The heat wave on the East Coast has kept many of us looking for ways to stay cool. However, in Washington, the “hot air” became even hotter as news of the Shirley Sherrod mistake and Charlie Rangel’s ethics problems seemed to overshadow President Obama’s signing of the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act on Wednesday. Many on Wall Street who are directly affected by the legislation were, in an uncustomary manner, not invited to the signing ceremony. Regardless, things now become really interesting.

The SEC must hire approximately 800 additional staff in order to handle new responsibilities, issue more than 200 new rules and complete almost 20 studies in a relatively short time period. Some of these new regulations will affect IR professionals as we outlined in NIRI’s most recent Executive Alert on the impact of financial reform. I don’t expect the SEC to wait long – I am already hearing that by as early as next month we may see a final proxy access rule for shareholder nominated directors. Because Congress is on recess most of the month until after Labor Day, August is generally quiet in Washington, but the SEC will be buzzing.

One aspect of financial reform that I mentioned during the House and Senate negotiations was the potential for increased short sale disclosure. Indeed, Section 929 of the new legislation is an amendment to Section 13(f) disclosures requiring “public disclosure of the name of the issuer and the title, class, CUSIP number and aggregate amount of the number of short sales of each security, and any additional information determined by the Commission following the end of the reporting period. At a minimum, such public disclosure shall occur every month.” The legislation also further outlines manipulative short selling as illegal and adds some clarity for brokers to notify customers “that they may elect not to allow their fully paid securities to be used in connection with short sales. If a broker or dealer uses a customer’s securities in connection with short sales, the broker or dealer shall provide notice to its customer that the broker or dealer may receive compensation in connection with lending the customer’s securities.” So does this mean issuers may gain further insight into shareholder ownership with improved 13(f) filings that include short sale activities? I would like to think so, and NIRI will certainly be working towards this end as the SEC implements this rule. I suggest reading a recent article in Securities Technology Monitor for further discussion of this provision if you are interested in more information.

Last week, I told you about the very important solicitation for comment by the SEC on proxy mechanics. Starting next week and extending for several weeks, I will be taking the SEC’s concept release apart section by section and urging you and your companies to comment on what I believe to be those areas most critical to our profession. The participation of public companies in the SEC comment process is absolutely essential to improving the U.S. proxy system.

In NIRI news this week, I invite both attendees and non-attendees to access session materials, video and audio from the 2010 NIRI Annual Conference available on the NIRI website. An excellent example of the kind of high-impact, immediately actionable content presented at conference are the top career management tips provided by the panel of NIRI member experts assembled for our popular “Advancing from Mid-Career to the Next Level” session.

I also invite you to attend our free member webinar “Issues and Trends in IR Communication” with participation from NIRI Senior Roundtable members and NIRI’s research department. Next week we begin the three part webinar “Creating Compelling Investor Presentations” for the member price of $150 for all three parts. Finally, NIRI will participate in an industry effort coordinated by the CFA Institute to suggest a model Compensation Discussion and Analysis or CD&A for issuers to adopt. I am looking for reviewers to read the proposal and provide comments. If you are interested, please email me. Thank you in advance for your consideration.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

It appears to have been a week of nearly unprecedented significance for the SEC: a landmark $550 million settlement with Goldman Sachs - the largest SEC penalty ever assessed against any Wall Street firm; congressional passage of the mammoth “Dodd-Frank Wall Street Reform and Consumer Protection Act” replete with its major rulemaking implications; and the long-awaited issuance of its 151 page “Concept Release on the U.S. Proxy System.” And while the first item is simply interesting, regular readers know that it is the second and third items that have important implications for NIRI members and their companies.

