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SEC Holds Off on Divisive Rules
In December, the SEC is set to finalize several other rules.
It plans to introduce new restrictions on short selling -- betting that a company's shares will fall -- that would often require traders to pay a small premium to place such bets. That may reduce the number of short sales.
Previously, the agency had considered stopping short sales altogether when shares were declining rapidly, a response to congressional and public outcry about the collapse of financial stocks last fall.
The SEC will also finalize new rules to govern money-market funds, which promise customers easy access to their cash with interest rates better than ordinary savings accounts. The new rules would limit what these funds can invest in and require that they hold more cash or cash-equivalents on hand, making them less vulnerable to shocks.
Finally, the SEC will establish rules requiring companies to analyze for investors how their compensation policies might lead to risk-taking.
Other proposals will wait until next year. Officials said they are waiting to ensure the proposals are properly calibrated and can withstand any potential lawsuit. The U.S. Chamber of Commerce, among others, has expressed deep skepticism about several rules that seek to more closely control public companies.
The most controversial would make it easier for investors in companies to band together to propose directors for corporate boards. Many public companies argue that these measures would allow their boards to be hijacked by narrow interests, such as environmental or union causes.
"The financial crisis highlighted a longstanding concern -- some directors are simply not doing the jobs expected by their employers, the shareholders. Compounding the problem is that in too many cases the director nomination process is flawed, largely due to limitations imposed by companies and the securities laws," Jeff Mahoney, general counsel of the Council of Institutional Investors, wrote in a letter to the SEC.
Another proposal would ban the use of "placement agents" -- third parties used by investment to try to get the business of public pension plans -- after a major "pay to play" scandal earlier this year.