Chairman Schapiro Resignation and SEC Rulemaking Progress

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As reported in NACD Directors Daily, two weeks from today Mary Schapiro will step down from her current role as chairman of the Securities and Exchange Commission (SEC); she will be replaced by a current democratic commissioner, Elisse Walter. Commissioner Walter has served as an SEC commissioner since 2008. Although Commissioner Walter has not been designated as “acting chairman,” her appointment will last until the end of her current term at the SEC. According to the Wall Street Journal, an official from the White House has indicated that a permanent successor will be named before Commissioner Walter’s term concludes at the end of 2013. Until then, the commission will be split between two democrats and two republicans.

A significant portion of Chairman Schapiro’s tenure at the SEC was focused on implementing Dodd-Frank’s many provisions—and it is expected that Commissioner Walter will continue on this path. According to Davis Polk, the SEC has met 32, or approximately 33.7 percent, of the 95 requirements mandated by the legislation with finalized rules. However, the commission has also missed 50 deadlines. The SEC is not alone in its struggle to meet deadlines: the overall Dodd-Frank implementation process has proceeded in a similar fashion. From all regulatory agencies tasked with fulfilling Dodd-Frank legislative mandates, just 33.4 percent have been met with finalized rules.

To date, the SEC has finalized a number of critical Dodd-Frank rules on corporate governance, including: conflict minerals, compensation committee and advisor independence, say on pay and say on golden parachutes, and the elimination of broker discretionary voting. The SEC’s rule on proxy access was invalidated by the DC Circuit Court, due to the lack of an adequate cost-benefit analysis. Looking ahead, the agency is scheduled to implement rules on: pay for performance and pay ratios, compensation clawbacks, employee and director hedging, and the use of compensation consultants. The timeline for the implementation of these rules is uncertain; while the SEC posted a proposed timeline for Dodd-Frank rulemaking early this year, it has since has replaced the timeline with a list of pending actions.

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