As a Cleveland Browns fan, I thought I’d seen it all over the course of the past two decades – a veritable “12 Days of Christmas” of incompetence & hilarity:
The Browns have been so dependably inept for so long that they’ve lent their name to a new word to describe staggeringly incompetent behavior – “Brownsing.” So, I guess I shouldn’t have been completely surprised when the SEC announced that (now former) Browns LB Mychal Kendricks had been charged with insider trading. But as jaded as I am about my favorite team, this was something new:
The SEC alleges that after meeting at a party, Mychal Kendricks began receiving illegal tips from Damilare Sonoiki, an analyst at an investment bank who had access to confidential, nonpublic information about upcoming corporate mergers. Kendricks allegedly made $1.2 million in illegal profits by purchasing securities in companies that were soon to be acquired and then selling his positions after the deals were publicly announced, in one instance generating a nearly 400 percent return on his investment in just two weeks.
In return for $1.2 million in alleged profits, Kendricks lost a $3.5 million payday from the Browns, will undoubtedly face a significant civil penalty from the SEC, and – because the US Attorney’s Office in Philly has also brought criminal charges – potentially faces up to a year in prison. Yes, this is some next-level Brownsing for sure.
Kendricks isn’t the first NFL player to get on the wrong side of the securities laws. Former NY Giants DB Will Allen pled guilty last year to charges brought in connection with his role in an investment scheme targeting athletes. In 1999, Hall of Fame QB Fran Tarkenton consented to an injunction against future violations of the securities laws, including Rule 10b-5, for his role in an alleged fraud scheme.
Materiality Definition: FASB Goes Back to SAB 99
We’ve previously blogged about FASB’s controversial efforts to amend the definition of “materiality” for purposes of financial statement disclosure. At the end of August, FASB amended Accounting Concepts Statement No. 8 to address materiality.
This recent blog from Cydney Posner says that with the amendment, FASB has hopped into Marty McFly’s DeLorean & traveled about a decade back in time. Here’s the intro:
In 2015, FASB sent a number of stakeholders into a tizzy when it issued two exposure drafts, part of its disclosure framework project, intended to “clarify the concept of materiality.” After hearing from any number of preparers, practitioners and other commenters, FASB has now reversed course.
According to FASB, the “main amendment” in Amendments to Statement of Financial Accounting Concepts No. 8, issued at the end of August, “reinstates the definition of materiality that was in FASB Concepts Statement No. 2, Qualitative Characteristics of Accounting Information, which was superseded in 2010.” In other words, it’s back to SAB 99.
Elad Roisman Confirmed as SEC Commissioner
Yesterday, the Senate confirmed former Senate Banking Committee staffer Elad Roisman to serve as an SEC Commissioner. Once he is sworn in, his appointment means that the SEC will finally have a full slate of 5 Commissioners – at least for now. Commissioner Kara Stein is expected to leave her post at year end.
While media reports indicate that President Trump is likely to nominate Commissioner Stein’s former aide Allison Lee to fill Kara’s upcoming vacancy, that hasn’t happened yet. CNN Congressional Correspondent Phil Mattingly tweeted that it was interesting that Commissioner Roisman’s nomination was not paired with a nominee recommended by the Democrats, as often has been the case..
Tune in tomorrow for the webcast – “Nasdaq Speaks: Latest Developments & Interpretations” – to hear senior Nasdaq Staffers Arnold Golub, Lisa Roberts, Nikolai Utochkin and John Zecca discuss all the latest that Nasdaq-companies need to know.
Narcissism: Not a Desirable Part of a CEO’s Skill Set
This Stanford article says that a recent study concluded that companies led by overconfident, self-centered risk takers are likely to face a lot of lawsuits. Here’s an excerpt:
In an article published in Leadership Quarterly, O’Reilly and colleagues Bernadette Doerr and Jennifer A. Chatman of the University of California, Berkeley, show that narcissistic CEOs subject their organizations to potentially ruinous legal risks as well. Not only are they more likely to become embroiled in protracted litigation, but their personality traits make them less sensitive to objective assessments of risk. Narcissists are less willing to take advice from experts and to settle lawsuits — even when it’s likely that the company will lose.
