Global securities regulators have slated a meeting to discuss “urgent regulatory issues” related to the credit crisis, including the effectiveness of regulatory efforts to curb abusive short selling, the Securities and Exchange Commission said.

The meeting of the International Organization of Securities Commissions Technical Committee will be held by teleconference on Nov. 24.

“In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences,” SEC Chairman Christopher Cox, chairman of the technical committee, said. “This high-level coordination among international regulators will allow us to review the steps we have taken thus far and ensure that our ongoing and future actions are effective and mutually reinforcing.”

An SEC press release says the technical committee will consider the effectiveness of recent regulatory responses in reducing manipulative short selling, and possible coordination on rules relating to naked short sales, particularly with regard to position reporting and delivery and pre-borrowing requirements.

Also on the agenda are the development of disclosure principles to promote transparency in over-the-counter markets for derivatives and other financial instruments; an assessment of members’ progress in adopting credit rating agency rules based on IOSCO’s revised Code of Conduct and work on developing a common examination module; and ensuring that the process of developing international accounting standards “continues to take account of the interests of investors.”

No promises, so don’t hold your breath, but it’s possible that the Securities and Exchange Commission could publish the adopting release on its XBRL rule before the lights go out on 2008.

That’s according to SEC Chief Accountant Conrad Hewitt, who told attendees on Nov. 18 at the Financial Executives International’s conference on Current Financial Reporting Issues that the issuance of the adopting release “may occur before the end of the year, so hang on.”

For those of you who need a refresher, since the proposing release was published back in May, the SEC’s proposed rule would mandate the use of XBRL, with the 500 largest public companies starting to provide XBRL data to the SEC as soon as next spring, and the remainder phased-in in 2010 and 2011.

Hewitt didn’t offer any hints about what the final rule might look like, but noted that companies would “continue to make their filings in EDGAR until we get all of the bugs worked out.”

Meanwhile, Hewitt also noted that OCA is working with Corporation Finance on some of the recommendations made by the Advisory Committee on Improvements to Financial Reporting related to materiality, the correction of errors, and professional judgment.

The Committee on Foreign Investment in the United States has issued its final regulations governing security reviews of foreign investments in domestic businesses.

The final rules, published Nov. 14, follow the issuance of proposed regulations back in April. They take effect 30 days after publication in the Federal Register and will apply to covered transactions entered into after the effective date.

The rules implement section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007, which provides for a CFIUS review of a covered transaction to determine the effect of the transaction on national security and to address any threat posed by such transaction.

The regulations “in large part mirror the April proposed regulations and codify existing CFIUS practice and procedures, and add certain clarifications and examples in response to public comments received on the proposed regulations,” according to an alert by the law firm Morrison & Foerster.

“The effect of FINSA and the final regulations is likely to be that a greater number of transactions will be notified to CFIUS, and such transactions, in particular those involving foreign government interests and critical infrastructure, will be subject to enhanced scrutiny,” the authors write.

The Securities and Exchange Commission has finally posted for comment its long-awaited roadmap for the potential use of International Financial Reporting Standards by U.S. issuers for their filings with the Commission.

The 165-page roadmap sets forth seven milestones that, if achieved, could lead to the required use of IFRS as issued by the International Accounting Standards Board by U.S. issuers in 2014 if the Commission believes it to be in the public interest and for the protection of investors. The commission voted to publish the roadmap back in August.

The milestones relate to:
• improvements in accounting standards;
• the accountability and funding of the IASC Foundation;
• the improvement in the ability to use interactive data for IFRS reporting;
• education and training relating to IFRS;
• limited early use of IFRS where this would enhance comparability for U.S. investors;
• the anticipated timing of future rulemaking by the Commission; and
• the implementation of the mandatory use of IFRS by U.S. issuers.

Under the proposal, out for a 90-day comment period once it’s published in the Federal Register, the Commission would determine in 2011 whether to proceed with rulemaking to require that U.S. issuers use IFRS beginning in 2014 if it is in the public interest and for the protection of investors to do so.

