john coates financial disclosure
ESG issues are global issues. I write to comment on legal authority. No court has ever found that this long line of exercises of the basic authorities on which the current rule relies were beyond the Commissions authority. John Coates Acting Director, Division of Corporation Finance March 11, 2021 Statement Published in Connection with Remarks at the 33rd Annual Tulane Corporate Law Institute [1] Not long ago, the title of this statement would have needed to unpack "ESG" into Environmental, Social and Governance. MD&A: The 12-month period ended June 30, 2022, represents the first period in which companies were required to comply with the amended MD&A disclosure requirements adopted by the SEC in November 2020. Going forward, I believe SEC policy on ESG disclosures will need to be both adaptive and innovative. General Motors announced it plans to sell only electric passenger vehicles by 2035. Here, we survey research on steroid hormones and their cognitive. Economic analysis and expert fact-finding and assessments may inform choices about how detailed and what the details should be, and the Commission needs to follow its own economic analysis guidance in arriving at its conclusions, as well as comply with administrative law. In other words, public companies disclosures were expected to go beyond basic financial statements. Evidence regarding the clear and present financial materiality of transition risk is discussed below. [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. In its overall framework, the proposed rule builds on the Task Force on Climate Related Financial Disclosure (TCFD), whose leadership includes the CFO of Unilever, the General Manager of Mitsubishi, and the former CAO of HSBC, and whose work has been supported by Bank of America, Barrick Gold, Dupont, Hewlett Packard, and Pepsico, among scores of other companies. He joined his billionaire sister and co-CEO, Denise, in 2001 to launch Bet365 after she . 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. If Congress had intended to displace Commission disclosure authority regarding environmental matters (including climate-related financial disclosures) when it gave EPA authority to require disclosure in 1970, it seems surprising (to put it mildly) that Congress did not respond after the Commission adopted environmental disclosure rules in the 1970s. Implied repeals occur only when two statutes are in irreconcilable conflict or when a later act covers the whole subject of the earlier one and is clearly intended as a substitute. In either case, the intention of the legislature to repeal must be clear and manifest. Nothing about the Clean Air Act is in irreconcilable conflict with the securities laws, and as just discussed, the Clean Air Act and subsequent EPA rulemaking address and could address only a part of what the proposed rule would address, even focusing narrowly on greenhouse gas emissions disclosure alone. They require fact-finding and expert factual judgments about likely effects, costs, benefits and risks of alternatives, including inaction, in the face of investor needs that have led most large companies to publish inconsistent and variable climate-related disclosures. It does not suggest any limit other than what is in the statutes themselves, including NEPA. Litig., 238 F. Supp. I fear, though, that participants may not have thought through all the legal implications of these statements under the circumstances of these transactions. There are 300+ professionals named "John Coates", who use LinkedIn to exchange information, ideas, and opportunities. In simple terms, the PSLRA excludes from its safe harbor initial public offerings, and that phrase may include de-SPAC transactions. At the same time, the risk of misuse of such information should also be carefully evaluated in light of the economic realities of the capital formation process. In contrast, proposals to give the Commission discretion to approve or disapprove of the soundness of stock offerings was rejected by Congressthe 1933 Act in the end embraced full and fair disclosure as the method to protect investors. VIA EMAIL: coatesjo@sec.gov John Coates, Acting Director Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549 April 14, 2021 Re: Guidance Needed to Issuers on the Presentation of Shareholder Proposals Dear Director Coates: I am writing to urge the Division of Corporation Finance to issue The rule proposes disclosures of information about financial risks and opportunities that are reasonably understood as appropriate for the protection of investors. 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. Despite this clear authority, critics argue the Commission lacks authority to move forward with the proposal. Circuit Court of Appeals in 1979: the Commission has been vested by Congress with broad discretionary powers to promulgate (or not to promulgate) rules requiring disclosure of information beyond that specifically required by statute. They point to a footnote in a 2016 Concept release to support this claim. 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. 