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It’s early days, but I’m pleased to report that the optimism I expressed about the SEC in the aftermath of the 2024 election may have been warranted.  At a minimum, the actions taken by the SEC since January 20 demonstrate support for the issuer community, an interest in pursuing the traditional goals of the SEC, and a willingness to help those of us who advise clients with respect to SEC rules and the many interpretations of those rules.

What the Commissioners Are Saying

First, on January 27, Commissioner Hester Peirce spoke before the Northwestern Securities Regulation Institute.  Her remarks were witty (as always) and, for the most part, spot on, to the point that I considered copying them here.  (I haven’t, though I have copied some of her choice remarks below.)  I do take issue with a few of her remarks (also as always), including her view that a corporation’s singular focus should be on building value for shareholders; it seems to me that it is not possible to build value without focusing on other constituencies such as customers, suppliers, and – yes – even the community at large.  Those matters aside, Ms. Peirce made the following good points, among others:

  • “Public companies should be at the beck and call of shareholders qua shareholders, not the ever-growing, never-satisfied set of stakeholders that brazenly grasp at company resources to do something other than maximize the value of the company.”
  • “The SEC…has a limited mission. One of the pillars of that mission is serving the investors who entrust their money to other people by facilitating the provision of disclosure necessary for investment decisions….”
  • “We all have special interests but endeavoring to stuff them all into securities filings undermines the reason we have such documents in the first place.”
  • “[W]e should re-examine the ownership thresholds in Rule 14a-8 and other available tools to ensure that a proponent has some meaningful economic stake or investment interest in a company. A proponent with such a commitment is more likely to submit a proposal that is actually in the interest of the company. We also should take a fresh look at how Rule 14a-8’s consideration of social significance under two bases of exclusion has affected the number, type, and excludability of shareholder proposals.”

Ms. Peirce’s remarks touched upon the politicization of the SEC but did not directly focus on its mission to help companies grow, at the same time strengthening and growing our capital markets.  That issue was addressed in remarks by SEC Acting Chairman Mark Uyeda, when he spoke before the Florida Bar’s Securities Institute and M&A Conference in late February.   Mr. Uyeda covered a lot of territory in his remarks, but the ones that got my attention included the following:

  • “The Commission has begun the process of returning to its narrow mission to facilitate capital formation, while protecting investors and maintaining fair, orderly, and efficient markets.  One purpose of the Commission’s regulatory mandate is to create capital markets that facilitate the competitiveness and ingenuity of American industry.”
  • “[T}here are things that the Commission can do to help make IPOs attractive again.”
  • “The Commission’s role in fostering economic growth does not end with the company’s IPO.  The Commission’s rules governing disclosure obligations should consider a company’s size and resources so that smaller companies are not disproportionately burdened as they compete.  The Commission introduced scaled disclosure based on a company’s size in 1992, and it was an innovative creation at the time.  However, the Commission’s current rules with respect to filer categories and associated disclosure obligations are needlessly complex and do not provide sufficient scaled disclosure benefits.  As an example, a company with a $250 million public float is subject to the same disclosure requirements as a company with a $250 billion public float.  This outcome results from the fact that the Commission has not changed its thresholds for a company to qualify as a large accelerated filer or accelerated filer since they were established in 2005.”

But There’s More – Specific Actions

Lest you think that the goals noted above, while laudable, are too lofty to be meaningful, the SEC has, in fact, taken some actions that to implement those goals and to support the issuer community, as follows:

  • On February 11, referring to the ongoing litigation regarding the SEC’s climate disclosure rules, Acting Chairman Uyeda announced that he had “directed the Commission staff to… request that the Court [overseeing litigation about those rules] not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases.”  It may be too soon to break into a chorus of “ding dong the witch is dead,” but the rules are not going anywhere for a while, at least.
  •  The SEC has also introduced a new practice of redlining updated Compliance and Disclosure Interpretations to show changes from the prior versions.  This is a very small step, but one that will save many of us a great deal of time when we are looking for SEC views on a wide variety of matters.

And that’s not all.  Regardless of what you think about crypto (and I’m one of those who find the whole area off-putting), the SEC has made it clear that it will no longer treat crypto as if it were a fatal disease that must be avoided at all costs.  And that change in attitude has taken place before the new SEC Chairman, Paul Atkins – reputed to be a staunch advocate of crypto – is seated.

In other words, so far so good.  I’m tempted to say “tune in next time for another exciting episode,” but hopefully you know that already.