SEC Rulemaking

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SEC Proposes Amendments to Modernize Rule 701 and Form S-8 and Temporary Rules to Allow for “Platform Worker” Participation

On November 24, 2020, the SEC released proposed amendments and proposed temporary rules relating to the federal securities laws that govern the issuance of equity securities to service providers pursuant to compensatory arrangements. Each proposal will be subject to a 60-day public comment period following publication in the Federal Register.

  • First, the SEC proposed amendments to modernize the framework for securities offerings and sales to workers under Rule 701 of the Securities Act of 1933 and registration statements on Form S-8.

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Davis Polk Client Memo: SEC Amends Shareholder Proposal Rule

On September 23, 2020, the SEC adopted amendments to the shareholder proposal rule. Rule 14a-8 allows a shareholder that meets certain requirements to use a company’s proxy statement to have its proposal voted on by all shareholders. Our memorandum describes the most salient points of the amendments.

Read the full memo here.
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Davis Polk Client Memo: SEC Updates Business, Legal Proceedings and Risk Factors Disclosure

On August 26, the SEC adopted amendments to update the business description, legal proceedings and risk factor disclosures that U.S. companies make in registration statements, annual reports and quarterly reports. In making these changes, the SEC is taking a more tailored and “principles-based” approach to disclosure, with the intention of simplifying compliance for companies and improving information provided to investors.
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Davis Polk Client Alert: SEC Finalizes Rules for Proxy Advisors

The SEC voted (3 to 1) on Wednesday to adopt final rules that would regulate proxy advisory firms and permit companies that are the subject of their voting recommendation reports to provide responses. Read here for a summary of the rules.

Read the full alert here.

 
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SEC’s Spring 2020 Reg Flex Agenda Indicates Universal Proxy Rule May Be Coming Soon

The SEC’s 2020 spring agenda of its rulemaking actions under the Regulatory Flexibility Act (RFA) has been posted. The agenda, commonly referred to as the “Reg Flex Agenda,” is published semiannually and reflects the actions the SEC Chairman anticipates the agency will complete in the short term (within a year and almost all items are listed in the “Proposed Stage” or “Final Rule Stage”) or the long term (longer than a year and the items are listed as “Long-Term Actions”). 
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SEC Staff Updates Its Guidance on Shareholder Meetings & COVID-19

The SEC Staff updated today its prior March 13, 2020 guidance relating to shareholder meetings, including virtual meetings. You may recall that the Staff’s March guidance provided welcome clarity to issuers that previously mailed and filed their proxy materials, but who wish to change the date, time or location of their meetings, allowing them to essentially issue a press release and file that on EDGAR without needing to remail all materials.
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SEC Chairman Releases Statement on Proposed Changes to Financial Reporting and Discusses Climate-Related Disclosure

Today, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) voted to propose amendments to certain financial disclosure requirements under Regulation S-K, specifically those requirements related to Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).  In addition to these proposed amendments, the SEC issued guidance for registrants to consider when using metrics and key performance indicators in their MD&A disclosures. 
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SEC Chairman Clayton Testifies Before Senate Banking Committee

On Tuesday, December 10, 2019, Chairman Jay Clayton testified before the Senate Committee on Banking, Housing, and Urban Affairs (Committee) on the “Oversight of the Securities and Exchange Commission.” After Committee Chairman Mike Crapo delivered his opening remarks, which were supportive of the agency, Chairman Clayton gave an overview of the agency’s initiatives over the past year.
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SEC’s Fall 2019 Reg Flex Agenda

The SEC’s 2019 fall agenda of its rulemaking actions under the Regulatory Flexibility Act (RFA) has been posted. The agenda, commonly referred to as the “Reg Flex Agenda,” is published semiannually and reflects the actions the Chairman anticipates the SEC will complete in the short term (within a year) and the long term (longer than a year). 
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SEC Investor Advisory Committee Panel on ESG – Data, Disclosure and Materiality

Last Thursday, the SEC’s Investor Advisory Committee (IAC) held an open meeting, which included a session to discuss investor use of environmental, social and governance (ESG) data in their investment and capital allocation decisions. During this session, the IAC heard insights from and asked questions of a panel consisting primarily of ESG-focused investors, as well as one academic.
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Next SEC Investor Advisory Group Meeting–How Are Investors Using ESG Data?

Earlier this week, the Securities and Exchange Commission (SEC) announced that its Investor Advisory Committee (IAC) will be holding a meeting on Thursday, November 7, 2019, at 9:30 a.m. E.T. The agenda includes a morning discussion on whether and how investors use environmental, social and governance (ESG) data in their investment and capital allocation decisions. The agenda and press release provide no further details on the session topic other than the panelist list provided below.
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SEC Commissioners Testify Before House Financial Services Committee on ESG, Proxy and Other Topics

On Tuesday, September 24, 2019, SEC Chairman Jay Clayton, along with Commissioners Jackson, Lee, Peirce and Roisman, testified before the House Financial Services Committee (Committee) in a hearing titled “Oversight of the Securities and Exchange Commission, Wall Street’s Cop on the Block.” Chairwoman Maxine Waters observed that the last time all the SEC Commissioners had been before the Committee was over a decade ago, in 2007.
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SEC Roundtable on Short-Term / Long-Term Management of Public Companies

Yesterday, the SEC Division of Corporation Finance hosted a roundtable on the impact of short-termism on U.S. capital markets and whether modifications should be made to the reporting system to address these impacts. In December, the SEC published a request for comment on these topics, specifically with respect to earnings releases and quarterly reports. At yesterday’s roundtable, the SEC reiterated that the comment period is still currently open.
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SEC Selects July 18th for Roundtable on Short-Term / Long-Term Corporate Management, Regulations and Public Reporting

The SEC announced yesterday that the Division of Corporation Finance (“Division”) will host an afternoon roundtable on July 18, 2019 on the effects of short-termism on the capital markets and whether any regulatory modifications should be made to address the impacts.

