FR 2021-02267

The document discusses a proposal by the Long-Term Stock Exchange, Inc. (LTSE) to amend certain rules regarding how companies listed on the exchange are required to develop and maintain policies that support long-term value creation. Specifically, the proposed change centers on LTSE Rule 14.501. This amendment is intended to streamline and clarify the process for enforcing compliance with LTSE Rule 14.425, which mandates listed companies to implement specific long-term policies related to stakeholders, strategy, compensation, board governance, and investor relations.

General Summary

The LTSE has put forward a proposal to change how compliance with specific rules is managed. LTSE Rule 14.425 demands that companies establish and periodically review policies aimed at fostering long-term value. These policies must be in line with certain guiding principles provided by the LTSE. The proposed changes focus on LTSE Rule 14.501, which outlines the procedures to enforce these policies. Should a company fail to comply, it can propose a compliance plan for evaluation, allowing time to address deficiencies before facing the risk of delisting. This approach intends to promote sustained corporate governance while providing companies a fair opportunity to rectify any shortcomings.

Significant Issues and Concerns

1. Complexity and Technical Jargon: The document uses highly technical language that may be challenging for individuals without a background in securities regulation to comprehend. This could hinder effective public understanding and input.

2. Consequences of Non-Compliance: While the document outlines potential pathways for companies to address non-compliance, it does not clearly elucidate the impacts or actions for companies failing to submit a satisfactory compliance plan.

3. Clarity and Accessibility: The explanations regarding the amendments lack simplicity and clarity. They could be presented in a manner that's easier for a broader audience to understand.

4. Fair Treatment and Equity: The document emphasizes fair treatment for all companies, yet it does not specifically elaborate on how firms of different sizes may be affected differently by these changes.

5. Impact on Costs and Burden: There is insufficient discussion about the possible financial burden or costs that companies might endure to implement these new requirements.

Impact on the Public and Specific Stakeholders

• General Public: The proposed changes may indirectly affect investors and the general public by aiming to enhance the transparency and accountability of companies listed on the LTSE, potentially leading to more stable investment environments.

• Listed Companies: Companies listed on the LTSE would be directly impacted as they may need to develop comprehensive compliance plans and ensure their policies are in line with the LTSE's long-term principles. The process allows for corrective measures to attain compliance, which may support continued market participation and investor confidence.

• Investors: For investors, particularly those with a long-term focus, these changes could enhance confidence in the governance practices of listed companies, potentially making these companies more attractive investment prospects.

• Smaller Companies: The potential differential impact on smaller firms is not clearly addressed, and such companies might face unique challenges given the resources required to develop and maintain comprehensive policies aligning with LTSE's requirements.

In summary, the proposed amendments by the LTSE to its compliance enforcement processes appear to have potential benefits for enhancing long-term governance in listed companies. However, the explanatory document needs to address several concerns relating to complexity, clarity, and potential unintended burdens on companies to more holistically achieve its intended goals and foster a more robust discussion among stakeholders.