WASHINGTON May 8 A top U.S. regulator called on
Thursday for a broad swath of investor reforms, from new
measures to empower shareholders in corporate elections to
better disclosure on how retail orders are routed and executed.
Kara Stein, a Democratic member of the Securities and
Exchange Commission, presented her ideas at the Council of
Institutional Investors annual conference in Washington.
Stein drew applause when she threw her support behind
requiring universal proxy ballots, a plan that CII formally
petitioned the agency to consider in January.
"It is time for the commission to consider permitting, if
not mandating, universal proxy ballots," Stein said.
She also questioned the process for determining how and when
the SEC permits companies to exclude shareholder proposals on
Stein lamented that rules on the books requiring retail
brokerages like TD Ameritrade and Charles Schwab
to disclose details on order routing and best
executions are stale and need to be updated.
"We need to revise those standards to make sure that data is
more useful in a computerized age," she said.
COMPANIES VS. SHAREHOLDERS
Stein's comments on corporate election matters differ from
the views of some fellow SEC commissioners.
In March, SEC Commissioner Daniel Gallagher, a Republican,
called for some opposite reforms, including measures to restrict
the voting power of activist shareholders and limit what types
of shareholder proposals can be considered.
The ideological divide on shareholder voting matters has
also been evident on the SEC's website, where groups with
dueling interests have submitted petitions seeking new rules.
The CII's petition asks the SEC to mandate the use of a
universal proxy ballot on which all board nominees, by both
corporate management and shareholders, are considered on a
single slate in a contested election.
Currently, such ballots are only permitted with a nominee's
consent. As a result, the CII said, management's ballot often
does not let voters "split their ticket."
The U.S. Chamber of Commerce and others recently asked the
SEC to amend its rules to make it harder for shareholders to
include proposals on the ballot that failed in prior votes.
Stein did not directly address the Chamber's proposal, but
called for improving the process for how the SEC reviews
requests to exclude shareholder proposals.
Stein also raised questions about whether SEC disclosure
rules are strong enough to help retail investors determine if
they are getting best execution. She questioned whether
conflicts of interest over payment for order flow may impede
best execution, which requires brokerages, among other things,
to achieve the best price in the shortest possible time frame.
Questions have been raised recently about whether SEC rules
permitting retail brokerages to receive incentive fees and
rebates in exchange for sending orders to certain venues could
be impeding best execution.
Earlier this week, Reuters reported that the SEC's
enforcement division recently sent subpoenas and other requests
to brokerages as part of an investigation of best execution and
payment for order flow. [ID: nL2N0NN1ZB]
Firms are required to submit quarterly reports detailing
their payment-for-order-flow arrangements, as well as monthly
reports on best execution.
Stein did not offer specific proposals on how disclosure can
(Reporting by Sarah N. Lynch; Editing by Dan Grebler)