The Securities and Exchange Commission voted unanimously today to publish a statement updating its position on the possible adoption by U.S. companies of International Financial Reporting Standards that keeps a 2011 deadline for making a final decision on whether or not to make the move, but would delay adoption until at least 2015.

Under the statement approved at a Feb. 24 open meeting, if ongoing convergence projects are successfully completed and a forthcoming SEC staff work plan is executed, the Commission would still make a decision in 2011 on whether to adopt IFRS for all U.S. companies.

However, based on views by commenters on its 2008 proposed roadmap for IFRS adoption that companies would need a four- to five-year timeframe to make the change in their financial reporting systems to incorporate IFRS, SEC officials said if they decide to move forward with IFRS adoption, U.S. companies wouldn’t report under IFRS any earlier than 2015.

The 2008 proposed roadmap for IFRS adoption contemplated letting some U.S. companies use IFRS as soon as filings for fiscal years ending on or after Dec. 15, 2009, and would’ve mandated adoption on a phased-in schedule starting in 2014.

Under today’s statement, the SEC isn’t pursuing the early use option at this time, but said it may consider it later. It also left open the question as to how issuers would adopt IFRS—for instance whether it would be mandated or voluntary and phased-in or all at once.

The statement directs the SEC staff to gather information to help the Commission evaluate the impact that the use of IFRS by domestic companies would have on the U.S. securities market, with public progress reports beginning by October 2010 on a staff work plan and on the status of convergence efforts by U.S. and international standard setters.

The Financial Accounting Standards Board, which oversees U.S. Generally Accepted Accounting Principles, and the International Accounting Standards Board, which sets IFRS, set a 2011 target date for a completion of their current convergence projects. The Commission said it will continue to monitor the progress of those efforts.

According to an SEC fact sheet, the staff work plan will focus on concerns raised by commenters including:

• Determining whether IFRS is sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.
• Ensuring that accounting standards are set by an independent standard-setter and for the benefit of investors.
• Investor understanding of and education about IFRS, and how it differs from U.S. GAAP.
  Understanding whether U.S. laws or regulations beyond the securities laws, such as tax laws and regulatory reporting, would be affected by a change in accounting standards.
• Understanding the impact on large and small companies, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
• Determining whether the people that prepare and audit financial statements are sufficiently prepared, through education and experience, to make the conversion to IFRS.

Roughly a third of the capital markets outside of the United States use IFRS, according to the SEC. Foreign private issuers have been permitted since 2008 to file financial statements with the SEC prepared in accordance with IFRS without reconciling to U.S. GAAP.

“Incorporating IFRS into our financial reporting system would involve a significant undertaking,” SEC Chairman Mary Schapiro said in remarks during the meeting. “We must carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.”

At the same meeting, the SEC voted 3-2 to adopt an alternative uptick rule, which amends Rules 201 and 200(g) of Regulation SHO to impose short sale restrictions.

Under the rule, which was opposed by Republican Commissioners Kathleen Casey and Troy Paredes, a circuit breaker would be triggered for a stock any time its price drops 10 percent or more from the prior day’s closing price in one day, and short selling in that security would only be allowed if the price is above the current national best bid.

The alternative uptick rule would apply to short sale orders in that stock for the remainder of the day and the following day. The SEC said the rule generally would apply to equity securities listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.

The topic of International Financial Reporting Standards for domestic companies is back on the Securities and Exchange Commission’s agenda.

At an Open Meeting on Feb. 24, the Commission will consider “whether to publish a statement regarding its continued support for a single-set of high-quality globally accepted accounting standards and its ongoing consideration of incorporating International Financial Reporting Standards into the financial reporting system for U.S. issuers,” according to a Sunshine Act Meeting Notice posted Feb. 19.

At the same meeting, the SEC will also consider whether to adopt amendments to Rules 201 and 200(g) of Regulation SHO relating to short-sale restrictions.

The SEC published its proposed roadmap on the adoption of IFRS for U.S. companies for comment in November 2008, as the economic crisis was deepening. Under that proposal, a small group of public companies would be able to  start filing using IFRS voluntarily as early as 2010, and others would be required to adopt the standards on a phased-in scheduled, starting with fiscal years ending on or after Dec. 15, 2014, if certain milestones were met. A final decision on whether to move ahead with mandatory adoption would be made in 2011.

While the 200-plus comment letters were generally supportive of the pursuit of a single set of global accounting standards, they were sharply divided on how best to get there.

