2017) ([W]here defendants make mixed statements containing non-forward-looking statements as well as forward-looking statements, the non-forward-looking statements are not protected by the safe harbor of the PSLRA.). 6LinkedIn 8 Email Updates, What a SPAC Believer Thinks of SPAC Mania. It does not address how to measure or use the social cost of carbon, as is done by other agencies. Again, this language is not limited to what is necessary to protect investors, but gives the Commission discretion to specify what information is appropriate to protect investors and markets, based on its fact-finding and expert application of the statutes goals to evolving investor needs. Even as to the financial system, it does not set out comprehensive climate policy. Only at that time did EPA take the position its 1970 authority over air pollution gave it authority to require climate-related disclosures. [14] See generally, H.R. Contrary to some critics, letters from individuals also supported climate-related disclosures and were cited several times in the proposing release. The text, the ordinary meaning of its key words (that is, other and information), and their context (the title and relevant headings of the Commissions organic statutes), as analyzed above, are clear as to the Commissions ability to require the proposed disclosures for the protection of investors. Congress created the Commission as an expert agency with the capacity to address significant problems affecting the nations securities markets. The United States Securities and Exchange Commission has focused increasingly on SPACs in recent months, and is particularly concerned with conflicts of interest that incentivize a SPAC's sponsors, directors, officers, and affiliates to close a de-SPAC transaction even when doing so is not in the best interests of SPAC shareholders, and whether Shareholder Litig. The proposed rule specifies the details of disclosure, just as Congress directed the Commission to do. 23, 2013) (citing Sawant v. Ramsey, 3:07-CV-980 VLB, 2010 WL 3937403 (D. Conn. Sept. 28, 2010) (holding that otherwise forward-looking statements that contain misrepresentations of current facts are not protected by the safe harbor provision of the PSLRA or the bespeaks caution doctrine); In re Nortel Networks Corp. Sec. All Rights Reserved. As detailed above, the proposed rule could not fairly be viewed as embodying climate change policy generally. 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. 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. We will also need to be open to and supportive of innovation in both institutions and policies on the content, format and process for developing ESG disclosures. 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 That request elicited massive amounts of public input on potential climate-related disclosure, and gave anyone skeptical about the project ample notice that it was on the Commissions agenda, and ample time to adduce evidence against it. 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. US public companies (e.g., the S&P 500) derive 40% of their revenues on average from non-US operations, and many have larger shares of their activities located offshore. John Coates, the Divisions current Acting Director, has been named SEC General Counsel. Nothing at stake in this proposed rule justifies such judicial lawmaking. These claims raise significant investor protection questions. Copyright 2023 ALM Global, LLC. Far from calling for lengthy or complex sustainability reports of the kind most S&P 500 companies already publish, these requirements could be met with relatively succinct disclosure for companies with minimal climate-related risks. Traditionally, and as it has been used by the Supreme Court to date, the major questions doctrine is one of many canons that courtsas faithful agents of the Constitution and the Congressuse to interpret statutes, not rewrite them. John Jenkins, SPACs: Is the PSLRA Safe Harbor Driving the Boom?, Deal Lawyers.com (Feb. 3, 2021); Bruce A. Ericson, Ari M. Berman and Stephen B. Amdur, The SPAC Explosion: Beware the Litigation and Enforcement Risk, Harv. Changes came as part of an omnibus criminal law Session Law 2021-138, Part XXI. Most public companies could go dark today, if they were prepared to surrender their stock exchange listings. [7] See, e.g., Chris Bryant, Why Chamath Palihapitiya Loves SPACs So Much, Bloomberg Opinion (January 28, 2021) (citing Haystack, Alignment Summit Chats: SPACS (w/ Chamath Palihapitiya), YouTube (Dec. 2, 2020) (statement of Chamath Palihapitiya) (Because the SPAC is a merger of companies, youre all of a sudden allowed to talk about the future. Volkswagen announced $180 billion of investments in electronic vehicles. This list contains the names for all officeholders. At hearings on what became the 1933 Act, the Senate heard testimony advocating longer or shorter periods of time for financial statements, specific proposals for additions to or eliminations from the list of disclosure items, arguments about whether audits should be done by reference to industry peers, and how expensive audits would be. For example, many companies have no major facilities in flood plains, do not consume significant amounts of energy, and do not produce significant greenhouse gas emissions. Before joining the SEC, he served as the John F. Cogan Professor of Law and Economics at Harvard University, where he also was Vice Dean for Finance and Strategic Initiatives. The context of this authorizing language reinforces these conclusions. 11, Special Purpose Acquisition Companies (December 22, 2020). The long-recognized fact the statutes were remedial laws following the Crash of 29. This statement creates no new or additional obligations for any person. Many legal issues are open to reasonable debate. As such, there is no one set of metrics that properly covers all ESG issues for all companies. 