The biggest rewrite of Wall Street rules since the last financial crisis isn’t over at the SEC.
The Securities and Exchange Commission still is working on regulations that were part of the post-crisis Dodd-Frank Act—a decade after it became law in 2010. The remaining work includes some of the statute’s thornier provisions, like disclosures on executive compensation and payments for extracting oil and gas.
The Republican-leaning SEC is making progress on implementing the Obama-era law, issuing a new proposal on reporting resource extraction payments in December without Democratic support. The commission also finalized some swaps regulation under the statute the same month with no Democratic backing.
“It’s better to have a legal regime than not to have one because Congress told us that we should have one,” said Republican SEC Commissioner Hester Peirce, who led the swaps rulemaking.
The commission put a proposal for clawing back executive pay on its most recent short-term agenda, which came out in November. Other reporting rules for so-called conflict minerals and pay-versus-performance remain on the agency’s long-term agenda.
Below is a rundown of four unfinished Dodd-Frank rules to follow in 2020.
The agency’s work to stand up Dodd-Frank’s requirement that companies claw back executives’ improperly awarded incentive-based compensation is on the agency’s near-term agenda for the first time since President Donald Trump took office in 2017.
A divided commission under then-Chairman Mary Jo White released a clawback proposal in 2015. The plan would direct companies to recover money given to certain executives in excess of what they should have received after an accounting restatement, if the revision came in response to “material noncompliance” with securities laws.
Daniel Gallagher, a Republican commissioner at the time, said the proposal was “tortured and nightmarish.” The plan also faced pushback from the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, which called the proposal “needlessly complex and overly prescriptive.” The SEC has yet to say how it may change the proposal.
An anti-corruption reporting requirement that calls on companies to disclose payments made to governments for extracting oil, gas, and minerals is still in the works. The SEC is writing a third version of the reporting rule, after earlier attempts were thrown out in court and by Congress.
“It’s an incredible thing to think 10 years on from Dodd-Frank, we still don’t have any reporting,” said Joseph Williams, advocacy manager at the nonprofit Natural Resource Governance Institute.
Lobbyists for the oil and gas industry have pushed back against the rule, saying their competitors in other countries don’t have to make such disclosures. But similar rules elsewhere mean companies like the U.K.’s BP, China’s Sinopec, and Russia’s Gazprom, already provide this kind of reporting.
Another disclosure rule meant to make sure the supply chain for certain minerals isn’t fueling conflict in central Africa has also seen some rewrites over the years and could see more to come, just not anytime soon.
The Trump administration floated the idea of axing the conflict minerals reporting rule before putting out new guidance on it that softens the SEC’s enforcement stance if companies don’t go beyond basic disclosures.
The rule’s most-lasting impact may be in putting “supply chain traceability into the consciousness of a lot more companies,” according to Michael Littenberg, a partner at Ropes & Gray LLP. Now some companies are taking a similar approach to sourcing for other commodities like cobalt or palm oil.
Pay v. Performance
Also unfinished is required reporting that uses corporate performance to make the case for how much executives get paid.
A pay-versus-performance disclosure rule proposed in 2015 is sitting on the SEC’s long-term agenda. Companies have made their own disclosures since then.
“The way companies choose to depict pay for performance tends to reflect their view of the issue,” said Steve Seelig, senior director of executive compensation at consultancy Willis Towers Watson. The rule is meant to make such disclosures more uniform, but there’s disagreement over what measures to use.