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. This is for the obvious reason that investors in the parent company face the consequences of all economic results created by that company. The plain language could not be clearer in directing the Commission to do what it is proposing to do: specify the details of disclosure appropriate to protect investors, based on its fact-finding and expert judgment. 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. 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. Modern finance and valuation techniques focus on risk and expected future cash flows. If the public wants comprehensive disclosures of climate impact that extend beyond impacts on investors, legal authorities other than those used here may need to be usedperhaps by other agencies or Congress itself. 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. If a company would benefit from climate-mitigation policies adopted by other agencies, that information would be no less useful to investors than information about transition risk. It is not a rule requiring or limiting opinions or controversial speech, and raises no First Amendment concerns. Earnings statements, analyst call scripts, investor presentations, and the regular flows of press releases, investor relations communications and other ways companies supplement disclosure requirements are commonly longer or more complex than anything required by the Commissions rules. If there are risks to the use of cost-effective, complete, and reliable forward-looking information in any setting, those risks should be carefully evaluated in light of the goals of the federal securities laws. 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. 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. Companies face higher costs in responding to investor demand for ESG information because there is no consensus ESG disclosure system. The context of this authorizing language reinforces these conclusions. Most large public companies report much climate information, albeit in a non-comparable and inconsistent way. 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. Site Map, Advertise| Only at that time did EPA take the position its 1970 authority over air pollution gave it authority to require climate-related disclosures. First, while we should be mindful of the costs of new ESG disclosures, we must at the same time acknowledge the costs from the absence of a consensus ESG-focused disclosure system. It is true that the subject matter of the financial risks and opportunities raised by climate change are complex, and climate experts have specialized knowledge about climate science. First, and most directly, all involved in promoting, advising, processing, and investing in SPACs should understand the limits on any alleged liability difference between SPACs and conventional IPOs. 25, 2021); Jennifer Bennett, Canoo Faces Investor Suits Over Post-SPAC Deal Focus Changes, Bloomberg Law (Apr. He joined his billionaire sister and co-CEO, Denise, in 2001 to launch Bet365 after she . John Coates does not need much of an introduction. Appropriate liability should attach to whatever claims it is making, or others are making on its behalf. 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. But that, too, is uncertain at best. It does not suggest any limit other than what is in the statutes themselves, including NEPA. Professor Coates served as General Counsel and as Acting Director for the Division of Corporation Finance for the SEC. As John Coates steps down, two things make him 'very proud' The release cites a number of studies to this effect. Part of the difficulty is in the fact that ESG is at the same time very broad, touching every company in some manner, but also quite specific in that the ESG issues companies face can vary significantly based on their industry, geographic location and other factors. But companies will not be limited by the rule itself in how they and their investors respond to climate change. You can see John Rubin's blog on this here. More specifically, any material misstatement in or omission from an effective Securities Act registration statement as part of a de-SPAC business combination is subject to Securities Act Section 11. Important and challenging questions must be addressed, such as: These are questions that the SEC should be a key part of answering. In addition to being limited and calibrated to U.S. public companies, the rule does not require disclosure related to non-investor impacts. Customer Service| Disclosures - FEDERAL RESERVE BANK of NEW YORK Harvard Law's John Coates, Now at SEC, Reveals Consulting Income The D.C. Circuits decision, moreover, was premised in part on a representation by the Commission that the Commission would continue to reevaluate the need for such [new disclosure] requirements from time to time. The climate disclosure rule now proposed by the Commission is precisely in keeping with that long-standing commitment by the Commission. By contrast, the focus of traditional environmental regulationincluding EPA reporting rulesis solely the reversethe impact of companies on climate change. Both options are priced the same. John Coates - Forbes from Harvard University. But it remains true that IPOs are understood as a distinct and challenging moment for disclosure. Rather, as long as the Commission considers that question in good faith and follows appropriate process, Congress has directed that the Commission make that decision, not the courts. But critics claim that EPA authority repealed the Commissions authority is even more basically addressed by noting the significant differences in the two agencies organic statutes as applied to climate-related financial risk. . Acting Corp Fin Director Coates says ESG disclosure requirements In the budget rider, Congress made no mention of any other agency, nor can the text of that law be reasonably interpreted to displace any agencys authority. Apr. One study worth highlighting, now published in a leading finance journal, finds that climate disclosures are already actively if imperfectly priced in the capital markets, effects confirmed in other published articles. 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. The safe harbor was intended to provide a defense against such suits and provide grounds for summary dismissal. They believe climate change is not primarily caused by human activity. The rest of this post details Points I and II. Companies objectively do or do not have strategies that reflect transition risk or physical risks of climate change. 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. Previously, Coates was a partner at Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and financial institutions. Private equity fund investors are already and increasingly demanding climate-related information and commitments from the funds or their advisors. A SPAC Curveball | Publications | Kirkland & Ellis LLP During the hearings, it was explicitly noted by a former FTC Commissioner and an advisor to President Roosevelt that: We are trying not to have this bill be too long. In sum, each attack succeeds only as applied to a fictional new rule. About ten percent of SPACs have liquidated between 2009 and now.[6]. John M Coates Mark Gurnell Zoltan Sarnyai Little is known about the role of the endocrine system in financial decision-making. It only specifies disclosures, and does not regulate climate change, or regulate climate emissions. 