I’ve gotta say, I’m pretty skeptical about this study – after all, this management style worked well for Hank Scorpio.
Securities Litigation: #MeToo Class Actions the New Normal?
Last week, a shareholder class action was filed against CBS following revelations of alleged sexual harassment by CEO Les Moonves. Over on the D&O Diary, Kevin LaCroix recently blogged that these lawsuits may represent the “new normal” for shareholder litigation. Here’s an excerpt:
The securities suit against CBS follows a now growing list of companies that have been hit with D&O lawsuits following revelations of sexual misconduct by one of the firm’s executives. Earlier this summer, National Beverage Corp. was hit with a securities suit following allegations that its CEO had sexually harassed company employees. Earlier suits have arisen involving Wynn Resorts and 21st Century Fox.
Kevin says it is increasingly clear that the accountability process arising out of revelations of sexual misconduct won’t just target the wrongdoer, but also other executives who allegedly facilitated the misconduct or turning a blind eye.
As noted in this WSJ article, SEC Chair Jay Clayton recently noted in this speech that a concept release on capital formation is on the way. Here’s an excerpt from this recap of the speech by Cooley’s Cydney Posner:
The main topic was the plan to revisit the thresholds that trigger the SOX 404(b) requirement to provide an auditor attestation report on internal control over financial reporting. One thing is pretty clear from this speech: odds are excellent that relief from SOX 404(b) is in the offing for more small companies.
First, Clayton focused on a point that he viewed as “often misunderstood”: that even those companies that are not now required to obtain a SOX 404(b) auditor attestation must still “establish, maintain and assess the effectiveness of ICFR, and, even if not engaged to report on ICFR, independent auditors are still responsible for considering ICFR in the performance of their financial statement only audits. In considering ICFR, independent auditors can better plan their audits and provide management and audit committees with observations about the company’s ICFR. I believe this scaled approach has proven to be appropriate for smaller reporting companies and again reflects the perspective that one size regulation of public companies does not fit all.”
To support that last point, he highlighted the difference in size between the 50th largest exchange-listed company (market cap of approximately $100 billion) and the median exchange-listed company (market cap of less than $1 billion). Moreover, he pointed out, many companies could benefit from relief as there are more than 1,200 exchange-listed companies with a market cap of less than $250 million. (In connection with the expanded definition of “smaller reporting company”—an expansion similar to the one likely under consideration here—the staff estimated that 966 additional companies would be eligible for SRC status in the first year. See this PubCo post.)
Other potential beneficiaries of relief, according to Clayton, are companies with little or no revenue, such as many biotechs. In those cases, he asserted, the money that would otherwise be used for the SOX 404(b) attestation “could instead be used to hire new scientists to advance life-enhancing or life-saving developments.” He concluded by reminding us that he had directed the staff to come up with potential amendments to reduce the number of companies subject to SOX 404(b), while, of course, maintaining appropriate investor protections.
The SEC Conducts Far More Town Halls These Days…
As part of the ongoing effort to promote capital formation, it seems that one of the priorities of SEC Chair Jay Clayton is to engage with small businesses across the country and to conduct town halls with entrepreneurs & retail investors (which Jay started calling “Main Street” investors before the “Main Street Investor Coalition” was formed).
In fact, all five Commissioners attended a town hall in Atlanta in June – and Corp Fin Director Bill Hinman joined Jay recently at a “fireside chat” with the Tennessee Governor at Nashville’s “Wildhorse Saloon”. I don’t recall a Corp Fin Director attending a town hall before – but it’s possible that happened in the past…
By the way, the SEC has a whole page devoted to Chair Clayton’s “fireside chats” – with videos going back to last summer…
Our September Eminders is Posted!
