Audit, Compliance and Risk Blog

SEC emphasizes need for clear disclosure of climate change-related impacts on public companies

Posted by Jon Elliott on Mon, Oct 25, 2021

In September 2021, the Securities and Exchange Commission (SEC) Division of Corporation Finance (Division) provided public companies with guidance about disclosures of climate-related information that SEC expects from public companies. This guidance appears in a newly-released template with sample comments the Division may issue to companies regarding failures to make adequate climate-related disclosure. The remainder of this note provides some context to the relevant SEC-administered provisions, and summarizes the Division’s new letter.

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Tags: SEC, climate change, csr, Environment

Are Your Climate Risks “Material”, and If So, Do You Disclose Them?

Posted by Jon Elliott on Thu, May 17, 2018

The Securities and Exchange Commission (SEC) administers reporting requirements for companies listed on national securities exchanges (“listed companies” or “public companies”), under the federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These requirements include detailed specifications for some reporting, such as financial reporting consistent with Generally Accepted Accounting Practices (GAAP). But SEC also administers vaguer reporting standards – including requirements to report any information that might be “material” to investors’ evaluation of a public company. Registered entities must disclose material information, including details or caveats necessary to ensure that the disclosures are not misleading. Materiality is open to wide differences in interpretation, at any given time across companies with different activities and resources, and over time based on developments in markets and the wider world. The Government Accountability Office (GAO) recently issued an evaluation of SEC’s “Commission Guidance Regarding Disclosure Related to Climate Change” (referred to below as the “2010 Guidance”), and subsequent general and company-specific guidance related to this topic. Read More

Tags: Corporate Governance, Business & Legal, SEC, directors, directors & officers

SEC Expands Public Company Cybersecurity Disclosure Expectations

Posted by Jon Elliott on Tue, Apr 10, 2018

The Securities and Exchange Commission (SEC) has just published Interpretive Guidance to “assist” public companies with evaluation and reporting of their cybersecurity risks. This Guidance expands similar SEC guidance issued in 2011, reflecting the growing importance of the issue and highly-publicized cybersecurity breaches during the intervening years. The following discussion summarizes the new Guidance, and provides context.

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Tags: Corporate Governance, Business & Legal, SEC, Internet, directors, directors & officers

International Business Group Recommends Climate-Related Financial Disclosures

Posted by Jon Elliott on Tue, Aug 15, 2017

As governments worldwide consider expanding requirements to manage greenhouse gas (GHG) emissions and moderate climate change, private sector groups are mobilizing to craft voluntary reporting and management activities – which might shape or even avoid future governmental mandates. In May, the 32 international business leaders on the Financial Stability Board’s (FSB’s) Task Force on Climate-related Financial Disclosure issued recommendations for climate-related financial disclosures by public companies worldwide. The Task Force reported these recommendations to the Group of 20 (G-20) leaders at last month’s meeting in Hamburg – the G-20 finance ministers and central bankers had asked FSB in 2015 to commission the Task Force.

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Tags: SEC, Greenhouse Gas, ghg, climate change

BC Securities Commission Addresses Allegations of Fraud Against Real Estate Developer

Posted by Ron Davis on Thu, May 04, 2017

In Re Hornby Residences Ltd. (2017 BCSECCOM 17), the British Columbia Securities Commission had to determine whether a real estate development corporation and its principal had violated the BC Securities Act s. 57(b) prohibition against fraud in connection with the issuance of a security when the funds invested were used to pay the principal and other corporations controlled by the same principal, Brendan James Schouw. Schouw was a real estate developer and the sole director of Hornby, and of Grace Residences Ltd. and Homer Residences Ltd. Schouw was also connected with Drake Residences Ltd., although the Commission was not provided with information about its directors and officers.

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Tags: Corporate Governance, Business & Legal, SEC, Canadian, directors & officers

Don’t Give Insider Stock Tips As Stocking Stuffers

Posted by Jon Elliott on Mon, Dec 19, 2016

As you consider which gifts to give this Holiday season, the U.S. Supreme Court has just made it clear that you should not give the gift of insider stock tips. The Salman v. United States decision resolves a split between lower courts about whether the government must show that someone who breaks trust by giving insider information to a friend or relative automatically breaks rules against insider trading since the “tipper” expects the “tippee” will make money from the tipped information, or whether prosecutors must be prove the tipper expects to gain personally when the tippee trades.

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Tags: SEC

SEC Tries Again To Increase Resource Extraction Issuers’ Reporting

Posted by Jon Elliott on Tue, Jul 26, 2016

The Securities and Exchange Commission (SEC) has recently republished requirements for publicly listed “resource extraction issuers” to report payments they make to the U.S. federal government or foreign governments, related to commercial development of oil, natural gas, or minerals. These requirements fulfill one of many duties assigned SEC by the 2010 Dodd-Frank Act, this one codified in a new Section 13(q) of the Securities and Exchange Act of 1934 (1934 Act).

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Tags: SEC, Environmental, Oil & Gas, directors, directors & officers

Oil Companies Must Let Shareholders Vote To Expand Reporting Relevant To Climate Change

Posted by Jon Elliott on Thu, Apr 14, 2016

In recent years, activist investors have sought to expand climate-related reporting by publicly traded companies – directly by pressuring the companies, and indirectly by petitioning the U.S. Securities and Exchange Commission (SEC) and other regulators to require additional reporting in periodic reports on the businesses’ status and prospects, and in annual meeting reports and proxy requests. SEC has been criticized for doing very little in response to these requests, but took potentially important actions on March 23.

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Tags: SEC, EHS, Oil & Gas, directors, directors & officers

SEC Adopts Crowdfunding Rules

Posted by Jon Elliott on Mon, Feb 22, 2016

The 2012 Jumpstart Our Business Startups (JOBS) Act enacted a number of changes to national securities laws intended to make it easier for small companies to raise capital privately, before having to confront the possibilities of initial public offerings or acquisition. One important piece directed the Securities and Exchange Commission (SEC) to enact rules to allow “crowdfunding” of qualifying small capital issues without requiring registration of the securities or issuer with SEC itself. The JOBS Act directed SEC to issue its rules by January 2013, but SEC only completed the task in November 2015, with rules that will become effective in May 2016. (I blogged about the proposal here) SEC’s new Regulation Crowdfunding (codified as 17 Code of Federal Regulations (CFR) part 227) defines requirements for issuers, and a new category of registered entities called “intermediaries”, who must register with SEC as brokers (using pre-existing rules) or as a new category of party called “funding portals.”

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Tags: Business & Legal, SEC, EHS

SEC Ponders Responsibilities For Board of Directors’ Audit Committees

Posted by Jon Elliott on Tue, Sep 15, 2015

Boards of directors are responsible for governing their corporations. Many boards divide their work among committees. Committees often include an “audit committee,” with responsibilities that may include:

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Tags: Business & Legal, SEC, Accounting & Tax, Audit Standards