john coates financial disclosure john coates financial disclosure

This blog answers some questions about the changes. 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. A comprehensive reporting regime would apply to all companies, worldwide, regardless of ownership, and would encompass impacts generally, rather than solely physical risks and transition risks to investors in US public companies. It is also not a rule the EPA or any other regulatory agency has adopted or could legally adopt. Previously, she represented private and public companies on corporate and securities matters at Hill & Barlow law firm. John Coates, the producer of the classic animation film The Snowman, has died of cancer. A draft of what would become the 1933 Act in the Senate included disclosure items directly in the statute, and did not contain the equivalent language later adopted in Section 7, which directs the Commission to go beyond that list (which is separate from the Commissions general rulemaking authority in Section 19). John Jenkins, SPACs: Is the PSLRA Safe Harbor Driving the Boom?, Deal Lawyers.com (Feb. 3, 2021); Bruce A. Ericson, Ari M. Berman and Stephen B. Amdur, The SPAC Explosion: Beware the Litigation and Enforcement Risk, Harv. For EPA, those emissions may not be a priority. Where do we go from here? Join National Law Journal now! EPA, for example, exempts from reporting emission sources below source-specific thresholds. In their second stage, SPACs complete a business combination transaction, in which the SPAC, the target (i.e., the private company to be acquired), or a new shell holdco issues equity to target owners, and sometimes to other investors. Securities Act Rule 419 (which predated passage of the PSLRA) limits its definition of blank check company to one that issues penny stock. Most SPACs, however, avoid meeting the definition of penny stock issuer and are therefore neither a blank check company nor a penny stock issuer as those terms are defined. As a result, the rule will minimize costs and maximize benefits of compliance. First, the 1933 Act itself required disclosure not only of specified financial items, but also qualitative, open-ended information, such as the general character of the companys business, compensation, and material contracts, and reinforced its breadth by referring not only to opinions of accountants and appraisers but also engineers and other professionals, such as lawyers oras under the present proposalexperts on greenhouse gas accounting. To be sure, an IPO is generally understood to be the initial offering of a companys securities to the public, and the SPAC shell company initially offers redeemable equity securities to the public when it first registers to raise funds in order to look for and later acquire a target. Rather than casting disclosure rules in stone, Congress opted to rely on the discretion and expertise of the SEC for a determination of what types of additional disclosure would be desirable. The actual rules fit with the goals of environmental activists is poor, and its fit with the goals of investor advocates is tight. The rule as proposed would provide a framework for companies to inform investors about all of the effectsprofitable and loss-causingthat climate risks may have on a company. At the end of 2018, the US SIF Foundation identified $11.6 trillion in US-domiciled sustainable, responsible, and impact investment strategy assets, of which $8.6 trillion were managed on behalf of institutional investors and $3.0 trillion were managed on behalf of individual investors. Dynamically explore and compare data on law firms, companies, individual lawyers, and industry trends. What disclosures do investors need to make informed investment and voting decisions? Key points: Coates was a key figure in Brisbane's 1992 Summer Olympics bid, which lost out to Barcelona The IOC has designated Brisbane as the preferred candidate city to host the 2032 Olympics Coates says he is confident Brisbane can keep costs down if it does host the Games John Coates is the John F. Cogan Professor of Law and Economics at Harvard Law School, where he also serves as the Deputy Dean for Finance and Strategic Initiatives and Research Director of the Center on the Legal Profession. The only limit on companies ability to speak about climate is a long-standing limitnot created by the proposed rulethat they not lie or deceptively omit material information in doing so. ': ABA Rejects Proposal to Make Law School Admissions Tests Optional, 'A Very Virginia Spin': Businesses Must Establish Internal Appeals Process Under New State Consumer Data Privacy Laws, Read the Document: DOJ Urges Court to Deny Trump Immunity in Jan. 6 Appeal, Paul Clement Says Tribalism at Law Schools Hurts Judicial Legitimacy, Law.com Editors and Analysts Offer Top Trends to Watch for 2023. 1 Twitter 2 Facebook 3RSS 4YouTube They will continue to be vigilant about SPAC and private target disclosure so that the public can make informed investment and voting decisions about these transactions. 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. As noted in the Commissions 2010 climate guidance, A 2007 [GAO] report states that 88% of all property losses paid insurers between 1980 and 2005 were weather-related. Since 1980, the US alone has experienced 323 severe weather events causing more than $1 billion of damage each. In closing, I want to make three final points. Finally, it is beyond argument that the Clean Air Act nowhere mentions the Commission much less modifies its disclosure authority. And to be yet more clear, the Commission has not simply expanded or added to required disclosures over timeit has cut, compressed, and consolidated as well, in step with the needs of investors over time. That climate risks overall have been overstated by climate activists. 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. Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst. Not surprisingly, disclosure about these risks did not initially show up in SEC filings, but there too they went from invisible to increasingly disclosed. 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. ESG problems are global problems that need global solutions for our global markets. 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 the proposing release goes beyond the numerous supportive investor comments in the March comment file to note at length many kinds of additional evidence showing ways in which more, more comparable, and more reliable information would protect investors by improving their ability to assess and price climate-related financial risks and opportunities, both at the time of initial stock investments and in secondary market trading. As discussed in Point II, the proposed rule requires disclosures about financial risks and opportunities, so even if there were an explicit limit on the Commissions authority that disclosures under Section 7 be financial in nature, or related to the financial statements, or to the elements in the statute, the proposed rule would still be authorized. The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2) all agencies of the Federal Government shall make available to States, counties, municipalities, institutions, and individuals, advice and information useful in restoring, maintaining, and enhancing the quality of the environment. Rather, it calls for specific disclosures that investors in US public companies need to evaluate and price climate-related financial risks and opportunities. I will work tirelessly to execute our rules and make sound recommendations that will help the SEC realize its mission.. 14, 2014) (setting forth special procedures required in mergers involving control shareholders, without which heightened entire fairness must be shown by interested fiduciaries); Olenik v. Lodzinski, 208 A.3d 704 (Del. 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. They of course help sell the deal, but they can also be a key component for boards and other participants in negotiating and understanding the economics indeed, the fairness of the transaction. Law.com Compass delivers you the full scope of information, from the rankings of the Am Law 200 and NLJ 500 to intricate details and comparisons of firms financials, staffing, clients, news and events. This discretion continues to be sensible, in light of the fact that: The Commissions task [is] a peculiarly difficult one, requiring it to find a path between the views of the parties to the rulemaking polarized in support of the broadest disclosure or in opposition to any disclosure, to interpret novel statutory commands, and to make decisions against the background of rapidly changing conditions . JOHN COATES, HARVARD LAW SCHOOL: Okay, thank you. Surveys of institutional investors published in peer-reviewed financial journals confirm this evidence. As stressed by Commissioner Peirce in her dissenting statement, the proposed disclosures called for by the rule are in line with prior Commission-required disclosures, as detailed in Annex A. License our industry-leading legal content to extend your thought leadership and build your brand. With all these changes, the appeal of understanding and developing law around economic substance over form may be greater than ever. 2017) ([W]here defendants make mixed statements containing non-forward-looking statements as well as forward-looking statements, the non-forward-looking statements are not protected by the safe harbor of the PSLRA.). John Coates does not need much of an introduction. In other words, public companies disclosures were expected to go beyond basic financial statements. 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. It has never been EPAs job. Although courts have increasingly applied the First Amendment to disclosure obligations over time, critics are able to cite no case law supporting the notion that simply because facts may inform or be relevant to a political debate, requirements calling for disclosure of those facts are subject to heightened scrutiny, much less violate the First Amendment. Moreover, state law, such as in Delaware, may require disclosure of projections used by the boards or their advisors in these transactions. When the only dissenting Commissioners primary basis for dissenting is that the Commission has already addressed the topic in prior rulemakings upheld by courts, courts have no basis for using one discretionary canon to apply personal policy judgments on a topic within the Commissions conventional and textually clear statutory authority. He observed first-hand the powerful emotions driving traders. John C. Coates is the Acting Director of the SEC's Division of Corporation Finance. It is not a rule requiring or limiting opinions or controversial speech, and raises no First Amendment concerns. Modern finance and valuation techniques focus on risk and expected future cash flows. It does not embody a general policy to address climate change, or engage the range of social and economic issues that climate change raises. [12] Given this legal landscape, SPAC sponsors and targets should already be hearing from their legal, accounting, and financial advisors that a de-SPAC transaction gives no one a free pass for material misstatements or omissions. These claims raise significant investor protection questions. Thousands more have been filed since the release was proposed, including many from self-identified individual investors. Asbestos-related disclosure is a great example. Aside from the elementary fact that the Commission has no authority to edit Congressionally adopted statutes, the concept release actually says precisely the opposite. EPA did not use its authority to develop greenhouse gas emission disclosure requirements until 2009, and did so only after being directed to do so by Congress in an annual budget appropriations rider. John Coates Financial Services Professional at NYLIFE Securities