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Here’s the news from Annalisa Barrett: On Wednesday, the California Assembly passed Senate Bill 826, which requires that companies headquartered in the state which are traded on a major stock exchange have women on their boards.
If the bill is signed by Governor Brown, companies with their principal executive offices located in California will face monetary penalties if they do not have at least one female director serving on their board as of December 31, 2019. As of June 30th, among Russell 3000 companies that are headquartered in California:
– 20% of boards (85 companies) had no women
– 38% of boards had one woman
– 29% of boards had two women
– 14% of boards had three women
California’s New Gender Diversity Law: The Details
Annalisa Barrett also sends us these details: The Russell 3000 Index does not include many of the microcap companies headquartered in the California. A recent study of microcap boards nationwide found that most do not have female directors; therefore, it stands to reason that the number of companies affected immediately by the bill is much higher than 85. In fact, Board Governance Research has identified more than 120 California-headquartered companies which have all-male boards.
The bill further requires that nearly all companies headquartered in California have more than one female director by December 31, 2021. The number of female directors required by that date varies by board size, as follows:
– 4 or fewer directors: 1 female director required
– 5-member board: 2 female directors required
– 6 or more directors: 3 female directors required
Based on board size and composition as of June 30, 2018, 377 of the Russell 3000 companies headquartered in California will need to add a total of 684 female directors by December 31, 2021.
Boards which do not add the requisite number of women to their boards by the 2019 and 2021 deadlines will have to pay fines to the Secretary of State. The first time a company is not in compliance, the fine will be $100,000. In the event of subsequent years of noncompliance, the fine increases to $300,000. However, while the monetary impact of non-compliance is important, the reputational damage may be even more impactful. Since the bill requires that the California Secretary of State publish an annual update of compliance, the scrutiny from the press and public will likely lead to negative publicity for any company with an all-male board.
However, one could argue that this negative publicity will occur even if the Governor does not sign the bill. Therefore, companies headquartered in California would be well served to begin the process of identifying female director candidates if they have not already done so. And, given the nationwide attention that the bill is receiving (e.g., this WSJ article), companies across the US with all male boards should expect intensified scrutiny as well.
This WSJ article notes that opponents of the mandate believe it will result in unfair discrimination against men – so they intend to challenge the law in court. It also points out that the legislation provides for creating an extra board seat to accommodate a new female member, rather than removing a man already on the board.
Board Gender Diversity: Russell 3000 Adds Women
Earlier this week, Equilar reported that the percentage of women on Russell 3000 boards has increased for the third consecutive quarter – to almost 18%. And from April to June of this year, 35% of new board seats went to women. However, 485 companies – about 17% of the Russell 3000 – continue to have all-male boards.
Here’s the second “list-of-lists” installment from Karla Bos of Aon (here’s the first one):
1. Things I’ve Moved To My JOMO List – To Practice The “Joy Of Missing Out”
2. Reasons Everyone Should Move Across Country At Least Once
3. The Name Of Every Plant In My Yard, Where I Bought It, What I Paid For It & When I Planted It
4. Barriers I Have Implemented/Need to Implement So Rattlesnakes Can’t Get Into My Yard
5. Home Improvement Projects My Husband & I Want To Do Ourselves
6. Home Improvement Projects My Husband Wants To Do (But I Think We Should Hire Someone)
7. Ways That “Urgent” Work That Gets In The Way Of “Important” Work & How I Try To Balance That
8. My MinimaLIST – Items I Never Use & Should Donate, Items I’ve Donated This Year, Things I Need To Let Go Of
9. Verbal Commands For Our Home Automation System That I Can Never Remember
10. Things I Need To Research & Source Before Buying (AKA What Not To Buy If Enough Time Passes & Apparently I Didn’t Need It After All)
11. Foods My Niece & Nephew Will – And Won’t – Eat These Days
12. Rattlesnake Emergency & Removal Contacts – And What To Do If Bitten
Sustainability Disclosure: “Give The People What They Want”
This recent 31-page report from Ceres – “Disclose What Matters” – benchmarks sustainability disclosure from almost 500 companies worldwide to see whether they’re providing the information that investors actually need.
