John Coates, the vice-president of the International Olympic Committee and outgoing president of the Australian National Olympic Committee, said "to a large extent" that Sydney was awarded the. 1 Twitter 2 Facebook 3RSS 4YouTube 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. Does that provide de-SPAC participants with protections in private litigation that are not available in a conventional IPO? Funding, governance and public accountability are all critical elements of a reliable, trusted disclosure system. Specifically, Section 7 gives the Commission unambiguous authority to specify the contents of disclosure documents used to register securities for sale to the public. 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. 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. [5] Initial investors also commonly obtain warrants to buy additional stock as at a fixed price, and sponsors of the SPAC obtain a promote greater equity than their cash contribution or commitment would otherwise imply and their promote is at risk. Because the items listed in the statutes themselves could not reasonably be understood to cover all pertinent facts, the final language in the statute also reflected an expectation that Commission regulations would be needed to augment the statute itself. Mar. L. Sch. 5 . Simply put, any such asserted difference seems uncertain at best. 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. 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. To be sure, an IPO is generally understood to be the initial offering of a companys securities to the public, and the SPAC shell company initially offers redeemable equity securities to the public when it first registers to raise funds in order to look for and later acquire a target. Going forward, I believe SEC policy on ESG disclosures will need to be both adaptive and innovative. The Securities and Exchange Commission today announced that Renee Jones has been appointed Director of the Division of Corporation Finance. In addition to being limited and calibrated to U.S. public companies, the rule does not require disclosure related to non-investor impacts. It addresses global climate risks to public companies, and not all climate risks created by domestic activities of all companies, public and private. 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. In the Clean Air Act amendments of 1970, Congress gave EPA authority to require disclosures relating to the environment. As companies continue to disclose more in sustainability reports, they should already be evaluating those disclosures in light of existing anti-fraud obligations. The proposed rule does not itself restrict or limit environmentally harmful activity. It is not a transformative surprising regulatory departure, raising such a major question as to justify interpretive methods other than those of a faithful agent of Congress. Previously, Coates was a partner at Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and financial institutions. Overturning this rule as unauthorized on that basis would wipe out most of the Commissions disclosure rulebook. With all these changes, the appeal of understanding and developing law around economic substance over form may be greater than ever. The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2) all agencies of the Federal Government shall make available to States, counties, municipalities, institutions, and individuals, advice and information useful in restoring, maintaining, and enhancing the quality of the environment. Even if some may find resistance to the rule (or new regulation generally) to be appealing from a policy standpoint, doing that here has no basis whatsoever in the statutes text.. 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. It does not regulate climate activity itself (e.g., greenhouse gas emissions) and would have modest effects on the economy as a whole. Liability risk is an important feature of the conventional IPO process. 2003) (holding that statements encompassing forward-looking and present or historical components were not entitled to safe harbor protection where the [c]omplaint alleges that the Defendants had no basis for their optimistic statements and already knew (allegedly) that certain risks had become reality and notably where plaintiffs adequately pled scienter). I write to comment on legal authority. So, instead, like a cuckoo putting its eggs into anothers nest, critics have resorted to mischaracterizing the proposal, and inventing their own, fictional rulenot actually proposedto attack premise two, and claim the Commission lacks authority for their fictional new rule. The proposed rule is reasonably designed to address these inconsistencies, give investors comparable information, and make it more reliable. The proposed rule does not call for opinion or controversial speech of the kind that raises First Amendment concerns. 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. .. The Court has stressed the structure and design of the 1933 and 1934 Acts reflect an understood need for regulatory flexibility, even in decisions limiting the reach of Commission rules where the precise limits of its authority are less clear, such as Rule 10b-5: Congress recognized that efficient regulation of securities trading could not be accomplished under a rigid statutory program. In numerous cases, the Court and lower courts have held that the federal securities laws are to be construed broadly, not technically and restrictively, but flexibly to effectuate its remedial purposes.. 