If you are a securities law nerd and you feel like now might be a good time to take part in the Great Resignation, take a look at the SEC’s recent job postings for the Division of Corporation Finance. Corp Fin is now hiring for the job of Chief Counsel, which I held in Corp Fin from 2003 to 2007. I always say that my time as Chief Counsel was the best job I ever had a securities lawyer, because every day you get to “drink from the firehose” of securities law issues. It is also a great opportunity to work with the very talented Staff in the Office of Chief Counsel, in Corp Fin and in the other Offices and Divisions at the SEC. If you have any questions about what it is like to serve in Corp Fin or the job of Chief Counsel in particular, always feel free to reach out to me.
The National Association of Corporate Directors recently published its 2022 Governance Outlook, which is designed to give corporate directors and senior executives a comprehensive overview of major business and governance issues that are likely to demand board focus over the coming year.
The topics addressed in the NACD Governance Outlook include:
Board Agendas Must Change to Meet 2022 Director Priorities
Embracing Greater Investor Interest in ESG Practices
The Role of the Board in Overseeing ESG
How Purpose is Changing the Board M&A Oversight Role: What Directors Are Saying
Board Responsibilities in Mitigating Ransomware Risk in 2022
The Role of Boards in Assessing DE&I Practices with Advanced Data Analytics
Directors and Officers Liability Threat and Insurance 2022 Outlook
State Street Global Advisors released its annual letter to board members of portfolio companies outlining the engagement issues that SSGA will prioritize this year. The letter indicates that SSGA’s main focus for 2022 “will be to support the acceleration of the systemic transformations underway in climate change and the diversity of boards and workforces.”
On the climate change front, SSGA states that, for the 2022 proxy season, it will expect companies in major indices in the US, Canada, UK, Europe, and Australia to align with climate-related disclosures requested by TCFD, including whether the company discloses: (1) board oversight of climate-related risks and opportunities; (2) total direct and indirect GHG emissions (Scope 1 and Scope 2 emissions); and (3) targets for reducing GHG emissions. SSGA will take voting action against directors if companies do not meet SSGA’s specific disclosure expectations. Further, SSGA will launch a targeted engagement campaign with “the most significant emitters” in its portfolio to encourage disclosure aligned with SSGA’s disclosure expectations for climate transition plans, and in 2023 SSGA will hold companies and directors accountable for failing to meet those disclosure expectations.
On diversity, SSGA has enhanced its diversity policy to provide that, beginning in the 2022 proxy season, SSGA will expect all of its portfolio companies to have at least one woman on their boards. Additionally, beginning in the 2023 proxy season, SSGA will expect boards to be comprised of at least 30% women directors for companies in major indices in the US, Canada, UK, Europe, and Australia. In each instance, SSGA will vote against the Chair of the board’s Nominating Committee or the board leader should a company fail to meet these expectations.
The letter also notes that SSGA has expanded its focus on diversity to include race and ethnicity, and for the 2022 proxy season SSGA will take voting action against responsible directors if: (1) companies in the S&P 500 and FTSE 100 do not have a person of color on their board; (2) companies in the S&P 500 and FTSE 100 do not disclose the racial and ethnic diversity of their boards; and (3) companies in the S&P 500 do not disclose their EEO-1 reports.
As I roll into my 15th year of writing for the CCRcorp publications, I am reflecting back on some of my favorite blogs, podcasts and publications over the years. When I joined the organization back in 2007 after leaving the SEC, I had never written a public blog, so I really had no idea what to expect. Under Broc’s tutelage, I learned that it was important to lighten up once in a while and to not always focus on the securities and governance content. That wise advice made me realize that a blog is much more like a conversation than a newsletter or a treatise, so you have to show your personal side from time to time.
One of the most amazing things about writing the blog is the incredible feedback that you get from our members. To me, that is one of the most rewarding aspects of the job. Over the years, I have found that the more personal blogs tend to generate the most feedback, because they are often relatable to the experiences of our members. I will never forget the blog which generated the most member feedback, which was my discussion of presenting at my child’s Career Day. Anyone who is a parent of elementary school-age children can relate to the trepidation that a lawyer feels when you have to compete with the firemen, policemen, air force pilots, etc. at Career Day. Members enjoyed my approach on the presentation and some asked whether they could use my materials for their own presentations, including a prospectus for 4th graders!
A member recently asked in our Q&A Forum where things stand with the SEC’s review of filings for climate change disclosure. This focused review effort by the Division of Corporation Finance was initiated by then-acting Chair Allison Herren Lee, who directed the Staff to review the extent to which issuers address the topics identified in the SEC’s 2010 climate change guidance. In September 2021, the Staff released a sample comment letter regarding climate change disclosure, which echoed the comments that issuers had been receiving from the Staff around that time. When we last checked in on this topic in November, issuers found themselves on the receiving end of a second round of comments, with the Staff asking more questions around the determination of materiality with respect to climate change information.
