Officials at the SEC all seem to be singing the same tune these days, emphasizing the need to amp up company disclosures regarding Brexit, the LIBOR phase-out and cybersecurity. As reported by the WSJ, Corp Fin Chief Accountant Kyle Moffatt, speaking at the FEI Current Financial Reporting Issues Conference, echoed the earlier informal guidance provided by SEC Chair Jay Clayton, Corp Fin Director William Hinman and Deputy Director Shelley Parratt that the SEC will be looking for enhanced disclosure on these topics where material. (See this PubCo post.) Given the onslaught of admonitions, companies would be well advised to pay attention.
The WSJ is reporting that, in a speech to the FEI Current Financial Reporting Issues Conference in New York, SEC Chair Jay Clayton advised the audience that the SEC is “sharpening its focus on corporate disclosures about the risks associated with the U.K.’s exit from the European Union….‘My personal view is that the potential impact of Brexit has been understated….I would expect companies to be looking at this closely and sharing their views with the investment community.’” To be sure, in terms of potential disruption, some practitioners have likened the havoc that Brexit could create to the chaos anticipated from the Y2K bug! But even if that analogy turns out to be a bit too apocalyptic, as we approach 10-K season, companies should consider how Brexit could affect their businesses and whether that impact merits disclosure.
Way back in 2016, the SEC issued a Concept Release requesting comment on an enormous variety of potential changes to Reg S-K, including sustainability. (See this PubCo post.) As reported by BNA, then-Director of Corp Fin, Keith Higgins, advised that the highest proportion of comments received on the Reg S-K Concept Release related to better environmental and social responsibility disclosure. He observed that, of the 360 “unique” comment letters (i.e., non-form letters) received, about 80% “were looking for improved sustainability disclosure.” The problem, he recognized, was that those types of sustainability disclosures were not necessarily amenable to one-size-fits-all rulemaking. According to Higgins, “[c]limate change tops the list of issues….” However, he acknowledged, the issues involved in sustainability “cut across 79 different industries and aren’t suited to a constant set of rules….‘Everyone recognizes that one-size-fits-all disclosure is likely not to be so effective in the sustainability area—others recognize the enormity of that task.’” (See this PubCo post.) Now, independent standard-setting organization SASB, the Sustainability Accounting Standards Board, seems to have come to the rescue, announcing that it has published a series of sustainability accounting standards specifically tailored for 77 industries. According to the SASB Chair, the publication of these standards represents an “important milestone” because they provide “codified, market-based standards for measuring, managing, and reporting on sustainability factors that drive value and affect financial performance.” Will the SEC now take up the challenge of sustainability disclosure?
The NYSE has proposed a change to Section 303A.00 of the Listed Company Manual related to the exemption from the compensation committee requirements applicable to smaller reporting companies. (See this Cooley Alert.) The amendment is intended to conform the Section to the new SEC rules related to SRCs.
Corp Fin has posted some updates to its CDIs relating to the new rule amendments regarding smaller reporting companies. (See this Cooley Alert and the SEC’s Amendments to the Smaller Reporting Company Definition — Compliance Guide.) In connection with the new updates, Corp Fin has also withdrawn a number of CDIs (presumably, at least in part, because they were no longer appropriate in view of the changes to the rules). Below are summaries:
No, it’s not Groundhog Day. (In fact, it’s election day. Go vote!) But this proposal from the NYSE to amend Sections 312.03 and 312.04 of the Listed Company Manual sounds remarkably similar to the one that the SEC has just approved for Nasdaq—modifications to the price requirements for purposes of determining whether shareholder approval is required for certain issuances. (See this PubCo post.) Just like the new Nasdaq rule, the NYSE proposal would
change the definition of market value for purposes of the shareholder approval rule and
eliminate the requirement for shareholder approval of issuances at a price less than book value but greater than market value.
In this report, EY discusses an analysis it conducted of voluntary cybersecurity-related disclosures in the 10-Ks and proxy statements of Fortune 100 companies (79 companies that had filed as of September 1, 2018). The analysis notes that, not only are regulators focused on cybersecurity risk management and disclosure, but investors consider cybersecurity risk management as critical to the board’s risk oversight responsibilities and boards are increasingly engaged on the topic. The analysis found a wide variation in the depth and nature of the disclosures.