4 minute read 20 Feb 2019
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Five SEC key priorities in 2019

Authors

Bridget Neill

EY Americas Vice Chair, Public Policy

Regulatory and policy strategist with three decades of experience shaping public policy impacting the global financial markets and the accounting profession. Passionate about her family.

Shauna Steele

EY Americas Director, Public Policy

Experienced capital markets, public policy and trade professional helping EY firms in the Americas navigate the dynamic public policy environment. Avid reader, Spanish speaker and mother of three.

4 minute read 20 Feb 2019
Related topics Public policy

What public companies, boards and investors should watch for in 2019

The U.S. Securities and Exchange Commission (SEC) has a 2019 agenda that includes promoting capital formation, revamping the proxy process and monitoring company disclosures about cyber risks and incidents and the impact of Brexit, among other topics.

SEC Chairman Jay Clayton has signaled his intention to follow through on priorities established in 2018 while also initiating several new ones discussed below. This publication examines the elements of the 2019 SEC agenda with the greatest potential impact for issuers, boards and investors.

  • Clayton remains focused on increasing the attractiveness of US public markets and continues to explore ways to expand investment options for retail investors while maintaining adequate investor protection.

    He has acknowledged that no single policy initiative will reverse the decline in IPOs over the past two decades or expand investment options for retail investors; rather, he has suggested that the Commission will continue to take a multifaceted approach to facilitating capital formation in 2019.

    Expected actions in 2019:

    • A proposed rule to reduce internal control attestation requirements for certain smaller companies
    • Consideration of responses to proposed rule expanding “testing the waters” accommodations
    • Consideration of possible changes to quarterly reporting and earnings releases to reduce regulatory requirements and promote long-term investing
    • A concept release on potential changes to the private offering framework
  • The SEC has placed several projects on its short-term agenda to streamline and modernize disclosure requirements. These include proposing amendments to Regulation S-X on the disclosure of financial information relating to acquired businesses and updates to Industry Guide 3 on bank holding company disclosures.

    Another project would modernize certain business and nonfinancial disclosure requirements found in Regulation S-K. This project would build on a concept release issued in 2016 covering a wide range of disclosure requirements.

    Bill Hinman, Director of the Division of Corporation Finance, also has indicated that he hopes the SEC will adopt the July 2018 proposal that would help streamline and simplify financial disclosures relating to guaranteed and collateralized debt securities.

    Scrutiny of Brexit and cybersecurity disclosures

    Clayton has indicated that disclosures relating to Brexit and cybersecurity will receive attention from the staff. Clayton has expressed concern that the market does not fully understand the implications of the United Kingdom’s planned exit from the European Union and that disclosures to investors may be insufficient.

    In addition, as cybersecurity has taken on greater prominence, Clayton and SEC staff have continued to communicate concerns that public companies are not adequately disclosing their cybersecurity risks to investors.

    Dodd-Frank rulemaking

    In 2019, the SEC plans to move forward on a rule re-proposal required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). This rule would require resource extraction companies to disclose payments to governments. While the SEC adopted a final rule to implement this provision of the Dodd-Frank Act in 2016, Congress overturned it in 2017.

    Expected actions in 2019:

    • Proposed rules to streamline and modernize certain disclosure requirements
    • Scrutiny of company disclosures on Brexit and cybersecurity issues
    • Dodd-Frank rulemaking on disclosures of payments to governments by resource extraction companies.
  • Clayton has stated that the SEC is seeking to take a “balanced regulatory approach” to FinTech developments — looking to support innovative technologies that could promote capital formation while also protecting investors.

    Expected actions in 2019:

    • Continued engagement with market participants on the interaction of the securities laws with FinTech
    • Continued monitoring of FinTech companies’ compliance with the securities laws and investigations by the Division of Enforcement where market participants fall short
  • The SEC is expected to take action regarding various aspects of the proxy process in 2019.

    Following a roundtable in November 2018 to consider the proxy process and shareholder engagement in light of recent changes in markets, technology and company operations, Clayton has identified three areas in which the SEC staff is formulating recommendations for the Commission to consider:

    • Proxy solicitation and voting process
    • Shareholder engagement through the shareholder proposal process
    • Role of proxy advisory firms

    Expected action in 2019:

    SEC staff development of recommendations regarding how to improve the proxy process

  • SEC enforcement under Clayton continues to focus on retail fraud and digital technologies. The key goals of the Division of Enforcement include deterring securities law violations by pursuing cases that send important signals to the market, return lost assets to injured investors and hold individuals accountable.

    Expected action in 2019:

    Continued focus on securities law violations that significantly harm retail investors, relate to FinTech or involve gatekeepers, such as lawyers and accountants, and individual accountability, including executives and directors

The issue of facilitating capital formation and increasing the attractiveness of the public markets for smaller companies is one of my highest priorities as SEC Chairman. I am concerned that Main Street investors are bearing costs (and missing investment opportunities) as a result of the shrinking number of US-listed public companies.
Jay Clayton
SEC Chairman

Conclusion

Clayton has laid out a clear agenda for 2019 that builds on previous actions, which could result in significant rulemaking during the calendar year. Investors, issuers and board members may want to take advantage of opportunities to engage with the Commission through the comment process or direct contact to provide input as the SEC continues to demonstrate steady progress across its range of priorities.

Summary

This publication examines the elements of the 2019 SEC agenda with the greatest potential impact for issuers, boards and investors.

About this article

Authors

Bridget Neill

EY Americas Vice Chair, Public Policy

Regulatory and policy strategist with three decades of experience shaping public policy impacting the global financial markets and the accounting profession. Passionate about her family.

Shauna Steele

EY Americas Director, Public Policy

Experienced capital markets, public policy and trade professional helping EY firms in the Americas navigate the dynamic public policy environment. Avid reader, Spanish speaker and mother of three.

Related topics Public policy