john coates financial disclosure
Not a Bloomberg Law Subscriber?Subscribe Now. As detailed above, the proposed rule could not fairly be viewed as embodying climate change policy generally. That there are limits on the limits is also clear from prior decisions. What disclosures do investors need to make informed investment and voting decisions? Most large public companies report much climate information, albeit in a non-comparable and inconsistent way. As noted above, subsequent to the initial passage of the securities laws, but after the passage of the initial Clean Air Act and in the same year EPA was created (1970), Congress directed the Commission (along with all other agencies of the federal government) to consider environmental protection in its rulemakings. Investors and owners commonly view forward-looking information as decision-useful and relevant. Despite all of this, it may still be thought that the PSLRA offers something for SPACs not available to conventional IPOs. Our Team Account subscription service is for legal teams of four or more attorneys. Appropriate liability should attach to whatever claims it is making, or others are making on its behalf. This discretion continues to be sensible, in light of the fact that: The Commissions task [is] a peculiarly difficult one, requiring it to find a path between the views of the parties to the rulemaking polarized in support of the broadest disclosure or in opposition to any disclosure, to interpret novel statutory commands, and to make decisions against the background of rapidly changing conditions . The caption to Section 7Information required in registration statementcontains no qualifiers on information. The authorizing language in Section 7(a)(1) is limited by Section 7(a)(2), but only for a designated class of emerging growth companies, and not as to content. Aside from the elementary fact that the Commission has no authority to edit Congressionally adopted statutes, the concept release actually says precisely the opposite. 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. 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. Not long after Denise Coates convinced her family to bet big on internet gambling, the first . 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. Because the rule is an investor-oriented disclosure rule, it is within the Commissions expertise. When the only dissenting Commissioners primary basis for dissenting is that the Commission has already addressed the topic in prior rulemakings upheld by courts, courts have no basis for using one discretionary canon to apply personal policy judgments on a topic within the Commissions conventional and textually clear statutory authority. Congress wanted and authorized the Commission to require disclosure to protect investors despite these limits, based on its expert judgment about what its experience and qualitative evidence showed it, supplemented by whatever science can add. 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. 11, Special Purpose Acquisition Companies (December 22, 2020). Such a conclusion should hold regardless of what structure or method it used to do so. That climate risks overall have been overstated by climate activists. Rather, it calls for specific disclosures that investors in US public companies need to evaluate and price climate-related financial risks and opportunities. 9300 Shelbyville Road, Suite1250, Louisville, KY 40222 (502) 327-8589. and lifetime income strategies . 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. [8] In re Netsmart Technologies, Inc., Shareholder Litig., 924 A.2d 171 (Del. SPAC use and popularity have soared over the past six months, John Coates, acting director of the Securities and Exchange Commission's Division of Corporation Finance, said in a note Thursday.. Important and challenging questions must be addressed, such as: These are questions that the SEC should be a key part of answering. But for the protection of investors, these limits are features, not bugsthey precisely show how the rule adheres to Congresss clear but limited delegation of disclosure specification to the Commission. An IPO is where the protections of the federal securities laws are typically most needed to overcome the information asymmetries between a new investment opportunity and investors in the newly public company. John C. Coates is the Acting Director of the SECs Division of Corporation Finance. John C. Coates is the John F. Cogan, Jr. Mar. As a result, the rule will minimize costs and maximize benefits of compliance. Key points: Coates was a key figure in Brisbane's 1992 Summer Olympics bid, which lost out to Barcelona The IOC has designated Brisbane as the preferred candidate city to host the 2032 Olympics Coates says he is confident Brisbane can keep costs down if it does host the Games But it remains true that IPOs are understood as a distinct and challenging moment for disclosure. By seeking to address those considerations adequately and transparently, the SEC can and should play a leading role in the development of a baseline global framework that each jurisdiction can build upon to address its individual needs. With all these changes, the appeal of understanding and developing law around economic substance over form may be greater than ever. Economically, and practically, the private target of a SPAC is a different organization than the SPAC itself. How might a different disclosure regime have elicited different disclosures? They point to a footnote in a 2016 Concept release to support this claim. Moreover, the landscape is changing rapidly so issues that yesterday were only peripheral today are taking on greater importance. Not long ago, the title of this statement would have needed to unpack ESG into Environmental, Social and Governance. Banks and insurance companies are increasingly demanding similar information to make loans or underwrite policies. John Coates is the John F. Cogan, Jr. Climate-affecting companies owned by individuals, governments, families, or private equity funds would not be directly affected. The rule is limited to companies from which the Commission has traditionally required full disclosure. 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 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. Not surprisingly, disclosure about these risks did not initially show up in SEC filings, but there too they went from invisible to increasingly disclosed. John Coates, the John F. Cogan, Jr., Professor of Law and Economics at Harvard Law School, has joined the American College of Governance Counsel as a Fellow. A topic of a disclosure is political, or controversial, or is not uncontroversially for investor protection, any of which would only invite interest groups to politicize a topic in the hopes of later arguing it should be off limits for the Commission to address. 