On December 15, the Securities and Exchange Commission (SEC) proposed enhanced disclosure requirements and amendments to the rules regarding issuer share repurchases and Rule 10b5-1 plans. The proposals related to Rule 10b5-1 plans address perceived gaps in the current reporting obligations and concerns over insider trading, which SEC Chairman Gary Gensler first raised in early summer 2021. Likewise, the share repurchase proposals aim to “lessen the information asymmetries between issuers and investors.”
Continue Reading SEC Proposes New Rules for Share Repurchases and Rule 10b5-1 Plans
Consolidation and Globalization of ESG Standards Progress: CRD Dissolves to Support IFRS Foundation and ISSB
Last month at the 2021 United Nations Climate Change Conference (commonly referred to as the COP26), the International Financial Reporting Standards Foundation (IFRS Foundation) announced the formation of an International Sustainability Standards Board (ISSB). Continue Reading Consolidation and Globalization of ESG Standards Progress: CRD Dissolves to Support IFRS Foundation and ISSB
[Virtual Event] Corporate & Securities Counsel Public Company Forum
Bass, Berry & Sims invites you to join us for our 3rd Annual Corporate & Securities Counsel Public Company Forum. Although we are unable to meet in-person due to ongoing concerns resulting from the COVID-19 pandemic, we are excited to host this year’s forum virtually. Continue Reading [Virtual Event] Corporate & Securities Counsel Public Company Forum
Potential SEC Disclosure Considerations Related to Vaccine Mandates
As you have inevitably read about, in September 2021, the Biden administration instructed the Department of Labor’s Occupational Safety and Health Administration (OSHA) to write a rule that would generally require employers with more than 100 employees to mandate vaccination or weekly testing and mask-wearing for unvaccinated employees.
OSHA published its final rule on Friday, November 5, which generally requires, among other things, employees to be vaccinated or start testing by January 4, 2022, with an earlier (December 5, 2021) enforcement date regarding the rule’s mask mandate, among other requirements for employers. Within 24 hours of the publication of the final rule, the Fifth Circuit Court of Appeals granted an emergency motion to stay enforcement of the vaccine requirement and required the administration to respond by Monday, November 8. In its response, the administration asked the court to lift the stay. Final resolution of the matter is pending.
Continue Reading Potential SEC Disclosure Considerations Related to Vaccine Mandates
SEC Staff Significantly Changes Guidance on Shareholder Proposals and Rescinds Prior Guidance
On November 3, Chairman Gary Gensler announced that the Staff (Staff) of the Securities and Exchange Commission’s (SEC) Division of Corporation Finance released SLB 14L (“new guidance”) regarding shareholder proposals.
The new guidance significantly changes the Staff’s approach when determining whether a shareholder proposal may be properly excluded from a company’s proxy statement. The new guidance rescinds SLBs 14I, 14J, and 14K (Rescinded SLBs), as well as any provisions of other prior Staff guidance that could be considered as inconsistent with the new guidance. A few of these changes are highlighted below.
Significant Social Policy Exception
The new guidance significantly impacts Rule 14a-8(i)(7), commonly referred to as the “ordinary business exception.” This substantive basis for exclusion permits a company to exclude a proposal that “deals with a matter relating to the company’s ordinary business operations.” Under the new guidance, the Staff will realign its approach for determining whether a proposal relates to “ordinary business” with the standard the SEC initially set forth in 1976, which provided an exception for certain proposals that raise significant social policy issues.
According to the new guidance, the Staff believes that an “undue emphasis was placed on evaluating the significance of a policy issue to a particular company at the expense of whether the proposal focuses on a significant social policy.”
Key ESG Disclosure Developments
I recently co-authored an article for Corporate Counsel with Stephanie Bignon, assistant general counsel at Delta Air Lines, highlighting key environmental, social and governance (ESG) disclosure developments. “Public companies are facing a rapidly changing regulatory and investor landscape with respect to climate and other environmental, social and governance (ESG) disclosures,” the authors observed.
One area of particular regulatory focus from the Securities Exchange Commission (SEC) is climate change, as several new initiatives aim to revamp the existing disclosure framework in this area, including:
- Indications from SEC Chairman Gary Gensler that new climate change disclosure rules will be proposed in late 2021 or early 2022.
- Significantly enhanced focus of the SEC’s Division of Corporation Finance on climate-related disclosure in public company filings, including a sample SEC Staff comment letter sent to at least dozens of companies questioning whether consideration had been given to including climate-related disclosures in SEC filings.
- SEC Division of Enforcement announcement in early 2021 that it is creating a Climate and ESG Task Force, and signaling that enforcement actions in the climate change area under existing SEC rules may be forthcoming.
With this heightened focus, we concluded the article with five practical takeaways for companies:
Should Public Companies Establish an ESG Disclosure Committee?
