Will the New Regulatory Agenda of the SEC Affect You?

The SEC recently announced its regulatory agenda, which reflects short-term and long-term actions to be taken by the agency...

The Securities and Exchange Commission (SEC) recently announced its regulatory agenda, which reflects short-term and long-term actions to be taken by the agency. The SEC’s rulemaking agenda includes hot-button issues like SPACs and climate risk disclosures. However, Bitcoin and other cryptocurrencies were notably left off the list.

The SEC’s annual agenda was released as part of the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions, which was released by the Office of Information and Regulatory Affairs on June 11, 2021. “To meet our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us,” SEC Chair Gary Gensler said in a press statement. “I look forward to collaborating with my fellow commissioners and the dedicated staff to propose and finalize rules that will strengthen our markets, increase transparency, and safeguard investors.” 

SEC Rulemaking Priorities

The SEC’s regulatory agenda includes the following noteworthy, proposed and final SEC rulemaking areas:

• Disclosure relating to climate risk, human capital, including workforce diversity and corporate board diversity, and cybersecurity risk
• Market structure modernization within equity markets, treasury markets, and other fixed income markets
• Transparency around stock buybacks, short sale disclosure, securities-based swaps ownership, and the stock loan market
• Investment fund rules, including money market funds, private funds, and ESG funds
• 10b5-1 affirmative defense provisions
• Unfinished work directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including, among other things, securities-based swaps and related rules, incentive-based compensation arrangements, and conflicts of interest in securitizations
• Enhancing shareholder democracy
• Special purpose acquisition companies
• Mandated electronic filings and transfer agents

In light of the GameStop controversy, the SEC is also planning to seek public comment on potential rules related to “gamification, behavioral prompts, predictive analytics, and differential marketing.” A Notice of Proposed Rulemaking could come this fall, with a target date of October 2021.

As for climate change disclosures, the agenda also identifies October 2021 as a target date for issuing a proposal. The agenda states that the SEC plans to propose rule amendments to “enhance registrant disclosures regarding issuers’ climate-related risks and opportunities.” Proposed rule amendments to enhance issuer disclosures regarding cybersecurity risk governance may also be forthcoming with a target date of October 2021.

With regard to short sale disclosure reform, the SEC plans to propose rules to implement section 929X(a) of the Dodd-Frank Act, which amended Section 13(f) of the Exchange Act to require the SEC to prescribe rules providing for the monthly public disclosure of the name of the issuer, the aggregate amount of the number of short sales of each security, and additional information. The agenda sets November 2021 as the target date for issuing the proposal.

With regard to SPACs, we will have to wait a little longer to see what changes the SEC may propose. The target date for issuing a proposal is April 2022.  In the meantime, SPAC issuers and underwriters have made certain adjustments of warrants provisions and other aspects of the structures and disclosures in new SPAC filings, after review and discussions of the SEC statements of concern earlier this year. That is one reason why the pace of filings, while slowed in prior months this year, have substantially picked up pace now.  SPAC filings continue to dwarf IPO filings as a result. Changes to the exempt offering framework may also be on the horizon. With a target date of April 2022, the SEC plans to seek public comment on ways to further update its rules related to exempt offerings to “more effectively promote investor protection, including updating the financial thresholds in the accredited investor definition, ensuring appropriate access to and enhancing the information available regarding Regulation D offerings, and amendments related to the integration framework for registered and exempt offerings.”

If you have questions, please contact us

If you have questions or if you would like to discuss the matter further, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.