SEC Chair Mary Schapiro acknowledged differences of opinion about the Dodd-Frank reform legislation, but asked for input in good faith to help implement the changes. In a speech to the U.S. Chamber of Commerce Center for Capital Markets Competitiveness, Schapiro said the legislation provides the SEC with new authority that will lead to more effective regulation in the years to come. She also announced that the SEC is seeking comments on numerous Dodd-Frank rulemaking provisions ahead of the official comment periods and directed interested parties to the SEC's Web site where the issues are organized by topic.

The rulemaking process works best when all stakeholders contribute views based on their experiences, according to Schapiro. The regulatory process is not designed to re-debate the issues that Congress has resolved, she added. Because of the significant rulemaking required by the Act, Schapiro said the process has been expanded to provide the maximum opportunity for public comment.

The SEC has created a series of e-mail inboxes at www.sec.gov, organized by topic. The pending rule proposals are presented in the order in which the implementation deadlines are the shortest. Schapiro said the staff has also been instructed to try to meet with any interested parties who seek a meeting. If the number of requests exceeds the staff's availability, Schapiro said the staff will try to meet with parties with varying viewpoints. The staff may have to limit the number of meetings with similarly situated parties and will limit multiple meetings with the same party, she advised.

Prior to a meeting, the staff will ask attendees to provide an agenda of the topics for discussion. The agenda will be placed in the public e-mail file. Meeting participants will be urged to submit written comments on the issue to the public file as well so that all interested parties will have an opportunity to review and consider those views. Schapiro said the SEC is likely to hold public hearings on certain proposals and expressed her determination to get the rulemaking right.

Schapiro discussed a few of the reform initiatives in greater detail. She said the SEC and the CFTC will engage in joint rulemaking on the over-the-counter derivatives provisions of the legislation. Joint rulemaking on key definitions will help to ensure regulatory consistency and comparability, she said.

The Act mandates a study on the effectiveness of the existing standards of care for broker-dealers and investment advisers. Schapiro announced that the SEC has issued a formal request for public comment and expects a significant response. The comment period is open for 30 days (Rel. No. 34-62577, July 27, 2010). At the completion of the study, the SEC has the authority to write rules to create a uniform standard of conduct for professionals who provide personalized investment advice to retail customers. The legislation requires that the standard be no less stringent than the standard that applies to investment advisers.

The Act's hedge fund provisions eliminate the 15-client rule that allows advisers to avoid registration even though they manage substantial amounts of assets on behalf of a large number of ultimate investors. The SEC has the authority to require registered advisers to maintain records and file reports regarding the private funds they advise. Schapiro added that the SEC has been working with the Financial Services Authority on hedge fund reporting requirements and will leverage that work in its rulemaking.

The SEC will adopt many rules relating to executive compensation. Advisory say-on-pay votes will be required at all companies at least every three years. Shareholders will also have a say on golden parachutes for executives. Companies will be required to disclose the median total compensation of all employees and the ratio of the CEO's pay to employees' pay. Companies will also be required to disclose the relationship between senior executives' compensation and the company's financial performance.

Another provision requires companies to disclose whether employees or directors are permitted to hedge against a decrease in the value of options granted as part of their compensation. The SEC will also write rules on new standards of independence for compensation committees and conflict of interest standards for boards when they retain compensation consultants. Companies will be required to develop new clawback policies to allow them to reclaim incentive-based compensation from current and former executive officers after a material financial restatement.

New rules will also prevent brokers from voting on behalf of beneficial owners on compensation matters. Schapiro said many of these issues are very complex and will benefit from the views of those who work in the field of corporate disclosure on a day-to-day basis. Schapiro also repeated her commitment to bringing a final rule to the Commission for consideration to facilitate shareholders' ability to nominate director candidates. She anticipates that the rules will be in effect for the 2011 proxy season.

Schapiro also plans to follow up on the public comments that are submitted in response to the SEC's concept release on its proxy plumbing project. The SEC will be busy with regulatory reform rulemaking, she said, but it will make the time to address these critical issues as well.