As a step along this roadmap, the release also describes proposed amendments to permit a limited number of U.S. issuers that are among the largest companies worldwide within their industry and whose industries use IFRS as the basis of financial reporting more than any other set of standards to elect to use IFRS beginning with filings for fiscal years ending on or after Dec. 15, 2009.

Compliance Week will provide detailed coverage of the SEC’s proposal in an upcoming issue.

In between defending the agency’s enforcement record and calling on lawmakers to close gaping holes in the U.S. financial regulatory system, the head of the Securities and Exchange Commission said he plans to ask Congress to authorize an SEC-led study to evaluate the reasons for the extraordinary recent market volatility.

Chairman Christopher Cox’s call for a new Commission akin to the Brady Commission that studied the 1987 market crash came in wide-ranging Nov. 12 remarks before the Practising Law Institutes’ annual securities regulation institute.

“Understanding the various causes of the financial instability that still persists is vital to restoring investor confidence and the full functioning of our markets,” Cox said in prepared remarks. “To achieve this, Congress should authorize a thorough study to evaluate the reasons for the extraordinary recent market volatility.”

Cox said such a study “would be of immense benefit in understanding the sources of this recent volatility, as well as in considering potential improvements to our rules and our regulatory structure that will help maintain orderly markets.”

Cox said he’ll recommend that Congress authorize the resources necessary for the SEC to lead such a study, since “to thoroughly deconstruct, down to the trade level, the significant quantities of technical information (including trade execution and other market quality data) that would have to be reviewed in order to answer these questions in the way this was done by the Brady Commission would require funding resources beyond those that are currently available to the SEC.”

He also echoed calls for Congress to appoint a Select Committee on Financial Services Regulatory Reform, with representation from each of the existing standing committees with responsibility for financial services regulation. While banking, insurance, and securities fall within the province of the Financial Services and Banking Committees, futures fall within the domain of the Agriculture Committees in each chamber—a jurisdictional split Cox said “threatens to forever stand in the way of rationalizing the regulation of these products and markets.”

Cox also reiterated his support for a merger between the SEC and the Commodity Futures Trading Commission into a “single agency with a clear mandate to protect investors by regulating the markets in all financial investments, including securities, futures, and derivatives,” one day after CFTC Acting Chairman Walter Lukken shot down the idea of a union as “ineffective.”

With the global financial crisis accelerating calls for regulatory reform in the United States, new plans for how best to revamp the U.S. system seem to emerge nearly every day. The latest to enter the fray of those offering their two cents on how to overhaul financial regulation is Commodity Futures Trading Commission Acting Chairman Walter Lukken, who, not surprisingly, took the opportunity to shoot down the renewed calls for a merger between his agency and the Securities and Exchange Commission.

Speaking to the Futures Industry Association’s Futures and Options Expo in Chicago on Nov. 11, Lukken said a merger between the two agencies—an idea that seems to resurface every time talk turns to regulatory reform—would be “ineffective” and would only reinforce the United States’ “outdated regulatory structure.”

“In Washington, this is code for the larger SEC—along with its rules-based model and culture—taking over the principles-based CFTC,” Lukken said in prepared remarks. Even if proposed as an interim step, he said the difficulty of a merger—both politically and substantively—would likely “transform a provisional action into a final one.”

Calls for a merger between the two agencies have re-emerged amid concerns about how best to regulate new financial products that blur the lines between SEC-regulated equities and CFTC-regulated futures. The idea was floated again in March, before the financial crisis was full-blown, as part of a plan released by Treasury Secretary Henry Paulson for revamping U.S. regulation. That same month, the SEC and CFTC signed a Memorandum of Understanding to establish a permanent regulatory liaison between them as part of efforts to increase their cooperation. Both agencies have come under fire in recent months for not doing enough to prevent the financial crisis.

Outgoing SEC chairman Christopher Cox has said he supports such a merger. However, Lukken, who announced that he’ll leave the CFTC shortly after the new administration enters the White House, said a merger alone doesn’t address the problems that plague the U.S. economy or the “shortcomings” in its regulatory system.

