Bank Regulatory Blog

SEC AMENDS PROXY RULES TO REQUIRE TARP SHAREHOLDER “SAY-ON-PAY” VOTE

Posted February 11, 2010

Author: Courtney C. Crouch III

 

Changes to the SEC’s proxy rules that will require publicly registered TARP recipients to permit an advisory shareholder vote on executive compensation are set to take effect on February 18, 2010.  The rule changes, which were adopted by the SEC last month, help implement and clarify how recipients should comply with the requirements of Section 111(e) of the Emergency Economic Stabilization Act of 2008.

            In addition to the vote itself, the amended proxy rules require TARP companies to disclose in their proxy statements that they are providing the separate shareholder vote on executive compensation, as disclosed pursuant to the compensation disclosure rules, and to briefly explain the general effect of the vote, such as, for example, whether the vote is non-binding.  The rules do not require the use of any specific language or form of resolution.  The SEC has also clarified that smaller reporting companies will not be required to provide a compensation discussion and analysis in order to comply with these requirements.

            For companies who received TARP funds prior to their last annual meeting, the new requirements are likely to be similar to what these companies prepared in connection with their proxy materials for last year’s meeting.  TARP companies may be pleased to know that the new SEC rules provide that TARP recipients will not have to file a preliminary proxy statement in advance of the definitive proxy statement due to the required “say-on-pay” vote. 

            To view the SEC release of the final rule, click here.

            http://www.sec.gov/rules/final/2010/34-61335.pdf

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