In light of the increasing level of investor and Securities and Exchange Commission (SEC) focus on environmental, social and governance (ESG) disclosure matters and the associated increase in the scope of ESG disclosures included by public companies both within and outside of SEC filings, public companies are well-advised to assess whether their disclosure control and procedures should be modified to address ESG disclosures.
Background on ESG Disclosures
As background, the SEC rules that implemented the Sarbanes-Oxley Act of 2002 require public companies to have disclosure controls and procedures (which are designed to ensure that the information required to be disclosed by a public company in its Exchange Act filings is recorded, processed, summarized and reported in accordance with SEC rules). Additionally, the SEC recommended that public companies establish disclosure committees as a component of their disclosure controls and procedures, and a significant majority of public companies have disclosure committees consistent with the SEC’s recommendation.
Disclosure committees may also be helpful to public companies as a means to support the Section 302 and 906 certifications required to be provided by the CEO and CFO on a quarterly basis under the Sarbanes-Oxley Act in connection with disclosures provided in periodic reports.
The amount of ESG disclosures included in SEC filings has significantly increased in recent years. This trend will no doubt continue once the SEC’s climate change rules expected to be proposed later this year or early next year become effective. Additionally, there has been a significant expansion in the scope of ESG disclosures being provided by many public companies (particularly large-cap companies) outside of SEC filings, including via corporate social responsibility or similar reports, and company website disclosures.
Continue Reading Should Public Companies Establish an ESG Disclosure Committee?
Bass, Berry & Sims Formally Launches ESG Advisory Practice with Webinar Series
I am excited to announce that Bass, Berry & Sims has formally launched its Environmental, Social and Governance (ESG) Advisory Practice Group. Businesses are facing increased pressure from regulators and stakeholders to meet ESG expectations and the area is rapidly evolving. To help our clients manage these new expectations, the firm has assembled a multidisciplinary team with extensive experience addressing the complex regulatory landscape and practical business considerations to help companies succeed. You can read more about our firm’s capabilities related to ESG here.
In conjunction with the launch of this new practice and to help businesses stay on top of the new regulations and other developments, the team is planning an ESG Impact Webinar Series. The first event in the series will be held November 10 and will focus on ESG matters related to regulatory updates, disclosure considerations, and stakeholder engagement. Additional information and registration details can be found here.
I am excited to be tasked with leading this new ESG Advisory Practice Group. I look forward to working with my team members and our clients on this evolving area. More information about the launch of the practice can be found here. As always, please reach out if you have any questions.
New MD&A Rules Are Here – A Slide Deck to Help with Internal Discussions
As we’ve previously blogged, in November 2020, the Securities Exchange Commission (SEC) adopted amendments to the Regulation S-K items related to Management’s Discussion and Analysis (MD&A) as well as certain selected financial disclosures. The amendments became effective on February 10, 2021 (effective date) but registrants were not required to apply the amended rules until their first filing related to their fiscal year ending on or after August 9, 2021 (mandatory compliance date).
As a result, compliance with these amendments will be required for most calendar-year companies beginning with the Annual Report on Form 10-K for the fiscal year ending December 31, 2021. However, companies with fiscal years that ended September 30, 2021, will be required to comply with the new rules in their upcoming 10-K. Registrants will also be required to apply the amended rules in a registration statement and prospectus that on its initial filing date is required to contain financial statements for a period on or after the mandatory compliance date.
While many issuers voluntarily early adopted the amendments covering Items 301 and 302 during this last 10-K reporting cycle, based on our experience a large number of registrants chose not to early adopt the amendments to Item 303 of Regulation S-K, relating to the MD&A section, because of the short time period after their adoption before the first 10-K. As a result, this fall will be an ideal time for many companies to analyze what impacts the new rules will have on their upcoming MD&A.
Continue Reading New MD&A Rules Are Here – A Slide Deck to Help with Internal Discussions
Bass, Berry & Sims Remembers James H. Cheek, III
It is with a heavy heart that we inform you that our friend and Bass, Berry & Sims colleague Jim Cheek passed away last week. He was a legend in the legal industry, especially in the area of corporate and securities law, and he is remembered as an inspiring leader and mentor. His legal acumen and commitment to service and meaningful relationships with clients, colleagues, and friends have shaped our law firm and the broader legal community, and his influence will remain central to that foundation for years to come.
Last year marked Jim’s 50th anniversary with Bass, Berry & Sims. As we reminisce about Jim and his impact on the firm, we find solace in knowing we had the opportunity to celebrate his career through a video tribute and dedication of our Nashville boardroom in his honor. We invite you to watch the video, which can be found here, in remembrance of a great man.
We join the Cheek family in grieving his loss. Please keep the family in your thoughts and prayers during this time. The firm is collecting some quotes in remembrance of Jim that we will share with the family, and we will publish some of them on our website. If you’d like to contribute, please email your tribute to tributes@bassberry.com.