A rule enacted by the Securities and Exchange Commission in 2003 required institutions to adopt and disclose policies for proxy voting that were intended to minimize conflicts between the institutions’ interests and those of their shareholders. An SEC staff interpretation of that rule led to a result almost the opposite of the ruling’s intent. Institutions could easily protect themselves from legal liability by shifting responsibility to proxy advisory firms, which acquired increasing power over corporate governance, to the detriment of shareholders.
The field of corporate governance has long considered the costs of the separation of ownership from control in publicly traded corporations and the regulatory and market structures designed to limit those costs.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 gave the U.S. Securities and Exchange Commission (SEC) the authority to adopt a proxy access rule. Though the legislation urged an exemption for companies with less than $75 million in market capitalization, the SEC unexpectedly failed to provide a permanent exemption from the rule for those companies. This paper finds that, for the roughly 900 publicly traded companies studied with under $75 million in market capitalization, the proxy access rule caused on the order of $335 million in shareholder losses.
This working paper explores the use and regulation of bank overdraft protection. It concludes that, absent a demonstrable market failure or demonstration of systematic consumer abuse, restriction on consumer choice of overdraft protection would likely impose substantial costs on consumers and banks with minimal gains.
The Securities and Exchange Commission’s proxy voting rules were meant to ensure well-informed proxy votes that reflect the interests of shareholders. However, the rules have instead given rise to two influential proxy advisory firms that have an inordinate amount of influence on corporate governance, according to a new report released by the Mercatus Center at George Mason University.
SEC Chairman Schapiro is handing the money market regulation baton to the Financial Stability Oversight Council, the members of which appear ready to take it up. Three weeks ago, the Securities and Exchange Commission had on its calendar a meeting to vote on a proposal to further regulate money market funds. Because three of Chairman Schapiro’s four fellow commissioners did not fall into line with her plan, she had to cancel the vote.
The CFTC, in a blitz of rulemaking, has outrun its fellow regulators in achieving the G20 objectives. Unfortunately, speed has come at the expense of workability. Implementation difficulties are perhaps most pronounced with respect to the international application of the CFTC’s rules. The CFTC has opted for an expansive approach that places it at odds with foreign regulators and threatens to expose firms to multiple sets of rules.
The Government Accountability Office (GAO) issued a report yesterday about the Financial Industry Regulatory Authority (FINRA), a powerful self-regulatory organization (SRO). Although self-regulation sounds like a good alternative to government regulation, the reality is not so clear.
Facebook’s initial public offering (IPO) captured the imaginations of many people who had never before considered investing. Much of the interest came from Facebook users who wanted to own a piece of a company that has become a staple of their lives. Others dreamt of turning a quick profit by getting in and out of the stock within the first day or week. Widespread media coverage only added to the fervor.
Gensler is correct that bad decisions made in one country can affect other countries’ economies, but U.S. regulators can’t shock proof the world. Perhaps Chairman Gensler, who, earlier this week, was complaining to the Senate Banking Committee about not having enough resources to do his job, should not try to add transactions conducted in Europe and Asia to his regulatory plate.