The proposed roadmap was put on the back burner last winter as the SEC dealt with the financial crisis, the Madoff fraud debacle, and a change in its leadership when the new administration took over last year.

After remaining mum on the issue for months, SEC officials in public remarks last fall said that converging U.S. Generally Accepted Accounting Principles and IFRS would be a high priority for the agency. The U.S. accounting standards setters, the Financial Accounting Standards Board and the International Accounting Standards Board, which sets IFRS, are working on several major joints projects to bring their standards closer.

As previously reported, at a conference in December, SEC Commissioner Elisse Walter said the SEC wouldn’t move forward with any plan until it was satisfied that concerns about IASB’s susceptibility to political pressure and independence were resolved.

Back in 2007, the SEC abolished a long-standing requirement that overseas companies listed on U.S. exchanges reconcile their financial statements to U.S. Generally Accepted Accounting Principles if they file using IFRS as promulgated by IASB.

—by Jaclyn Jaeger. E-mail Jaclyn at jjaeger@complianceweek.com.

It’s official: The Securities and Exchange Commission voted 3-2 today to publish an interpretive release, providing guidance to companies on its current disclosure requirements concerning climate change.

Chairman Mary Schapiro stressed that the SEC is not commenting or opining on the issue of climate change; rather the guidance is intend to “provide clarity and enhance consistency” to help companies decide what does and does not need to be disclosed.

Not all agreed with the release of the guidance. SEC Commissioner Kathleen Casey expressed particular concern about its timing with all the issues in the market today, and commented that it “sends a curious signal about the most pressing issues facing shareholders.”

In addition, Casey said the guide “falls outside our expertise and beyond our investor protection,” at a time when science and policy are increasingly in flux over the effects of climate change. “This guidance is premature at best,” she said.

Investor groups have long been pushing the SEC to issue guidance requiring companies to assess and disclose the risks they face from climate change. Casey argued, however, the interpretive release would, in fact, only cause more harm to investors by increasing their regulatory burdens.

SEC Commissioner Troy Paredes expressed all the same concerns as Casey. “Now is not the time to support climate change disclosure,” he concluded.

SEC Commissioners Luis Aguilar, Elisse Walter, and Schapiro strongly spoke in support of the interpretive release. Aguilar further noted that the guidance is only a “first step in where the Commission will begin to play a more proactive role.”

Compliance Week will have full coverage of the SEC’s decision on climate change in its Feb. 2 edition.

Get ready for new guidance on climate change disclosure. The Securities and Exchange Commission plans to vote next week on an interpretive release to provide guidance to companies on its current disclosure requirements.

According to a Sunshine Act notice posted Jan. 20, the SEC has scheduled an Open Meeting on Jan. 27, where it will consider a recommendation to publish an interpretive release to “provide guidance to public companies regarding the Commission’s current disclosure requirements concerning matters relating to climate change.”

Investor groups have long been pushing the SEC to issue guidance requiring companies to assess and disclose the risks they face from climate change.

If the Commission votes to publish the interpretive release, SEC spokesman John Nester clarified that it would be effective immediately upon publication, since it’s guidance, not a rule change.

Nester says the guidance is a response to “many factors, including that current guidance was written more than 25 years ago and much has changed since then.”

Also on the agenda is consideration of a recommendation to adopt new rules, rule amendments, and a new form under the Investment Company Act of 1940 governing money market funds.

Those tasked with drafting proxy disclosures take note: The Securities and Exchange Commission has approved proposed amendments to its proxy disclosure rules, with some notable changes from the July proposing release, that you’ll have to incorporate into your 2010 proxy disclosures.

The SEC, in a 4-1 vote, okayed proposed changes to the disclosures companies are required to make about compensation, risk, and corporate governance. The rules, which will be effective Feb. 28, 2010, aim to provide shareholders with better information to make voting decisions.

However, the rules approved at the Dec. 16 open meeting include some important tweaks from the proposal floated in July to address concerns raised in the more than 130 comment letters submitted to the SEC.

Most notably, the amendments will require companies to address their compensation policies and practices for all employees, not just executive officers, if the compensation policies and practices create risks that are “reasonably likely to have a material adverse affect on a company.”

The higher “reasonably likely” disclosure threshold wasn’t in the original proposal. Those disclosures also won’t be included in the Compensation Discussion and Analysis, and smaller reporting companies aren’t required to provide that disclosure.

Corporation Finance director Meredith Cross noted that the adopting release will include examples where companies might look for those issues and will instruct them to look at offsetting and mitigating factors.