2020) (breach of duty of candor due to failure to disclose conflict of interest in merger); Chester County Emp.s Ret. Large multinationalseven in the oil and gas or energy sectors, even actively emitting greenhouse gases in the USwould be unaffected if they list no securities in our markets. [5] For studies of SPACs, see, e.g., Michael Klausner, Michael Ohlrogge and Emily Ruan, A Sober Look at SPACs, Yale J. Reg. Would it have resulted in more timely, clear and useful information for investors about asbestos manufacturers, sellers and insurance companies? 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 Mr Coates told Channel 7's Sunrise he "overruled" Ms Palaszczuk after she initially said she would not be among the 1000 or so VIPs to attend the Opening Ceremony, which - like most of the . [2] It permits significant differences in how companies respond to a variety of mandatory requirements, including in many cases disclosing items if and only if they are material. As noted in the Commissions 2010 climate guidance, A 2007 [GAO] report states that 88% of all property losses paid insurers between 1980 and 2005 were weather-related. Since 1980, the US alone has experienced 323 severe weather events causing more than $1 billion of damage each. But for purposes of assessing the legal issues raised by the proposed rule, this limit underscores how the rule is investor-oriented and tailored, consistent with the securities laws. Women, Influence & Power in Law UK Awards honors women lawyers who have made a remarkable difference in the legal profession. An increasing number of US public companies are making major capital expenditures to pursue climate-related strategies, raising financial risks to pursue opportunities for their investors. Second, forward-looking information can of course be valuable. To be effective, he said, new SEC rules "must produce results that are useful, consistent, and comparable." As we think about structuring a disclosure system for ESG issues, one question that comes up is whether ESG disclosures should be the subject of mandatory versus voluntary disclosure provisions. To recap what is discussed above, EPAs authority is both materially broader and narrower than the Commissions, even as to the subpart of the Commissions rule addressing greenhouse gas emissions: In sum, EPA could not duplicate (or even approximate) the proposed investor-oriented rule, and the Commission could not duplicate (or even approximate) EPAs greenhouse gas disclosure rules. Reflected in the PSLRAs clear exclusion of initial public offerings from its safe harbor is a sensible difference in how liability rules created by Congress differentiate between offering contexts. Equally clear is that any material misstatement or omission in connection with a proxy solicitation is subject to liability under Exchange Act Section 14(a) and Rule 14a-9, under which courts and the Commission have generally applied a negligence standard. It does not suggest any limit other than what is in the statutes themselves, including NEPA. Moreover, state law, such as in Delaware, may require disclosure of projections used by the boards or their advisors in these transactions. Graphic Packaging is spending $600 million on the first paperboard line in the U.S. in decades, in part to lower carbon emissions. For example: Instead, the proposed rule would increase the climate-related information provided by public companies to investors. 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. The context of this authorizing language reinforces these conclusions. John, Joel. As a result, it would not intrude into topics or company-investor relationships that are markedly different from other authorized and long-standing rules. If markets are currently overly negative about a companys physical risks (e.g., to floods), such disclosures would facilitate a reduction in that companys cost of capital. Duke Energy is investing $52 billion in transitioning to lower carbon resources. The proposed rule would not require national banks to consider climate-risks in lending activitiesthat is for banking regulators. Instead of the resulting input showing the idea would be a bad one, or not reasonably designed to protect investors, the request generated substantial evidence that climate-related disclosures would be valued by investors. It does not even address new topics for purposes of disclosure, but instead (as discussed above) changes the specificity and mode of disclosure about long-regulated topics. If useful for the protection of investors, disclosure was not limited to the four corners of, or even commentary on, financial statements. On March 22, 2021, the SEC launched a new page on its website bringing together all things ESG including agency actions and the latest information on ESG investing. To the extent that those who disfavor consideration of legislative history truly give primacy to legislative text and structure, there is no plausible basis on which to argue the Commission lacks authority to adopt the proposed rule. And to be yet more clear, the Commission has not simply expanded or added to required disclosures over timeit has cut, compressed, and consolidated as well, in step with the needs of investors over time. In their second stage, SPACs complete a business combination transaction, in which the SPAC, the target (i.e., the private company to be acquired), or a new shell holdco issues equity to target owners, and sometimes to other investors. The release cites a number of studies to this effect. It also cut back on liability of disclosure. It is true that the subject matter of the financial risks and opportunities raised by climate change are complex, and climate experts have specialized knowledge about climate science. The D.C. Circuits decision, moreover, was premised in part on a representation by the Commission that the Commission would continue to reevaluate the need for such [new disclosure] requirements from time to time. The climate disclosure rule now proposed by the Commission is precisely in keeping with that long-standing commitment by the Commission. See also Rodriguez v. Gigamon Inc., 325 F. Supp. As detailed in Annex B to this post, not only has the Commission repeatedly specified more than the minima in the 1933 Act itself, it has repeatedly had its augmented disclosure rules acknowledged, accepted and ratified by Congress, through multiple amendments to its organic statutes. Over the past six months, the U.S. securities markets have seen an unprecedented surge in the use and popularity of Special Purpose Acquisition Companies (or SPACs). Third, the 1933 Act includes a specific limit to this authority, that it be for the protection of investorsbut no further qualifier. 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. Should the SEC reconsider the concept of underwriter in these new transactional paths? [10] See infra note 12. As with the 1933 Act, this statutory language authorizes periodic reports and imposes no subject-matter restriction on those reports. 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. Public Statement on ESG Disclosure On March 11, 2021, the SEC published a statement by John Coates, acting director of the SEC's Division of Corporation Finance, in connection with remarks given at the 33 rd Annual Tulane Corporate Law Institute (available here ).
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