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11/5/2009
House Committee Approves Investor Protection Act
The Act, which includes an amendment authorizing the SEC to allow shareowner votes on corporate directors, awaits final approval from the full House of Representatives.
 
SocialFunds.com -- On November 4, the US House Financial Services Committee passed the Investor Protection Act (HR 3817) by a vote of 41-28. Introduced on October 15 by Rep. Paul E. Kanjorski of Pennsylvania, the Act will double the authorized funding for the Securities and Exchange Committee (SEC) over five years, and provide the Commission with new enforcement powers and regulatory authorities.

Preceding the Committee's approval of the Act, an amendment introduced by Representatives Maxine Waters of California and Gary Peters of Michigan, which confirms the authority of the SEC to issue rules on the right of shareowners to vote on directors of corporate boards, was approved.

According to Maureen Thompson, Executive Director of ShareOwners.org, a nonprofit advocate for retail investors, "Proxy access is actually a market-based approach to regulatory reform. By giving shareowners a true voice in the boardroom, you can ensure that we will be better able to provide oversight of directors and management and to hold them accountable for their actions."

In addition to confirmation of proxy access by investors, the Act will strengthen the SEC's ability to regulate securities markets, enforce the fiduciary duty of broker-dealers and investment advisers to prioritize the interests of their customers, and end the inclusion in contracts of mandatory arbitration in cases of defrauded investors seeking redress.

In a speech delivered to the Practicing Law Institute on November 4, SEC Chairman Mary Schapiro outlined the ways in which the Commission proposes to improve proxy access.

Describing the proxy statement as the "only communication a company makes that is specifically addressed to, and intended for, shareholders," Schapiro said, "I believe that the most effective means of promoting accountability in corporations is to make the shareholders' vote both meaningful and freely exercised."

"Under our proposal, shareholders who satisfy certain eligibility and procedural requirements would be able to have a limited number of nominees included in the company's proxy materials," Schapiro said. "The proposed new rules would also allow shareholders of a company to submit their own proposals to create an alternative proxy access process for disclosing shareholder nominated candidates, provided this different process doesn't conflict with Commission rules."

The House committee's passage of the Investor Protection Act arrives at a time when shareowners are preparing their resolutions for the 2010 proxy season. According to Thompson of ShareOwners.org, the Act "will be packaged with other pieces of legislation reforming oversight of the financial markets and considered on the House floor, most likely in December."


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