In Focus

CII Balks at House Proposals to Change Shareholder Proposal Rules, Quarterly Financial Reports and XBRL Disclosure

CII sent a letter to leaders of a House Financial Services Committee panel expressing concerns about three bills dealing with financial regulation that were discussed at a May 23 hearing. One would hike resubmission thresholds for filing shareholder proposals. Noting that shareholder proposals have ushered in may significant improvements to corporate governance, CII said that current thresholds provide a reasonable amount of time for emerging issues to gain traction. A second bill to make quarterly financial reporting optional would eliminate potentially critical information investors rely on, CII argued. The third bill would eliminate or ease requirements for certain kinds of companies to use XBRL technology for their SEC filings. If enacted, CII said, the legislation would impede efforts to modernize disclosure and make company filings less useful to investors.

CII Backs SEC Oversight of Cryptocurrencies and ICOs

In a May 8 letter to SEC Chair Jay Clayton, CII expressed support for the SEC’s efforts to police cryptocurrencies and initial coin offerings (ICOs). CII’s letter cited lessons learned from the 2008 financial crisis about the dangers of unregulated markets. In the wake of that market meltdown, CII strongly supported a robust regulatory regime for over-the-counter derivatives markets. Noting the exponential growth of the cryptocurrency and ICO markets, CII urged the SEC to “err on the side of investors and other market participants” in determining which cryptocurrencies and ICOs are securities. Federal regulation will ensure that investors have the protections and information they need to make informed judgments about what they are investing in as well as an array of remedies to address fraud or abuse. CII also asked the SEC to consider additional guidance or rulemaking to create a more transparent and uniform approach to regulating these products.

CII Supports MSCI’s New Approach to Dual-Class Listings, With Modifications

CII submitted a comment letter to MSCI May 9 on the index provider’s consultation regarding the treatment of unequal voting structures. MSCI proposed in January to factor into each security the proportion of each constituent’s total voting power in free float. CII commends MSCI for its careful and thoughtful proposal.  The Council generally supports the proposed approach, but recommends that a company be exempt from weighting based on voting rights if it establishes a time-based sunset of no more than seven years, potentially renewable by vote of shareholders with inferior voting rights. S&P Dow Jones no longer allows dual-class companies to join the S&P 1500 and component indexes. FTSE Russell excludes from its developed market indexes any company with a free float that constitutes less than 5% of total voting power, and has indicated its interest in revisiting that threshold. Comments on the expanded consultation are due May 31. MSCI intends to announce any changes to its methodology by June 21.