In what is being described as the greatest legislative change to financial supervision since the 1930’s, the Dodd-Frank Act will affect all U.S. public companies. Passed by the Senate last week, it is currently on President Obama’s desk awaiting his signature. The White House has announced that the president will sign it into law tomorrow, and NIRI will release an Executive Alert later today outlining investor relations considerations. The regulatory implications are significant – I have seen reports that the bill requires nearly 250 rulemakings and nearly 70 studies. To give you a perspective on its size, the Dodd-Frank Act is 2,319 pages, while Sarbanes-Oxley legislation was only 61 pages. The SEC gets its fair share of studies and new rulemaking from the new legislation, particularly as it relates to public company corporate governance. So now the hard work of regulatory implementation begins and we must wait and watch. The legislation sets up a defined timeline for some items, but in many cases it is left up to the rulemaker such as the SEC.

Despite this significant new workload, the SEC to its credit pushed forward last week with its “proxy plumbing” concept release. NIRI responded by issuing a press release supporting this effort. As you know, on its own and through the Shareholder Communications Coalition, NIRI has long advocated for improvements to the proxy system and related issues including greater proxy advisory service regulatory oversight and transparency and a stronger institutional share ownership disclosure regime. I think any improvements can only serve to increase public confidence in the integrity of our markets. The key will be for public companies to take advantage of the SEC’s 90 day comment period to submit specific problems they have had with proxy mechanics and suggest improvements.

While this action was unfolding in Washington, I was in São Paulo, Brazil for the week as a guest of IBRI (the Brazilian equivalent to NIRI) speaking at their annual conference. Other than our neighbor Canada, Brazil has the largest number of non-U.S. NIRI members. They also have the second largest non-U.S. NIRI conference attendance. I was delighted to have the opportunity to spend time there and want to share several observations with you.

I believe Brazil has about 400 public companies, yet there were 800 people attending the conference! Brazilian public companies are required by law to have someone in an investor relations capacity and so they take IR very seriously. So seriously, in fact, that many send the entire IR team including the CFO to the conference. Plus, Brazil’s SEC equivalent, the CVM, is an active participant in the conference and sat through sessions to hear about problems and challenges of IR professionals. Lastly, they invite the analyst association – ABRASCA – to be active partners in the conference making for a very positive experience.

One thing Brazilian IR professionals don’t have to worry about is shareholder ID and a detailed understanding of who owns their shares. Trade data (as I understand it) is reported daily to the CVM so companies have a continuous shareholder base update. Those with U.S. ADR’s are understandably as frustrated as American companies with the lack of U.S. ownership transparency. Needless to say, I was impressed and it reaffirmed for me how much we can all learn from each other.

Finally this week, let me remind you about our upcoming “Introduction to Investor Relations” on September 12-15 in Boston. NIRI offers this comprehensive program twice a year and it is an excellent place to begin your career development in the field of investor relations. Alternatively, if you have a full week to devote to IR professional development, registration ends shortly for the University of Michigan IR Certificate program, “Theory and Practice of Investor Relations” on August 15-20.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

Congress returned to Washington yesterday with a full agenda including the financial regulatory reform legislation that most expect to pass the Senate in the next two weeks and be immediately signed into law by the president. SEC Chair Mary Schapiro spoke about this issue last week at a conference of the Society of Corporate Secretaries and Governance Professionals. I attended the conference and spoke on the benefits of IR and corporate secretaries working together more closely, and I also visited with several NIRI members.

In her speech, Schapiro discussed the expected workload at the SEC as a result of the reform legislation noting that the amount of studies and increased authority will create an environment where a great deal must be done in a relatively short time over the next 18 months. Top of mind considerations for Schapiro, in addition to implementing governance provisions, include: increased SEC oversight of OTC derivatives, implementing standards of care for broker/dealers and investment advisors, harmonizing fiduciary standards for anyone giving investment advice, and hedge fund oversight.

The SEC is not, however, waiting to issue a concept release on voting infrastructure, or proxy mechanics. One of NIRI’s top advocacy agenda priorities, NIRI has been pushing for change on this for quite a while. Approval of the concept release is expected tomorrow at an open SEC meeting. The release will be divided into three sections, with specific questions/issues contained in each section. The first section is likely to address accuracy, transparency, and efficiency in the voting process, and will touch on issues such as: over-voting and under-voting, vote confirmation, voting and securities lending, proxy distribution costs including e-Proxy fees and client-directed voting.

