SEC Open Meeting, March 30, 2011
|Proposal Date||Re-Proposal Date||Comment Deadline|
|June 10, 2011||August 28, 2013||October 30, 2013|
|Final Rule Issue||Effective Date||Compliance Date, Rule Changes||Compliance Date, Disclosure|
|June 27, 2012||July 27, 2012||September 25, 2012||January 1, 2013|
The U.S. Securities and Exchange Commission (SEC) public meeting focused on the issuance of proposed rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning credit risk retention, specifically requiring sponsors of asset-backed securities (ABS) to retain a minimum of 5 percent of credit risk with regard to the assets underlying the securities and disallowing these sponsors from transferring or hedging said risk. Along with the SEC, the following five agencies introduced this joint proposal:
- Board of Governors of the Federal Reserve System
- Department of Housing and Urban Development
- Federal Deposit Insurance Corporation
- Federal Housing Finance Agency
- Office of the Comptroller of the Currency
At the meeting, the Commission also focused on the SEC-specific proposal under Dodd-Frank concerning listing standards for compensation committees and compensation consultants.
Topics of Discussion
- Options for sponsors' meeting the risk-retention requirements under Dodd-Frank.
- The independence of compensation committee members, taking into consideration "the sources of compensation of a director, including any consulting, advisory or compensatory fee paid by the company to such member of the board of directors [and] whether a member of the board of directors of a company is affiliated with the company, a subsidiary of the company, or an affiliate of a subsidiary of the company."
- Authority and funding of the compensation committee.
- Five independence factors that determine the selection of a compensation adviser.
- Exemptions for five categories of companies from the above-listed compensation committee independence factors.
- Modifications of two existing rules related to the compensation consultant conflicts of interest disclosure.
Credit Risk Retention
Listing Standards for Compensation Committees
Commissioner Troy A. Paredes, whose statements include:
- Support for the proposal concerning credit risk retention.
- Request for comment on whether securitizers should be allowed additional options, on top of what is included in the proposed rules, for meeting their risk retention requirement under Dodd-Frank, and whether these securitizers should be allowed to create new methods for meeting this five percent demand.
- Support for the proposal concerning listing standards for compensation committees.
- "The question, then, is this: Should the SEC exempt smaller reporting companies from the new listing requirements? Relatedly, should the SEC exempt newly public companies? Are there still other categories of issuers that the Commission should exempt from the listing requirements? Or should all exemptions be left to the exchanges to propose, subject to Commission review under Section 19(b)?"
Chairman Mary L. Schapiro; whose statements include:
- An explanation of how securitization, or "the buying and bundling of assets such as housing, student, car and commercial loans, contributed to the financial crisis.
- Recalling previous SEC proposals related to risk retention and the securitization chain.
- "The proposal we consider today impacts a broader class of issuers than did our April 2010 proposal regarding credit risk retention. As directed by Dodd-Frank, today’s proposed rules have been jointly developed by the staffs of several agencies."
- An explanation of specific listing standards and possible exemptions for smaller reporting companies who may be affected.
Commissioner Luis A. Aguilar, whose statements include:
- A summary of the weaknesses in the securitization market.
- A series of questions regarding the potential gaming of the system when securitizers select from a menu their choice of risk retention method:
- "Are there any kinds of securitizations for which a particular form of risk retention is not appropriate?
- Are there ways that sponsors could avoid the risk retention requirements in an effort to reduce or eliminate their risk retention requirements?
- Do the conditions and limitations in the proposed rules effectively limit the ability of the sponsor to structure away its risk exposure?"
- On the topic of compensation committees: "I encourage commenters to carefully consider the proposal and whether the final rule should apply equally to all listed companies, regardless of whether their compensation issues are considered technically by a committee or in some other way."
Commissioner Kathleen L. Casey, whose statements include:
- Support for the proposal concerning credit risk retention, followed by four detailed questions for comment.
- "I have stated in many other contexts my strong preference for state law and private ordering solutions to corporate governance requirements. So too here, my first choice would be not to impose — or to use the stock exchanges as our proxy to impose — compensation committee and compensation adviser requirements upon public companies, whose directors are subject to fiduciary duties and whose stockholders have rights established by state law and pursuant to a company’s governing documents."