Rather, he said the United States should scrap its current outdated regulatory framework in favor of an objectives-based regulatory system, similar to that called for by Paulson, comprised of three primary authorities: a new systemic risk regulator, a new market integrity regulator, and a new investor protection regulator.

A new systemic risk regulator would have responsibility for policing the entire financial system and take preventative action against “black swan” risks that could cause a contagion event. Lukken said such a regulator “is absolutely necessary given the witnessed interconnections of our financial markets and the speed of the current global crisis.”

A new market integrity regulator would oversee the safety and soundness of key financial institutions, including exchanges, investment firms, and commercial banks whose failure may jeopardize the integrity of the markets, while a new investor protection regulator would broadly oversee investor protection and business conduct across all firms. The different functions of the CFTC, the SEC, and various banking regulators would be dispersed among the three regulatory authorities.

Lukken said regulation by “objective rather than function will ensure that all products and institutions are properly overseen based on identified public risks rather than futile and difficult determinations of whether an instrument is a security, a future, or a swap contract.”

Such a structure would require certain reporting of exchange and over-the-counter market data to regulators, particularly when such products begin playing a public pricing role or when their size creates the risk of a systemic event. The credit default swaps market would “meet this threshold,” said Lukken. He suggested Congress look to the model adopted in the Farm Bill for the OTC energy swaps market, which triggers additional oversight and transparency when a product begins to serve a significant price discovery function.

Lukken also called for a “complete rewrite and modernization of the laws and regulations governing the financial markets,” including the securities and futures laws, to adopt a more consistent principles-based regulatory approach.

He also supported the creation of a bipartisan select Congressional committee to study financial reform—an idea that’s been bandied about in recent Congressional hearings on regulatory reforms and suggested the creation, in the interim, of a unified regulatory board consisting of the heads of the Federal Reserve, the SEC, and the CFTC—that would facilitate the sharing of market information and be armed with joint rulemaking and exemptive authority to eliminate regulatory gaps and duplications in the current system.

He also supported efforts to create a clearinghouse for credit default swaps, noting that clearing has worked “extraordinarily well” in managing credit risk for futures contracts.

Lukken also said global regulators should consider standardizing the sharing of international market data among regulators and common standards for the bankruptcy treatment of customer assets around the world.

Economic pressures are forcing many companies to take a hard look at their compensation and incentive programs to find ways to cut costs. However, many are still up in the air about making any major changes.

That’s according to the results of an online survey of human resource executives and staff at more than 450 companies by Towers Perrin.

For example, even though 85 percent of respondents report that their company’s shares are trading more than 15 percent below last year’s levels, and almost 60 percent report that their stock price has declined by 30 percent or more, over half of the companies say that no final decisions have been made on how their long-term incentive grant methodology may need to be adjusted to reflect the change in stock price, Towers Perrin notes. Even fewer have decided how or if they will address underwater stock options.

John England, a Towers Perrin managing principal and a leader of the firm’s executive practice globally, says the findings and the firm’s recent consulting experience suggest that most companies are “still grappling with all of the governance, retention, and motivational implications of the economic crisis for their executive compensation programs.”

Just over half (53 percent) of the survey respondents have decided to leave their long-term performance targets unchanged despite recent events. Another 42 percent are considering the implications of making adjustments, and only 5 percent are already planning to make adjustments to reflect the new economic realities.

More than half of survey respondents forecast lower bonuses for 2008 performance than for 2007.

England says that, “Many of the tried-and-true incentive compensation rules of the road will be re-examined for a current fit with the realities of today’s environment, particularly for high-potential executives and those in pivotal roles who are always in demand.”

Meanwhile, nearly half of those polled say their company is somewhat or very likely to reduce pay/merit increase budgets, and 39 percent are considering a reduction in annual incentives and bonuses.

In the companies most adversely affected by economic and market turmoil, Towers Perrin says compensation and rewards cutbacks are targeted for all levels—from the senior executive ranks to line workers. For example, when comparing expected 2008 bonus payouts with those from 2007, respondents noted that any changes or reductions in compensation will be roughly the same for senior executives, middle managers, supervisors, and non-management staff.

