The U.S. Securities and Exchange Commission (SEC) announced this month that it has approved a contentious pay-ratio rule first introduced by the Dodd-Frank Act five years ago. Also in recent regulatory news: The SEC reiterated its stance on protecting internal whistleblowers and is fighting to redefine its regulatory role on Wall Street.
SEC approves CEO pay disclosure rule
Earlier this month, the SEC voted to adopt an executive pay-ratio disclosure requirement that was first introduced under the Dodd-Frank Act when it was approved by Congress in 2010. The provision will require public companies to disclose their chief executives’ yearly compensation in proportion with employees’ median earnings.
The requirement is highly controversial, and its adoption was delayed for years because opponents argued that the rule’s supporters wanted to shame CEOs instead of illuminate pay gaps. They also contended that implementing the rule will needlessly drain companies’ resources.
“Here we are, on the cusp of adopting a nakedly political rule that hijacks the SEC’s disclosure regime to once again effect social change desired by ideologues and special interest groups,” said SEC Commissioner Daniel Gallagher, one of the rule’s opponents, in a statement.
However, proponents such as Economic Policy Institute President Lawrence Mishel said the rule is an important step toward greater corporate transparency.
SEC extends Dodd-Frank protections to internal whistleblowers
The SEC also released guidance about how to interpret whistleblower rules under the Securities Exchange Act of 1934. The document bolsters the agency’s viewpoint that whistleblowers who report misconduct internally before informing the SEC are protected by the employment retaliation protections provided by the Dodd-Frank Act.
The guidance is at odds with recent court rulings on Dodd-Frank’s vague language on what constitutes a “whistleblower” and who is entitled to the whistleblower protection rules, reported The Wall Street Journal. The law’s whistleblower provisions provide retaliation protections to those who report wrongdoing to the SEC, but the agency maintains that this extends to those who first report violations internally. The agency’s recently released guidance is meant to give whistleblowers greater clarity about the SEC’s stance on the matter, as well as give whistleblowers more confidence they will be protected when reporting internally, Jordan Thomas, a partner at Labaton Sucharow LLP, told WSJ.
“The SEC is sending clear message to the whistleblowers, companies and courts about the scope of its authority to prosecute cases involving retaliation against whistleblowers,” he said.
To redefine role, SEC ramps up pursuit of high-profile cases
The SEC is also ramping up efforts on high-profile cases that could revamp its role as a Wall Street regulator. The trend comes as SEC detractors claim that the agency is not assertive enough in its enforcement against prominent wrongdoers, and is instead too focused on low-profile cases, according to The New York Times.
These high-profile cases include the following: pending charges in an investigation involving insider trading and cybersecurity; pending investigations into insider trading activity by golfer Phil Mickelson and sports gambler William T. Walters; and a pending investigation into Wall Street’s employment of the children of China’s political elite.
The Times reported the SEC’s progress comes during a slowdown of criminal investigation into insider trading activity in New York due to a recent court ruling that makes it more difficult for federal prosecutors to pursue these cases.
Massachusetts Senator Elizabeth Warren, the U.S. Chamber of Commerce and law professors are among those critics that have called on the agency to be more aggressive when pursuing criminal investigations against Wall Street.