At a hearing about this legislation held last week by the Committee on Banking Housing & Urban Affairs, former SEC Commissioner Rob Jackson testified that:
– The Act would close a significant gap in the current common law, by clearly outlawing trading on info obtained through cybersecurity hacks. That’s because the Act’s definition of “wrongful” trading on MNPI would extend to information obtained through theft or unauthorized access, or violation of a Federal law protecting computer data or intellectual property or privacy of computer users.
– The SEC should reconsider foreign companies’ Section 16 exemptions – in order to crack down on apparent insider trading by executives at foreign firms listed in the US. That was the topic of a study released a couple weeks ago by Professor Jackson along with Bradford Lynch and Daniel Taylor, which was reported on by the WSJ.
As John blogged a couple of months ago, the comment period for the SEC’s proposal to modernize Rule 10b5-1 officially expired on April 1st – and 169 letters are now posted. Here are a few notable submissions:
– Shearman & Sterling – suggesting modifications to the proposal that would lessen the burden on companies
– Davis Polk – responding to a large number of the Commission’s specific requests for comment, including support in principle for a narrow and shorter D&O cooling-off period, but not supporting a cooling-off period for company plans
– Sullivan & Cromwell – identifying areas of concern for the proposal being too broad & burdensome, and urging a transition period of at least 12 months if the proposal is adopted
– Cravath – generally supportive of Commission efforts to prevent abuse of the affirmative defense and increase transparency around Rule 10b5-1 – e.g., supportive of a D&O cooling-off period – but unaware of empirical evidence suggesting abuse in the context of share repurchases that would justify the additional costs imposed by proposed restrictions on issuer trades
– Dorsey & Whitney – raising questions & potential resolutions with respect to the operation of open market employee stock purchase plans
The comment period for the SEC’s proposal to modernize repurchase disclosure also officially expired on April 1st – and just under 100 letters have rolled in so far. A number of prominent law firms & corporations have weighed in, as well as:
– The Society for Corporate Governance – raising concerns about the proposal’s requirements for daily disclosure and operational information about buyback programs and about the impact on investor returns, liquidity & capital formation
– Senators Marco Rubio (R-FL) & Tammy Baldwin (D-WI) – supporting the proposal & encouraging additional enhanced disclosures about alternative uses of capital and whether repurchases are financed by additional debt
– Oxfam – 8 pages on the supposed harms of share repurchases
– NYSE – supporting the proposal in principle, including enhanced periodic disclosure and XBRL data, but expressing concern over unduly burdensome disclosure requirements that would also erode information quality
– Business Roundtable – opposing the proposal due to adverse impacts on efficient capital allocation and undue costs & consequences for issuers, investors and the capital markets overall
– Better Markets – supporting the proposal, advocating for even more disclosure about financing of and motivations for repurchases, and suggesting that Form SR be “filed” rather than “furnished”
– US Chamber of Commerce & others – urging the SEC to reconsider the assumptions underpinning the proposal until it has conducted further economic analysis of the proposal’s potential impact, including in relation to the Rule 10b5-1 proposal (also see this 30-page addendum)
With new SEC rules, record support levels for shareholder proposals, and relentless regulatory & investor scrutiny, your proxy disclosures – and the actions that support them – are more important than ever. The Proxy Disclosure & Executive Compensation Conferences will inform you of what you need to know to protect your company and board. Get practical guidance about rule changes, staff interpretations, emerging disclosure risks, investor and proxy advisor positions, executive pay expectations, the board’s role, and more. Check out the agendas – 17 sessions over three days.
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Early Bird Rates – Act Now! As a special “thank you” for early registration, we’re offering an “early bird” rate for a limited time. Get the best price by registering today – online by credit card or by emailing sales@ccrcorp.com. You can purchase access to this Conference on a standalone basis – or bundle & save by also registering for our Proxy Disclosure & Executive Compensation Conferences the same week.
Join us tomorrow, Wednesday April 13th at 2pm Eastern Time, for the first of PracticalESG.com’s 3-part DEI workshop series – “Collecting Diversity, Equity & Inclusion Data: What to Measure & Why” – to hear DiversityIQ’s Cheryl Cole, Fossil Group’s Sheri Crosby Wheeler, Aon’s Aria Glasgow, Pipeline Equity’s Katica Roy, Fortune’s Ruth Umoh, and NextRoll & PracticalESG.com’s Ngozi Okeh discuss, among other things:
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The Canadian government unveiled its federal budget last week, with an entire chapter devoted to climate. As US companies assess the SEC’s climate disclosure proposal and shareholder demands, this requirement by our neighbor to the north is another sign that regulators and investors are losing patience with voluntary disclosures about emissions and climate risks to companies, and moving towards mandates for comparable info.
Among other things, Section 3.4 of the budget calls on the investment industry and federally regulated financial institutions to support the “transition economy” on the path to net-zero emissions. Here’s an excerpt:
Climate Disclosures for Federally Regulated Institutions
The federal government is committed to moving towards mandatory reporting of climate-related financial risks across a broad spectrum of the Canadian economy, based on the international Task Force on Climate-related Financial Disclosures (TCFD) framework.