The final rule will also require disclosure about the board’s role in risk oversight, instead of risk management as proposed, that’s focused on how that oversight is administered. For instance, whether that oversight resides with the audit committee or a separate risk committee, or to the extent it’s within different parts of the board, how those parts interact.

Required disclosures about the fees paid to compensation consultants and their affiliates were also modified from the proposing release. Under the final rule, disclosures of the fees paid and related disclosures won’t be required if the amount of additional services provided to the company by the consultant or an affiliate is less than $120,000 during the company’s fiscal year. The requirement also includes an expanded exception for consulting on broad-based plans such as 401(k)s or health insurance plans, and services limited to providing non-customized information such as surveys.

As expected, the rules also revise the reporting of stock and options awards so the full grant date fair value will be reported in the summary and director compensation tables, instead of the annual accounting charge.

For stock and options awards subject to performance conditions, the amount reported in the tables will be the aggregate fair value at grant date, based on the probable outcome of performance conditions. The maximum potential value of the awards will be disclosed in the footnotes to the tables.

The staff noted that, for fiscal years ending on or after Dec. 20 2009, companies will be required to present recomputed disclosure for all fiscal years included in the tables, but won’t be required to include different NEOs from any preceding fiscal years based on the recomputed total compensation.

The rules also expand the disclosure companies have to disclose about the experience, qualifications, and skills of individual directors and nominees and directors’ involvement in legal proceedings, and require companies to disclose whether and why their principle executive officer and chair roles are combined or split, and the role of a lead independent director, if the company has one.

In addition, the rules require disclosure of whether and, if so, how the nominating committee considers diversity in identifying nominees. If the committee or board has a policy for considering diversity in identifying nominees, the company must disclose how that policy is implemented and the effectiveness of that policy is assessed.

The rules also accelerate the reporting of voting results to require results be reported in Form 8-K within four business days of the meeting at which they’re held.

Meanwhile, proposed amendments to various proxy solicitation procedural rules were not included in the final rule. Due to the interrelation of some of those proposals to a pending SEC proposal intended to facilitate shareholder director nominations in company proxy materials, the staff recommended the SEC defer consideration of those proposals until it takes up the other rule.

Commissioner Kathleen Casey was the lone dissent on the rule. Her objections stemmed from the expanded disclosures related to director and nominee qualifications and the board’s consideration of diversity, which she said could undercut investors’ understanding of how companies assemble their boards and would encroach on the board’s decision-making authority.

Compliance Week will provide readers with full details and coverage of the final rule in its Dec. 22 edition.

As anticipated, the Securities and Exchange Commission has scheduled an open meeting for Dec. 16 to consider whether to adopt amendments to its rules to enhance the disclosures companies are required to make about compensation and other corporate governance matters.

While the form and effective date of any final rule the Commission might adopt remains to be seen, SEC officials have repeatedly said they want to have the rules in place in time for the 2010 proxy season.

The proposals, detailed in a 137-page proposing release published in July, call for greater disclosure of risks, executive compensation, or risks stemming from executive compensation. Most notably, as proposed, the rules would require companies be required to discuss and analyze compensation policies for all employees, including non-executive officers, if risks arising from those compensation policies or practices may have a material effect on the company.

The proposals would also require more disclosure about director nominees’ experience, and an explanation of whether companies separate their chairman and CEO roles and any possible compensation consultant conflicts of interests. Other proposed amendments would change how companies report the value of the stock and option awards granted to executives and directors and require disclosure much sooner of shareholder voting results. Comments on those proposals closed in September.

Also on the agenda for the meeting is consideration of amendments to the investment adviser custody rule (rule 206(4)-2) under the Investment Advisers Act of 1940) and related forms and rules.

Compliance Week will provide readers with full coverage of the SEC’s actions at the meeting in an upcoming edition.

One sleeper item that might be of interest to companies and shareholder activists in the Securities and Exchange Commission’s proposing release for its proxy disclosure and solicitation enhancements: An amendment that observers say could potentially facilitate activists’ solicitation activities.

The proposed amendment, which is part of a broad package of reforms proposed at the SEC’s July 1 open meeting and detailed in a 137-page proposing release out for comment until Sept. 15, allow dissidents to send unmarked copies of management’s proxy without triggering the proxy rules.

The proposal would clarify that an unmarked copy of management’s proxy card that’s requested to be returned directly to management isn’t a “form of revocation” under Exchange Act Rule 14a-2(b)(1), so a person furnishing the duplicate proxy card isn’t disqualified from relying on the rule’s exemption.

