Some may view these limits as creating incentives for public companies to go private, or for private companies to not go public. It requires no disclosure from privately held unlisted companies. (Jan. 14, 2021). ': ABA Rejects Proposal to Make Law School Admissions Tests Optional, 'A Very Virginia Spin': Businesses Must Establish Internal Appeals Process Under New State Consumer Data Privacy Laws, Read the Document: DOJ Urges Court to Deny Trump Immunity in Jan. 6 Appeal, Paul Clement Says Tribalism at Law Schools Hurts Judicial Legitimacy, Law.com Editors and Analysts Offer Top Trends to Watch for 2023. Yet the Commission nonetheless has long protected investors in bank holding companies by requiring detailed disclosure beyond the financial statement for such companies, as noted in Annex A. [8] Participants and their advisors are used and expect to prepare and disclose projections in acquisitions, including de-SPACs. It only specifies disclosures, and does not regulate climate change, or regulate climate emissions. . The claim that the proposed rules requirements are so unrelated to investor protection as to altogether fall outside the Commissions obligation to specify financial risk disclosures is without merit. The guidance on potential conflicts of interest in the context of the initial public offering of a SPAC is divided into five categories: (1) insiders' competing fiduciary or contractual obligations to other entities, (2) the specified timeframe to complete an initial business combination, (3) deferred underwriter compensation, (4) economic terms https://www.law.com/nationallawjournal/2021/03/25/harvard-laws-john-coates-now-at-sec-reveals-consulting-income-clients/. Without such confidence, Congress astutely observed: Easy liquidity of the resources in which wealth is invested is a danger rather than a prop to the stability of [the market] system. It is authorized by clear statutes, is consistent with settled understandings, and addresses disclosure topics covered by rules adopted long ago by the Commission and ratified by Congress. The rest of this post details Points I and II. As stressed by Commissioner Peirce in her dissenting statement, the proposed disclosures called for by the rule are in line with prior Commission-required disclosures, as detailed in Annex A. Companies either do or do not engage in activities that result in the emission of greenhouse gases. 51283 (Mar. Nor does the proposal purport to be authorized by a newly discovered power in the securities lawsthe power is disclosure, as it has been for nearly a century. 2018) (CFO's statement about corporation's large deferred service, healthy product backlog, and consistent quarterly linearity, which was a statement made with another statement as to expected earnings for an upcoming quarter, were non-forward-looking statements and were not protected by the PSLRA's safe-harbor; statement included facts regarding the present state of the corporation, not assumptions); NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc., No. Not a Bloomberg Law Subscriber?Subscribe Now. Indeed, the texts are so clear thatin contrast to the many times the Commission has been challenged on anti-fraud rulemakings, where authority has been interpreted as limited by common law anti-fraud principlesfew attempts have been made to challenge the Commissions use of its basic disclosure authorities to require disclosure. For years, asbestos-related risks were invisible, and information about asbestos would likely have been called non-financial. Over time, those risks went from invisible to visible to extremely clear, and clearly financial. John Coates, acting director of the SEC's Division of Corporation Finance, similarly stated in a recent speech that the "SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost effective manner," noting in particular the task of adapting existing rules and 25, 2021); Jennifer Bennett, Canoo Faces Investor Suits Over Post-SPAC Deal Focus Changes, Bloomberg Law (Apr. Ch. He served as a Department of Justice-appointed independent monitor for a large, systemically important financial institution and as an independent consultant to the SEC in one of the first Fair Fund distributions. To do so would turn the doctrines purpose against itself, turn courts into unelected mini-legislatures, and subvert rather than reinforce the separation of powers. As background, noted in the proposing release, the Commission published a request for comment a year earlieron March 15, 2021so that its current process has already gone beyond the requirements of administrative law. I will work tirelessly to execute our rules and make sound recommendations that will help the SEC realize its mission.. Economically, and practically, the private target of a SPAC is a different organization than the SPAC itself. Further reducing concerns about whether the rule is within the Commissions expertise, the proposed rule aligns with ways that companies and investors have jointly and voluntarily agreed to provide climate-related information. Those important topics remain for Congress, and the proposal on its own does not raise new major questions warranting a deviation from standard statutory interpretation. Asbestos-related disclosure is a great example. Jones most recently served as Professor of Law and Associate Dean for Academic Affairs at Boston College Law School, where she taught courses in corporations, securities regulation, startup company governance, and financial regulation. He has testified before Congress and provided consulting services to the U.S. Department of Justice, the U.S. Department of Treasury, the New York Stock Exchange, and participants in financial markets, including hedge funds, investment banks, and private equity funds. This heightened scrutiny for a companys first introduction to the public market applies in other contexts as well such as a companys first registration of a class of securities under the Securities Exchange Act of 1934 or an A/B exchange offer. Open in Who Shared Wrong byline? 