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). Do particular disclosures, procedures, and liability rules reduce the all-in costs of capital? Many contain materiality qualifiers, but many do not. From an environmental policy perspective, prioritizing based on environmental impact might make sense. 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. 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. Statement of John Coates, Harvard Law School . An increasing number of US public companies are making major capital expenditures to pursue climate-related strategies, raising financial risks to pursue opportunities for their investors. The American College of Governance Counsel is a professional, educational, and honorary association of lawyers widely recognized for their achievements in the field of governance. At an athletics meet in Melbourne early this year, he ran into John Wylie, the investment banker who chairs the Australian Sports Commission. Companies either do or do not have property, plant and equipment in flood plains. I will work tirelessly to execute our rules and make sound recommendations that will help the SEC realize its mission.. Second, in thinking about ESG disclosures, we should not view ourselves as forced into a stark choice between voluntary and mandatory disclosure. Economically, and practically, the private target of a SPAC is a different organization than the SPAC itself. The safe harbor was intended to provide a defense against such suits and provide grounds for summary dismissal. The disclosures would consist of facts, not opinions, and raise no First Amendment concern. Financial Reports. Authority for disclosure under the 1934 Act addressed more than the need for protection of the initial investor acquiring securities. A consortium of public energy companies is raising $1 billion for emissions reductions technology. Disclosure reduces paranoia, and moderates reactions. But the Commissions authorities go further, precisely because Congress recognized that investors need information beyond the moment of initial offer and sale, which are addressed by the 1933 Act. 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 25, 2021); Jennifer Bennett, Canoo Faces Investor Suits Over Post-SPAC Deal Focus Changes, Bloomberg Law (Apr. Key points: Coates was a key figure in Brisbane's 1992 Summer Olympics bid, which lost out to Barcelona The IOC has designated Brisbane as the preferred candidate city to host the 2032 Olympics Coates says he is confident Brisbane can keep costs down if it does host the Games That ESG no longer needs to be explained illustrates how important these issues have become to todays investors, public companies and capital markets. John Coates Coates has served as the SEC's Acting Director of the Division of Corporation Finance since February 2021. But we do have a provision that permits the Commission to set up rules and regulations which will have the effect of law. But Coates will have his own financial . 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. 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. (IOC) (AOC) 2020IOC ICAS . They of course help sell the deal, but they can also be a key component for boards and other participants in negotiating and understanding the economics indeed, the fairness of the transaction. In this regard, the work of the IFRS Foundation to establish a sustainability standards board appears promising. 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. Washington D.C., June 14, 2021 . It only specifies disclosures, and does not regulate climate change, or regulate climate emissions. 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. He steps down from the AOC on Saturday, less than 12 months after helping Australia win its third Games bid, this time in Brisbane in 2032, but retains his exalted IOC status. The Commissions authority to consider environmental risks was reinforced and made even more clear by another statute, which critics do not seem to have even noted, much less considered, as detailed below. About John Coates. He received his law degree from New York University Law School and his Bachelor of Arts with highest distinction from the University of Virginia. That is, the rules perspective of that of investors and companiestheir strategies, risk management, governance and metricswithout regard to whether a given company independently creates a climate impact that is large or small for the overall environment, or whether it is more or less exposed than other companies to physical risks of climate change. It also cut back on liability of disclosure. 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. Access to additional free ALM publications, 1 free article* across the ALM subscription network every 30 days, Exclusive discounts on ALM events and publications. To be sure, projections are woven into the fabric of business combinations. The safe harbor only applies in private litigation, and does not prevent the Commission from taking appropriate action to enforce the federal securities laws. Indeed, the texts are so clear thatin contrast to the many times the Commission has been challenged on anti-fraud rulemakings, where authority has been interpreted as limited by common law anti-fraud principlesfew attempts have been made to challenge the Commissions use of its basic disclosure authorities to require disclosure. John CoatesActing Director, Division of Corporation Finance. John F. Cogan, Jr. The Commissions authority, to reiterate, includes discretion to promulgate rules governing corporate disclosure. Congress wanted and authorized the Commission to require disclosure to protect investors despite these limits, based on its expert judgment about what its experience and qualitative evidence showed it, supplemented by whatever science can add. Anyone who sees a role for law to require disclosure of comprehensive information about the sources of greenhouse gas emissions will not be satisfied by this rule. John Coates, the producer of the classic animation film The Snowman, has died of cancer. The Securities and Exchange Commission today announced that Renee Jones has been appointed Director of the Division of Corporation