Cox: Proxies aren’t in ‘plain English’ despite new rules

LOS ANGELES — Securities and Exchange Commission Chairman Christopher Cox is on a mission to wipe out the legalese in corporate-disclosure documents. On a trip here late last month, Mr. Cox blasted corporate America for continuing to use obtuse language in proxy statements and said that the SEC soon will take steps to improve disclosure to 401(k) participants. Speaking at a corporate- governance meeting at the Marshall School of Business at the University of Southern California, his alma mater, he said that a recent analysis of 40 proxies that had been filed since new rules requiring “plain English” disclosure had gone into effect “all [fell] short [of] readability standards.” The filings “aren’t anywhere near to plain English,” Mr. Cox said. The SEC approved the revamped proxy-disclosure rules last July, and they went into effect in December. New focus on retail Mr. Cox told corporate officers and lawyers at the meeting that the SEC’s stance on clear language was “part of a renewed effort to focus on retail investors.” In an interview, he pointed to the SEC’s focus on older investors, on the use of interactive data in disclosure documents and on improved overall mutual fund disclosure as evidence of that effort. In addition, the SEC soon will announce an initiative aimed at improving disclosure within 401(k) plans, Mr. Cox said. “It [will be] similar to what we did ... with executive compensation [to ensure that 401(k)] performance metrics are comparable [and] the disclosures are investor friendly,” he said. “There isn’t anything specific yet,” regarding 401(k) disclosure, said SEC spokesman John Nester. The SEC will work with the Department of Labor on the project, he said. As previously reported, the Labor Department is working to improve disclosure of indirect payments made by retirement plan vendors (InvestmentNews, Feb. 5). Separately, the House Education and the Workforce Committee held hearings last month about the transparency of 401(k) fees. Meanwhile, Mr. Cox said that advisers can handle “some very difficult questions that every broker can understand on a personal level with seniors who are investing with them.” Specifically, he said, they should consider their responsibility in the event that a client becomes senile. They should weigh what sort of advanced arrangements can be made in anticipation of such an event. Open to suggestions “Those are questions we’re studying right now,” Mr. Cox said. “We are open to suggestions at the SEC about how to establish best practices in this area.” The SEC’s next “senior summit” this summer will address issues regarding older investors and how to best serve them, Mr. Cox said. “The general aging of the population is making this a real priority,” and “the demand that’s going to be placed on investments [from longer life spans] is going to add further stress” to portfolios, he added.