The report acknowledges that sustainability disclosure has grown by leaps & bounds during a short time period. But some of it’s akin to throwing everything at the wall to see what sticks. According to Ceres, here’s what investors want:
1. Comparability: There’s been a lot of progress here – 70% of companies now use the Global Reporting Initiative Standards, often in conjunction with other overlapping reporting standards. As painful as it might be, it’s time to familiarize yourself with the available standards and help select one or more for your company.
2. Integration: Only about 20% of companies connect the dots to describe how their systems integrate sustainability values & assessments into business processes. Reiterating its spring 2018 report on “systemic” sustainability, Ceres suggests describing the board’s oversight role, materiality assessment processes, how assessment results are used in the business, financial relevance, and stakeholder engagement.
3. Reliability: Only 42% of companies give any indication that there’s been formal assurance for sustainability disclosures, and fewer than 10% provide the “holy grail” of third-party verified disclosures and recommendations for improvement.
The report also includes sector & regional findings – 80% of American companies are classified as “median” or “poor” performers – and provides “best practice” examples.
Transcript: “Retaining Key Employees in a Deal”
We have posted the transcript for our recent DealLawyers.com webcast: “Retaining Key Employees in a Deal.”
According to two recent studies, the days of CEOs staying out of politics are pretty much over. The jury’s out on whether that’s good for business. This Weber Shandwick study says that 46% of people are more likely to buy from a company whose CEO speaks out on an issue (that they agree with), but 35% of people have boycotted a company because of CEO activism. And 7% of people say it’s led them to buy a company’s stock – while 5% say it’s led them to sell. This Morning Consult study reflects similar findings.
With stats like that, you might think CEOs should just avoid risk by keeping a low profile. That might’ve worked 5 years ago – but now a big chunk of people view silence as activism too. This WSJ op-ed suggests that it’s as likely to alienate customers & business partners as public declarations. It contends that the way to simultaneously please the “stick to business” crowd & the “social justice” crowd is to make statements that link the issue to the company’s bottom line – not personal moral views.
Board Oversight of CEO Political Activism
If CEO social & political activism is the “new normal,” the next question is whether – and how – boards can manage the related risks & opportunities. This “Corporate Board Member” article and this NACD article give some recommendations on how to proactively establish CEO communication guidelines that address:
1. The company’s mission, audiences, and relevant social & political issues
2. How to handle specific topics (Practice in advance. Get diverse views to recognize “blind spots.”)
3. Whether & how to use social media
4. Using a “personal opinion” disclaimer for comments related to the CEO’s personal convictions
5. Ways to monitor sentiments of employees, shareholders & other stakeholders – and make timely updates to company policies on evolving issues
6. How the CEO’s internal & external communications will be evaluated as part of the performance review
Earlier this month, I blogged about a heightened focus on “impact investing” among funds, foundations, banks, family offices and pension funds. This study (from an asset manager that specializes in impact investing) suggests that’s probably a result of client demand. About half of the 1000 survey participants were interested in using their investment dollars to make a positive impact on society, in addition to their obvious desire to garner a financial return. Here are the finer points:
– 49% of people found impact investing “appealing” – compared to 38% in 2016
– 56% of Millennials are interested in impact investing – compared to 52% of Gen Xers and 44% of Boomers
– 45% of people say they intentionally choose to do business with companies whose “values align” with their own
– Popular causes for impact investing ranked as healthcare/disease prevention, environment/sustainability, education, mitigating poverty, and alignment with religious principles
Last week, the SEC issued this fee advisory that sets the filing fee rates for registration statements for 2019. Right now, the filing fee rate for Securities Act registration statements is $124.50 per million (the same rate applies under Sections 13(e) and 14(g)). Under the SEC’s new order, this rate will decrease to $121.20 per million, a 2.6% decrease. This reduction modestly offsets the price hikes from the past couple of years.