“This proposed change is significant because it broadens the scope of an exemption that had been effectively limited in 2004 after a decision in the U.S. Court of Appeals for the Second Circuit,” notes Howard Dicker, a partner in the law firm Weil Gotshal & Manges in a July 9 alert.

In MONY Group, Inc. v. Highfields Capital Management, the Second Circuit reversed a district court decision consistent with the staff’s views that the unmarked copy of management’s proxy card wasn’t a “form of revocation” within the meaning of Exchange Act Rule 14a-2(b)(1).

“We propose to clarify the rule to align with our view by amending it to provide expressly that a ‘form of revocation’ does not include an unmarked copy of management’s proxy card that the soliciting shareholder requests be returned directly to management,” the proposing release states, noting that the clarification “is consistent with advice the staff informally has provided in response to related inquiries since the rule was adopted.”

The amendment would “aid efforts by persons not seeking proxy authority to facilitate voting by shareholders sharing their views on matters submitted for shareholder approval—such as in a ‘just vote no’ campaign—without having to incur the costs and efforts of conducting a fully regulated proxy solicitation and provide shareholders a convenient opportunity to indicate their votes after hearing those views without having to request another proxy card from management,” the release states.

Dicker notes that the proposal is expected to “generate some controversy” since shareholders may not have significant information about the soliciting person that might be material to their voting decision.

Likewise, Ronald Mueller, a partner in the law firm Gibson Dunn & Crutcher, says if adopted, the amendment could “become a big issue, because companies could potentially find themselves caught by surprise by a stealth vote no or vote against campaign.”

“It’s something companies may want to focus on in their comments,” he says.

Pages 50-51 of the proposing release seeks comment on several questions related to the proposal, including the appropriateness of the proposed amendment, whether a soliciting person that provides an unmarked copy of management’s proxy card should be required to file a Notice of Exempt Solicitation even if they don’t meet the thresholds under Exchange Act Rule 14a-6(g), and whether such a soliciting person should be required to file and provide to solicited persons other information about itself.

Compliance Week will provide readers with more coverage of the details of the proposing release in an upcoming edition.

The Securities and Exchange Commission voted 3-2 along party lines to approve the New York Stock Exchange rule amendment that effectively ends broker discretionary voting in director elections.

The rule change will be effective for shareholder meetings held on or after Jan. 1, 2010.

At today’s open meeting, Commissioners Elisse Walter and Luis Aguilar voted along with Chairman Mary Schapiro to approve the rule change, which amends NYSE Rule 452 and corresponding Section 402.08 of its Listed Company Manual to eliminate broker discretionary voting for the election of directors, except for companies registered under the Investment Company Act of 1940.

“The most fundamental way shareholders can ensure that directors remain accountable to them is through the director election process,” Schapiro said. “The NYSE rule proposal is designed to help assure that voting rights for matters as critical as the election of directors are exercised by those with economic interests in the company rather than by brokers, thereby improving corporate governance and enhancing accountability.”

Currently, under Rule 452, brokers are allowed to vote in uncontested director elections shares held in street name if they don’t receive instructions from share owners 10 days before the annual meeting. Proponents of the change say the votes distort election outcomes, since brokers tend to vote in line with management. Opponents of the change argue that it will make it harder for some companies to achieve quorum and could raise solicitation costs. The controversial NYSE rule proposal had been sitting in limbo at the SEC since October 2006.

Commissioners Kathleen Casey and Troy Paredes voted against the rule change, largely due to concerns that the change to Rule 452 should be made only as part of a broader reform of the proxy process, and not in isolation.

“Although I agree with the animating principle behind the amendment … that the election of directors is not merely a routine matter, I believe we are doing investors a tremendous disservice by approving this without closely analyzing the effects this action is likely to have in determining what other changes to the proxy voting process should be adopted concurrently with this rule change,” Casey said.

However, Schapiro, noting that the proposal “has essentially been awaiting approval for nearly three years, said, “Keeping our decisions on hold indefinitely doesn’t solve problems. So, I think it is time for us to move forward.”

Still, acknowledging “logistical concerns about the new rule’s implementation,” Schapiro said, “There are related areas of shareholder communication and voting and logistics that the Commission absolutely will be studying this year.”

Commissioners at the meeting also voted to approve publishing for comment proposals to amend its rules to enhance and expand the disclosures that registrants are required to make about the relationship between compensation and material risk, the qualification of director candidates, and why they chose their particular leadership structure, as well as additional information about the board’s use of compensation consultants. The SEC also voted to approve rules clarifying how companies that receive TARP money can comply with the requirement under the Emergency Economic Stabilization Act of 2008 to hold a shareholder advisory vote on executive pay.

