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From Securities Regulation Daily, February 6, 2017

Acting Chair Piwowar seeks comments on pay ratio compliance, implementation

By Mark S. Nelson, J.D.

Acting SEC Chairman Michael Piwowar requested public comments on the Commission’s pay ratio disclosure rule with respect to unexpected compliance woes and on implementation of the rule. Comments are due within 45 days. The announcement marks the second time in less than a week that the acting chairman has pushed for reconsideration of a Commission rule.

Piwowar cited issuers’ "unanticipated compliance difficulties" that had come to his attention as the basis for reconsidering the pay ratio rule. He said companies’ testing of controls and other systems needed to comply with the rule could impact whether they meet the deadline for reporting. But Piwowar also directed SEC staff to reconsider the rule’s implementation with an eye to whether new guidance or relief may be needed. Piwowar urged both SEC staff and the public to "expedite" their separate reviews due to the short compliance timeframe, which is set to start with the first fiscal year beginning on or after January 1, 2017.

Dodd-Frank Act Section 953(b) directed the Commission to amend Item 402 of Regulation S-K to require issuers to disclose their ratios of the median of the annual total compensation of all employees to the annual total compensation of their CEOs. The Commission adopted the final version of the rule in August 2015 with some but not all requested changes, yet not enough to garner support from then-Commissioner Piwowar and Commissioner Daniel Gallagher, both of whom dissented from the vote by the fully-appointed Commission. Since then, the Division of Corporation Finance has published Compliance & Disclosure Interpretations in an effort to clarify how parts of the rule can be applied in practice.

Last week, Piwowar directed the agency to reconsider existing guidance and relief under the Commission’s conflict minerals rule while also inviting public comments. And on a related front, Congress recently disapproved the Commission’s resource extraction issuers rule via a joint resolution under the Congressional Review Act. The White House has expressed support for the resolution and the president is expected to sign it.

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