“Dofra”, “Dodfra”, “Direct Access” And The “Proxy Plumbing Release”… Get Out Those Plumbers-Helpers Pronto!

Whether you call it “DOFRA” as Pat McGurn calls it, or “DODFRA”, to give Dodd and Frank equal billing, the Dodd-Frank act passed both houses of congress as we were drafting this issue and will likely be law before we go to press.

A lot of “plumbers-helpers” will surely be needed to push all the “stuff” that’s called for through the legislative and regulatory pipelines: A total of 243 regulatory actions will be required, according to a Davis Polk and Wardwell tally, with 95 of them flowing into an SEC pipeline that was severely backed-up with “stuff” beforehand.

We are betting, however, that Direct Access will be among the very first things the SEC will enable, now that they have the legislative “cover” – and in fact, a mandate now, to do it. We are hearing that they will take action by August 3rd – and will call for a 3% ownership threshold and a 2 year holding period, which will represent a modest victory for common sense vs. earlier threshold proposals – plus an exemption for “small companies” who, clearly would have been the major targets of small-time, short-term- investor troublemakers, looking to use the company proxy statement simply to stir the pot. Most people are now con- ceding that Direct Access will largely be a non- event…aimed strictly at the most egregiously tone-deaf and defiant companies…though, for sure, there will be a “test- case” or two…and maybe that “stuff-stirrer” Carl Icahn will give it a go or two, since it’s free.

Meanwhile, the SEC issued its Concept Release on the U.S. Proxy System – which, at a quick glance, seems to be a pretty thorough and useful discussion of what have become known as “Proxy Plumbing” issues. This is a great name, as we’ve been saying, and a useful analogy, in that it addresses a very old, complicated and rickety system, with many pipelines - many of them with serious clogs and leaks. Fixing it will take hard work. And it will be a very messy and a potentially dirty job…And guess what; just like a real plumbing job, there IS the potential for things to go badly wrong, and for us hapless plumbers to get seriously mucked up if we’re not careful. So sit down and read the Release…and vow to follow the discussions that will ensue…and to weigh in with the SEC if you believe, as we do, that some important changes are required. Watch this space for a deeper discussion and some “stuff-stirring” of our own in the next issue.