If a U.S. public company owns facilities outside the US, as many do, they would be required to provide investors with information about those facilities. Finally, even if the major questions doctrine were thought relevant here, the contents of the proposal areas discussed at length above and in Annex Adirectly in keeping with the way that the Commission has functioned since inception. Asbestos-related disclosure is a great example. 6LinkedIn 8 Email Updates, What a SPAC Believer Thinks of SPAC Mania. [7] This, such observers assert, is the reason that sponsors, targets, and others involved in a de-SPAC feel comfortable presenting projections and other valuation material of a kind that is not commonly found in conventional IPO prospectuses. Courts have rejected attempts to deny application of the securities laws and the philosophy of full disclosure in cases involving the sale of a whole company, if effected through the sale of securities, or where conduct may violate both corporate law and the Commissions disclosure laws. "John is widely recognized as an expert on corporate governance, corporate transactions, and compliance and disclosure processes," Lee said in a statement. Economically, and practically, the private target of a SPAC is a different organization than the SPAC itself. June 21, 2019) (refusing to dismiss case challenging merger approved by shareholders on ground that disclosure prior to vote was inadequate); Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. Despite this clear authority, critics argue the Commission lacks authority to move forward with the proposal. John C. Coates is the Acting Director of the SECs Division of Corporation Finance. Companies could comply with the rule and say: No debate over the level of risk created by climate change is predetermined or purported to be resolved by the rule. Law.com Compass delivers you the full scope of information, from the rankings of the Am Law 200 and NLJ 500 to intricate details and comparisons of firms financials, staffing, clients, news and events. Here, we survey research on steroid hormones and their cognitive. Circuit affirmatively held that the Commission had authority to do that, and, in its judgment, to potentially go further. Business Law Today (June 25, 2020); Ellison Ward Merkel et al., Litigation Risk in the SPAC World, Quinn Emanuel Trial Laws. Professor Coates served as General Counsel and as Acting Director for the Division of Corporation Finance for the SEC. The World Meteorological Organization has tracked damage from weather events for the past fifty years; the top five most economically destructive events all occurred since 2005. 1 Twitter 2 Facebook 3RSS 4YouTube Instead, basic principles of statutory interpretation support the Commissions authority to adopt the proposed rule. Ch. Evidence regarding the clear and present financial materiality of transition risk is discussed below. The release cites a number of studies to this effect. Image: Getty. These cases also show that protection of investors includes disclosure not only about securities, but also companies that issue them, and risks to investors their activities create. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere); Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy A Reply to Professor Rock by Lucian A. Bebchuk, Alma Cohen, and Charles C. Y. Wang (discussed on the Forum here); Stakeholder Capitalism in the Time of COVID, by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Corporate Purpose and Corporate Competition by Mark J. Roe (discussed on the Forumhere). They argue that the disclosures required by the fictional new rule would be opinions, not facts, so it would violate the First Amendment. No. But that, too, is uncertain at best. Congressional support for the Commissions clear (but statutorily limited) disclosure authority is shown by the fact that over time, in the face of repeated Congressional amendments and annual budget laws (in which Congress can and has inserted riders further limiting Commission discretion), the Commissions requirements ranged far beyond the limited lists of information in the 1933 and 1934 Acts themselves. Governance needs to ensure the independence and expertise of any individuals involved in the setting of ESG disclosure standards, and allow for a rigorous, inclusive and transparent process for developing standards. 104-369, 43 (November 28, 1995) (Congress created the safe harbor provision to enhance market efficiency by encouraging companies to disclose forward-looking information.). So, my background is, my introduction alluded to it, is the corporate and financial market side and I was blissfully ignorant of and happy to ignore everything that The president's financial disclosure reports are extensively reviewed for potential or actual conflicts of interest and compliance with applicable laws and policies by the Chief Compliance and Ethics Officer of the Bank, and the Chairman of the Bank's board of directors. Laws against fraud have always been consistent with the First Amendment. A company in possession of multiple sets of projections that are based on reasonable assumptions, reflecting different scenarios of how the company's future may unfold, would be on shaky ground if it only disclosed favorable projections and omitted disclosure of equally reliable but unfavorable projections, regardless of the liability framework 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. This legislative choicedisclosure, but not merit reviewis an important and real intelligible principle limiting the Commissions general authority, along with the specific, and limited purpose for those disclosures, that they be those appropriate for the protection of investors. These limits explain why further restrictions on the Commissions authority to specify disclosures to protect investors were not needed to constitutionally cabin Congresss delegation to the Commission under the 1933 Act. 