Results for: conflict minerals
SEC extends conditional relief related to coronavirus (COVID-19)
Today, in light of the continuing impact of COVID-19, the SEC issued an order extending the filing periods covered by its previous conditional reporting relief. The order provides public companies with a 45-day extension to file or furnish specified SEC filings that would otherwise have been due between March 1 and July 1, 2020. The order supersedes and extends the SEC’s original order of March 4, 2020, which had applied to filings due between March 1 and April 30, 2020. As SEC Chair Jay Clayton observed, “[h]ealth and safety continue to be our first priority….These actions provide temporary, targeted relief to issuers, investment funds and investment advisers affected by COVID-19. At the same time, we encourage public companies to provide current and forward-looking information to their investors and, in these uncertain times, companies are reminded that they can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements.” At the same time, the staff of Corp Fin issued Disclosure Guidance Topic No. 9, which offers the staff’s views regarding disclosure considerations and other securities law obligations in the context of COVID-19 and related uncertainties (to be covered in a separate post). The SEC encourages companies to contact the SEC staff with questions or matters of particular concern, such as administrative issues related to inability to obtain a required signature due to a quarantine or other issues that may need to be addressed on a case-by-case basis.
Nasdaq to propose new tier for thinly traded securities
It’s well recognized that the equity markets work pretty well for companies that trade in high volumes, but companies with low trading volumes? Not so much. Thinly traded securities often face liquidity challenges, including wider spreads, higher transaction costs, fewer market makers and potential difficulties for investors that seek to unwind their positions. These issues can discourage small- and medium-sized enterprises from accessing the public markets, a problem that the SEC has been anxious to address. To find potential solutions for these problems, in October 2019, the SEC solicited proposals for changes in equity market structure designed to improve the secondary trading markets for thinly traded securities. Nasdaq has just announced that it has submitted to the SEC an application for exemptive relief that would facilitate its proposal “to establish a tier nestled [sounds very cozy!] within the U.S. public equity markets that is better tailored and far more hospitable to thinly-traded securities than is the all-purpose, undifferentiated market environment in which they suffer today.”
SEC proposes new accredited investor definition and new rules for disclosure of payments by resource extraction issuers (updated)
At an open meeting this morning, the SEC proposed changes to the definition of “accredited investor,” as well as new rules relating to disclosure of payments by resource extraction issuers. As discussed below, Commissioners Robert Jackson and Allison Lee dissented on both of these proposals. Notably, the responses of all the Commissioners to these proposals highlighted their sharply divergent views on the role of government and the fundamental purposes of the securities laws. Both proposals will be open for comment for 60 days.
What’s on the SEC’s new fall 2019 agenda?
SEC Chair Jay Clayton has streamlined the Regulatory Flexibility Act Agenda to limit it to the rulemakings that the SEC actually expects to take up in the subsequent period. Clayton has previously said that the short-term agenda signifies rulemakings that the SEC actually plans to pursue in the following 12 months. (See this PubCo post and this PubCo post.) The SEC’s Fall 2019 short-term and long-term agendas have now been posted, reflecting priorities as of August 7, the date on which the SEC’s staff completed compilation of the data. Items on the short- and long-term agendas are discussed below.
SCOTUS keeps agency deference alive in Kisor v. Wilkie. But is it just a “stay of execution”?
Today, SCOTUS decided Kisor v. Wilkie, an important case that raised the question of whether to overrule the decades-long deference of courts to the reasonable interpretations by agencies (such as the SEC) of their own ambiguous regulations, often referred to as Auer deference (or Seminole Rock deference, referring to Auer’s antecedent). SCOTUS, with Justice Kagan writing the majority opinion (with Chief Justice Roberts as the swing vote), said no. Justice Gorsuch (and three other Justices) would overturn Auer. According to Gorsuch, the majority’s decision was “more a stay of execution than a pardon.”
What’s on the SEC’s new RegFlex Agenda?