LLC Law Offices of Gary Martin Hays & Associates 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. Supporting statements were also overwhelmingly filed directly by investors of all kinds (not just or even primarily from socially activist or impact investors). For example, it does not call for disclosure of a companys climate-related impacts on employees or customers or communities, except to the extent those impacts result in overall financial or business risks or opportunities (which do impact investors). The subject of a disclosure is new, when the nature of business and investment is dynamic. Even as to the financial system, it does not set out comprehensive climate policy. John Coates is author of the financial bestseller The Hour Between Dog and Wolf: How Risk-Taking Transforms Us, Body and Mind. Critics of Coates say he has too . Sixty percent of the Fortune 500 have announced climate targets, typically stated with reference to emissions data, including 17% with net-zero targets, yet 72% of investors lack confidence companies are serious about these targets. This is exactly how the Commission has taken on similar issues in the past, as detailed in Annex A. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Should the SEC reconsider the concept of underwriter in these new transactional paths? The focus of those amendments, however, was the creation of national air quality standardswhat we generally call pollutionand the enforcement of those standards on a set schedule. John Coates Coates has served as the SEC's Acting Director of the Division of Corporation Finance since February 2021. In the context of legislation that does not implicate fundamental rights or a suspect class, faithful enforcement of the Constitution requires a court to hew as closely as possible to the norm of faithful agency by enforcing the text unadulterated by judicial tweaking.. Three points about this text are worth emphasizing. 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. What is proposed is to not to add new subject matters to public company disclosures, but to refine the mode and detail of already-required 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. On balance, research on the Act's net . 1 Twitter 2 Facebook 3RSS 4YouTube To view this content, please continue to their sites. Donilon - 278.pdf Robert Downing - 278.pdf Travis Dredd - 278.pdf Anita Dunn - 278.pdf Stacy Eichner - 278.pdf John Elias . Do current liability provisions give those involved such as sponsors, private investors, and target managers sufficient incentives to do appropriate due diligence on the target and its disclosures to public investors, especially since SPACs are designed not to include a conventional underwriter at the de-SPAC stage? Previously, Coates was a partner at Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and financial institutions. The case for the Commissions authority to adopt the proposed rule is a simple, two-premise syllogism: Hence the rule is authorized. 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. Under federal securities law, the touchstones for all securities offerings remain what they have long been. Congress did not direct the Commission to protect investors through disclosure only when it is politically non-controversial to do so. John Coates failed to apologise for his comments towards Annastacia Palaszczuk. As the proposing release notes, half of all public companies already make some climate disclosures in their SEC reports, and the Chamber of Commerce reports that more than half of surveyed companies publish sustainability reports. It does not even address new topics for purposes of disclosure, but instead (as discussed above) changes the specificity and mode of disclosure about long-regulated topics. I think it is only about 30 pages, while the British Companies Act is over 300 pages. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere); Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy A Reply to Professor Rock by Lucian A. Bebchuk, Alma Cohen, and Charles C. Y. Wang (discussed on the Forum here); Stakeholder Capitalism in the Time of COVID, by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Corporate Purpose and Corporate Competition by Mark J. Roe (discussed on the Forumhere). Her leadership will be invaluable as the Division facilitates disclosure under our current rules and undertakes rule modernization to meet the challenges of today. . Any answer to that question should note the limits of the safe harbor in the PSLRA. [17] But it also is clear that investors at the time of the initial SPAC filing cannot understand all aspects of the long-term value proposition of the offering, precisely because a SPAC does not have operations or a business plan beyond a search for a target. Posted by John C. Coates (Harvard Law School), on, Harvard Law School Forum on Corporate Governance, on Proposal on Climate-Related Disclosures Falls Within the SECs Authority, The Illusory Promise of Stakeholder Governance, by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum, Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy A Reply to Professor Rock, Stakeholder Capitalism in the Time of COVID, Corporate Purpose and Corporate Competition, Congress created and in plain words authorized the Commission to protect investors by specifying public company disclosures of information about financial risks and. 2020) (breach of duty of candor due to failure to disclose conflict of interest in merger); Chester County Emp.s Ret. 6LinkedIn 8 Email Updates, Accounting and Financial Reporting Guidance, Compliance and Disclosure Interpretations, No-Action, Interpretive and Exemptive Letters, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs), SPACs, IPOs and Liability Risk under the Securities Laws, ESG Disclosure Keeping Pace with Developments Affecting Investors, Public Companies and the Capital Markets. The result is a continuously adjusted, detailed system