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. A SPAC is a shell company with no operations. No. If we do not treat the de-SPAC transaction as the real IPO, our attention may be focused on the wrong place, and potentially problematic forward-looking information may be disseminated without appropriate safeguards. But it remains true that IPOs are understood as a distinct and challenging moment for disclosure. These claims raise significant investor protection questions. Congress provided a safe harbor for forward-looking statements made by established, publicly traded, reporting companies. John F. Cogan, Jr. Because, finally, the disclosures are financial and do not extend to the large part of the economy owned by private companies, they would not constitute general climate change policy, such as a carbon tax or emissions cap-and-trade scheme. Financial Reports. With the large pool of private capital available and the increase in Exchange Act Section 12(g) registration thresholds, a company can remain private and grow significantly without going through a traditional IPO. The proposed rule would not require national banks to consider climate-risks in lending activitiesthat is for banking regulators. The Biden administrations new acting head of a key component of the U.S. Securities and Exchange Commission reported earning more than $2.5 million in law school income and consulting fees paid by financial firms and major U.S. companies, according to a newly released financial statement. The event, which was organized by the nonprofit consumer advocacy organization Public Citizen, also included speeches by former Harvard Law School [] Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. The proposal is both narrower and broader than the critics fictional rule because it calls for and is limited to investor-focused information from public companiestraditional and long-standing hallmarks of U.S. securities laws and regulations. John Coates Financial Services Professional at NYLIFE Securities LLC EPA, by contrast, focuses on conduct in the United States. Growing Mineola firm with national practice seeks associate (with 3-6 years experience) to handle complex general liability matters.Competit CASH KRUGLER & FREDERICKS LLC is Celebrating Our 20th Anniversary & Newest Partners! Professor Coates served as General Counsel and as Acting Director for the Division of Corporation Finance for the SEC. 3 The sweep of regulatory change has reignited criticism for failure to base the changes . John Coates Coates has served as the SEC's Acting Director of the Division of Corporation Finance since February 2021. 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. These investors included individuals and institutions. Investors and owners commonly view forward-looking information as decision-useful and relevant. That there are limits on the limits is also clear from prior decisions. About Us| As a result, depending on current capital market pricing, the rule could increase climate-impacting activities. Congressional ratification has been repeated and affirmativenot mere inaction. Public companies are already subject to more regulation, however, and if the requirements of the Sarbanes-Oxley Act did not drive a wave of going private transactions (and they did not), the marginal additions to disclosure required by this rule is highly unlikely to do so. Statements about current valuation or operations have been viewed as outside the safe harbor by some courts, even if they are derived from or linked to forward-looking projections or statements. What disclosures do investors need to make informed investment and voting decisions? 1 Twitter 2 Facebook 3RSS 4YouTube Biography. It is not a rule, regulation, or statement of the SEC. Part of the difficulty is in the fact that ESG is at the same time very broad, touching every company in some manner, but also quite specific in that the ESG issues companies face can vary significantly based on their industry, geographic location and other factors. As noted above, this claim is wrong because the securities laws already limit the Commissions power in two ways, to the use of disclosure (versus merits review) as a regulatory tool, and to the use disclosure for the protection of investors. These claims are further belied by a string of decisions in which courts have rejected attempts by the Commission to rely on disclosure and anti-fraud authority to engage in substantive regulation of corporate transactions or corporate mismanagement. Although the content and nature of the disclosure have long been covered by Commission rules, the proposed rules add specificity, detail, and consistency (and require assurance) in ways that existing rules do not. Section 12 of the 1934 Act conditions exchange-trading privileges unless securities are registered by companies disclosing such information, in such detail, as to the [company] as the Commission may by rules and regulations require, as necessary or appropriate in the public interest or for the protection of investors, in respect of the following: the organization, financial structure, and nature of the business.. 1 Twitter 2 Facebook 3RSS 4YouTube ESG issues are global issues. Under federal securities law, the touchstones for all securities offerings remain what they have long been. That possibility further calls into question any sweeping claims about liability risk being more favorable for SPACs than for conventional IPOs. 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. Coates was re-elected president at the AOC's annual general meeting in Sydney on Saturday morning, seeing off the challenge of hockey gold medallist Danni Roche by winning the vote count 58-35. By contrast, the focus of traditional environmental regulationincluding EPA reporting rulesis solely the reversethe impact of companies on climate change. Surveys of individual investors by firms such as Morgan Stanley confirm this evidence. The limitations in 7(a)(2) were imposed in 2012, by which time (as detailed below and in Annex A), the Commission had repeatedly relied upon the language in Section 7(a)(1) to require disclosures of all kinds, including non-financial disclosures, environmental disclosures and climate-change related disclosures. 2021 Financial Disclosure Statements. The long-recognized fact the statutes were remedial laws following the Crash of 29. Section 13(a)(2) of the 1934 Act goes further still, and requires companies to disclose, under rules the Commission: may prescribe as necessary or appropriate for the proper protection of investors and to insure fair dealing in the security such annual reports and such quarterly reports as the Commission may prescribe.
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