The second section is expected to consider shareholder communications and participation, including: the NOBO/OBO classification system, the need to increase retail investor participation in proxy voting, investor education, shareholder forums, whether e-Proxy has been successful, and the feasibility of data tagging proxy and vote filings.

I believe the third section will explore the relationship between voting power and economic interest of shares, and discuss proxy advisory services oversight, record date issues (dual record date feasibility) and empty voting.

The SEC is expected to put the concept release out for a 90 day comment period. The Commission emphasizes the need for individual companies to submit comments citing specific inequities and problems they have encountered. The SEC is interested in addressing areas of the proxy system where current structure disadvantages segments of shareholders. We will be going into more depth on this once the concept paper is approved and available for reading.

Speaking of reading, I invite you to read a ProPublica article highlighting new academic research suggesting that hedge funds may be trading on insider information supplied by companies that seek loans from them. I am not sure how widespread the practice of borrowing from hedge funds actually is, but it seems problematic and much like letting the fox inside the henhouse.

I am nearing my limit for this week’s message and want to end on the lighter side. Since you might start hearing a recently coined Washington phrase – the “G factor” – in the near future, I’ll give you a little background so you can be one of the first to use it in your organization. The “G factor” is the convergence of all things starting with “G” that are casting a cloud over the Obama administration, the economy and our general well being. The list includes: Gulf oil spill, Greece’s economy, Gaza/the Middle East, Germany and the financial stability actions of Europe, probably guns for Afghanistan/Iraq and, finally, GDP for the concerns of our slowing economy.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

We crossed the midway line this past week for 2010. While we wait for the Senate to pass financial regulatory reform and the President to sign the reform into law, it seems like a good time to catch our breath after the long weekend. Let's look at Washington and regulatory changes affecting IR during the last six months and then look ahead to the rest of 2010 and potential regulatory changes that may impact IR.

During the first half of 2010:

• The SEC approved some long awaited Notice & Access changes.
•The SEC released an updated climate change disclosure interpretation.
•The SEC approved a modified circuit breaker/uptick rule.
•The SEC implemented additional circuit breakers after the flash crash.
•The SEC approved an IFRS work plan.
•The SEC issued a concept release on evolving capital markets.
•Congress almost approves regulatory reform legislation with many governance and disclosure changes.

Looking forward over the next six months, here are my thoughts on several items affecting IR that will (or are likely to) take place on the regulatory scene here in Washington:

• In mid-July, Congress is likely to finally approve financial regulatory reform legislation with many governance and disclosure changes included as part of the legislation. NIRI will issue an Executive Alert on these changes as soon as President Obama signs this into law. In some companies, new regulations could have a significant impact on corporate governance. IR should stand ready for increased involvement with C-Suite and Board.

• Within a few weeks of the President signing into law financial regulatory reform, the SEC will likely approve proxy access rules and companies will immediately begin to assess the impact of shareholder access to Board nominations. IR professionals should be an important internal voice in determining corporate strategies on proxy access.

• The SEC will release and then quickly approve new rules for companies to comply with new federal say-on-pay laws and compensation disclosure laws as mandated by new financial reform laws. IR professionals will want to get up to speed on these quickly and NIRI will be working to ensure that IROs understand the impact.

•Before the end of summer, the SEC is expected to release a concept paper on evaluating proxy mechanics, improvements to shareholder communications and an evaluation of proxy advisory firms. NIRI and our partners, via the Shareholder Communications Coalition, will be asking for companies to write comment letters, and NIRI's Board will be meeting with the SEC on this matter in September.

•Over the next few months the Senate may take the House's lead and consider new laws that would require disclosure of political contributions. NIRI will follow this issue and report back to you as this matter evolves.

•On November 2, 2010, citizens of the U.S. will vote on 36 of 100 Senate seats and all 435 Congressional seats. The election season is likely to be especially difficult for incumbents of both parties and the election outcome will likely impact the President's agenda for his next two years in office. Democrats and Republicans alike will be jockeying for position over the next few months, so it is not unlikely to expect some surprises in Washington. Who knows what or how this will affect IR, but NIRI will be monitoring this closely.

