Global investors push SEC on “unfinished business” of proxy access and credit ratings agencies

The US Securities and Exchange Commission (SEC) should deal with “unfinished business” from the financial crisis by seeking to overturn a court ruling against investor proxy access and making credit ratings agencies transparent and accountable, according to some of the world’s largest pension scheme managers. A letter from Anne Stausboll, Chief Executive Officer of CalPERS to Mary L. Schapiro, Chairman of the SEC, co-signed by 14 investors running assets of $1.6 trillion, sets out six priorities it says the SEC should “complete” to protect investors and maintain fair, orderly and efficient markets. On proxy access – the ability to nominate directors to a company board – the investors said the SEC should “renew rulemaking” by addressing barriers raised in a July 2011 by the Court of Appeals for the District of Columbia Circuit. The court blocked proxy access by ruling that the SEC had been “arbitrary and capricious” in its original legislation proposals by failing to consider the economic consequences.
However, the investors said the SEC should back proxy access as a “fundamental shareowner right” to nominate director candidates on an equal footing with board or management candidates. Credit rating agencies, the investors said, should be made to disclose fully the data and models used to develop their ratings of securities.The statement is one of the first by a group of institutional investors to challenge the model of credit ratings. The letter said the SEC should create an “independent mechanism” to track the accuracy and effectiveness of the current ratings process and complete a study on alternative methods of financing credit ratings.
More broadly, the investors said the SEC should revive its Investor Advisory Committee and appoint an investor advocate to provide investors’ perspectives on regulatory issues.
The other three priorities pitched to the SEC were the adoption of final rules on executive compensation reforms under Dodd-Frank, the continuation of work on International Financial Reporting Standards, and the inclusion of climate change disclosure, diversity and sustainability issues into board nomination procedures and financial reporting.
Signatories of the SEC letter included CalSTRS,
Connecticut Retirement Plans and Trust Funds, the Office of New York City Comptroller and Ohio Public Employees’ Retirement System in the US. UK pension fund signatories were BT Pension Scheme Management, Railpen, and the
Universities Superannuation Scheme.
Dutch pensions giants APG and PGGM also signed.
Link to letter