As noted in the SEC’s order, the new fees will go into effect on October 1st like the last six years (as mandated by Dodd-Frank) – which is a departure from years before that when the new rate didn’t become effective until five days after the date of enactment of the SEC’s appropriation for the new year – which often was delayed well beyond the October 1st start of the government’s fiscal year as Congress and the President battled over the government’s budget.
Recently, the NYC Comptroller & NYC Pension funds compiled 18 “best practice” board matrices from companies that were targeted by the “Boardroom Accountability Project 2.0” – which we’ve blogged about on our “Proxy Season Blog.”
Each of the “best practice” companies discloses director skills on an individual basis. When it comes to gender and race & ethnic diversity, the companies are grouped into two categories: (1) voluntary self-identification of individual directors and (2) aggregate board self-identification.
EYCBM’s “Proxy Season Review” (pg. 2) says that 29% of companies in the S&P 500 are now disclosing director-specific skills – and 17% of companies are disclosing skills on an aggregate basis. Those stats are up from 10% and 1% just three years ago.
SEC’s ALJs Get a “Do-Over”
Remember earlier this summer, when SCOTUS held that the SEC’s ALJ appointment process was unconstitutional? At that time, all pending administrative proceedings were stayed – and there was even some question of whether prior ALJ decisions were valid.
Well, it looks like the SEC is now doubling down on its ALJs. Last week, it issued an order to ratify the appointment of previously-approved ALJs and lift the stay on administrative proceedings, effective immediately. But, there will be completely new hearings in front of a different ALJ for all of those stayed proceedings – almost 200 cases! This Ropes & Gray memo analyzes the order. Here’s an excerpt:
First, the Order attempts to confirm that the SEC has appointed those ALJs as per the Appointments Clause of the Constitution, and that the ALJs may adjudicate cases.
Second, the Order addresses the Lucia majority’s only definitive command regarding a remedial scheme – that Lucia be afforded the opportunity for a new hearing in front of a different ALJ than the one who had previously decided his case. In fact, the Order grants all respondents in the newly un-stayed proceedings the “opportunity for a new hearing before an ALJ who did not previously participate in the matter,” and remands all cases pending before the Commission to the Office of the ALJs “for this purpose.”
Moreover, the Order vacates “any prior opinion” the Commission has issued in nearly 130 matters pending before the Commission. Chief ALJ Brenda P. Murray confirmed via notice on August 23, 2018 (the “Notice”) that another nearly 70 cases pending before ALJs prior to the Order would be reheard pursuant to the Order. As a result of this Order, respondents (and possibly the SEC) who received a negative initial decision from an ALJ prior to the SEC’s Ratification Order but have not yet exhausted their appeal, will now get a fresh “bite at the apple” and a completely new hearing before a different ALJ.
Recently, the IRS issued long-awaited initial guidance – via Notice 2018-68 – on how awards made on or prior to November 2, 2017 can continue to qualify for the “performance-based” exception of Internal Revenue Code Section 162(m) – notwithstanding its elimination by the Tax Cuts & Jobs Act last December. Recall that the result of the tax reform amendments is that companies can’t deduct any “covered employee” pay above $1 million (the definition of “covered employee” was also expanded).
Over on CompensationStandards.com, Mike Melbinger is analyzing all of the “ins & outs” of the new guidance on his blog. Here’s his overview of the framework that will apply:
The guidance answers nearly all of our questions, but it’s not nearly as favorable as we hoped – and not even as favorable as we expected. It contains more than 14 detailed examples, which are more helpful than the text itself. However, the guidance (and the examples) are full of twists and turns and exceptions to the exceptions.
