by T. GormanPosted on Posted in SECActions

Environmental issues; climate change; and environmental, social and governance issues or ESG. These issues are all the talk, at least since the Biden administration came to Washington and took over. The SEC, which has not updated its environmental disclosure requirements in a decade, suddenly cannot get enough.

Now the agency has a senior staff position dedicated to the environment. The Acting Chair directed the Division of Corporation Finance to review the out of date Commission disclosure standards. And, the Division of Enforcement entered the fray with a press release on March 4, 2021 announcing a new task force lead by the Division’s Acting Deputy Director named the Climate and ESG Task Force.

So what will Enforcement and its new task force do for the agency in the area of the environment? Three things. First, it will “identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. That should not take long since the disclosure standards are largely ineffective.

Second, the new enforcement group will analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies,” according to the release. This could be an important function. Many funds have or are implementing climate related policies, investment strategies and approaches. Blackstone is, for example, a leader in this area.

Third, the “climate and ESG Task Force will evaluate and pursue tips, referrals, and whistleblower complaints on ESG related issues, and provide expertise and insight to teams working on ESG-related matters across the Division.” While this sounds like a potentially significant task, its actual meaning is at best elusive.

The hope here, however, is that all of these actions amount to more than what Commissioners Hester Peirce and Eland Roisman suggest in their comments published the same day as the Enforcement Release. While the two Commissioners express agreement with the new environmental – climate approach adopted recently by the agency, their view seems to be that moving forward little should be expected beyond what is currently happening: “we assume that the new initiative is simply a continuation of the work the staff has been doing for more than a decade . . .”

If the upshot of these initiatives is more of the same, the SEC would do better to just stop. World securities regulators are moving quickly to create the disclosure requirement necessary to effectively inform investors and the markets about the efforts of corporations, investment advisers, funds and others in the area of climate change and ESG as has been repeatedly recounted in articles in this space. Here is hoping that by the time of the U.N. Summit on these issues in the fall the Commission has decided to become a leader and not a follower in this critical area.

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by T. GormanPosted on Posted in SECActions

Gary Gensler, nominated by President Biden to serve as Chair, Securities and Exchange Commission, will testify tomorrow before the Senate Committee on Banking, Housing and Urban Affairs.

Mr. Gensler stresses strengthening transparency and accountability for the markets “so people can invest with confidence, and be protected from fraud and manipulation. . .” according to his brief prepared remarks for the Committee. Throughout those remarks Mr. Gensler stresses his experience and knowledge of the markets, developed through years of work and service. He previously worked at Goldman Sachs, served as the Chair of the CFTC and currently teaches courses focused on the markets at MIT.

His term as the CFTC under President Obama from May 2009 through early 2014 may be the best guide to how the nominee would serve as Chairman of the SEC. During the period of his service Congress passed the massive Dodd-Frank Act. That transformative piece of legislation gave the small agency led by Mr. Gensler a massive job: Write the rules and regulations for governing the swaps markets. He did; passed them with largely bipartisan support, and they have worked.

Mr. Gensler’s CFTC work also illustrates the kind of leader he would be at the SEC: One dedicated to moving the agency forward to provide what he calls the “clear rules of the road and a cop on the beat to enforce them.” That kind of leadership will be critical to moving the economy forward and helping the nation prosper as the country emerges from the covid pandemic.

There is no doubt that the challenges at the SEC will be significant. To begin there is virtually nobody home – there are few senior staff positions that have not been vacated. The agency also has a docket of issues and questions ranging from new listing standards for Nasdaq to a revamp of critical disclosure requirements and trading questions arising from recent disturbances in the markets. There is little doubt, however, that Mr. Gensler has the experience and expertise to direct the Commission in a manner that is consistent with its long and successful history.

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