2008) (identifying a breach of fiduciary duties for failure to disclose material facts to stockholders before stockholder vote on merger); City of Fort Myers Gen. Emp.s Pension Fund v. Haley, 235 A.3d 702 (Del. [8] In re Netsmart Technologies, Inc., Shareholder Litig., 924 A.2d 171 (Del. Jones is a member of the American Law Institute and has served as the Co-Chair of the Securities Law Committee of the Boston Bar Association. On April 12, 2021, the Staff of the U.S. Securities and Exchange Commission (SEC), under the signature of Acting Director of the Division of Corporate Finance John Coates and Acting Chief Accountant Paul Munter, released the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies Graphic Packaging is spending $600 million on the first paperboard line in the U.S. in decades, in part to lower carbon emissions. Because it is an investor-focused disclosure rule, and in no plausible way advances a general policy on climate, it raises no new major question of that kind, that might theoretically justify a departure from standard methods of statutory interpretation. They believe climate change is not primarily caused by human activity. For example: Instead, the proposed rule would increase the climate-related information provided by public companies to investors. Second, the 1933 Act makes clear that Congress expected and directed the Commission to go beyond content specified in the Act, and granted authority to go beyond what is necessary to include what the Commission concludes is appropriate for the protection of investors. . Funding, governance and public accountability are all critical elements of a reliable, trusted disclosure system. That request elicited massive amounts of public input on potential climate-related disclosure, and gave anyone skeptical about the project ample notice that it was on the Commissions agenda, and ample time to adduce evidence against it. It does not embody a general policy to address climate change, or engage the range of social and economic issues that climate change raises. Terms of Service. Some critics argue that investor demand should not be equated with investor protection, and it is true that the Commission has not (for good reason) attempted to survey investors in setting its own rulemaking agenda. The Commission does, but has no investor-protection authority over climate impacts more generally, such as those on communities or habitats, beyond impacts that are important to investors decision-making. Aside from the elementary fact that the Commission has no authority to edit Congressionally adopted statutes, the concept release actually says precisely the opposite. Letter to the Stakeholders of the Olympic Movement - Olympic News 2 years ago | By John Coates | Olympics.com 2020) (breach of duty of candor due to failure to disclose conflict of interest in merger); Chester County Emp.s Ret. These investors included individuals and institutions. Companies objectively do or do not have strategies that reflect transition risk or physical risks of climate change. Although the rule is more limited than what an impact advocate would want, it is in one important way broader than anything EPA has adopted or is likely to have to power to implement: its geographic reach. It does not suggest any limit other than what is in the statutes themselves, including NEPA. In its overall framework, the proposed rule builds on the Task Force on Climate Related Financial Disclosure (TCFD), whose leadership includes the CFO of Unilever, the General Manager of Mitsubishi, and the former CAO of HSBC, and whose work has been supported by Bank of America, Barrick Gold, Dupont, Hewlett Packard, and Pepsico, among scores of other companies. But Congress has never cut back on the Commissions general obligation to specify the contents of its disclosure regime, such as by editing or reversing prior disclosure specifications. Again, this limit may leave some climate advocates disappointed. Even if the safe harbor clearly applies, its procedural and substantive provisions do not protect against false or misleading statements made with actual knowledge that the statement was false or misleading. And thank you very much for the invitation to be in a place I don't usually go, right? He had been serving as the independent monitor for the U.S.. In addition to being limited and calibrated to U.S. public companies, the rule does not require disclosure related to non-investor impacts. Rather than casting disclosure rules in stone, Congress opted to rely on the discretion and expertise of the SEC for a determination of what types of additional disclosure would be desirable. Business Law Today (June 25, 2020); Ellison Ward Merkel et al., Litigation Risk in the SPAC World, Quinn Emanuel Trial Laws. