At the end of January 2025, SEC Commissioner Hester Peirce, who finally is not on an island alone within the SEC top brass, gave a speech at the Northwestern Securities Law Institute giving some insight into what we can expect from the SEC under the new administration.
Commissioner Peirce has been vocal over the years about her disdain for bringing political and social issues into SEC reporting and compliance management for public companies, however now, working with like-minded executives, she has solid ideas for a path forward. First and foremost, a public company should have the goal of maximizing value for its shareholders as a group. Unfortunately, in today’s world, public companies are often forced to answer to activists, non-shareholder “stakeholders” and the like, forcing executives to utilize company resources to further these groups (or individual’s) favorite cause. Commissioner Peirce notes that “[D]irectors and executive officers serve shareholders and society best by keeping the companies they guide focused on maximizing long-term financial value.”
Likewise, Commissioner Peirce believes the SEC should stay in its lane. That is, the SEC should ensure public companies provide the best, most understandable, material and relevant information to the investing public to allow them to make informed decisions. She emphasizes that it the consumer/investor that does and should make those investment decisions – the SEC should not act as big brother. Commissioner Peirce points out that attempts to utilize the SEC’s disclosure rules to serve non-investor constituencies have grown in recent years. Examples include the climate disclosure rules, human disclosure rules, conflict mineral disclosure rules and CEO pay ratio disclosure rules. Pointedly, “[I]f this trend continues, companies’ securities disclosures will bury information material to investors in an unwieldy catalog of responses to special interest groups’ demands.”
Similarly, the SEC should stop pressuring asset managers to push public companies into contentious social and political issues. For example, now funds have to disclose votes by category, such as “environment or climate,” “human rights or human capital/workforce,” and “diversity, equity, and inclusion” making them targets for whatever groups have opinions on these matters. Rather, fiduciary duty to the fund should be the only guiding principle for asset managers in deciding whether and how to exercise a vote.
Further, the SEC should do a better job protecting investors from having their resources diverted to deal with shareholder proposals that are not aimed at maximizing corporate value. Historically, shareholder proposals were focused on governance topics that had a direct relationship to the financial prospects of a company. However, in the past decade the number of shareholder proposals related to environmental and social issues has increased dramatically. Sorting through and addressing these proposals not only impose significant monetary costs on a company, but also non-monetary costs by diverting management and a board of directors attention away from maximizing corporate value and running the business in the industry(ies) the company is in. To protect investors from these expensive corporate diversions, the SEC should re-examine the ownership thresholds in Rule 14a-8 and other available tools to ensure that a proponent has some meaningful economic stake or investment interest in a company.
Another change that Commissioner Peirce would like to see is a decrease (or even elimination) of regulation by enforcement. Along the same lines, Commissioner Peirce is concerned that the SEC has been using enforcement to usurp management decision-making. For example, the SEC recently initiated different enforcement proceedings under the auspice of failing to maintain internal controls and procedures, which Commissioner Peirce believed were actually just questionable management decisions. In each of these cases the SEC did not charge the companies with fraud or making misleading disclosures. By requiring companies to establish disclosure controls for information that is not important for disclosure purposes, the SEC “seeks to nudge companies to manage themselves according to the metrics the SEC finds interesting at the moment.”
Commissioner Peirce rightfully advocates that the SEC should better communicate disclosure matters to public companies, both in the registration process and periodic reporting requirements. The SEC staff should engage early and often during the registration process and afterwards, assisting public companies and their lawyers and accountants with difficult questions about the application of new and existing rules.
Commissioner Peirce is excited about the possibility of a more neutral SEC focusing on securities matters and not all social and political agendas. I couldn’t agree more.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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