51283 (Mar. An effective ESG disclosure system does not imply a rigid and soon-to-be outdated set of limited disclosures. One need not believe any of these studies is the final word on the subject to believe that collectively, they provide sufficient evidence to believe, reasonably, that verified, consistent climate-related financial disclosures would be useful to protect investors. The safe harbor only applies in private litigation, and does not prevent the Commission from taking appropriate action to enforce the federal securities laws. As we address these questions, we should keep in mind some additional points. The rule builds on decades-long efforts by public companiessuch as 3M, Abbott Laboratories, Amazon, Apple, Chevron, Fujitsu, IBM, Johnson Controls, Michelin, P&G, Verizon and Walmartto develop practical, decision-useful, consistent, comparable and verifiable ways to report about climate risks and opportunities. In other words, the delegation to the Commission was deliberate, was specifically intended to apply to required disclosures, and was sensible, reflecting an anticipation that the Congress itself could not reasonably work out in detail the kinds of choices necessary to develop and keep up to date an appropriate disclosure regime. The industry-leading media platform offering competitive intelligence to prepare for today and anticipate opportunities for future success. 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. As the proposing release notes, half of all public companies already make some climate disclosures in their SEC reports, and the Chamber of Commerce reports that more than half of surveyed companies publish sustainability reports. After the de-SPAC, the entity carries on its operations as a public company. John M Coates Mark Gurnell Zoltan Sarnyai Little is known about the role of the endocrine system in financial decision-making. More than thirty years later, EPA had not applied its authority to require emissions disclosures to greenhouse gas emissions. 3d 1041, 1049-50 (N.D. Cal. 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. Contact Us| Terms of Service. EPA is charged by Congress to have a concern for the environment, not for investors. On the issue of global comparability, in the first instance, arguments in favor of a single global ESG reporting framework are persuasive. Professor of Law and Economics at Harvard Law School, where he also serves as the Vice Dean for Finance and Strategic Initiatives, and Research Director of the Center on the Legal Profession. The basics of a typical SPAC are complex, but can be simplified as follows. 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.. The rule is also calibrated to companies, not the environment. Consistent with the long tradition of disclosure requirements sketched above and in Annex A, the proposed rule specifies disclosure of climate-related financial risks to and opportunities for public companies. At the time, companies were thought by some to be reluctant to provide forward-looking information at least in part due to the prevalence of so-called strike suits which, irrespective of the merits of the claim, were usually less costly to settle than to fight in court. Again, this limit may leave some climate advocates disappointed. 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. Biography. In sum, throughout its history, and consistently, the Commission has fulfilled its statutory mandate to specify required disclosure of information that was not directly financial in nature, but posed risks about a future financial impacts, often indirect, contingent or both. [15] The PSLRAs exclusion for blank check companies overlaps the exclusion for penny stock issuers. As customary, and in keeping with the Division of Corporation Finances ordinary practices, staff are reviewing these filings, seeking clearer disclosure, and providing guidance to registrants and the public. John C. Coates, IV, Lucian A. Bebchuk, John C. Coffee, Bernard S. Black, . But just as important is the recognition of the costs associated with not having ESG disclosure requirements. Bloomberg reports that, according to Coates, the new disclosure requirements will focus on three topics: diversity, equity and inclusion; climate change; and human capital management. Previously, Coates was a partner at Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and financial institutions. Authority for disclosure under the 1934 Act addressed more than the need for protection of the initial investor acquiring securities. As to motivations, the long and extensive record leading to the proposal of the rule can be reviewed in its entirety and nowhere will any evidence be found that the purpose of the rule is other than to protect investors. About 1,020 U.S. companies voluntarily disclosed their Scope 3 emissions last year.. However, the rule does need to at least be rationally designed for investor protection to be authorized. [12] Cede & Co. v. Technicolor Inc., 634 A.2d 345, 361 (Del. The rule as proposed would provide a framework for companies to inform investors about all of the effectsprofitable and loss-causingthat climate risks may have on a company. That is because it is true that the Commissions authority does not run so far as to require disclosures for any reason, or for reasons not specified in its organic statutes. Most companies now includeand sometimes are required to include industry- or firm-specific key performance indicators in their Commission filings, which require industry- or firm-specialized knowledge to understand and evaluate. ESG issues are global issues. 2017-0421-KSJM, 2019 WL 2564093 (Del.Ch. Join National Law Journal now! It would have a relatively modest impact on the economy as a whole, and basically levels up disclosure requirements to disclosures already made by the majority of large companies. The information, including financial statements, relevant to evaluating the investment changes dramatically in the de-SPAC because the private target has operations unlike the SPAC; and initial SPAC investors commonly have the right to and do sell or have their shares redeemed.