SEC Chair Paul Atkins Outlines Agenda to Revamp US Public Markets

Strategic Insights -

SEC Chair Paul Atkins identified a decline in listed companies and proposed a three-part agenda to revitalize US public markets. He emphasized the need to simplify disclosure requirements, de-politicize shareholder meetings, and reform securities litigation to make the US a more attractive place for companies to list. Chair Atkins focused on precatory shareholder proposals, citing concerns about their increasing frequency and potential impact on companies, and suggested that Rule 14a-8(i)(1) may permit their exclusion. He also criticized Delaware's Senate Bill 95, which prohibits mandatory arbitration and fee-shifting for federal securities law claims, and expressed hope that the Delaware legislature will revisit these provisions to promote securities litigation reform.

Key Takeaways:

  • SEC Chair Paul Atkins proposed a three-part agenda to revitalize US public markets: simplifying and scaling disclosure requirements, de-politicizing shareholder meetings, and reforming securities litigation.
  • Chair Atkins expressed concerns about the increasing frequency of precatory shareholder proposals focused on social and environmental issues, which he believes may not be material to a company's business.
  • Chair Atkins suggested that Rule 14a-8(i)(1) may permit companies to exclude precatory proposals that are not "proper subjects" for shareholder action under state law, citing Delaware law as an example.
  • Chair Atkins highlighted the potential for companies to establish different state-level thresholds for shareholder proposals, such as those under Texas law, and use Rule 14a-8 to exclude proposals that do not meet these requirements.
  • Chair Atkins called for a "fundamental reassessment" of Rule 14a-8, questioning whether shareholders should be able to "force companies" to solicit proposals at minimal cost to the shareholder.
  • Chair Atkins criticized Delaware's Senate Bill 95, which prohibits mandatory arbitration and fee-shifting for federal securities law claims, calling these provisions "two giant steps backward" in efforts to modernize Delaware corporate law.
  • Chair Atkins expressed hope that the Delaware legislature will revisit the prohibition of mandatory arbitration and fee-shifting with respect to federal securities law claims to promote securities litigation reform.

Statistics:

  • The number of listed companies has declined in recent years.
  • Chair Atkins suggests that Rule 14a-8(i)(1) permits companies to exclude precatory proposals that are not "proper subjects" for shareholder action under state law.
  • Delaware law does not explicitly provide shareholders with the right to vote on non-binding matters.
  • Texas law allows companies to require shareholders to meet higher ownership thresholds to be eligible to submit a shareholder proposal.
  • The SEC has not taken a clear position on whether the SEC would take the issue to the Delaware Supreme Court should the SEC have to reconcile an argument between a company and a proponent.

Sources:

  • Chair Atkins' remarks at the John L. Weinberg Center for Corporate Governance's 25th Anniversary Gala
  • Rule 14a-8(i)(1) of the Securities Exchange Act of 1934, as amended
  • Delaware law regarding shareholder proposals
  • Texas law regarding shareholder proposals
  • Senate Bill 95 of the Delaware legislature
  • The SEC's recent statement on mandatory arbitration