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team. E.g., Jeff Montgomery, SPAC Investor Sues in Chancery Over MultiPlans Stock Drop, Law360 (Mar. Indeed, the actual proposed rule requires disclosure about subject matters long covered by indisputably authorized disclosure requirementsthe first point made by Commissioner Peirce in her dissent. She received an undergraduate degree from Princeton University and a J.D. 2017-0421-KSJM, 2019 WL 2564093 (Del.Ch. Among them were Alliance-Bernstein, Neuberger-Berman, Schroder and Wellington, as well as BlackRock and State Street. Before joining the SEC, he served as the John F. Cogan Professor of Law and Economics at Harvard University, where he also was Vice Dean for Finance and Strategic Initiatives. VIA EMAIL: coatesjo@sec.gov John Coates, Acting Director Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549 April 14, 2021 Re: Guidance Needed to Issuers on the Presentation of Shareholder Proposals Dear Director Coates: I am writing to urge the Division of Corporation Finance to issue If Congress had intended to displace Commission disclosure authority regarding environmental matters (including climate-related financial disclosures) when it gave EPA authority to require disclosure in 1970, it seems surprising (to put it mildly) that Congress did not respond after the Commission adopted environmental disclosure rules in the 1970s. Specifically, the Commission relied upon wide-ranging and deep engagement over more than a year, gathering input from public comments, in public discussions, and meetings with and through letters from companies, investors, trade groups, climate specialists, EPA and other experts regarding corporate environmental and climate reporting, to craft its proposed rule, just as it has done in other areas. Nor has the major questions doctrine ever been used to overturn authority unambiguously granted by the plain text of a statute. Often these requirements have been specific and prescriptive in nature. The only limit on companies ability to speak about climate is a long-standing limitnot created by the proposed rulethat they not lie or deceptively omit material information in doing so. It does not impose regulatory control over millions of small greenhouse gas sources. Even as a disclosure rule, it only calls for a subset of the climate-related disclosures from a subset of companies that affect climate change. Exxon Mobil plans to invest $100 billion in carbon capture infrastructure. The United States Securities and Exchange Commission has focused increasingly on SPACs in recent months, and is particularly concerned with conflicts of interest that incentivize a SPAC's sponsors, directors, officers, and affiliates to close a de-SPAC transaction even when doing so is not in the best interests of SPAC shareholders, and whether 6, 2021) (showing that there have been 26 total liquidations as of Apr. The Commissions authority to adopt the actual proposed rule remains intact, and clear. Implied repeals occur only when two statutes are in irreconcilable conflict or when a later act covers the whole subject of the earlier one and is clearly intended as a substitute. In either case, the intention of the legislature to repeal must be clear and manifest. Nothing about the Clean Air Act is in irreconcilable conflict with the securities laws, and as just discussed, the Clean Air Act and subsequent EPA rulemaking address and could address only a part of what the proposed rule would address, even focusing narrowly on greenhouse gas emissions disclosure alone. John CoatesActing Director, Division of Corporation Finance. But critics claim that EPA authority repealed the Commissions authority is even more basically addressed by noting the significant differences in the two agencies organic statutes as applied to climate-related financial risk. But most SPACs since 2009 have gone on to identify acquisition candidates. Coates received his Bachelor of Arts with highest distinction from the University of Virginia and his law degree from New York University Law School. Some but far from all practitioners and commentators have claimed that an advantage of SPACs over traditional IPOs is lesser securities law liability exposure for targets and the public company itself. This is for the obvious reason that investors in the parent company face the consequences of all economic results created by that company. John Coates Named Acting Director of the Division of Corporation Finance FOR IMMEDIATE RELEASE 2021-19 Washington D.C., Feb. 1, 2021 The Securities and Exchange Commission announced today that John Coates will serve as Acting Director of the agency's Division of Corporation Finance. JOHN COATES, HARVARD LAW SCHOOL: Okay, thank you. One of the primary purposes of the 1934 Act was to augment the 1933 Act by giving the Commission authority to require ongoing reports by companies whose securities were traded on stock exchanges. Both appointments are effective June 21, 2021. In sum, each attack succeeds only as applied to a fictional new rule. The law went beyond combating affirmative fraud, where intent, materiality, and damages had a role to play, and added to it a general philosophy of seller beware, in which all pertinent facts must be disclosed before a company sells stock, and liability could attach even without traditional hallmarks of fraud, albeit with separate limiting conditions.
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