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. Both options are priced the same. Finally, companies generally are mandated to make disclosures as needed to prevent other disclosures from being materially misleading. That is true for companies being acquired, as well as for companies going public. A SPAC is a shell company with no operations. John CoatesActing Director, Division of Corporation Finance. [1] This statement represents the views of the Acting Director of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC or Commission). Don't miss the crucial news and insights you need to make informed legal decisions. About 1,020 U.S. companies voluntarily disclosed their Scope 3 emissions last year.. The National Law Journal Elite Trial Lawyers recognizes U.S.-based law firms performing exemplary work on behalf of plaintiffs. [9] I am far from alone in noting the litigation risk attached to SPACs. Information should be cost-effective and reliable, and not materially misleading, in every securities transaction. I am pleased to welcome Renee to the SEC and look forward to working with her., I am excited to join the Division of Corporation Finances team of experienced and dedicated public servants, said Jones. The proposal is well within the Commissions authority to adopt. The proposed disclosures, including emission data, will help investors assess and price these risks and opportunities. Companies may chooseas many do nowto go beyond what is required, to convince investors and others that (for example) their strategies are going to succeed. Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! But for investors in that company, they reasonably could be, because the transition risks (in the form of higher energy costs or potential need for capital expenditures to mitigate their impacts) could be large for that company, depending on its size, capital, liquidity and financial resources. The SEC is well equipped to lead and facilitate a discussion on when and how ESG risks and data must be disclosed, and how to create and maintain an effective ESG-disclosure system that would promote the disclosure of decision-useful, reliable and, where appropriate, globally comparable ESG 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. If arguments of that kind could limit rulemaking authority, the Commission could never have adopted any disclosure rules. 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. Over that time, as noted above, the SEC proposed and adopted rules requiring environmental disclosures, in part to satisfy its obligations under NEPA. 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. Nor has the major questions doctrine ever been used to overturn authority unambiguously granted by the plain text of a statute. Harvard Law School Professor John C. Coates spoke at a briefing on Oct. 30 in Washington, D.C., to urge the Securities and Exchange Commission to require publicly traded companies to disclose their political spending. Shareholder Litig. Establishing a global framework, however, is complex and raises a number of considerations. Based on a review of current sustainability reports that cover the same topics as would be required by the proposed rule, companies with material climate risks could create compliant disclosure that would take up a relatively small share of a typical annual report. Where and how should disclosures be globally comparable? The basics of a typical SPAC are complex, but can be simplified as follows. It proceeds in two stages. It is against this backdrop that I think about the regulation of ESG disclosures. That climate risks overall have been overstated by climate activists. To be sure, projections are woven into the fabric of business combinations. Congress designed the safe harbor generally to permit and even encourage reporting companies to disclose information about future plans and prospects. As regards climate change, environmental agencies might do well to focus on global activities as well, but it is unclear how EPA could with its existing legal authority impose requirements on companies not operating in the US. In contrast to the specific mentions of these other federal agencies, the authorizing document, Reorganization Plan No. Empirical studies of financial markets and regulation have always had strong and inherent methodological limits, well-known and not seriously disputed, as well as data limitations. Said plainly, many investors in the SPACs own initial offering are not the investors in the ultimate public companys ongoing business operations.