SEC Fall 2023 Regulatory Agenda
On December 6, 2023, the SEC published its semi-annual Fall 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.
The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 43, down from 55 on the Spring 2023 Agenda.
Fourteen items are included in the proposed rule stage, down
SEC Spring 2023 Regulatory Agenda
On June 13, 2023, the SEC published its semiannual Spring 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.
The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 55, which is in-line with the average items under Gary Gensler’s regime (and much higher than
SEC Fall 2022 Regulatory Agenda
On January 4, 2023, the SEC published its semiannual Fall 2022 regulatory agenda (“Agenda”) and plans for rulemaking. The Unified Agenda of Regulatory and Deregulatory Actions contains the Regulatory Plans of 28 federal agencies and 68 federal agency regulatory agendas. My favorite Commissioner, Hester M. Peirce, was quiet about the agenda, not issuing a public statement this time. Upon publication of the Spring 2022 Agenda, Commissioner Peirce ripped the Agenda as being disconnected with the SEC’s core mission and as being focused on special interest groups instead of a broad range of market participants. The Agenda is published twice a year, and for several years I have blogged about each publication.
The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to
Report On The 41st Annual Small Business Forum
The Office of the Advocate for Small Business Capital Formation (“Office”) has delivered a report to Congress following the 41st annual small business forum (“Report”). The Report includes recommendations of the Office and its annual forum participants. The forum itself featured panelists and discussions on (i) empowering entrepreneurs, including tools for capital raising; (ii) hometown entrepreneurship including how entrepreneurs can thrive outside of capital raising hubs; (iii) new investor voices including how emerging fund managers are diversifying capital; and (iv) small-cap world including what to know and how to think ahead.
I’ve been writing about the forum for many years and have even attended a few times. Each year the topics are similar, but the recommendations tend to transform over time. Last year the topics included (i) navigating ways to raise early rounds; (ii) diligence including how savvy early-stage investors build diversified portfolios; (iii) tools for emerging and smaller funds and their managers; and (iv) perspectives on smaller public companies.
Caremark Is Alive And Well – Director Liability In Delaware
The last time I wrote about In Re Caremark International Inc. (“Caremark”), and its protections for a board of directors from breach of fiduciary duty claims, was in early 2021 following a year of cases that had eroded its historical strong defenses. Now, almost two years later, boards have paid attention to the judicial opinions and added compliance practices, including implementing written oversight systems, resulting in a dramatic uptick in the dismissal of plaintiff’s attempts to satisfy Caremark claims.
Background
In Re Caremark International Inc. Derivative Litigation was a civil action in the Delaware Court of Chancery in 1996 which drilled down on a director’s duty of care in the oversight context. A Caremark claim “seeks to hold directors accountable for the consequences of a corporate trauma.” To adequately allege such a claim, a plaintiff must allege that the board had some level of involvement in the trauma such that it knew or should have known about
SEC Proposed Mandatory Climate Disclosure Rules – Part 7
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules are enormous in scope, complexity, and ramifications with a polarizing comment response largely along party lines. The comment period ended June 17, 2022, after a relatively short, but necessary extension by the SEC. Despite the controversy, there is no doubt that the rules, even if somewhat modified, will be passed and public companies need to start preparing now. The recently published Reg Flex Agenda indicates we should see final rules in October 2022. The rules will require compliance with extraordinarily
SEC Proposed Mandatory Climate Disclosure Rules – Part 6
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules are heady and complex (490-page rules release) presenting an enormous scope, complexity and ramifications. As such, like the SPAC rules, I am breaking down the proposal in detail in a series of blogs.
In the first blog in this series, I provided some background and an introduction to the rules (see HERE). The second provided a high-level summary of the proposed rules including the phase in compliance schedule (see HERE). The third blog in the series discussed the
ESG – The Disclosure Debate Continues
The ESG debate continues, including within the SEC and amongst other regulators and industry participants. Firmly in support of ESG disclosures, and especially climate change matters, is SEC Chair Gary Gensler and Commissioner Allison Herren Lee, while opposing additional regulation is Commissioners Eliad L. Roisman and Hester M. Peirce. Regardless of whether new regulations are enacted (I firmly believe they are forthcoming), like all SEC disclosure items, the extent of disclosure will depend upon materiality.
Materiality
The U.S. Supreme Court’s definition of materiality is that information should be deemed material if there exists a substantial likelihood that it would have been viewed by the reasonable investor as having significantly altered the total mix of information available to the public [TSC Industries, Inc. v. Northway, Inc.]. The concept of materiality represents the dividing line between information reasonably likely to influence investment decisions and everything else.
Rule 405 of the Securities Act defines “material” as “[T]he term material, when
ESG – Board of Directors and Auditor Matters
In a series of blogs, that is likely to be an ongoing topic for the foreseeable future, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Climate change initiatives and disclosures have been singled out in the ESG discussions and as a particular SEC focus, and as such was the topic of the first blog in this series (see HERE). The second blog talked more generally about ESG investing and ratings systems and discussed the role of a Chief Sustainability Officer (see HERE). The last blog on the topic focused on current and prospective ESG disclosure requirements and initiatives, including the Nasdaq ESG Reporting Guide (see HERE).
ESG is not just a topic impacting social position disclosures but can go directly to the financial condition of a reporting company, and as such its financial statements. Accordingly, ESG reporting requires auditor and audit committee
ESG Disclosures – A Continued Discussion
In a series of blogs, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Former SEC Chair Jay Clayton did not support overarching ESG disclosure requirements. However, new acting SEC Chair Allison Herron Lee has made a dramatic change in SEC policy, appointing a senior policy advisor for climate and ESG; the SEC Division of Corporation Finance (“Corp Fin”) announced it will scrutinize climate change disclosures; the SEC has formed an enforcement task force focused on climate and ESG issues; the Division of Examinations’ 2021 examination priorities included an introduction about how this year’s priorities have an “enhanced focus” on climate and ESG-related risks; almost every fund and major institutional investor has published statements on ESG initiatives; a Chief Sustainability Officer is a common c-suite position; independent auditors are being retained to attest on ESG disclosures; and enhanced ESG disclosure regulations are most assuredly forthcoming.