One thing the guidance does make absolutely clear is that the first step in determining whether any payment to any person in any year after 2017 is subject to the draconian limits of Section 162(m) is to determine whether there was a written binding contract in effect on November 2, 2017, which created a legal obligation on the company under any applicable law (e.g., state contract law) to pay the compensation under such contract if the employee performs services or satisfies the applicable vesting conditions. Every one of the many examples provided in the guidance begins with a determination of whether the plan or agreement created a legal obligation on the company. In the examples, some do and some don’t.
The existence of discretion to reduce any promised payment does not always make the full payment subject to the deduction limit of 162(m), but it usually reduces the amount of the payment that is grandfathered. However, the failure, in whole or in part, to exercise negative discretion under a contract does not result in the material modification of that contract.
As we predicted in a few blogs from earlier in the year, the accrued benefits and accounts under non-qualified deferred compensation plans are most likely to qualify for grandfathering protection. In many cases, future payments to the company’s CFO will be grandfathered and remain deductible. However, as we feared, benefits and accounts under plans that reserve to the company the right to amend or terminate the plan prospectively (which includes all well-drafted plans) will only be grandfathered to the extent they are legal obligations as of November 2, 2017.
Art Meyers, Takis Makridis and I will be drilling deeply into this topic (among others) at the upcoming NASPP Conference in our session titled: “Hot Topics in Equity Compensation.” The topic heading is deliberately vague to allow us to cover exclusively issues like this, which have developed or evolved since the deadline for submitting topics and materials for the Conference.
Last week, the PCAOB Staff posted this updated “Audit Report Guidance”– updating original guidance that came out in late 2017. The updated guidance doesn’t say anything new about “critical audit matters” – but it gives more instruction for these areas:
– Voluntarily disclosure about audit participants (including sample language)
– Calculating & describing auditor tenure
– Reporting when other regulators require internal control audits
– Explanatory & emphasis paragraphs
– Supplemental & interim financial information
– Special reports
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– A Hostile “Token-Over?”
– Activism: Want a Settlement? It’ll Cost a Comp Committee Seat
– ICOs: A Dip in the Action?
– Cybersecurity: Will the SEC’s New Guidance Spur New Disclosures?
– Sustainability: Differentiator for Sell-Side Analysts’ Survival?
Time for an update on the Wu-Tang Clan’s crypto activities – and I’m afraid the news is bad. Very bad. Remember when I blogged about Ghostface Killah’s planned ICO for his C.R.E.A.M. (Cash Rules Everything Around Me) token? Sadly, this “Digital Music News” story reports that it has, shall we say, “underperformed”:
Back in January, a cryptocurrency company called Cream Capital hoped to raise $30 million through an initial coin offering (ICO). The company was named after the Wu-Tang Clan’s 1993 song, ‘C.R.E.A.M.’, which stands for ‘Cash Rules Everything Around Me’. Wu-Tang’s Ghostface Killah was a founding member of the company, and hoped his involvement with the cryptocurrency would help raise funds during its initial coin offering.
However, it appears as though the ICO hasn’t gone well, as the coin’s value has plunged more than 96% since it launched back in January. The Cream Dividend token initially went on sale back in November of 2017, when coins were sold for as little as $0.02 per coin. The price for the cryptocurrency subsequently spiked in January to a high of $0.12, before riding a downward trending wave. The current value of the coin at the time of writing is just $0.0045, making it a crypto-flop.
So, Ghostface Killah’s C.R.E.A.M. coin has lost 96% of its value. That’s not good – but if it’s any consolation, he’s got a lot of company among much higher-profile cryptocurrencies.
Sarbanes-Oxley Compliance: You Know It Don’t Come Easy. . .