A quarter of the companies surveyed expect bonuses will drop more than 25 percent year-over-year across the board, while 39 percent of those surveyed believe 2008 bonuses will stay about the same as last year’s for all employee groups.

Companies are considering other steps to cut discretionary costs. More than half (58 percent) acknowledge they’re somewhat or very likely to scale back this year’s holiday party and other employee events to save money, while 74 percent plan to cut spending on travel and entertainment, and 47 percent plan to cut training budgets.

More than half of respondents (54 percent) are somewhat to very concerned about turnover of their high-performing and business-critical employees as a result of the way the organization handles the economic crisis. To address the issue, 30 percent are considering cash retention awards and 41 percent are considering targeted salary increases to help retain and motivate top performers.

Amid continuing discussions among lawmakers and regulators about how to reform the U.S. financial regulatory system, the chairman of the Securities and Exchange Commission says enforcement, and in particular, cooperation with overseas securities regulators on enforcement matters, remains a top priority.

The SEC has been working closely with its international regulatory counterparts to “coordinate our actions and align our strategies” as the global credit crisis has unfolded, SEC Chairman Christopher Cox told a gathering of global securities regulators.

“In our global economy, regulators responsible for maintaining healthy securities markets have to make enforcement a top priority and have to reach across borders to do that job well,” Cox said in a Nov. 7 speech to participants at the SEC’s International Enforcement Institute.

Calling the scale of the agency’s international enforcement cooperation “massive,” Cox noted that, during the last year, the SEC made 556 requests of foreign regulators for assistance with investigations. Meanwhile, the SEC received 454 requests from foreign regulators for law enforcement help, “and we have been eager to provide it,” Cox said.

The SEC is also working with its foreign regulatory counterparts on 12 open sub-prime investigations.

Noting that the SEC executed an enhanced enforcement Memorandum of Understanding with the Australian Securities & Investments Commission, Cox hinted that the agency is looking to forge similar ties with other regulators.

“We hope that this enhanced level of enforcement cooperation will serve as a model for other jurisdictions, and possibly set a new international standard for enforcement cooperation,” he said.

Such agreements would extend to the sharing of accounting information, including audit work papers, telephone and Internet service provider records, the confidential exchange of credit card records, travel records, employment information, and corporate records. Regulators would also assist each other in obtaining records of electronic and telephonic communication, testimony, responses to questions, and statements from witnesses.

As an example of cooperative international efforts, Cox cited a recent case in which the United Kingdom’s Financial Services Authority provided the Commission with intelligence that helped the SEC obtain an asset freeze in the UK against a UK citizen who was a defendant in a pending SEC action in Boston. In another cross-border case still underway, the SEC worked with Andorran authorities to obtain an asset freeze in a securities fraud scheme by a Spanish national living in Barcelona and operating through offshore companies based in Panama, Dominica, Belize, and the British Virgin Islands.

“In the United States, we fully appreciate that the long arm of the law has to reach not only from Boston to San Francisco, but also to Bangalore and Santa Domingo,” Cox said.

The SEC chairman also defended the agency’s enforcement record, which has come under fire in recent months. For the fiscal year just ended, he noted that the SEC brought the second-highest number of enforcement actions in its history, including a record number of insider-trading cases. Among those was a high-profile insider-trading action against former Dow Jones Board Member David Li and three others in Hong Kong that Cox said required “close and very real-time cooperation” with the Hong Kong Securities and Futures Commission.

In each of the last two years, Cox said the SEC has set the record for the highest number of corporate penalty cases in its history. The SEC has also brought a record-setting number of cases under the Foreign Corrupt Practices Act. Since January 2006, the SEC has brought 38 foreign bribery cases—more than all prior years of the Act combined.

Cox said more than a third of the total staff works in the enforcement program, a higher percentage than at any time in the past 20 years. In the past year, enforcement personnel increased by 4 percent.