•FASB's work and IFRS convergence projects, including those on financial instruments, revenue recognition, leases, presentation of other comprehensive income, fair value, financial statement presentation and consolidations, to name a few, will require IR to understand any changes that take place. IR will then need to work with financial staff to understand the impact within the company, in financial presentations and in investor's understanding of the organization. NIRI will supply resources to IR professionals as these changes materialize.

In conclusion, while I won't make any wild speculations, it wouldn't surprise me to see some minor changes in the proxy system considered by year end, new models emerge for proxy advisory services, and for the SEC to consider the issue of majority voting. I hope you have planned some vacation for the summer, because I think we are all going to need that time to re-energize and prepare for a busy fall. In my opinion, it will not be a quiet second half of the year and I believe IR professionals and those who oversee IR will want to stay close to NIRI to be sure to stay abreast of changes.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

As Washington and particularly Congress focuses on the July 4th holiday break, there is still much to do. It will be an interesting vote this week (if it happens) on final financial reform legislation as the debate in the joint House-Senate Conference Committee ended late last week with agreement on a 2,000+ page final bill. Doubt has crept into every step of the financial regulatory reform bill process and the last hurdle (final passage by House and Senate) has everyone holding their breath. In fact, Senator Byrd’s death yesterday creates just another challenge in getting the votes needed for passage. I have not yet read the entire bill, but the following highlights the governance and other provisions of interest to IR:

• Federally mandated majority voting has been removed.
• Federally mandated shareholder proxy access was a hotly debated area. Congress will not mandate shareholder holding requirements, instead giving the SEC authority to implement proxy access. We should expect the SEC to pass a final rule as early as July, but certainly before the end of summer.
• Federally mandated non-binding say-on-pay – shareholders will have the decision on the frequency of this vote (every one, two or three years). The SEC will also have the authority to exempt smaller companies.
• Shareholder vote on golden parachutes is included.
• Mandated executive compensation clawbacks for inaccurate financial statements is included.
• Corporate compensation committees will be required to include only independent directors and have authority to hire compensation consultants.
• SOX exemption for small businesses with less than $75 million in market capitalization is included.
• The SEC will require companies to disclose the comparison of: 1) executive compensation to financial performance, and 2) CEO compensation to the median compensation of all other employees.
• Enhanced compensation rules are included for the financial services sector.
• Disclosure of employee and director hedging.
• Large institutional money managers will be required to disclose their compensation-related votes.
• Hedge funds must register and provide additional information to the SEC.

The last word on financial regulatory reform for this week is that many in the House and Senate are cranky about parts of the bill which has resulted in a great deal of tension related to securing the necessary votes for passage. Since they believe passage is a done deal, lobbyists for the many interests represented by the new provisions have moved on to the regulators charged with implementing the new regulations.

While the SEC appears to have missed their stated June 30th deadline for the proxy plumbing concept release, I am hopeful it will be released in July. Your NIRI National Board will meet with the SEC on this matter in September. SEC Chairman Schapiro recently discussed some of the questions that will be in the release related to proxy advisory firms, including (my personal thoughts in parentheses):

• Should there be greater oversight on proxy advisory firms by the Commission? (Yes!)
• Should there be checks on accuracy of the information provided by proxy advisers? (Yes!)
• Do advisers that provide services to corporations and investors manage their conflicts of interests appropriately? (It seems like a conflict when to advise investors on an issue and also evaluate companies on the same matter.)

The Securities Transfer Association (STA) sent a letter to the SEC in early June requesting a review of proxy communications fees. They are particularly focused on the appropriateness of suppression and other fees being charged for investors in separately managed accounts. For example, STA believes fees should not be charged when an investor has delegated proxy voting rights to a broker-dealer. Thanks to the STA for bringing up this matter. It seems to me that this is an area where fees should certainly be reviewed.