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. The proposed rule specifies the details of disclosure, just as Congress directed the Commission to do. If comprehensive, economy-wide disclosure of climate impacts of all types of business is to be required by regulation, doing so will require more than the Commissions authority. John Coates Financial Services Professional at NYLIFE Securities LLC 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. Some claim that the statutory limits on the Commissions disclosure authority have no real meaningbecause one can pretend that anything is for protection of investors, no real limiting principle exists in the 1933 and 1934 Acts on the Commissions authority, so either it impermissibly delegates or further limits need to be invented to make the statutes constitutional. (Jan. 14, 2021). STAY CONNECTED Investments are being held back in the absence of that information. The safe harbor was intended to provide a defense against such suits and provide grounds for summary dismissal. One of the primary purposes of the 1934 Act was to augment the 1933 Act by giving the Commission authority to require ongoing reports by companies whose securities were traded on stock exchanges. Congress created the Commission as an expert agency with the capacity to address significant problems affecting the nations securities markets. No case is the contrary, and critics of the Commissions proposed rule cite none. A comprehensive reporting regime would apply to all companies, worldwide, regardless of ownership, and would encompass impacts generally, rather than solely physical risks and transition risks to investors in US public companies. In fact, its basic disclosure authorities (in Section 7 of the 1933 Act and Sections 12 and 13 of the 1934 Act) are augmented by additional specific authority to to prescribe the form or forms in which required information shall be set forth. If the Commission after fact-finding reasonably believes more detail is needed to protect investors about a concededly authorized topic, it is legally authorized to require more detail, as it has done through both rules and disclosure review since 1933. Companies face higher costs in responding to investor demand for ESG information because there is no consensus ESG disclosure system. From a legal authority point of view, company- and investor-based calibration is in keeping with the Commission focusing on investors, rather than on environmental priorities. As we think about structuring a disclosure system for ESG issues, one question that comes up is whether ESG disclosures should be the subject of mandatory versus voluntary disclosure provisions. Even if one has a strong belief in the value of the major questions doctrine as an important tool for enforcing the constitutional principle of separation of powers, there is no role for a clear statement principle when the text and context of a statute are as clear and consistent as the 1933 and 1934 Acts are. With all these changes, the appeal of understanding and developing law around economic substance over form may be greater than ever. Our regime contains comply or explain requirements (e.g., if a company does not have an audit committee financial expert, it can explain why),[3] where the ability to explain makes the requirement less than rigidly mandatory and for some companies potentially more informative. As we address these questions, we should keep in mind some additional points. We'll send you a myFT Daily Digest email rounding up the latest Denise Coates news every morning. Detailed case studies of six rules - (1) disclosure rules under Sarbanes-Oxley Section 404, (2) the SEC's mutual fund governance reforms, (3) Basel III's heightened capital requirements for banks, (4) the Volcker Rule, (5) the SEC's cross-border swap proposals and (6) the FSA's mortgage reforms - finds that precise, reliable, quantified CBA On March 22, 2021, the SEC launched a new page on its website bringing together all things ESG including agency actions and the latest information on ESG investing. In sum, each attack succeeds only as applied to a fictional new rule. Voluntary, unassured disclosures are more likely to include greenwashing, impairing investors ability to assess and price risk, and undermining honest companies ability to communicate with investors and build confidence; some greenwashing rises to the level of fraud, while other disclosures or omissions may not rise to the level of actionable fraud with proof of scienter. 2009) (There is no required state of mind for a violation of section 14(a); a proxy solicitation that contains a misleading misrepresentation or omission violates the section even if the issuer believed in perfect good faith that there was nothing misleading in the proxy materials); Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on Potential Exchange Act Section 10(b) and Section 14(a) Liability, Exchange Act Release No. On March 11, Acting Director of the SEC Division of Corporation Finance, John Coates, published a statement in connection with remarks he delivered at the 33rd Annual Tulane Corporate Law Institute, noting how important ESG issues have become to investors, public companies and capital markets, while at the same time acknowledging that 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. Third and finally, one of the more interesting and challenging aspects of recent SPAC transactions is that the investors in the SPACs first public capital raise often redeem or sell their shares around the time of the business combination. Do current liability provisions give those involved such as sponsors, private investors, and target managers sufficient incentives to do appropriate due diligence on the target and its disclosures to public investors, especially since SPACs are designed not to include a conventional underwriter at the de-SPAC stage? My remarks here do not attempt to answer those or the multitude of other questions about ESG disclosures. However, it is also commonly understood that it is the de-SPAC and not the initial offering by the SPAC that is the transaction in which a private operating company itself goes public, i.e., engages in its initial public offering. 