Exam Alert: SEC requires new exchange listing standards and proxy disclosures

Effective July 27, 2012, the SEC has adopted a new rule that requires national securities exchanges to modify their listing standards. The rule provides new standards for compensation committees and compensation advisers. The SEC also requires companies to disclosure of conflicts of interest for their compensation consultants. Continue reading

Effective July 27, 2012, the SEC has adopted a new rule that requires national securities exchanges to modify their listing standards.  The rule provides new standards for compensation committees and compensation advisers.  The SEC also requires companies to disclosure of conflicts of interest for their compensation consultants.

 

The new listing standards must include provisions that require each member of a company’s compensation committee to be a member of the board of directors and to be independent.  Independence will be gauged based on the source of the person’s compensation and whether the person is affiliated with the company, among other factors.

 

The standards must provide that the compensation committee:

-may retain a compensation adviser,

-be responsible for the selection, payment, and supervision of the compensation adviser, and

-is properly funded.

 

The standards must only allow a compensation committee to select a compensation adviser after considering:

-other services provided by the adviser to the company

-amount the adviser has earned from the company

-policies to prevent conflicts of interest

-relationships between the adviser and members of the compensation committee

-whether the adviser owns company stock

-relationships between the adviser and company executives

 

The following companies will be exempt from the compensation committee independence requirements:

-limited partnerships

-companies in bankruptcy proceedings

-registered open-end management investment companies

-foreign private issuers, though they must explain why they don’t have an independent compensation committee in their annual reports

The exchanges can establish additional exemptions.

 

The following companies are exempt from the compensation committee listing standards altogether:

-controlled companies

-smaller reporting companies

 

Under new proxy disclosure rules, companies must disclose whenever the work of a compensation consultant raises a conflict of interest, if that consultant has a role in setting the level of executive and director compensation.

 

Source: SEC Release 2012-115

This alert applies to the Series 24, Series 62, Series 79, and Series 7.

Exam Alert: US Labor Dept requires disclosures from plan service providers

The US Labor Department has finalized a rule under ERISA that will require service providers for pension plans to disclose information about their fees to the employers sponsoring the plans. The rule will be effective July 1, 2012. Continue reading

The US Labor Department has finalized a rule under ERISA that will require service providers for pension plans to disclose information about their fees to the employers sponsoring the plans.  The rule will be effective July 1, 2012.

The rule will require disclosure of the service provider’s compensation structure (including both “direct” compensation from the plan sponsor and “indirect” compensation from other sources), as well as potential conflicts of interest.  The rule is limited in scope to ERISA-covered defined benefit and defined contribution pension plans.  The rule applies to service providers who expect to receive at least $1,000 in compensation for specified plan-related services, including fiduciary, advisory, brokerage, and recordkeeping services, or other financial services for which they receive indirect compensation.

Sources:

U.S. Treasury, Labor Departments Act to Enhance Retirement Security for an America Built to Last


Fact Sheet – Final Regulation Relating to Service Provider Disclosures Under Section 408(b)(2)

This alert applies to the Series 62, Series 6, Series 26, Series 24, Series 7, Series 65, Series 66, and Series 82 – these exams address ERISA considerations.