Proxy Access Decision: Major Impact on Other Rulemakings? Much has been written about the DC Circuit's proxy access decision in the Business Roundtable/Chamber lawsuit – including conjecture about what the SEC might do now regarding proxy access (see my blog with Stan Keller's thoughts last week). As noted in this excerpt from this Covington & Burling memo, the court's decision could have implications far beyond proxy access itself: The SEC and other agencies will need to redouble their economic analysis in the rulemaking process. The most significant aspect of the shareholder access decision is its impact on future rulemakings by the SEC and other federal agencies. At its core, this case was about the level of economic analysis that an agency must employ when considering the potential consequences of a rulemaking. The adopting release for Rule 14a-11 included a long and detailed analysis that was intended to address the very issues that the Court ultimately concluded had been inadequately assessed in the rulemaking. While many will observe that the Court has given the SEC a roadmap for adopting future rules, including potentially a revamped shareholder access rule, a closer reading of the opinion suggests that any such rulemaking will have to be accompanied by substantial economic analysis that may be beyond the resources that the agency can reasonably expend on any one rulemaking. Moreover, the shareholder access litigation sets a high standard for rulemaking by any agency, finding that the arbitrary and capricious standard requires a federal rulemaking to explicitly address the major comments raised in opposition to the rulemaking and provide a detailed explanation of why the rulemaking was not changed in response to such comments. In effect, this decision further elevates the importance of comment letters and even statements by dissenting agency officials. XBRL: Liability Exemptions Phase-Out for Larger Companies I've been blogging about a lot of hand-wringing by smaller companies facing mandatory XBRL and the related costs. But there is also cause for concern among larger companies as the XBRL liability exemptions are now phasing out too. As noted in this Skadden Arp's memo: When the SEC adopted the XBRL filing requirements in December 2008, it recognized the concerns that filers had raised about potential liabilities under the securities laws for errors and omissions in interactive data files by limiting certain liabilities for a two-year period. Each group of companies in the three-year phase-in period is provided the benefit of the two-year limited liability provisions. The limitations include deeming interactive data files "furnished" and not "filed" or part of a registration statement or prospectus for purposes of the liability provisions in Securities Act Sections 11 and 12 and Exchange Act Section 18, and exempting the interactive data file from the anti-fraud provisions of the securities laws if the company makes a good faith attempt to comply with the data tagging rules and promptly amends any deficiency after becoming aware of it. The two-year limited liability period runs from the due date of the first Form 10-Q–exclusive of the available 30-day grace period for first-time filers noted above–for which a company was required to submit XBRL data. For the first group of companies that were required to comply with the XBRL requirements, large accelerated filers with a market cap of over $5 billion, these limited liability provisions will end on August 10, 2011. Because the filing deadline for the Form 10-Q for the period ended June 30, 2011 for large accelerated filers is August 9, 2011, the first group of companies will not lose the benefits of the limited liability provisions until they file their Forms 10-Q for the period ended September 30, 2011. Given the expiration of the limited liability periods, companies should evaluate their disclosure controls and procedures for interactive data files. In the "Dodd-Frank Blog," Jill Radloff provides examples of SEC filings amended to include XBRL exhibits. And for those seeking to make XBRL easier, the XBRL Challenge Contest seeks the top open source app for analyzing financial data… The S&P Report: US Downgraded Here's a copy of the S&P research report that downgraded the US long-term securities late on Friday. By the way, we occasionally post research reports that are about the broader economy, etc. in the "Credit Quality Reports" section of our "Credit Rating" Practice Area. Poll: The S&P Downgrade Please give your anonymous vote on S&P's decision to downgrade the US long-term securities to AA+: Online Surveys & Market Research – Broc Romanek
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