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. This statement does not alter or amend applicable law and has no legal force or effect. That legal questionwhether the proposed disclosures could reasonably be viewed in good faith by the Commission as beneficial for investor protectionis easy to answer in the affirmative, based on the record before the Commission when it voted to propose them. She received an undergraduate degree from Princeton University and a J.D. Executive compensation is its own, complex and specialized area of management and finance, leading companies to hire expert advisors to develop compensation plans. What Joseph L. Rini Knows, Attorney Rachel Y. Marshall A Pillar of Strength for the Community, SpotDraft Raises $26 Million in Series A Funding for AI-Powered Legal Software. The Commission is charged with protecting investors generally, and even if a subset of investors believe that they do not (or do) want or need particular information, their views should not necessarily control the Commission in the exercise of its expert judgment. Information should be cost-effective and reliable, and not materially misleading, in every securities transaction. Moreover, is it appropriate that the choice of how to go public may determine or be determined by liability rules? Instead, the rules limitsto public companies with securities trading in the U.S.again underscore how it is well within the scope of traditional securities law, designed for investor protection, and not for other goals. 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). The event, which was organized by the nonprofit consumer advocacy organization Public Citizen, also included speeches by former Harvard Law School [] Its greenhouse gas emission disclosure elements are aligned with the EPAs existing requirements for US emission sources, which in turn are aligned with the widely used and privately developed Greenhouse Gas Protocol, which was a joint product of companies, investors and other organizations. The Commission cannot shirk its duty to protect investors even if that duty to an extent overlaps with EPAs duty to protect the environment. Business Law Today (June 25, 2020); Ellison Ward Merkel et al., Litigation Risk in the SPAC World, Quinn Emanuel Trial Laws. Companies either do or do not have property, plant and equipment in flood plains. 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. The Commission has authority over disclosure about all activities of a consolidated multinational if it is a US public company, including the 40+% or more of those activities that are located outside the US, as noted above. The directive consolidated authorities and activities spread across six different departments and agencies, ranging from the Department of Agriculture to the Atomic Energy Commission. It does not address how to measure or use the social cost of carbon, as is done by other agencies. 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. As a result, the rule will minimize costs and maximize benefits of compliance. Posted by John C. Coates (Harvard Law School), on, Harvard Law School Forum on Corporate Governance, on Proposal on Climate-Related Disclosures Falls Within the SECs Authority, The Illusory Promise of Stakeholder Governance, by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum, Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy A Reply to Professor Rock, Stakeholder Capitalism in the Time of COVID, Corporate Purpose and Corporate Competition, Congress created and in plain words authorized the Commission to protect investors by specifying public company disclosures of information about financial risks and. The commentary distinguishes between the full disclosure purpose of the 1933 Act from its separate, anti-fraud purpose. 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. 2634.101-805 (see Subparts A-H) Financial disclosure reports are used to identify potential or actual conflicts of interest. The caption to Section 7Information required in registration statementcontains no qualifiers on information. The authorizing language in Section 7(a)(1) is limited by Section 7(a)(2), but only for a designated class of emerging growth companies, and not as to content. 