Securities and Exchange Commission: universal power of attorney

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B-333815

December 15, 2021

The Honorable Sherrod Brown
President
The Honorable Patrick J. Toomey
Ranking Member
Banking, Housing and Urban Affairs Commission
United States Senate

The Honorable Maxine Waters
President
The Honorable Patrick McHenry
Ranking Member
Financial Services Commission
House of Representatives

Topic: Securities and Exchange Commission: universal power of attorney

Pursuant to Section 801 (a) (2) (A) of Title 5, United States Code, this is our report on a major rule promulgated by the Securities and Exchange Commission (SEC) entitled “Universal Proxy” (RIN: 3235- AL84). We received the rule on December 2, 2021. It was published in the Federal Register as final rule on December 1, 2021. 86 Fed. Reg. 68330. The effective date is January 31, 2022.

According to the SEC, the final rule amends federal proxy rules to improve the ability of shareholders to elect directors through the proxy process in a manner consistent with their ability to vote in person at a meeting. shareholders’ meeting. Specifically, the SEC said it requires the use of a universal proxy card in all non-exempt solicitations involving director election contests, except those involving registered investment firms. and business development companies. To facilitate the use of a universal proxy card, the SEC further said it is also amending the federal proxy rules to establish certain notification, minimum solicitation, filing, formatting and presentation requirements. , as well as other related rule changes consistent with the adoption of a universal proxy card. power of attorney requirement. In addition, the SEC said it has decided to adopt new disclosure requirements relating to voting standards and further requiring certain voting options for all director elections, whether or not they are contested.

Attached is our assessment of the SEC’s compliance with the procedural steps required by Section 801 (a) (1) (B) (i) through (iv) of Title 5 in relation to the rule. If you have any questions about this report, or would like to contact the GAO officials responsible for the assessment work relating to the purpose of the rule, please contact Shari Brewster, Deputy General Counsel, at (202) 512-6398.

Shirley A. Jones
Associate Legal Director

Pregnant

cc: J. Matthieu DeLesLast
Assistant secretary

PREGNANT

REPORT UNDER 5 USC § 801 (a) (2) (A) ON A MAJOR RULE
ISSUED BY THE
SECURITY AND EXCHANGE COMMISSION
ENTITLED
“UNIVERSAL POWER OF ATTORNEY”
(RIN: 3235-AL84)

(i) Cost-benefit analysis

The Securities and Exchange Commission (SEC) said that for shareholders who would otherwise incur additional costs to vote for a combination of candidates who could not be elected by proxy, for example by attending the meeting in person, the final rule will result in cost savings. The SEC also said the final rule will allow shareholders who wish to split their vote, but are unwilling (or unable) to incur additional costs, to be able to vote for their preferred combination of nominees without incurring additional costs. The SEC further stated that the appointment and election of directors by shareholders represents a fundamental governance mechanism that can mitigate conflicts of interest between shareholders and management. While the most direct effect of the final changes is to improve the efficiency of the voting process and provide shareholders with greater choice when voting by proxy in contested director elections, the SEC has estimated that the final rule is also likely to impose direct costs on dissidents and entrants in some contests. The SEC also estimated that the final rule could have broader impacts on corporate governance and the relations between shareholders and management. The SEC further said that enabling split voting could result in more boards with a mix of directors appointed by registrants and dissenters, which could affect the effectiveness of boards. boards, positively or negatively. Finally, the SEC felt that the final rule could provide potential dissidents with a new way to generate publicity for alternative candidates or the broader concerns behind a competition at a relatively low cost, which could change the nature of interactions. between potential dissidents and the leadership.

(ii) Agency actions relating to the Regulatory Flexibility Act (RFA), 5 USC §§ 603-605, 607 and 609

The SEC conducted a final regulatory flexibility analysis. The analysis focused on: (1) a statement of the needs and objectives of the final rule; (2) a summary of the significant issues raised by the public comments; (3) a description of the small entities subject to the final rule; (4) a description of anticipated reporting, record keeping and compliance requirements; and (5) a summary of the agency’s action to minimize the impact on small entities.

(iii) Agency Actions Regarding Sections 202-205 of the Unfunded Mandates Reform Act 1995, 2 USC §§ 1532-1535

As an independent regulatory commission, the SEC is not subject to the requirements of the law.

(iv) Other relevant information or requirements under laws and decrees

Administrative Procedure Act, 5 USC §§ 551 et seq.

The SEC released a proposed rule on November 10, 2016. 81 Fed. Reg. 79122. The SEC held a comment period that ended on January 9, 2017. The SEC opened a second comment period from May 7, 2021 to June 7, 2021. 86 Fed. Reg. 24364. The SEC received comments and addressed them in the final rule.

Red Tape Reduction Act (PRA), 44 USC §§ 3501-3520

The SEC determined that the final rule contained information gathering requirements (ICR) submitted to the PRA. The first ICR is “Regulation 14A” associated with the Office of Management and Budget (OMB) control number 3235-0059. The burden associated with Regulation 14A is 778,802 hours and a cost of $ 103,805,312. The second ICR is “Rule 20a-1 under the Investment Companies Act 1940, Solicitations of Proxies, Consents and Authorizations” associated with control number OMB 3235-0158. The burden associated with Rule 20a-1 is 113,527 hours and a cost of $ 40,012,200.

Legal authorization of the rule

The SEC promulgated the final rule in accordance with Section 2 of Title 7; article 5221 of title 12; articles 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j , 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd , 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 and following., and 8302 of Title 15; and heading. 1350 of Title 18, United States Code, as well as Public Laws 111-203 and 112-106.

Executive Decree No. 12866 (Planning and Revision of Regulations)

As an independent regulatory commission, the SEC is not subject to the requirements of the ordinance.

Executive Decree No. 13132 (Federalism)

As an independent regulatory commission, the SEC is not subject to the requirements of the ordinance.

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