SEC Rulemaking is in Hyperdrive: Spring 2022 Regulatory Agenda
On June 22, the Biden Administration released the Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions – essentially a collection of the regulatory actions that the various federal administrative agencies plan to take in the near and long term. The SEC’s contribution to the Agenda indicates that the Commission plans to adopt or propose over 50 rules in the coming months, many of which would have far-reaching impacts on public companies, financial institutions, or the securities markets. Items and their target action dates that may be of particular interest to audit committees include:
Climate Change Disclosure – Final rule to be adopted in October 2022. The SEC staff is considering recommending that the Commission adopt rule amendments to enhance disclosures regarding issuers’ climate-related risks and opportunities. The amendments were proposed in March 2022. See SEC Unveils its Climate Disclosure Proposals, March 2022 Update.
Listing Standards for Recovery of Erroneously Awarded Compensation (Claw Backs) – Final rule to be adopted in October 2022. The SEC staff is considering recommending that the Commission adopt rules to direct securities exchanges to prohibit the listing of companies that have not implemented a policy mandating the recovery of incentive-based compensation following the restatement of financial statements on which the compensation was based. The claw back rule was originally proposed in 2015. The comment period was re-opened October 2021. See SEC Revives a Proposal to Require Compensation Claw Backs After Restatements, September-October 2021 Update). The SEC recently announced a third comment period on this proposal.
Pay Versus Performance – Final rule to be adopted in October 2022. The SEC staff is considering recommending that the Commission adopt rules to require issuers to disclose information that shows the relationship between executive compensation actually paid and the financial performance of the issuer. This rule was originally proposed in 2015. The comment period was reopened in February 2022. See SEC Wants to Hear More About Pay-For-Performance Metrics, January-February 2022 Update.
Human Capital Management Disclosure – Proposed rule to be published in October 2022. The SEC staff is considering recommending that the Commission propose rule amendments to enhance disclosures regarding human capital management. The current human capital disclosure rules were adopted in August 2020. See SASB Can Help Companies Comply with the SEC’s Human Capital Disclosure Requirement, December 2020 Update.
Cybersecurity Risk Governance – Final rule to be adopted in April 2023. The SEC staff is considering recommending that the Commission adopt rules to inform investors about cyber-security risk management, strategy, and governance, and to provide timely notification of material cybersecurity incidents. The Commission proposed such rules in March 2022. See SEC Proposes Cyber Risk Management and Attack Reporting Requirements, March 2022 Update.
Corporate Board Diversity – Proposed rule to be published in April 2023. The SEC staff is considering recommending that the Commission propose rule amendments to enhance disclosures about the diversity of board members and nominees. The current board diversity disclosure rules were adopted in 2009.
Disclosure of Payments by Resource Extraction Issuers – Proposed rule to be published in April 2023. The SEC staff is considering recommending that the Commission amend the existing rules that require disclosure of payments made by issuers to the U.S. government or to foreign governments for the commercial development of oil, natural gas, or minerals. The current resource extraction disclosure rules were adopted in December 2020. See If at First You Don’t Succeed: SEC Adopts Revised Resource Extraction Disclosure Rule, December 2020 Update.
Inclusion of a project on the Agenda does not commit an agency to act on it, and many of the SEC’s ambitious target action dates are likely to slip. SEC Commissioner Peirce issued a statement criticizing the Agenda, which she characterized as a “rush of radical rulemakings * * * despite pleas from almost every type of market participant and other interested party that the Commission slow down so that the public can catch up and provide meaningful input on our outstanding proposals.”