3 The sweep of regulatory change has reignited criticism for failure to base the changes . Although climate change overall indisputably raises important policy questions, those remain for Congress. All Rights Reserved. The Division plays an essential role in ensuring investors have the information they need to make informed investment decisions. These claims raise significant investor protection questions. It also illustrates the pace of ESG developments. Ch. On April 12, 2021, the Staff of the U.S. Securities and Exchange Commission (SEC), under the signature of Acting Director of the Division of Corporate Finance John Coates and Acting Chief Accountant Paul Munter, released the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies 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. 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. [5] For studies of SPACs, see, e.g., Michael Klausner, Michael Ohlrogge and Emily Ruan, A Sober Look at SPACs, Yale J. Reg. JOHN COATES, HARVARD LAW SCHOOL: Okay, thank you. Bare claims that a later-in-time-statute addressing a different agency and a different set of legislative purposes are ever viewed by courts as silently trumping earlier statutes if their content overlaps in any way, or if the later one is in some way more specific than the earlier one, are wrong as a matter of law. Its creation was accomplished by Presidential directive, subsequently approved by Congress in 1984. 5, 2021); Priya Cherian Huskins, Why More SPACs Could Lead to More Litigation (and How to Prepare), A.B.A. Jones is a member of the American Law Institute and has served as the Co-Chair of the Securities Law Committee of the Boston Bar Association. Although some are reluctant to consider legislative history or expert contemporaneous commentary in interpreting statutes, it is useful to do so briefly here for a simple reason. 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. Those involved should be accountable to relevant constituencies, including investors and companies. John C. Coates and R. Glenn Hubbard, Competition in the . She received an undergraduate degree from Princeton University and a J.D. To the extent that those who disfavor consideration of legislative history truly give primacy to legislative text and structure, there is no plausible basis on which to argue the Commission lacks authority to adopt the proposed rule. : John Dowling Coates 1950 57 - . Critics of Coates say he has too . Private companies that combine with SPACs to enter the public markets have no more of a track record of publicly-disclosed historical information than private companies that are going through a conventional IPO. Over time, the Commission has used its authorities under the 1933 Act and the 1934 Act to specify the details of required disclosures about a range of matters, both in and outside corporate financial statements, as illustrated in detail in Annex A to this post. John Coates is a senior research fellow at the University of Cambridge. 'Horrendous enemy, terrific friend': What drives AOC head John Coates? "He has spent the last three decades deeply engaged with our capital markets as a scholar, practitioner, and member of the SEC's Investor Advisory Committee. In simple terms, the PSLRA excludes from its safe harbor initial public offerings, and that phrase may include de-SPAC transactions. John Coates, named acting director of the SEC's Division of Corporation Finance on Feb. 1, made the remarks on Thursday during a conference on climate finance hosted by the Institute of. The resulting awareness of the need for detailed specification of disclosures led to the delegation reflected in the 1933 Act. The creation of an entire new agency (the Commission) to implement and enforce the laws. For example: Instead, the proposed rule would increase the climate-related information provided by public companies to investors. 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. Denise Coates, the quiet queen of online betting from Stoke | Financial [2] It permits significant differences in how companies respond to a variety of mandatory requirements, including in many cases disclosing items if and only if they are material. Clear statement canons play no role when statutes speak clearly. 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. 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. 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. An IPO is where the protections of the federal securities laws are typically most needed to overcome the information asymmetries between a new investment opportunity and investors in the newly public company. Many legal issues are open to reasonable debate. Thousands more have been filed since the release was proposed, including many from self-identified individual investors. 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 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. In the Clean Air Act amendments of 1970, Congress gave EPA authority to require disclosures relating to the environment. Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Copyright 2023 ALM Global, LLC. Office of the Clerk, U.S. House of Representatives Most public companies could go dark today, if they were prepared to surrender their stock exchange listings. Where and how should disclosures be globally comparable? The actual rules fit with the goals of environmental activists is poor, and its fit with the goals of investor advocates is tight. License our industry-leading legal content to extend your thought leadership and build your brand. The institutions included both passive index funds and actively managed funds, as well as pension funds and other kinds of institutions. Numerous other disclosure requirements adopted by the Commission over the years are similar in applying to specialized areas of expertise primarily existing outside the agency. 5 . That climate risks overall have been overstated by climate activists. 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. Public companies are already subject to more regulation, however, and if the requirements of the Sarbanes-Oxley Act did not drive a wave of going private transactions (and they did not), the marginal additions to disclosure required by this rule is highly unlikely to do so. Professor of Law and Economics Harvard Law School 1875 Cambridge Street Cambridge, MA 02138, United States phone: 617-496-4420 e-mail: jcoates@law.harvard.edu *Corresponding Author Electronic copy available at : http ://ssrn.com /abstract = 2375396 COST-BENEFIT ANALYSIS OF FINANCIAL REGULATION: CASE STUDIES AND IMPLICATIONS (Sept. 30, 2020). SEC.gov | John Coates Named Acting Director of the Division of .. The Court has stressed the structure and design of the 1933 and 1934 Acts reflect an understood need for regulatory flexibility, even in decisions limiting the reach of Commission rules where the precise limits of its authority are less clear, such as Rule 10b-5: Congress recognized that efficient regulation of securities trading could not be accomplished under a rigid statutory program. In numerous cases, the Court and lower courts have held that the federal securities laws are to be construed broadly, not technically and restrictively, but flexibly to effectuate its remedial purposes.. Companies may chooseas many do nowto go beyond what is required, to convince investors and others that (for example) their strategies are going to succeed.
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