Finance. Or they argue without evidence about secret motivations, socialist agendas, and political goals to cripple industries and to reduce our nations energy security. My remarks here do not attempt to answer those or the multitude of other questions about ESG disclosures. The long-recognized fact the statutes were remedial laws following the Crash of 29. It is true that many companies are spending money to do thisfurther evidence of the importance of the information. Financial disclosures released by former Secretary of State John Kerry indicate that until March of this year he held hundreds of thousands of dollars of investments in energy-related companies . The Division plays an essential role in ensuring investors have the information they need to make informed investment decisions. : John Dowling Coates 1950 57 - . Going forward, I believe SEC policy on ESG disclosures will need to be both adaptive and innovative. Striking down regulations adopted pursuant to clear and limited delegated authority would turn the doctrines purpose against itself, prevent Congress from assigning traditional fact-finding and implementation roles to agencies, turn courts into unelected mini-legislatures, and subvert rather than reinforce the separation of powers. Would it have resulted in more timely, clear and useful information for investors about asbestos manufacturers, sellers and insurance companies? 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. When Congress passed the PSLRA, the path to becoming a public company was fairly simple and standardized. The Commission has commonly limited requirements to material and related items, but that is not because of a legal limit on its authority, but as a subsidiary choice of how to implement Congresss policy judgment to require full and fair disclosure, based on its experience and expertise. Importantly, supporting letters came from many public companies (e.g., Adobe; Bank of America; BNP Paribas; Chevron; Dow Credit Suisse; Etsy; Microsoft; Paypal; Salesforce.com). 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.. Rep. No. There are 300+ professionals named "John Coates", who use LinkedIn to exchange information, ideas, and opportunities. Most public companies could go dark today, if they were prepared to surrender their stock exchange listings. The claim that the proposed rules requirements are so unrelated to investor protection as to altogether fall outside the Commissions obligation to specify financial risk disclosures is without merit. John Coates, the Divisions current Acting Director, has been named SEC General Counsel. The Commission does, but has no investor-protection authority over climate impacts more generally, such as those on communities or habitats, beyond impacts that are important to investors decision-making. Second, forward-looking information can of course be valuable. What disclosures do investors need to make informed investment and voting decisions? Read fairly and dispassionatelynon-politically, one might saydisclosures specified by the rule are not about environmental impact, or climate change, but about financial risks and opportunities related to climate change. John Coates Financial Services Professional at NYLIFE Securities LLC To be sure, some elements of the SECs regulatory regime reflect a recognition that small or new public companies may not be as able to shoulder the costs of all disclosure requirements as older, larger companies. Surveys of institutional investors published in peer-reviewed financial journals confirm this evidence. She received an undergraduate degree from Princeton University and a J.D. 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. The purpose of the disclosure was also to protect markets and market pricing, and improve the resulting allocation of capital. 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. He is a former Research Fellow in Neuroscience and Finance at the University of Cambridge, and previously traded derivatives for Goldman Sachs and ran a trading desk for Deutsche Bank. Another peer-reviewed, published study finds that exposure to sea level rises and flooding is causally reducing property values, consistent with physical risk already being actively if imperfectly priced in property markets, which in turn expose investors in public companies that own real estate to related financial risks. If markets are currently overly negative about a companys physical risks (e.g., to floods), such disclosures would facilitate a reduction in that companys cost of capital. Imposing further limiting principles may for some be appealing from a policy standpoint, but doing so has no basis whatsoever in the statutes text.. Moreover, state law, such as in Delaware, may require disclosure of projections used by the boards or their advisors in these transactions. The Commission has neither approved nor disapproved its content. The complete publication, including footnotes and annex, is available here. The requirements have included disclosures about risks and uncertainties generally, and of information both qualitative (business segments; competitive conditions; management, environmental and other litigation; and contracts) and quantitative (mineral reserve estimates, loan performance statistics, coverage ratios, material transactions, and compensation). The rule proposes disclosures of information about financial risks and opportunities that are reasonably understood as appropriate for the protection of investors. He has been the . What lessons can we learn from earlier examples of evolving risks? Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. 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. 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. Law.com Compass includes access to our exclusive industry reports, combining the unmatched expertise of our analyst team with ALMs deep bench of proprietary information to provide insights that cant be found anywhere else. "The staff at the Securities and Exchange Commission are continuing to look carefully at filings and disclosures by SPACs and their private targets," John Coates, the SEC's acting director of corporate finance, said in an April 8 statement .