Details of the proposals have not yet been posted to the SEC’s Website. Compliance Week will provide readers full coverage of the SEC’s actions at the July 1 meeting in an upcoming edition.

The Securities and Exchange Commission plans to kick off July with a busy agenda. A decision on discretionary broker votes,  and votes on whether to propose new disclosures about compensation and rules governing say-on-pay at TARP companies are on the agency’s agenda for next week.

The Commission has slated an Open Meeting for July 1 to consider whether to approve the proposed rule change filed by the New York Stock Exchange to amend NYSE Rule 452 to eliminate broker discretionary voting for the election of directors. The agency will also vote on whether to codify previously published interpretations that don’t permit broker discretionary voting for material amendments to investment advisory contracts with an investment company, according to a June 24 Sunshine Act Meeting notice.

The SEC will also consider whether to propose amendments to its rules to enhance the disclosures registrants must make about compensation and other corporate governance matters and to clarify “certain of the rules governing proxy solicitations.”

SEC Chairman Mary Schapiro has said in public remarks that the agency will consider, among other things, proposals requiring greater disclosure about a company’s overall compensation approach and potential conflicts of interest by compensation consultants.

Also on the agenda is whether to propose amendments to the federal proxy rules to set forth requirements for TARP recipients that are required under the Emergency Economic Stabilization Act of 2008 to provide shareholders an advisory vote on executive compensation.

Securities and Exchange Commission officials at today’s open meeting voted 3-2 to publish for comment amendments to its proxy rules that would enable shareholders to have their director nominees included on corporate proxies and allow them to submit proposals about nomination, procedural, or disclosure matters.

Commissioners Elisse Walter and Luis Aguilar voted along with chairman Mary Schapiro in favor of voting to publish the proposing release, while commissioners Kathleen Casey and Troy Paredes voted against it.

“No less than three times in recent memory has the Commission considered the question of amending our federal proxy rules to address so-called proxy access,” Schapiro said at the open meeting. “The time has come to resolve this debate.”

Like a failed proposal floated back in 2003, today’s recommendation includes a new Rule 14a11. However, unlike the 2003 proposal, the proposed rule doesn’t include triggers and instead of a 5 percent ownership threshold and two-year holding period, the staff is recommending a one-year holding period and a tiered ownership threshold of 1, 3, or 5 percent depending on the size of company.

The proposed new Rule 14a11 would apply to all companies that have a class of equity securities subject to Exchange Act proxy rules, including registered investment companies, but it wouldn’t apply if shareholders don’t have the right to nominate directors under state law or pursuant to provisions of a company’s governing documents.

The 1 percent ownership threshold would apply for large accelerated filers and registered investment companies with net assets of $700 million or more, a 3 percent threshold would apply for accelerated filers and registered investment companies with net assets between $75 million and $700 million, and a 5 percent ownership threshold would apply for non-accelerated filers and registered investment companies with net assets of less than $75 million.

While 14a11 won’t apply if shareholders don’t have nomination rights, as proposed, Brian Breheny, deputy director of the Division of Corporation Finance, noted that the rule would continue to apply even if a company also has a provision in its governing documents that provides shareholders with an alternative mechanism to include shareholder director nominees in the company’s proxy materials.

The proposal also recommends an amendment to Exchange Act Rule 14a8, the so-called election exclusion, that would enable shareholders to include proposals in proxy materials that would amend or request amendments to a company’s governing documents to address the company’s nomination rights or disclosures, or other procedural matters related to those nomination rights, provided the disclosures or provisions do not conflict with the Commission’s proposed Rule 14a11.

Back in 2007, the SEC proposed amendments that would’ve enabled shareholders to include proposals on shareholder director nomination bylaws in the company’s proxy materials where certain conditions were met, including a 5 percent ownership threshold, a one-year holding period, and additional disclosures.

Breheny said the only new change if the amendment to 14a8 were to be adopted “would be to allow shareholders to submit proposals about nomination, procedural, or disclosure matters.” However, he noted that the changes to 14a8 wouldn’t enable a shareholder to include a proposal that would impact the disclosure provisions provided by Rule 14a11.

Unlike 2007, today’s proposed amendments don’t require any additional conditions. Breheny said the current eligibility provisions of 14a would apply: ownership of at least $2,000 in market value or 1 percent of securities, whichever is less, and a one-year holding period.