To date, we have not seen any correspondence from completed climate change reviews posted on EDGAR (other than situations where the comments have been raised on registration statements). This suggests that the reviews are ongoing, and anecdotally it seems that issuers have been receiving multiple rounds of comments from the Staff concerning their climate change disclosure (or lack thereof). From our understanding, the comments continue to focus on the determination as to materiality of the climate change information, and in some cases issuers are getting more comments in the subsequent rounds than they did in the first round. Given this trajectory, it does not seem likely that the comment process will wrap up any time soon, which makes things difficult for the subject issuers who are now in the process of preparing their Form 10-Ks.
For issuers who are not on the receiving end of the Staff’s comments, the Sample Letter remains a good resource for considering the applicability of the 2010 guidance to the issuer’s disclosure for the upcoming reporting season.
The National Venture Capital Association (NVCA) recently published a new Model Questionnaire for Directors and Executive Officers and a new Questionnaire for 5% Holders in Connection with Public Offerings. These documents are designed to be comprehensive and to be used as companies go public. Check them out today in our D&O Questionnaires Practice Area.
Webcast Week closes out strong tomorrow with our webcast “ISS Forecast for the 2022 Proxy Season.” Marc Goldstein, Head of US Research at ISS, will be joined by Ning Chiu from Davis Polk and Bob Lamm from Gunster. They will review what happened in the 2021 proxy season, the changes that ISS is making to its policies in 2022 and a variety of hot topics for the upcoming proxy season.
If you attend the live version of this 60-minute program, CLE credit will be available. You just need to submit your state and license number and complete the prompts during the program.
Members of TheCorporateCounsel.net are able to attend this critical webcast at no charge. The webcast cost for non-members is $595. If you’re not yet a member, subscribe now by emailing sales@ccrcorp.com – or call us at 800.737.1271.
In yesterday’s blog, I mentioned how the relatively short comment periods contemplated for the SEC’s recent rulemaking proposals have drawn some attention, even though delays in publishing the proposing releases may ultimately frustrate plans to rush those rulemakings through the process. Interestingly enough, Patrick McHenry (R-NC), the Ranking Member of the House Committee on Financial Services, and Pat Toomey (R-PA), the Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, also took notice of the SEC’s comment periods, sending a letter yesterday to Chair Gensler expressing concern that “rulemakings under your tenure have consistently provided unreasonably short comment periods, which will harm the quality of public comment and may run afoul of the Administrative Procedures Act.” The letter notes that the Administrative Conference of the United States, an independent federal agency charged with recommending improvements to administrative process and procedure, endorses a comment period of at least 60 days for significant regulatory actions.
Congressman McHenry and Senator Toomey urge Chair Gensler to immediately extend all comment periods for the SEC’s proposed “rules of significance” to at least 60 days, including “reopening the comment filing for those rulemakings with shorter comment periods that have closed prematurely.” They request a response by January 24, 2022.
One thing I would note in this context is that the SEC does not actually stop accepting comments when the “deadline” for comments has passed. The comment file remains open, and comments are accepted, up to the time that final rules are adopted. In fact, in my experience of both working on many comment letters over the years and working on rulemaking at the SEC, the Staff that is working on the rulemaking continues to consider any comments that come in after the deadline whenever it is possible to do so. The reality is that no matter how long you make the comment period for a proposed rulemaking, it is still going to be difficult to solicit meaningful comments from the public, and from the perspective of those preparing the comments for the SEC, it is always going to be difficult to prepare thoughtful comments in a timely manner unless you have people dedicated to doing so. So, in the end, the SEC Staff working on the rulemaking and the individuals and groups that provide the comments are just doing the best they can in the time allotted.
This recent Wall Street Journal article describes the efforts that the SEC is currently considering as a means to address the persistent “unicorn” phenomenon – private companies worth $1 billion or more. Unicorn’s have been vexing lawmakers and policymakers for decades now, as the availability of plentiful private capital, ever-increasing regulatory burdens and a persistent securities litigation threat have resulted in large companies not going public and subjecting themselves to SEC regulation, public scrutiny and plaintiffs’ lawyers. An inkling of the SEC’s plans recently emerged in the Reg Flex agenda, and now more details are emerging.
It appears that the SEC may reconsider the mandatory registration provisions of the Securities Exchange Act as a means of drawing the unicorns into the SEC’s public reporting system. The Section 12(g) thresholds that trigger mandatory registration were of course raised by the JOBS Act of 2012, but it now appears that the SEC may revisit those thresholds and/or the manner in which investors are counted for the purposes of those thresholds. In their statement following the release of the most recent Reg Flex agenda, Commissioners Peirce and Roisman noted that “[l]owering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation.”
Wow, it is webcast week this week! Join me tomorrow for what promises to be a very interesting discussion of the SEC’s recent proposals on our webcast “Rule 10b5-1 & Buybacks: Practical Impacts of SEC’s Proposals.” I am fortunate to be joined by Brian Breheny from Skadden, Ning Chiu from Davis Polk, Meredith Cross from WilmerHale and Keir Gumbs from Broadridge Financial Solutions, and we will discuss all aspects of these proposals and the steps that companies should be taking now.
If you attend the live version of this 60-minute program, CLE credit will be available. You just need to submit our state and license number and complete the prompts during the program.
Members of TheCorporateCounsel.net are able to attend this critical webcast at no charge. The webcast cost for non-members is $595. If you’re not yet a member, subscribe now by emailing sales@ccrcorp.com – or call us at 800.737.1271.