Now NIRI news for this week:
1. Tomorrow is “Downloading NIRI,” our review of the 2010 NIRI Annual Conference broadcast from the NASDAQ MarketSite. Attend in person, online or view the video after the event. More information is available on the NIRI website.
2. Individual annual conference sessions are now available online. These sessions enable you to benefit from the great programming if you were unable to attend. More information is available here.
3. NIRI’s 2009 Annual Report is now available online here.
4. Now that we have ushered in summer, the NIRI – University of Michigan IR Certificate Program is just around the corner in August. The curriculum has undergone a complete review and update to keep pace with the changing role of IR in today’s capital markets. This certificate program is one of only two such programs NIRI supports at a national level, and is a great way to gain a career edge. For more information, click here. I look forward to seeing you in mid-August at the University of Michigan.
5. Finally, our sympathies to the family of Tom Newton who passed away over the weekend. Tom is formerly with Computershare.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

Washington was back in action last week as financial regulatory reform moved forward in the House-Senate Conference Committee. The activity thus far has been a mix of grandstanding, politics and agreement on keys issues. I am sure you would expect nothing less, but handicapping the provisions in the final bill is a difficult exercise. Here is a summary of relevant provisions, but note that more intense negotiations have begun and I expect these items to evolve even further by week’s end.

• Federally mandated majority voting appears to be slowly fading and may be removed completely if Senate negotiators prevail.
• Federally mandated shareholder proxy access still seems probable, but we may see some of the key holding requirements mandated by Congress and not left to the SEC. A 5% ownership threshold and two year holding period are being discussed but are hotly contested by unions and large institutions as voiced by the Council of Institutional Investors.
• Federally mandated say-on-pay has been discussed and we may see a shift in the proposal from an annual period to every two or three years.
• SOX exemption for small businesses seems likely for those with less than $75 million in market capitalization.
• Large institutional managers will likely be required to disclose their compensation related votes.
• Shareholder voting on golden parachutes may not be included in the final bill.
• Enhanced incentive compensation rules are still being debated.

Among the additional proposed provisions suggested by Barney Frank are two that have been included in NIRI’s advocacy efforts and would be very well received by IR professionals:

• Required daily reporting of short sales, prohibition against manipulative short sales, and required notification that customers may elect not to allow their securities to be used in connection with short sales and that the broker may receive compensation if the shares are so used.
• Providing the SEC with authority to adopt rules that would require more timely reporting when a person acquires more than a 5% ownership interest in an issuer.

I am pleased that these provisions are part of the discussion. However, as with any negotiations in Washington, things change - and with politics, things always change. There is no certainty that these proposals will make it into the final legislation, but it does give me pleasure that the voice of IR is being heard in the regulatory reform process.

Regular readers of this column know that for several months we have awaited the SEC’s concept release or discussion draft on proxy mechanics. SIFMA, the voice of the broker community, released its analysis of the proxy system including how issuers communicate and the state of OBO/NOBO. As you might expect, brokers like the current process and see little need to discuss major updates to a system designed long ago when street name shareholders were the minority and technology was not widely used. I am disappointed by their close-minded views considering that NIRI, the Council of Institutional Investors and issuers represented by the Shareholder Communications Coalition have all articulated the need to modernize systems and processes consistent with current technologies and the evolved state of share ownership.

Speaking of technology, my previous association (Futures Industry Association) formed a new lobbying group named the Principal Traders Group to represent the interests of those involved in proprietary trading including high frequency trading. I am not surprised by this as various trading strategies have been under the microscope in recent months. I suspect their voice will become very strong, very quickly due to the deep funding their lobbying efforts will likely enjoy.

Finally, in what is becoming a NIRI-NASDAQ tradition, NASDAQ will host a video webinar at its New York MarketSite on June 30 summarizing the highlights from NIRI’s very successful 2010 Annual Conference. You are invited to attend in person (please RSVP as space is limited) or participate in the webinar - more details are available here.

