The Advisors' Blog

– Broc Romanek, CompensationStandards.com

As I have blogged many times (here’s one), the SEC’s Reg Flex Agendas tend to be “aspirational” – and experience bears that out as the SEC often misses its “target” deadlines. I actually loathe blogging when a new Reg Flex Agenda comes out – because some folks read too much into it. In fact, I’m only blogging about it now to try to stave off more misinformation (until just the last few years, the Reg Flex Agenda was completely ignored by everyone)!

Anyway, the latest edition is out – and the following proposed & final rulemaking projects are listed with a April 2017 timeframe:

– Finalize the outstanding compensation proposals (clawbacks/P4P/hedging & pledging/institutional investment manager filing of Form N-PX to disclose their proxy voting- this one has been on the Reg Flex Agenda since 2010!)
– Propose the S-K & S-X changes arising out of the disclosure effectiveness concept releases
– Propose universal proxy
– Propose additional board & nominee diversity disclosures
– Propose changes arising out of the Item 407 audit committee disclosures concept release
– Propose changes to “smaller reporting company” definitions
– Propose changes to Guide 3 (bank holding companies) & Guide 7 (mining)
– Propose the ridiculous 10-K Summary Page, as required by the FAST Act

There are numerous other rulemakings listed. Given the Presidential election, which often increases the likelihood of a change in who is serving as the SEC Chair, this April 2017 timeframe is even more dubious than usual. A new SEC Chair would take time to be confirmed – and then it takes a while for a new Chair to decide their rulemaking priorities and get the ball rolling…

Drilling Down: What is the “Regulatory Flexible Agenda?”

Given that there is so much misinformation out there, let me lay out what the Reg Flex Agenda is – and isn’t. The Regulatory Flexibility Act requires each federal agency – in April and October – to publish an agenda in the Federal Register identifying rules that the agency expects to consider in the next 12 months that are likely to have a significant economic impact on a substantial number of small entities.

The Regulatory Flexibility Act specifically provides that publication of the agenda does not preclude an agency from considering or acting on any matter not included in the agenda – and in fact, an agency is not required to consider on any matter that is actually included in the agenda. As a result, the target dates in the Reg Flex Agenda are fairly meaningless. The SEC may act sooner or later – or even never!

And since the Reg Flex Agenda is not an “official” agenda of what the SEC really will do, all kinds of whacky and aspirational stuff makes it into each Reg Flex Agenda. For example, an SEC Commissioner might have a pet project that gets listed – but the SEC Chair might not have any intention of letting that idea see the light of day.

This bizarre “fictional” stature of the Reg Flex Agenda can cause challenges for the SEC if they get called down to Congress to testify and a member of Congress asks why the agency hasn’t hit a target date. It’s tough to testify that “Yes, Senator, I know we listed that rulemaking as being completed ‘in the Fall’ – but you should ignore the Reg Flex Agenda.” But this is reality…