of disclosure specifications, reflecting the Commissions fact-finding and expertise. It is not a transformative surprising regulatory departure, raising such a major question as to justify interpretive methods other than those of a faithful agent of Congress. Finally, a coordinated global disclosure system has great potential benefits, but achieving one will take careful attention to institutional design. Companies either do or do not engage in activities that result in the emission of greenhouse gases. Despite this clear authority, critics argue the Commission lacks authority to move forward with the proposal. No offers may be made or accepted from any resident outside the specific states referenced. It also illustrates the pace of ESG developments. Circuit concluded in 1979 that based on the record before it at that time, the Commission was not required to adopt environmental disclosure obligations beyond what it had already adopted, the Court also concluded that it was authorized to and could do so, if the Commission itself came to an expert judgment that doing so was in service of its statutory missions of protecting investors and promoting the public interest. [11] See, e.g., Beck v. Dobrowski, 559 F.3d 680, 682 (7th Cir. In plain unambiguous text, they encompass financial risks and opportunities related to any source. 2008) (identifying a breach of fiduciary duties for failure to disclose material facts to stockholders before stockholder vote on merger); City of Fort Myers Gen. Emp.s Pension Fund v. Haley, 235 A.3d 702 (Del. 28, 2018) (refusing to dismiss claim that Musk controlled Tesla despite owning only 22% of the voting power due to actual domination and control). Don't miss the crucial news and insights you need to make informed legal decisions. Fund v. KCG Holdings, Inc., No. Of course, as Commissioner Peirce does not do much to dispute, and as the proposing release makes clear, existing disclosures are spotty, inconsistent, incomplete and unverified under existing Commission rules. The proposed rule specifies the details of disclosure, just as Congress directed the Commission to do. What is the best way to verify or provide assurance about disclosures? Our existing disclosure regime, however, is already more nuanced than that, and there is no reason an ESG disclosure system would need to be less nuanced. Where and how can disclosures be aligned with information companies already use to make decisions. The Commission cannot shirk its duty to protect investors even if that duty to an extent overlaps with EPAs duty to protect the environment. 3d 1041, 1049-50 (N.D. Cal. Aircraft manufacturers essentially have their own specialized program accounting, due to the unusually long and complex capital investment process they follow. For example: Instead, the proposed rule would increase the climate-related information provided by public companies to investors. He was in his eighties. Further reducing concerns about whether the rule is within the Commissions expertise, the proposed rule aligns with ways that companies and investors have jointly and voluntarily agreed to provide climate-related information. 51283 (Mar. For example, many companies have no major facilities in flood plains, do not consume significant amounts of energy, and do not produce significant greenhouse gas emissions. The rest of this post details Points I and II. But it is also clear that companies are not doing so consistently, comparably, or reliably. The National Law Journal Elite Trial Lawyers recognizes U.S.-based law firms performing exemplary work on behalf of plaintiffs. Third, the 1933 Act includes a specific limit to this authority, that it be for the protection of investorsbut no further qualifier. Mr Coates told Channel 7's Sunrise he "overruled" Ms Palaszczuk after she initially said she would not be among the 1000 or so VIPs to attend the Opening Ceremony, which - like most of the . Customer Service| If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. But most SPACs since 2009 have gone on to identify acquisition candidates. Image: Getty. 22, 2019) (enjoining two cross-conditioned mergers due to disclosure inadequacies concerning special procedures used to mitigate conflict of interest). 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. No case is the contrary, and critics of the Commissions proposed rule cite none. 1, 2021, 4:10 PM). Again, this language is not limited to what is necessary to protect investors, but gives the Commission discretion to specify what information is appropriate to protect investors and markets, based on its fact-finding and expert application of the statutes goals to evolving investor needs. SPAC use and popularity have soared over the past six months, John Coates, acting director of the Securities and Exchange Commission's Division of Corporation Finance, said in a note Thursday.. Currently, EPA does not purport to require disclosures about greenhouse gas emissions from facilities located outside the US, even if they are owned by US companies. In truth, as this Point will detail, the actual proposed rule best fits with what investors need and want, and not what climate activists seeking to reduce climate impacts of business would seek, or even a rule they might write to elicit reporting about those impacts. LexisNexis and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. I thank Michael Conley for his service as Acting General Counsel, and I look forward to continuing to work with Michael and John on critical matters before the Commission., I am honored to continue to help advance the SECs mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation, said Coates. If the SPAC fails to find and acquire a target within a period of two years, the promote is forfeited and the SPAC liquidates. How much standardization can be achieved across industries? These data, again, are thus directly relevant to financial risks and opportunities for public companies.