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

The 2010 NIRI Annual Conference is now behind us and the initial feedback representative of the roughly 1,300 attendees was extremely upbeat – they left San Diego with positive energy and many immediately actionable ideas. The camaraderie was great and it was wonderful to see the new service providers and ideas in the IR Services Showcase. I was pleased to see more than 25 countries represented – an indicator of the global focus of our profession. Those interested in seeing and sharing Conference photos are invited to contribute to the NIRI Flickr site.

Meredith Cross, Director of the SEC’s Division of Corporation Finance was a highlight of the first general session. A video of her speech and the ensuing Q&A session is available to members on the NIRI website (other individual sessions will become available to members in the coming weeks for a nominal fee). If you did not attend I suggest spending 30 minutes listening to her comments. Cross gave a good overview of SEC activities affecting investor relations professionals mentioning, for example, the upcoming SEC evaluation of the U.S. proxy plumbing “system” and the need for all companies to weigh in with specific examples of problems they have experienced. SEC Chairman Schapiro reiterated this point in a speech last week, “… the mechanics of the proxy process have not kept pace with current market conditions or trading practices. For this reason, the Commission will soon consider publishing a Concept Release soliciting detailed ideas about how to modernize this voting infrastructure. We would like to hear about everything from whether the system of OBO/NOBO ownership should be changed, to whether proxy advisory firms should be subject to greater oversight (and if so, what that oversight should look like). I know that you and your companies will have important insights on these issues, and I look forward to your participation in this review.” I hope you will discuss internally your organization’s participation in this important process by commenting to the SEC later this summer.

Speaking of the SEC, the Commission updated the Reg FD Compliance and Disclosure Interpretations this past week with the addition of Question 101.11. While I think this item is stating the obvious, I pass it along as a reminder since the SEC saw the need to release it.

“Question: Does Regulation FD prohibit directors from speaking privately with a shareholder or groups of shareholders?

Answer: No. Regulation FD prohibits a company or a person acting on its behalf — such as directors, executive officers and investor relations personnel — from selectively disclosing material, non-public information to a shareholder under circumstances in which it is reasonably foreseeable that the shareholder will purchase or sell the company's securities on the basis of that information. If a company's directors are authorized to speak on behalf of the company and plan on speaking privately with a shareholder or group of shareholders, then the company should consider implementing policies and procedures intended to help avoid Regulation FD violations, such as pre-clearing discussion topics with the shareholder or having company counsel participate in the meeting. In addition, because Regulation FD does not apply to disclosures made to a person who expressly agrees to maintain the disclosed information in confidence, a private communication between an independent director and a shareholder would not present Regulation FD issues if the shareholder provided such an express agreement.”

In other Washington news, the next two weeks are critical for the financial regulatory reform bill moving through Congress, including corporate governance reform. Any change in the compromise bill seems most likely in the major components such as derivative use. This is relevant to IR professionals because it means that much of the proposed governance regulation will probably remain intact. Congress continues to target early July to present President Obama with final legislation. NIRI will have more on this matter in the coming weeks.

Today I am attending the NIRI Boston chapter’s 40th anniversary celebration. Congratulations NIRI Boston! I look forward to “A Walk Through the Decades” and hearing members reminisce about NIRI’s last 40 years.

Finally, don’t miss the opportunity to learn, or refresh your knowledge about the relevant regulations and court decisions that define investor relations at NIRI’s highly rated Regulations 101 seminar on June 29 in Chicago .

Until next week,

Jeff Morgan, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

Greetings from San Diego and the 2010 NIRI Annual Conference! As I write this we are midway through the Conference program. It has been an excellent program so far with much buzz around the great discussion and sharing among attendees as well as the several product announcements that have been made. For those of you unable to attend, we look forward to providing you with “nuggets of wisdom” in several forms over the next few weeks. I think everyone appreciated Monday’s speech and Q&A session with Meredith Cross, SEC Director of Corporation Finance. She kicked off Conference and set a great tone for the week in her comment that IROs play a crucial role in restoring confidence in our capital markets through effective investor communications.