Companies looking ahead at their 2012 agenda need to also consider an outside party’s to-do list that may have an impact on their business strategy. New rules the Securities and Exchange Commission plans to tackle this year fall into one of three areas: Dodd-Frank Act to-do items, proposals the SEC had temporarily tabled and will revisit, and new legislation that could help smaller companies extricate themselves from some burdensome reforms.

While many question whether the Dodd-Frank Act is actually the agent of change it set out to be, the first 18 months of its implementation have been relatively anticlimactic for nonfinancial companies and their management. One reason is the continued delay of some of the rules. The commission recently updated its schedule for when the regulator expects to propose and finalize rules, giving itself more time. Although the SEC finalized its say-on-pay rules in time for last year’s proxy season and established a new whistle-blower program last summer, the regulator still has several provisions to go that will affect the following issues at companies.

Compensation
One pressing governance item under the SEC’s to-do list for 2012 is clawback rules, which are expected to be completed within the next few months. They will have implications for current and former company officers who work for companies traded on stock exchanges. If a company restates its financials due to material noncompliance with financial-reporting requirements, it must recover any executive incentive compensation based on the false data. By solely following the less-stringent Sarbanes-Oxley clawback provision, many companies lack policies that include restatements caused by “innocent” error, as the new rule will likely require. The SEC will also be trying to implement additional Dodd-Frank compensation rules, including a requirement to disclose the ratio of CEO pay to that of the average worker. The commission has yet to issue a proposal on these two Dodd-Frank mandates and plans to do so by June.

Supply Chains
Another imminent rule, scheduled to be finalized in early 2012, will require public companies to disclose the use of conflict minerals certain minerals or metals that come from mines in the Democratic Republic of the Congo and adjoining countries, an area of the world notorious for its human-rights violations. The SEC received hundreds of comments on its initial proposal and had originally planned to finalize the rule by last summer. Companies will need to certify that their products and processes do not use materials from these places. Critics are worried that companies will bear full responsibility of tracking these materials from third-party vendors. Such work would be time-consuming and costly to implement and audit.

Proxies
On the commission’s back burner since Dodd-Frank was implemented is proxy plumbing. As its name suggests, proxy plumbing is an attempt to tighten or repair the current proxy voting system that affects shareholders. Each year 600 billion shares are voted at more than 13,000 shareholder meetings. More than a year ago, the SEC questioned whether the proxy system as a whole is operating with full accuracy and transparency for protecting shareholders’ votes and rights. Though there’s likely not enough time for the commission to enact rules effective for the 2012 proxy season, the SEC staff has indicated it is again actively looking at proxy plumbing initiatives.

Accounting
In our increasingly interconnected marketplace, there is a need for high-quality globally accepted accounting standards, yet the issue is how to get there. The SEC once proposed a timetable for adopting international financial reporting standards, but more recently has backed off that plan. The regulator has pushed off a decision until this year, likely during the latter half. In the meantime, U.S. and international standard-setters have been working to make their standards more aligned. If the SEC and U.S. standard-setters do not move to adopt — or at least fully converge with — IFRS soon, there may never be a uniform set of accounting standards accepted worldwide.

Crowdfunding
The SEC will also likely be weighing in some time this year on legislation passed overwhelmingly by the House in early November and proposed in the Senate. The measure is designed to give small, innovative start-ups increased flexibility to raise funds. The idea is that through lighter regulation, ordinary investors could buy securities up to a limited amount through established and vetted peer-to-peer platforms, including Internet sites. Crowdfunding would allow smaller companies to skirt full-disclosure issues facing larger public companies. The SEC and Congress are also considering whether to relax other rules to foster private-company growth, such as lifting the current ban on “general solicitation” in private placements. Expect some state regulators to object, since some of these legislative proposals would preempt states’ authority.

The SEC has an ambitious agenda for 2012. Whether the regulator gets through its checklist and mandates by next year at this time is uncertain at best. Time, lack of resources, and a threatened government shutdown stalled efforts last year. Nevertheless, companies should be prepared to respond and comply with (and in the case of crowdfunding, perhaps to embrace) these rules so that they can stay ahead of the ever-changing regulatory scheme and focus on their underlying businesses without fear of costly lawsuits or SEC actions.

Howard E. Berkenblit is a partner in Sullivan & Worcester’s corporate department and is co-leader of the firm’s securities and corporate governance practice group.

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