The Securities and Exchange Commission has posted some must-read guidance for companies preparing for the upcoming proxy season.The Division of Corporation Finance staff has posted a legal bulletin providing guidance on common issues related to shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934, which governs when a company must include a shareholder’s proposal in its proxy statement.

Among other things, the Nov. 7 staff legal bulletin notes that the SEC has established a new e-mail address, shareholderproposals@sec.gov, specifically for the receipt of rule 14a-8 no-action requests and related correspondence.

The bulletin clarifies that, if a proposal recommends, requests, or requires the board of directors to amend the company’s charter, the staff may concur that there is some basis for the company to omit the proposal if the company meets its burden of establishing that applicable state law requires any such amendment to be initiated by the board and then approved by shareholders in order for the charter to be amended as a matter of law. However, in accordance with longstanding practice, the staff response may permit the proponent to revise the proposal to provide that the board of directors “take the steps necessary” to amend the company’s charter. If the proponent revises the proposal within the time frame specified in the staff’s response letter, “we do not believe there would be a basis for the company to exclude the proposal under rule 14a-8(i)(1), rule 14a-8(i)(2), or rule 14a-8(i)(6)” the staff states. The bulletin includes a chart with examples of revisions that the staff has previously permitted.

The SLB also clarifies that, if a proponent is listed in a company’s records as a registered holder, and the records indicate that the proponent hasn’t owned the minimum amount of securities for the required period as set forth in rule 14a-8(b), the company must send the proponent a notice of defect if it wishes to exclude the proposal on eligibility grounds. The staff explained that because the proponent can hold the company’s securities by other means, the company’s records don’t prove conclusively that the proponent fails to meet the ownership eligibility requirement.

As a result, in situations where a company’s records indicate that the proponent doesn’t satisfy the ownership eligibility requirement in rule 14a-8(b), the company “must inform the proponent that the proponent must provide proof of ownership that satisfies the requirements of rule 14a-8(b) if the company intends to exclude the proposal based upon the proponent’s failure to satisfy the requirements of rule 14a-8(b),” the bulletin states.

Finally, the bulletin clarifies that proponents are required to provide companies with any correspondence they send to the staff in connection with rule 14a-8 no-action requests and encourages companies and proponents to use the same means of transmitting correspondence to each other that they use to transmit materials to the staff.

At the same time, the SEC has added a page on the Corp Fin Web site that contains Rule 14a-8 no-action requests received after Oct. 1, 2008, that are being reviewed by the staff.

The post-election wave of departures at the Securities and Exchange Commission has begun, with the announcement that Corporation Finance Director John White will leave the agency at the end of the year.

White will rejoin the law firm of Cravath, Swaine & Moore as a partner in its New York office, where he spent more than 25 years as a partner prior to joining the SEC in March 2006.

White has recommended more than 60 rulemaking releases during his tenure at the SEC, including the sweeping changes to executive and director compensation disclosure, efforts to improve implementation of Sarbanes-Oxley Act Section 404, the acceptance of International Financial Reporting Standards by foreign issuers, electronic delivery of proxy materials, and efforts to modernize the requirements that apply to foreign issuers and U.S. investors in foreign companies, such as the simplification of deregistration by foreign issuers, improvements to the cross-border tender offer rules and revision of the exemption from registration for foreign private issuers.

He has also overseen some major SEC rulemaking initiatives that are expected to be finalized shortly, including an updated roadmap for the use of IFRS by U.S. issuers and a proposal to mandate interactive data financial reporting for all issuers. The SEC published its interactive data rule proposal in May. The commissioners voted in August to publish the proposed IFRS roadmap. Both efforts appear to have stalled as the SEC has focused on dealing with the financial crisis.

SEC Chairman Christopher Cox said White’s work “has increased transparency for investors when that is what our markets have needed most.”

“The SEC and America’s investors could not have had a better leader during these challenging times,” Cox said.

“It has been a privilege to serve under Chairman Cox and the other members of the Commission and alongside the agency’s talented and dedicated staff—they are among the government’s finest,” White said in a statement. “The Division of Corporation Finance has a long and proud tradition of excellence, and I am grateful to have been a part of that tradition over the past few years.”