SEC Chair Jay Clayton has repeatedly made a point of his intent to take the Regulatory Flexibility Act Agenda “seriously,” streamlining it to show what the SEC actually expected to take up in the subsequent period. (Clayton has previously said that the short-term agenda signifies rulemakings that the SEC actually planned to pursue in the following twelve months. See this PubCo post and this PubCo post.) The SEC’s Spring 2019 short-term and long-term agendas have now been posted, reflecting the Chair’s priorities as of March 18, when the agenda was compiled. What stands out is not so much the matters that show up on the short-term agenda—although there are plenty of significant proposals to keep us all busy—but rather the legislatively mandated items that have taken up protracted residency on the long-term (i.e., the maybe never) agenda.
The “greatest judicial power grab since Marbury v. Madison”? SCOTUS considers Kisor v. Wilkie
As noted in this PubCo post, SCOTUS recently heard oral argument in Kisor v. Wilkie, a case involving the interpretation of a regulation issued by the Department of Veteran’s Affairs. In Kisor, a Vietnam vet, suffering from service-related PTSD, sought retroactive disability benefits from the VA. Interpreting the meaning of the term “relevant” as used in one of its own regs, the VA denied his claim for retroactive benefits. Why is this case important to public companies? Because the question presented to the Court was whether to continue the decades-long deference of courts to the reasonable interpretations by agencies (such as the SEC) of their own ambiguous regulations, often referred to as Auer deference (or Seminole Rock deference, referring to Auer’s antecedent). The decision, expected by this summer, could narrowly restrict, or even completely undo, that deference.
The case represents yet another example of concentrated efforts to dismantle or severely limit the administrative state—or the “deep state,” depending on your point of view. As explained in the opening of the amicus brief of the Cato Institute, quoting Chief Justice Roberts in dissent, “[o]verturning Auer would be a modest but important check on the ‘the danger posed by the growing power of the administrative state.’ City of Arlington, Tex. v. F.C.C.” What’s more, in his cert. petition, Kisor argued that “‘[r]evisiting Auer deference [would be] an appropriate place to begin’ a more complete ‘reconsideration’ of ‘existing doctrines of agency deference,’ including under Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc.” (quoted from the amicus brief of a group of Professors of Administrative Law and Federal Regulation in support of neither party).
Clayton Q&A and ESG at the SEC’s Investor Advisory Committee meeting
At last week’s meeting of the SEC’s Investor Advisory Committee, the Committee members held a Q&A session with SEC Chair Jay Clayton, followed by a discussion of environmental, social and governance disclosure, where the main question appeared to be whether to recommend that ESG disclosure be required through regulation, continued as voluntary disclosure but under a particular framework advocated by the SEC or continued only to the extent of private ordering as is currently the case.
Among the points addressed in the Q&A was a potential government shutdown. Clayton said that the SEC was planning for a possible shutdown, and that, as in previous shutdowns, he expected the SEC would be able to continue its operations for a number of days post-shutdown.
Semiannual reporting, we hardly knew ye—version 2.0—and other agenda items
No sooner had SEC Chair Jay Clayton, in informal comments at a public event, called a halt to speculation that large public companies would be seeing semiannual reporting any time soon (see this PubCo post), then out comes the Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions, which identifies “Earnings Releases/Quarterly Reports” as a pre-rule stage, substantive, non-significant (really?) agenda item for the SEC. The abstract indicates that Corp Fin “is considering recommending that the Commission seek public comment on ways to ease companies’ compliance burdens while maintaining appropriate levels of disclosure and investor protection.” Legal authority: “not yet determined.” Ok, does Clayton take it all back or does it still mean that, notwithstanding this agenda item, the likelihood of anything materializing as a result is—other than, as Clayton had intimated, perhaps for smaller companies—still pretty slim?
Groups take aim—from opposite directions—at shareholder proposals
New groups have recently been formed to take aim at the shareholder proposal process—its use by proponents and its implementation by Corp Fin—from both the right and the left ends of the political spectrum. In one case, the coalition formed is seeking to head off the recent surge of support by various institutional holders of shareholder proposals for environmental, social or governance disclosure or actions. For example, last year, proposals to enhance disclosures regarding climate change won majority votes at three major companies, in large part as a result of support from mammoth asset managers such as BlackRock and Vanguard, and two climate change proposals won majority support this year. It’s also been reported that nine ESG proposals were successful in winning majority votes this year. (See, e.g., this PubCo post.) On the other side is a group that is seeking to reform the shareholder proposal process to reverse a turn, as perceived by the group, by Corp Fin toward exclusion of more shareholder proposals related to ESG issues.
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