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Corp Fin Director Erik Gerding and Corp Fin Chief Counsel Michael Seaman discussed the latest developments in the Corp Fin yesterday at the Northwestern Securities Regulation Institute. Here are the top five highlights from their comments:

1. On the topic of cybersecurity, Gerding noted that when the Staff is reviewing the new cybersecurity disclosures, they will not be in the business of issuing “gotcha” comments. He noted that the Staff has provided guidance through Compliance and Disclosure Interpretations and Gerding’s statement on cybersecurity. He also noted that he continues to encounter misconceptions about the incident reporting aspect of the new cybersecurity rules, in that there seems to be a belief that the reporting obligation kicks in after the incident occurs, rather than after the issuer has determined that the incident is material. Gerding noted that the adopting release addresses how the materiality determination is nuanced and not anticipated to be a snap judgment, recognizing that assessing materiality is a deliberative process that can take some time.

2. On the topic of disclosure developments, Gerding noted that the Staff has been focused on disclosure in filings by financial institutions concerning interest rate and liquidity risk. The Staff has been seeking more particularized and meaningful disclosure concerning these risks in the current environment and the actions taken to address those risks. Gerding also reviewed the Staff’s guidance over the course of the past few years regarding China-based issuers and the Holding Foreign Companies Accountable Act.

3. Seaman noted that Corp Fin will be hiring a new Chief of the Office of Enforcement Liaison, and also addressed the current shareholder proposal season. He indicated that the submission of shareholder proposal no-action requests is up this year, with 167 requests coming into Corp Fin at this point as compared to 123 no-action requests last year. He indicated that the topics of the subject proposals is pretty consistent with recent years, including corporate governance, environmental and discrimination. Seaman noted that the new topic this season is artificial intelligence (AI), with a number of proposals addressing AI issues. He noted that there are a number of no-action requests pending that represent issues of first impression. Finally, he noted that the Staff is receiving shareholder proposal no-action requests through its new web-based form; however, if an one encounters technical difficulties with the SEC’s website, you can continue to email no-action requests to the Staff.

4. On the topic of AI, Gerding noted that the Staff is focused on what companies are saying in their SEC filings about AI. He noted that companies should have a basis for their claims and should address the impact on the company in terms of its results of operations and financial condition. Gerding indicated that boilerplate is showing up in AI disclosures, particularly in the context of risk factors. Gerding noted that there may be Staff guidance on this topic.

5. Addressing the first year of implementing the pay versus performance disclosure, Seaman pointed out the Staff’s approach to its review of filings and the Compliance and Disclosure Interpretations that the Staff issued in the Fall to address a number of interpretive issues. He highlighted the frequent comment topics, including omitting relationship disclosure, providing a description of how non-GAAP financial measures are calculated when they are listed as the Company Selected Measure, and using required headings and formatting for tables while following the Commission’s guidance from the adopting release when providing supplemental information.

– Dave Lynn