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  • Writer's pictureDaniel Goelzer

EY on SEC Priorities for 2024

In last month’s UpdateWhat Should be on the Audit Committee’s 2024 Agenda?, January 2024 Update lists accounting and consulting firm publications that suggest issues on which audit committees should focus in 2024.  In setting their agendas, audit committees may also want to review a new EY publication, SEC top five: What public companies, boards and investors should watch for in 2024.  While the focus is broader than issues that directly affect audit committees, many of the topics discussed will impact the committee’s work. (For a discussion of EY’s outlook last year on SEC priorities, see EY on SEC Priorities for 2023, February-March 2023 Update.)

 

EY groups pending SEC initiatives under five headings – Disclosure Rulemaking, Shareholder Proposals, Potential Rulemaking Impacting Private Companies, Technology, and Enforcement.  In each area, EY discusses recent developments and outlines expected 2024 activity. 

 

The chapter on Disclosure Rulemaking is the most directly relevant to audit committees. EY discusses three disclosure-related SEC rulemaking actions likely to occur in 2024:

 

  • Adoption of climate-related disclosure rules.  The Commission is likely to finalize its long-awaited (and controversial) climate disclosure rules.  In 2022, the SEC proposed rules that would require public companies to make disclosures about climate-related risks, climate-related targets and goals, greenhouse gas emissions, and how the board and management oversee climate-related risks. The proposals would also require companies to quantify the effects of certain climate-related events and transition activities in their financial statements. See SEC Unveils its Climate Disclosure Proposals, March 2022 Update. 

  • Proposal on human capital management disclosure.  According to its regulatory agenda, the Commission intends to release a proposal on human capital management disclosure.

  • Proposal on corporate board diversity disclosure.  A rule proposal on board diversity disclosure is also on the Commission’s regulatory agenda.

 

The Shareholder Proposals chapter of the paper may also be of interest to audit committees.  EY notes that the SEC will consider adopting a final rule based on a pending proposal to impose new limits on the ability of companies to exclude shareholder proposals from the proxy statement.  Opponents of these proposals have, as EY points out, highlighted “concerns, such as interference with the roles of management and the board and higher costs, including for non-petitioning investors.”

 

With respect to Enforcement, the paper cites, among other trends that may impact 2024, SEC Chair Gensler’s emphasis on the responsibilities of gatekeepers, such as lawyers and accountants, and his assertion that “[w]hen we hold accountable those in positions of trust, that builds trust in the markets.” Among other enforcement areas to watch in 2024, EY includes ESG disclosure: “The Commission is expected to continue scrutinizing market participants’ claims around ESG matters to make sure that these are consistent with companies’ actions. * * * The Commission [is] also focused on the adequacy of disclosure controls on ESG-related matters and the accuracy of governance-related disclosures.”  See ESG Meets Disclosure Controls in an SEC Enforcement Action, February-March 2023 Update.

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