March 29, 2024

From Insider Trading to Climate Risks: SEC’s Latest Releases Affecting Corporate Reporting

From Insider Trading to Climate Risks: SEC’s Latest Releases Affecting Corporate Reporting Capital Markets

The Securities and Exchange Commission (SEC) has once again taken a step to increase corporate transparency. In a series of comprehensive releases, the SEC has proposed amendments and proposals to tighten the reins on form 10-Ks, 10-Qs, and proxy statements. Below, we’ll unpack the highlights and implications of the latest SEC rules and proposals that are shaping the future of corporate reporting.

Highlights on recent rules are as follows:

1. Releases applicable to the 10-K and 10-Q are as follows:

  1. Release 33-11138, Insider Trading Arrangements and Related Disclosures,
  2. Release 34-97424, Share Repurchase Disclosure Modernization. One release/update discussed within the 2023 SEC Quarterly Reports – Form 10-Q is the updates to share repurchase rules within the purchases of equity securities by the issuer and affiliated purchasers section. In November 2023, the SEC issued an order postponing the effective date of its share repurchase disclosure rule after the US Court of Appeals for the Fifth Circuit, in response to a lawsuit by the US Chamber of Commerce, directed it to correct certain defects the court identified in the rule by November 30, 2023. The SEC stated the rule is stayed pending further Commission action. If the stay is lifted, the requirements discussed below should be followed.
  3. Release 33-11216, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure,
  4. The SEC proposed the following rules that are not yet finalized: Release 33-11042, The Enhancement and Standardization of Climate-Related Disclosures for Investors; the proposed rules would require registrants to provide robust disclosures about climate-related risks, their climate-related targets and goals, greenhouse gas (GHG) emissions, and how the board of directors and management oversee climate-related risks. The proposal would also require registrants to quantify the effects of certain climate-related events and transition activities in their audited financial statements.

2. Proxy statements

Proxy statements continue to evolve as a communication tool that promotes corporate engagement with shareholders about matters to be addressed at shareholder meetings. In response to increased investor focus on environmental, social, and governance (ESG) topics, many companies have enhanced their proxy disclosures to highlight initiatives and practices on key ESG topics such as diversity and inclusion, human capital management, climate risk, and environmental sustainability.

The SEC’s latest releases show the dynamic nature of corporate governance and the increasing expectations for transparency in today’s markets. As companies navigate the complexities of form 10-Ks, 10-Qs, and enhanced proxy statements, they are called to address growing investor concerns around ESG factors, including climate risks and cybersecurity. Stakeholders must understand and implement these disclosures to comply with regulatory mandates and foster investor trust and corporate resilience.

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