• ICE
  • NYSE
  • Contact
  • Insights
  • Login
Advocacy

Capitol Update

UPDATE ON THE NYSE'S ISSUER ADVOCACY EFFORTS RELATING TO REGULATORY AND LEGISLATIVE DEVELOPMENTS

In recent months the U.S. Securities and Exchange Commission (SEC) announced a number of regulatory initiatives, including concept releases and a guidance update. Additionally, Congressman Sean Duffy has proposed legislation to oversee proxy advisory firms. Below is an overview of these recent regulatory and legislative initiatives.

THE SEC'S DISCLOSURE EFFECTIVENESS REVIEW AND REVIEW OF DISCLOSURE UNDER REGULATION S-K

  • The SEC's recent concept release on Reg. S-K (a prescribed regulation under the U.S. Securities Act of 1933 that lays out reporting requirements for various SEC filings made by public companies) reflects questions regarding materiality, information overload, and information delivery for public company disclosures. This concept release is part of the SEC's broader effort of a "disclosure effectiveness review".
  • Highlights of the Reg. S-K concept release include:
    • considers business and financial disclosures in periodic reports
    • considers corporate compensation and governance information in proxy statements
    • considers corporate compensation and governance information in proxy statements
    • asks questions about information that should be modified, eliminated, or added to the list of disclosure items -- including appropriate materiality thresholds for these items
    • asks questions about "manners of delivery" of disclosure, such as cross referencing, hyperlinks incorporations by reference, etc.
  • SEC's Disclosure Effectiveness Review website
  • Reg. S-K concept release fact sheet

SEC: REG S-K, INCLUDING ESG (ENVIRONMENTAL, SOCIAL & GOVERNANCE) DISCLOSURE

  • Investor engagement and regulation are driving increasing awareness and action on ESG performance. Some investors directly engage regulators and public companies on specific ESG matters. The focus is increasingly of publicly available information on ESG policies and performance.
  • Some asset owners and managers are adapting their approaches and methods to integrate ESG into their risk, valuation, and performance analysis.
  • The SEC's Reg. S-K concept release has an entire section on ESG:Reg. S-K concept release fact sheet

PROXY ADVISORY FIRMS & INFLUENCE ON VOTING

  • Proxy advisory firms provide institutional investors with analysis and recommendations on management and shareholder proxy proposals. Generally, these are non-binding, but they do influence proxy votes.
  • Congressman Sean Duffy (R-WI) recently introduced the Proxy Advisory Firm Reform Act, which would require proxy advisory firms to register with the SEC and publicly disclose information about their procedures for advising their clients on proxy voting matters.
  • NYSE has expressed its support for this measure.

NON-GAAP FINANCIAL MEASURES

  • On May 17, 2016, the SEC's Division of Corporation Finance issued important updates to its Compliance and Disclosure Interpretations ("C&DIs") regarding the use of non-GAAP financial measures. The new interpretations represent a significant shift in the staff's historical views on non-GAAP disclosures. In light of the revised interpretations, public companies should carefully review and may need to revise their presentation of non-GAAP financial measures in SEC filings and earnings reports.
  • The standard for evaluating non-GAAP financial measures adopted under Regulation G (which governs non-GAAP disclosures) is very broad -- Regulation G applies whenever such an SEC reporting company discloses publicly or releases publicly any material information that includes a non-GAAP financial measure.

SEC ACCESS FEE PILOT

  • On July 8, 2016, the SEC's Equity Market Structure Advisory Committee (EMSAC) considered final recommendations to the Commission for an "access fee pilot" that will reduce exchange access fee caps, with the stated goal of measuring the impact on both market quality and marketplace behavior.
  • As proposed, the access fee pilot would include 300 companies and ETFs with market caps above $3 billion.
  • Access fees are used to incentivize NYSE DMMs and other market makers to provide more liquidity in a company’s stock at better prices than they would without the incentive. Consequently, NYSE opposes the proposed access fee pilot because it does not include any corresponding positive incentive for liquidity provision, such as a trade-at requirement.
  • Without a corresponding positive incentive, it is very likely that spreads will widen, more trading will take place on dark trading venues and investors will pay more to purchase a security.
  • EMSAC recommendations

DEFINITION OF SMALL REPORTING COMPANY

  • On June 27, 2016, the SEC issued a proposal to update the definition of "smaller reporting companies". The new definition would expand the number of companies that could qualify for scaled disclosures provided for in Regulations S-K and S-X.
  • The proposal would allow a company with less than $250 million of public float to provide scaled disclosures as a smaller reporting company, compared to the $75 million threshold under the current definition..
  • A company without a public float would be permitted to provide scaled disclosures if its annual revenues are less than $100 million.
  • NYSE supports this proposal and believes the SEC should consider expanding it to companies with higher market capitalization but very low revenues. NYSE is working with listed companies on particular issues in the proposal that relate to their business.
  • View the SEC's proposal

TICK SIZE PILOT PROGRAM

  • The Tick Size Pilot Program (“Pilot”) is scheduled to begin on October 3, 2016.
  • As described on our webpage, the Pilot is designed to increase liquidity for smaller public companies by widening the tick increment from $0.01 to $0.05.
  • Companies must have less than $3 billion in market capitalization, less than 1 million shares traded daily and a stock price above $2 to be eligible for the Pilot.
  • 1,200 of the eligible companies will be selected for the Pilot on a random basis.
  • There is no work required on the part of the companies. The final list of companies selected for the Pilot will be noticed on September 5, 2016.

Government Affairs
New York Stock Exchange
An Intercontinental Exchange Company (NYSE: ICE)
801 Pennsylvania Ave. | Washington, DC 20004


For questions on any of the topics covered in the Capitol Update, please contact your NYSE listing representative.