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. But forward-looking information can also be untested, speculative, misleading or even fraudulent, as reflected in the limitations on the PSLRAs liability protections, even when the safe harbor applies. Nothing at stake in this proposed rule justifies such judicial lawmaking. Instead, as summarized by the D.C. P.C. LONDON, Oct 10 (Reuters) - When John Coates was on a winning streak during his days as a trader at Deutsche Bank and Goldman Sachs, the narcotic-like "high" he experienced was so powerful he was determined to find out more. Fund v. KCG Holdings, Inc., No. Second, in thinking about ESG disclosures, we should not view ourselves as forced into a stark choice between voluntary and mandatory disclosure. Washington D.C., June 14, 2021 . The financial disclosure that John Coates filed also offered a rare public peek into the costs of corporate compliance monitors. Many legal issues are open to reasonable debate. John Coates has conceded the Australian Olympic Committee's (AOC) brand has been damaged by a bitter presidency campaign in which he emerged victorious. 'What Are We Fixing? Those limits were even more acute in 1933 (or even in 1996 when the Commission was first statutorily tasked with considering efficiency in some of its rulemakings). Surveys of individual investors by firms such as Morgan Stanley confirm this evidence. For example, the Commission could use the rulemaking process to reconsider and recalibrate the applicable definitions, or the staff could provide guidance explaining its views on how or if at all the PSLRA safe harbor should apply to de-SPACs. [14] See generally, H.R. 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. Anyone who argues that the Commission should leave the job of climate disclosure to the EPA has to have an answer to how the EPA could possibly protect US investors with information about the large amount of activities of US public companies that are located beyond the reach of the EPAs jurisdiction. All those sources here align with the 1933 Acts plain, ordinary meaning, and so confirm the above conclusions. Would it have resulted in more timely, clear and useful information for investors about asbestos manufacturers, sellers and insurance companies? Coates' Canons NC Local Government Law. 2d 613, 629 (S.D.N.Y. The proposed disclosures, including emission data, will help investors assess and price these risks and opportunities. Over that time, as noted above, the SEC proposed and adopted rules requiring environmental disclosures, in part to satisfy its obligations under NEPA. If those emissions targets are serious, they will matter to investors by leading to major changes in corporate strategy and investment policy, and in the financial risks and returns companies will generate for investors. 2, 2021). The Commissions authority to adopt the actual proposed rule remains intact, and clear. Equally clear is that any material misstatement or omission in connection with a proxy solicitation is subject to liability under Exchange Act Section 14(a) and Rule 14a-9, under which courts and the Commission have generally applied a negligence standard. The basics of a typical SPAC are complex, but can be simplified as follows. Third, the 1933 Act includes a specific limit to this authority, that it be for the protection of investorsbut no further qualifier. If that risk drives choices about what information to present and how, it should not in my view be different in the de-SPAC process without clear and compelling reasons for and limits and conditions on any such difference. The financial disclosure that John Coates filed also offered a rare public peek into the costs of corporate compliance monitors. Second, forward-looking information can of course be valuable. Dynamically explore and compare data on law firms, companies, individual lawyers, and industry trends. What is the best way to verify or provide assurance about disclosures? It does not impose regulatory control over millions of small greenhouse gas sources. Even as a disclosure rule, it only calls for a subset of the climate-related disclosures from a subset of companies that affect climate change. Here, the proposal frames difficult, subsidiary choices, which divide reasonable observers. EPA has no authority over disclosures about physical risks, or the financial risks of climate change to companies (and investors). That information may play a role in affecting the kinds of opportunities and risks that public companies can pursue with other peoples (investors) money, and how investors price those opportunities and risks, and use whatever governance or liquidity rights they have to respond to corporate behavior. The U.S. Supreme Court has repeatedly and recently emphasized that the fundamental purpose of the 1934 Act [was] to substitute a philosophy of full disclosure for the philosophy of caveat emptor . Its creation was accomplished by Presidential directive, subsequently approved by Congress in 1984. In the context of legislation that does not implicate fundamental rights or a suspect class, faithful enforcement of the Constitution requires a court to hew as closely as possible to the norm of faithful agency by enforcing the text unadulterated by judicial tweaking.. 6LinkedIn 8 Email Updates, What a SPAC Believer Thinks of SPAC Mania. Site Map, Advertise| The proposed rule would not require national banks to consider climate-risks in lending activitiesthat is for banking regulators. In part, that is because of one of the key limits on the Commissions authorityit is delegated the job of specifying information for disclosure, not the job of merits review, which would require it to have far more substantive expertise in those specialized areas.
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john coates financial disclosure