Protiviti recently released its annual “Sarbanes-Oxley Compliance Survey”, which reviews companies’ compliance efforts & the costs associated with them. This year’s survey says even after 16 years, this stuff’s still not easy – costs for many companies continue to rise, & the hours commitment continues to grow. Here’s an excerpt with some of the key takeaways:
– Compliance costs continue to rise for many organizations but remain dependent on size, SOX year, filer status and more – Many organizations experienced increases in their SOX compliance costs during their last fiscal year, and those spending $2 million or more grew as well. However, annual compliance costs did decrease from the prior year for certain groups of companies.
– SOX compliance hours have increased significantly – There are likely many factors at play here, including changing organizational structures resulting from ongoing digital transformation efforts, as well as continuing PCAOB inspections of external auditors that are placing increased demands on their clients to perform more rigorous SOX compliance testing and reporting.
Perhaps surprisingly, the survey also says that the use of automated controls testing & process automation remains low – and that implementing these technologies represents a significant opportunity to improve the efficiency of the compliance process.
Sustainability: More On “Will Delaware’s Statute Move the Needle?”
I’ve previously blogged about Delaware’s new sustainability certification statute. This recent blog from Lois Yurow reviews the statute & considers the “why bother?” question. Here’s an excerpt:
So why would a company bother getting a certificate (and paying fees, and assuming a disclosure obligation)?
Every company is at liberty now, certificate or no certificate, to voluntarily issue a sustainability report. Indeed, 85% of the Fortune 500 published a sustainability report in 2017. No doubt those reports represent a genuine commitment on the part of the issuing companies. Still, it pays to consider who chooses what a given company reports on: what goals it adopts, what metrics it uses to gauge progress, who measures that progress, and what specific information will be shared. With voluntary reporting, companies have almost infinite flexibility.
Under the Certification Act, reporting entities will need to disclose “objective and factual” performance results, and each entity’s governing body will be required to specifically address those results, offering its view of whether they represent success. By imposing these rules, the statute responds to the ever lingering concern that at least some sustainability reports are as much about marketing as they are about real change. The public in general, and investors in particular, may find the Certification Act’s data-heavy reports more valuable.
We’ll see how this plays out – I guess I’m still in the “corporate equivalent of buying a Subaru” camp when it comes to this statute, but this is the first piece I’ve seen that articulates what might be in it for companies that are looking to do more than just signal their virtue.
Earlier this year, we blogged about the GAO’s assessment of the SEC’s efforts to promote better climate change disclosure. According to the GAO, the biggest constraint that the SEC faced in its efforts was its need to rely on self-reporting. But this Bloomberg article says that the SEC isn’t pushing companies to improve disclosure in this area:
The SEC last issued a climate change-related public comment letter in September 2016, when it asked Chevron to expand its risk factor disclosure related to California’s greenhouse gas emission regulations. Typically, the SEC issues such letters to companies with suggestions on how they can fill in gaps. But the agency has been silent during this administration.
The article says that during the Obama administration, the SEC issued 44 climate change-related comment letters, while the SEC under Chairman Jay Clayton hasn’t issued any.
In another climate change disclosure-related development, the WSJ recently reported that SEC has dropped its investigation of ExxonMobil’s disclosures about how it accounted for oil and gas assets. As the WSJ reported in 2016, the investigation centered on the impact of climate change on the company:
The SEC’s probe is homing in on how Exxon calculates the impact to its business from the world’s mounting response to climate change, including what figures the company uses to account for the future costs of complying with regulations to curb greenhouse gases as it evaluates the economic viability of its projects.
The SEC’s investigation followed on a similar one initiated by the NY & Massachusetts AGs. That investigation continues, as does private class action litigation surrounding the company’s climate disclosure.
#Crypto Utopia: A Very Deep Dive on the Crypto Economy
Want to get up to speed fast on all things crypto? Check out #Crypto Utopia, a 124-page presentation on the current state of the cryptoeconomy – including an analysis of the market environment and regulatory & legal issues – from Autonomous.com and Latham & Watkins.
