 4 overarching goals, summarized on slides 5-8 of today's SEC IAC handout, and listed below. By and large the overarching goals cover the same broad areas as the 2004-09 SP. Changes are shown in brackets; the thrust of the goals as represented in some wording changes and moreso in the detail thereunder may be viewed by some as reflecting renewed rigor in light of events unfolding during the credit crisis and in response to lessons learned (as identified in SEC Office of Inspector General report issued on Aug. 31) regarding the SEC's handling of the Madoff fraud.

The four goals in the draft SP [vs. 2004-09 SP] are:
  1. Foster and enforce compliance with the federal securities laws ["Foster and" is new]
  2. Establish an effective regulatory environment ["Establish" replaces "Sustain;" "effective" replaces "effective and flexible"]
  3. Facilitate access to the information investors need to make informed investment decisions ["Faciliate access" replaces "encourage and promote" - specifically, goal 3 in the 2004-09 SP states: "Encourage and promote informed investment decision making"]
  4. Enhance the Commission’s performance through effective alignment and management of human, information, and financial capital [The draft SP is is a more detailed articulation of goal 4 in the 2004-09 SP which states: "Maximize the Use of SEC Resources"]
Highlights from OCA, Corp Fin Remarks

Below are selected highlights of remarks made by Jeff Minton, Chief Counsel in the SEC’s Office of Chief Accountant, and Shelley Parratt, Deputy Director, Disclosure Operations, SEC’s Division of Corporation Finance, to the SEC's Investor Advisory Committee during the discussion of SEC's draft Strategic Plan (SP) earlier today. (NOTE: These are only a few highlights from Minton’s and Parratt’s remarks; staff from other SEC divisions spoke as well.)

Jeff Minton, OCA:
One of the goals [goal 2, outcome 2.1] of the SEC is to establish and maintain a regulatory environment that promotes high quality:
  • disclosure,
  • financial reporting, and
  • [corporate] governance.

Corporate governance: the SEC [is seeking] enhanced disclosures about:

  • risk management,
  • executive compensation decisions & governance

Proxy voting:

  • The SEC will embark on a comprehensive review of proxy voting [rules].[See similar statement under Shelly Parratt's remarks, below]

Accounting and auditing:

  • The SEC will continue to promote high quality [accounting] standards by independent standard-setters. For example, the SEC will continue to support the FASB’s efforts to improve financial reporting, including recent initiatives to improve off-balance sheet accounting and accounting for financial instruments.
  • The SEC supports…[moving toward] a single set of high quality global standards [and supports] ongoing convergence initiatives between FASB and the IASB.
  • The SEC will continue to oversee the PCAOB with its goal of increasing audit quality through its standard-setting and inspections. [Of note:] The PCAOB has recently formed its own Investor Advisory Group.

Asset-backed securities:

  • SEC is looking to improve registration and disclosure requirements for asset backed securities. [See similar comment under Shelly Parratt's remarks, below]


  • SEC is looking to modernize beneficial ownership reporting requirements to address disclosure obligations for equity swaps and [certain other items]

Shelly Parratt, Corp Fin

Reg S-K:

  • [We are] looking at our core disclosure requirements [in] Reg S-K, those are the core disclosure requirements a company has to provide annually and in its transactional filings, we are going to take a look at those and make sure those are :
    - meeting the needs of modern day investors,
    - eliminate redundancies,
    - bring up to date

Proxy voting, shareholder communications

  • Comprehensive review of proxy voting and shareholder communications [rules] to bring more modern practices into the rules.

Mutual funds:

  • [Part of the disclosure review project will relate to] the mutual fund summary prospectus project that the Division of Investment Management is engaged with. [Susan Nash of the Division of Investment Management gave additional remarks at the IAC meeting.]

Asset-backed securities:

  • [Regarding] specialized categories of issuers and complexity of reporting, [we will be] taking a look at disclosure requirements for securitized products, asset-backed securities [existing Reg AB]; we are looking at those in light of economic events to see whether those are up to date, whether can improve.

Ownership reporting:

  • Increase in complexity of financial instruments is causing us to take a look at some of our disclosure requirements; [this] goes to [our] project on ownership reporting and how derivative securities impact ownership reporting.

Outreach Programs

Rich Hannibal of SEC's Office of Inspections and Examinations was among other SEC staff who presented information about SEC's draft SP at today's IAC meeting. (Susan Nash of the Division of Investment Management also presented information, as did other staff.) In discussing Goal 1 of the draft SP - Foster and enforce compliance with the federal securities laws - Hannibal spoke of some of SEC's outreach efforts as well as some detail regarding compliance inspections and exams. For example, Hannibal noted that the SEC is aiming to:"Enhance communication strategies, make sure information is disseminated broadly, we will have new efforts to increase our communication, maybe through getting more information out through newspaper articles, conferences, through our website, getting more information out through industry."

Although Hannibal's remarks regarding outreach were focused mainly on OCIE, SEC leadership and staff from throughout the Commission provide outreach at a variety of conferences and events, such as the FEI Current Financial Reporting Issues Conference described below.

FEI CFRI Conference
One opportunity where you can hear from SEC leadership and senior staff is by attending FEI's 28th annual Current Financial Reporting Issues (CFRI) conference. Nov. 16-17 at the Marriott Marquis Times Square in NYC. SEC Commissioner Kathleen Casey is providing a keynote speech at CFRI; additional speakers from the SEC include Chief Accountant Jim Kroeker, and Division of Corp Fin Chief Accountant Wayne Carnall. You also won't want to miss remarks by FASB Chairman Robert Herz, FASB Technical Director Russell Golden, CNBC Senior Analyst Ron Insana, and the opportunity to hear from and network with leading financial executives, auditors, board members and more. Register now for CFRI; early bird rates expire October 18.

See our separate blog post regarding remarks of SEC Deputy Chief of Staff Kayla Gillan, Commissioner Elisse Walter, and Commissioner Luis Aguilar, regarding the status of SEC's proposed rules on proxy access.

NOTE: This blog post is based on information discussed during the beginning of SEC's Oct. 5 Investor Advisory Committee (IAC) meeting; further information may have been presented later in the meeting. The IAC subcommitees are holding closed working sessions during their lunch break, and are set to reconvene in public session to present a summary of their deliberations at approximately 2:15 today.

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