Tag: SEC Commissioner Mark Uyeda
Commissioner Uyeda calls for development of guiding principles for foreign company disclosure requirements
Are the regulations applicable to foreign companies in for a reassessment? You might draw that conclusion from reading the remarks from SEC Commissioner Mark Uyeda at the Harvard Law School Program on International Financial Systems, 2024 U.S.-China Symposium last week. Uyeda observes that, from its earliest days, the SEC has “recognized the unique nature of foreign companies accessing the U.S. capital markets, and its rules have afforded different treatment to foreign companies,” such as different forms for registration and reporting. But more recently, the SEC has applied several of its rules equally to domestic and foreign companies, an approach that, in Uyeda’s view, is inconsistent and suffers from the absence of a “clearly articulated regulatory philosophy.” He advises that the SEC should step back and undertake a more comprehensive review with a view toward the development of guiding principles—a “philosophy for when disclosure by foreign companies should be equivalent to disclosure by U.S. companies.” In particular, he advocates that the SEC reexamine the definition of “foreign private issuer”: while a test based on ownership and management may have made sense in 1983, does it still “reflect the realities of today’s global capital markets, corporate structures, and business practices”?
Commissioner Uyeda warns: the SEC “has gone astray”
In remarks at PLI’s SEC Speaks, SEC Commissioner Mark Uyeda expressed his concern that the SEC “has gone astray”: instead of focusing on “its narrow mission,” Uyeda fears, the SEC is acceding to the pressure of political activists who “seek to transform the agency’s authority to achieve policy objectives that are outside of its statutory mandate.” To illustrate, Uyeda highlights two examples: the climate disclosure rules, just adopted by the SEC, and the conflict minerals rules, which were adopted by the SEC over a decade ago and are here presented as a cautionary tale. While the conflict minerals rules were actually mandated by Congress, the climate disclosure rules are something different: the SEC has “acted on its own volition,” Uyeda contends, in adopting “a climate disclosure rule that seeks to exert societal pressure on companies to change their behavior. It is the Commission that determined to delve into matters beyond its jurisdiction and expertise.” To Uyeda, “this action deviates from the Commission’s mission and contravenes established law.”
Exxon employs “direct-to-court” strategy for shareholder proposal. Will others do the same?
Back in 2014, a few companies, facing shareholder proposals from the prolific shareholder-proposal activist, John Chevedden, and his associates, adopted a “direct-to-court” strategy, bypassing the standard SEC no-action process for exclusion of shareholder proposals. In each of these cases, the court handed a victory of sorts to Mr. Chevedden, refusing to issue declaratory judgments that the companies could exclude his proposals. (At the end of the day, one proposal was defeated, one succeeded and one was ultimately permitted to be excluded by the SEC. See this PubCo post, and these News Briefs of 3/18/14, 3/13/14 and 3/3/14.) Now, ten years later, ExxonMobil has picked up the baton, having just filed a complaint against Arjuna Capital, LLC and Follow This, the two proponents of a climate-related shareholder proposal, seeking a declaratory judgment that it may exclude their proposal from its 2024 annual meeting proxy statement. In summary, the proposal asks Exxon to accelerate the reduction of GHG emissions in the medium term and to disclose new plans, targets and timetables for these reductions. Will Exxon meet the same fate as the companies in 2014? Perhaps more significantly, Exxon took this action in part because it viewed the SEC’s shareholder proposal process as a “flawed” system “that does not serve investors’ interests and has become ripe for abuse by activists with minimal shares and no interest in growing long-term shareholder value.” If Exxon is successful in its litigation, will more companies, likewise faced with environmental or social proposals and perhaps perceiving themselves beset by the same flawed process, follow suit (so to speak) and sidestep the SEC?
Commissioner Uyeda has some suggestions about the rulemaking process
In remarks this week before PLI’s 55th Annual Institute on Securities Regulation, SEC Commissioner Mark Uyeda shared his views about the disclosure rulemaking process. He observed that, since becoming a commissioner 16 months ago, the SEC has adopted five major disclosure rules—pay versus performance, clawbacks, amendments to rule 10b5-1, share repurchases and cybersecurity—and has identified four more that are in the works. He focused on four key issues: determining purpose, the need for re-proposals, scaling disclosure and considering rulemaking costs and burdens on a cumulative basis. As you might guess, Uyeda had some thoughtful criticisms of the rulemaking process and offered some potential remedies.
Commissioner Uyeda addresses shareholder proposal overload—is “private ordering” the answer?
On Wednesday, SEC Commissioner Mark Uyeda spoke to the Society for Corporate Governance 2023 National Conference on the topic of shareholder proposals under rule 14a-8, a topic on which, historically, the commissioners’ energetic back-and-forth has been reflected in Corp Fin interpretations that have literally shifted back and forth. You might think these reversals are a new thing, but Uyeda reminds us about the goings-on in 2015, when Whole Foods was first permitted to exclude, as a conflicting proposal under Rule 14a-8(i)(9), a proxy access proposal, only to have the staff reverse course shortly thereafter. (See this PubCo post, this PubCo post and this PubCo post.) “Relying on the Commission’s rules, or its staff’s positions,” he later observes, “in this area is akin to building a sand castle on the beach. Any rule or interpretation, no matter how recently adopted, is at risk of being erased by the next wave.” However, Uyeda finds the reversals over the course of the last few years particularly problematic. In his view, the recent interpretative changes in SLB 14L have led to a surfeit of proposals the aggregate effect of which he finds to be “value-eroding.” He suggests some approaches to address the problem. Are we looking at a fundamental—some might say radical— reimagining of the shareholder proposal process?
Commissioner Uyeda’s prescription for addressing decline in number of public companies
The public/private company dichotomy has been a perennial discussion topic. (See, e.g., this PubCo post, this PubCo post, this PubCo post, this PubCo post and this PubCo post.) A statistic frequently tossed around is that there are about half as many public companies today as there were in 1996, and those that are around today are older and larger. And while the IPO market was in a bit of funk last year, the private markets have been viewed as consistently vibrant, with more capital raised in the private markets than in the public. But the question of why and how to address the decline in the number of public companies has been a point of contention: is excessive regulation of public companies a deterrent to going public or has deregulation of the private markets juiced their appeal, but sacrificed investor protection in the bargain? At the end of January, we heard from SEC Commissioner Caroline Crenshaw addressing the question of whether the securities laws governing private capital raises might be too lax. Now, SEC Commissioner Mark Uyeda is speaking his mind on the topic, presenting remarks at the at the “Going Public in the 2020s” conference at Columbia Law School.
Extra hours to file Form 144—should the deadline be extended for all filings, Uyeda asks?
A couple of days ago, the SEC amended Reg S-T to extend the filing deadline for Form 144 from 5:30 p.m. to 10:00 p.m. Eastern Time. You may remember that, in June last year, the SEC adopted amendments to require electronic submission of several forms that could then be submitted on paper, including, for reporting companies, Form 144 (beginning April 13, 2023). (See this PubCo post.) Form 144 was then transformed into an online fillable document, similar to Form 4, designed to facilitate electronic filing and to be machine-readable and available for automated and efficient analysis. Prior to this week’s amendment to Reg S-T, a Form 144 submitted by direct transmission after 5:30 p.m. was deemed filed the next business day. Under the new amendments, effective March 20, a “Form 144 that otherwise complies with applicable filing requirements that is submitted by direct transmission after 5:30 p.m., but no later than 10:00 p.m., will be deemed filed the same business day.”
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