Subject: File No.
From: Keith P Bishop
Affiliation: Former California Commissioner of Corporations

September 24, 2012

1. The Appointment of Mr. Dear as Chairman of the Committee violates Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Act").

Section 911(c)(1)(A) of the Act provides that "The members of the Committee shall elect, from among the members of the Committee— (A) a chairman, who may not be employed by an issuer . . ." (emphasis added). This same requirement is included in Section 9(1) of the Committee's Charter. Section 3(a)(8) of the Securities Exchange Act of 1934 defines "issuer", with certain exceptions not relevant here, as "any person who issues or proposes to issue any security . . .". Mr. Dear is an employee of the State of California. See Cal. Govt. Code 20098. The State of California is an issuer because it offers and sells securities in the form of bonds and other evidences of indebtedness. Accordingly, Mr. Dear clearly may not serve as Chairman of the Committee. There is no ambiguity in Section 911 and Congress left no gaps for the Securities and Exchange Commission (Commission) to fill. The Commission and the Committee have no choice but to comply with the clear mandate of Congress.

2. The Committee should take appropriate steps to assure that its advice and recommendations are not inappropriately influenced by any special interests and are the product of the Committee's independent judgment.

The Committee should take appropriate steps to identify and address potential conflicts of interest. Based on publicly available information, it appears that several members of the Committee hold positions in organizations or entities that have significant business relationships with each other. It also appears that persons serving on the Committee have other relationships such as interlocking directorships that may affect their independence. Each Committee member should be required to disclose fully and publicly: (1) all actual and potential conflicts of interests and (2) all relationships (whether business or social) that call into question the independence of Committee members. In addition, the Committee should take appropriate steps to ensure that the Committee's advice and recommendations are not tainted by the votes of members who are interested or lack independence. At a minimum, these steps should include appropriate amendments to the Committee's Bylaws and Operating Procedures.

3. The Committee's governing documents should be amended to provide that interested persons are permitted to attend, appear before, or file statements with it.

Although Section 5 of the Committee's Charter provides that meetings of the Committee are open to the public, neither the Charter nor the Bylaws provide that interested persons are permitted to attend, appear before, or file statements with the Committee. Specifically, providing these rights will help to ensure that the Committee will have access to a wide range of views and will not be influenced inappropriately by any special interests.

4. The Committee's governing documents should clearly provide that all Committee documents are available for public inspection.

Section 12 of the Committee's Charter provides that the official records of the Committee will be available for public inspection pursuant to the Freedom of Information Act. To insure transparency and accountability, the Charter should specify that the Committee's official records include the Committee's records, reports, transcripts, minutes, appendixes, working papers, drafts, studies, agenda and other documents that were made available to, prepared for, or by the Committee.

5. The required vote should be amended to specify that action by the Committee requires the affirmative vote of a majority of the Committee members.

Section F of the Committee's Bylaws provides that action may be taken by a simple majority of the votes cast at a meeting at which there is a quorum. This is too low a voting threshold. Currently, there are 21 members of the Committee. Pursuant to Section H of the Bylaws, a quorum would consist of 11 members. Assuming that 11 members are present at a meeting, action could be taken by as few as 1 member (assuming that the other 10 abstain). Even in the more likely scenario of 11 members voting, action could be taken by less than 30% of the total membership of the Committee (i.e., 6 members). Imposing a higher vote requirement would help to assure that the Committee is not inappropriately influenced by special interests and that its advice and recommendations have the imprimatur of a true majority of the Committee members.

By way of background, I previously served as Commissioner of Corporations for the State of California and as a member of the California Senate Commission on Corporate Governance, Shareholder Rights and Securities Transactions. I have also served as Deputy Secretary and General Counsel to the California Business, Transportation Housing Agency and Interim Savings and Loan Commissioner. More recently, I have served as Co-Chairman of the Corporations Committee of the Business Law Section of the California State Bar. I have also served as an Adjunct Professor of Law at the University of California, Irvine and Chapman University School of Law. I am writing, however, in my individual capacity and not on behalf of my law firm, its clients, or the any of the foregoing.