Agenda: Division staff will moderate two back-to-back panels.  The first panel will address the causes and impact of short-termism with Director William Hinman and Deputy Director Shelley Parratt moderating.
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SEC Announces Summer Roundtable on Short-Term / Long-Term Corporate Management, Regulations and Public Reporting

The SEC has announced that the staff will host a roundtable this summer on important topics such as the short-term / long-term management of public companies and related periodic reporting and regulatory requirements.

The SEC’s four-year strategic plan highlights its focus on the long-term interests of Main Street investors. In its roundtable announcement, the SEC stresses the dual needs of Main Street investors – liquidity to pay for retirement and other expenses while at the same time long-term value to fund increasing longer lifespans – and how disclosure rules should reflect and foster these needs.
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SEC Adopts Hedging Policy Disclosure Rules and Requests Public Comment on Quarterly Reporting

The SEC yesterday announced that it has adopted the Dodd-Frank hedging policy disclosure rules and issued a request for comment on quarterly reporting.  We will provide additional information in the form of client memos, but preliminary information based on the fact sheets published includes:

Hedging Rules.  Compliance is required in proxy statements during fiscal years beginning on or after July 1, 2019. 
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Clayton Cites Shareholder Proposal and Proxy Advisory Firm Reforms as Priority Items for the SEC

In a wide ranging speech yesterday on SEC rulemaking, Chairman Clayton stated that after disregarding the more “aspirational” approach of past administrations, the SEC’s changed its approach to tailoring the 2018 Regulatory Agenda to the initiatives that the agency could reasonably complete in the next 12 months.  This led to the Commission advancing 23 of the 26 rules cited in the 2018 agenda.
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SEC to Consider Request for Comment on Earnings Releases and Quarterly Reports

The SEC issued a Sunshine Act Notice for an open meeting next Wednesday, December 5, where they will consider whether to issue a Request for Comment on the nature and content of quarterly reports and earnings releases issued by reporting companies.  The open meeting will start at 10:00 a.m. (ET) and will be webcast.

As reported by media, President Trump asked the SEC in August to study the possibility of requiring less frequent earnings reporting. 
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Davis Polk Submits Comment Letter on the SEC’s Concept Release on Compensatory Security Offerings Under Rule 701 and Form S-8

Davis Polk has submitted a comment letter on the SEC’s Concept Release on Compensatory Securities Offerings under Rule 701 and Form S-8. Our comment letter focuses on expanding the scope of eligibility for Rule 701 to cover “gig economy” workers and making corresponding changes to the scope of eligibility for Form S-8; streamlining Rule 701 disclosure requirements for foreign private issuers; clarifying disclosure requirements for RSU and profits interests awards made under Rule 701; and simplifying Form S-8 requirements to reduce administrative burdens on issuers.
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Senator Warren Introduces Bill to Mandate Disclosure of Climate Risk in SEC Filings

The Climate Risk Disclosure Act, introduced by Senator Warren, would require the SEC to issue rules for every public company to disclose:

  • Its direct and indirect greenhouse gas emissions
  • The total amount of fossil-fuel related assets that it owns or manages
  • How its valuation would be affected if climate change continues at its current pace or if policymakers successfully restrict greenhouse gas emissions to meet the Paris accord goal; and
  • Its risk management strategies related to the physical risks and transition risks posed by climate change

The SEC can tailor the rules to different industries, and impose additional requirements on companies in the fossil fuel industry.
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Senator Warren’s Accountable Capitalism Act Modeled on the Public Benefit Corporation

The Accountable Capitalism Act, introduced by Senator Warren, would require companies with more than $1 billion in revenue to obtain federal charters from a newly formed Office of United States Corporations at the Department of Commerce.  As explained in a WSJ op-ed, Senator Warren is concerned that companies have shifted to focusing solely, or largely, on being accountable to shareholders through maximizing returns for owners.
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What Corp Fin’s Two New Interpretations on Exempt Solicitations Tell Us

At the end of July, the SEC Division of Corporation Finance issued two interpretations (known as CDIs) on notices of exempt solicitations.  These are the filings that may suddenly show up on a company’s Edgar page, confusingly called “PX14A6G.”  For example, after filing its proxy statement in April, Facebook received four such notices from different investors. 
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SEC Publishes Final Rule and Concept Release on Equity Compensation Offerings

On July 18, 2018, the SEC voted unanimously both to issue a final rule and to solicit public comment through a concept release relating to the federal securities rules that govern the issuance of employer stock pursuant to compensation arrangements. Davis Polk discusses the SEC’s final rule and concept release here.

The final rule and the concept release were published to the Federal Register on July 24, 2018.
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