SEC and other reporting considerations
The SEC has continued to issue new rule proposals in Q2, although the pace of rulemaking slowed down somewhat compared to Q1. Its activities have included proposed new ESG-related disclosures for investment funds and advisors and rule changes relating to special purpose acquisition companies (SPACs). Still expected are SEC proposals to require disclosures on board diversity and human capital.
The SEC has taken several actions relating to climate disclosures. In May, the SEC extended the comment period on its proposed new rules to enhance and standardize disclosures that public companies make about climate-related risks, their climate-related targets and goals, their greenhouse gas (GHG) emissions and how the board of directors and management oversee climate-related risks. The proposed rules would also require registrants to quantify the effects of certain climate-related events and transition activities in their audited financial statements. The extension of the comment period is intended to provide the public additional time to analyze the issues and prepare their comments, given the extensive interest in the proposals. Also in May, the SEC proposed rules to require investment advisors and investment funds to disclose information about ESG investment practices, including requiring certain environmentally focused funds to disclose the greenhouse gas emissions associated with their portfolio investments.
The SEC also has proposed requiring new disclosures when a special purpose acquisition company (SPAC) conducts an initial public offering (IPO) and when it combines with a private operating company in what is known as a “de-SPAC transaction.” The proposal would also subject SPACs, underwriters and their private company targets to liability under the securities laws. The proposal is intended to more closely align the disclosure requirements and legal obligations of parties involved in de-SPAC transactions with those in traditional IPOs.
Other new SEC rule proposals address investment company names, security-based swap execution, and regulation and registration of security-based swap execution facilities.
Given the number of SEC rule proposals that have been issued in recent months, audit committees should consider how their companies should be preparing for potential regulatory changes, which could impact reporting requirements, related disclosures and enforcement trends. Find out key actions for audit committees.