The Office of the Superintendent of Financial Institutions (OSFI) will consult federally regulated financial institutions on climate disclosure guidelines in 2022 and will require financial institutions to publish climate disclosures—aligned with the TCFD framework — using a phased approach, starting in 2024.
OSFI will also expect financial institutions to collect and assess information on climate risks and emissions from their clients.
As federally regulated banks and insurers play a prominent role in shaping Canada’s economy, OSFI guidance will have a significant impact on how Canadian businesses manage and report on climate-related risks and exposures.
Separately, the government will move forward with requirements for disclosure of environmental, social, and governance (ESG) considerations, including climate-related risks, for federally regulated pension plans.
This move follows a proposal last fall by the Canadian Securities Administrators to require TCFD-aligned reporting by issuers. That particular proposal is still under consideration.
Tune in tomorrow from 1-2pm Eastern Time for our PracticalESG.com webcast – “Parsing the SEC’s New ‘Climate Disclosure’ Proposal.” We’ve gathered an excellent mix of perspectives – Morrison & Foerster’s Dave Lynn and Sidley’s Sonia Barros, who both previously served in high-level Staff roles at the Commission; Travelers’ Yafit Cohn and NuStar Energy’s Mike Dillinger, who have been assessing the proposal and overseeing ESG disclosures in-house; and our very own Lawrence Heim, Editor of PracticalESG.com with 35+ years of experience in the ESG field from a technical, auditing and management perspective. We will also be making this program available to members of TheCorporateCounsel.net.
This program will cover aspects of the proposal that are fundamentally different than the SEC’s current disclosure regime – and how to understand that. But we won’t stop there – we’ll also be discussing practical actions and realities companies need to know right now in preparing for climate disclosures aligned with SEC’s proposal. Not only will compliance require a long lead time, but investors may also push for the information regardless of the rule’s adoption and compliance date.
If you attend the live version of this 60-minute program, CLE credit will be available. You just need to fill out this form to submit your state and license number and complete the prompts during the program.
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We’ve posted the transcript for our recent webcast for members, “Shareholder Insights: 2022 Priorities.” This was a very informative discussion amongst Council of Institutional Investors’ Glenn Davis, Dimensional Fund Advisors’ Kristin Drake, Sustainable Governance Partners’ Rob Main, and Federated Hermes – International’s Tim Youmans. Here’s an interesting point raised by Rob & Tim:
Main: As we’ve entered into this 2022 season, it does feel like the burden of proof when it comes to shareholder proposals has shifted.
If I think back three, four, five years ago when there was a proposal, the clear burden of proof was on the shareholder proposal proponent. Now, it does feel like the notion of supporting shareholder proposals is becoming more mainstream. There is an inclination from the proxy advisors, but I think increasingly from the mainstream institutional investors as well, who start at a point of supporting the proposal and then must be convinced to walk it back if they’re not going to support that specific proposal at the company. I don’t know if there’s any reactions to that view from my fellow panelists.
Youmans: This is a good segue into a trend that’s happening, which is if you look at the leadership last year of IBM, Wendy’s, arguably Morgan Stanley, BlackRock, and then also on responses to racial equity audits and then on the board of GE regarding climate shareholder proposals, we are seeing more boards supporting shareholder proposals. That’s very interesting.
When that happens, the board can then seize the narrative, and pretty much control the entire discussion about this. It’s moving beyond the shift that you talked about, Rob. Boards are being self-active holders of their own narrative. This is a very interesting trend, and we hope to see more of this.
If you are not a member of TheCorporateCounsel.net, email sales@ccrcorp.com to sign up today and get access to the full transcript – or sign up online.
This week, President Biden announced his intent to nominate two individuals to serve on the Securities and Exchange Commission. The Commission currently has one open seat for a Republican and one seat for a Democrat when Commissioner Allison Herren Lee’s term expires in June.
The first nominee is Jaime Lizárraga, who currently serves as Senior Advisor to Speaker of the House Nancy Pelosi. Lizárraga oversees issues relating to financial markets, housing, international financial institutions, immigration, and small business policy and serves as the Speaker’s liaison to the Congressional Hispanic Caucus. He previously served on the Democratic staff of the House Financial Services Committee, and as a presidential appointee at the U.S. Department of the Treasury and the U.S. Securities and Exchange Commission.
The second nominee is Mark T. Uyeda, who is a career attorney with the SEC, currently on detail to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, where he serves as Securities Counsel on the Committee’s Minority Staff. Uyeda joined the SEC in 2006 and has worked in various capacities, including as Senior Advisor to Chairman Jay Clayton and Acting Chairman Michael S. Piwowar, and as Counsel to Commissioner Paul S. Atkins. He has also served as Assistant Director and Senior Special Counsel in the SEC’s Division of Investment Management.
Once the President formally nominates these individuals, they will move on to the Senate confirmation process. There is no telling how long that might take.
