john coates financial disclosure john coates financial disclosure

But we do have a provision that permits the Commission to set up rules and regulations which will have the effect of law. De-SPAC transactions also may give rise to liability under state law. Most companies now includeand sometimes are required to include industry- or firm-specific key performance indicators in their Commission filings, which require industry- or firm-specialized knowledge to understand and evaluate. It does not suggest any limit other than what is in the statutes themselves, including NEPA. Mar. But for investors in that company, they reasonably could be, because the transition risks (in the form of higher energy costs or potential need for capital expenditures to mitigate their impacts) could be large for that company, depending on its size, capital, liquidity and financial resources. This rule would not transform even the portion of the American economy regulated by the Commissionwhich remains investments in and markets for securities of public companies, not privately held companies, and the proposal adds no new companies to its disclosure regime. Asbestos-related disclosure is a great example. John Coates is the John F. Cogan, Jr. Nor has the major questions doctrine ever been used to overturn authority unambiguously granted by the plain text of a statute. 28, 2018) (refusing to dismiss claim that Musk controlled Tesla despite owning only 22% of the voting power due to actual domination and control). Her leadership will be invaluable as the Division facilitates disclosure under our current rules and undertakes rule modernization to meet the challenges of today. This is for the obvious reason that investors in the parent company face the consequences of all economic results created by that company. In the Clean Air Act amendments of 1970, Congress gave EPA authority to require disclosures relating to the environment. Without such confidence, Congress astutely observed: Easy liquidity of the resources in which wealth is invested is a danger rather than a prop to the stability of [the market] system. Still another study finds that mutual fund managers are misestimating climate risks based on current, inconsistent and unreliable disclosures. Here, we survey research on steroid hormones and their cognitive. Congress expected the Commission to use expert judgment to update disclosure over time, as new or newly identified risks emerge. If markets are currently overly negative about a companys physical risks (e.g., to floods), such disclosures would facilitate a reduction in that companys cost of capital. About 1,020 U.S. companies voluntarily disclosed their Scope 3 emissions last year.. If arguments of that kind could limit rulemaking authority, the Commission could never have adopted any disclosure rules. To be sure, some elements of the SECs regulatory regime reflect a recognition that small or new public companies may not be as able to shoulder the costs of all disclosure requirements as older, larger companies. Anyone who sees a role for law to require disclosure of comprehensive information about the sources of greenhouse gas emissions will not be satisfied by this rule. When everything everyone owns can be sold at once, there must be confidence not to sell. It would be unhelpful for multiple standards to apply to the same risks faced by the same companies that happen to raise capital or operate in multiple markets. How much standardization can be achieved across industries? SPAC shareholders typically have a vote on the so-called de-SPAC transaction, and many investors who purchased securities in the first stage SPAC either sell on the secondary market or have their shares redeemed before or shortly after the de-SPAC. John Coates holds court at last AOC farewell - Australian Financial Review John Coates Named Acting Director of the Division of Corporation Finance FOR IMMEDIATE RELEASE 2021-19 Washington D.C., Feb. 1, 2021 The Securities and Exchange Commission announced today that John Coates will serve as Acting Director of the agency's Division of Corporation Finance. Coates was re-elected president at the AOC's annual general meeting in Sydney on Saturday morning, seeing off the challenge of hockey gold medallist Danni Roche by winning the vote count 58-35. Renee Jones to Join SEC as Director of Corporation Finance; John Coates But most SPACs since 2009 have gone on to identify acquisition candidates. The rule is also calibrated to companies, not the environment. John C. Coates and R. Glenn Hubbard, Competition in the . Statement (PDF) . The case for the Commissions authority to adopt the proposed rule is a simple, two-premise syllogism: Hence the rule is authorized. The financial disclosure that John Coates filed also offered a rare public peek into the costs of corporate compliance monitors. Circuit affirmatively held that the Commission had authority to do that, and, in its judgment, to potentially go further. Third and finally, one of the more interesting and challenging aspects of recent SPAC transactions is that the investors in the SPACs first public capital raise often redeem or sell their shares around the time of the business combination. The Commission has always required information about a U.S. public companys consolidated subsidiarieswherever located. What disclosures do investors need to make informed investment and voting decisions? Congress provided a safe harbor for forward-looking statements made by established, publicly traded, reporting companies. . [4] With the unprecedented surge has come unprecedented scrutiny, and new issues with both standard and innovative SPAC structures keep surfacing. Appropriate liability should attach to whatever claims it is making, or others are making on its behalf. And now, according to Reuters , Acting Corp Fin Director John Coates remarked during a conference on climate finance that the SEC "'should help lead' the creation of a disclosure system for environmental, social and governance (ESG) issues for corporations." But how to craft the new rules? Before joining the SEC, he served as the John F. Cogan Professor of Law and Economics at Harvard University, where he also was Vice Dean for Finance and Strategic Initiatives. 12711-VCS, 2018 WL 1560293 (Del.Ch. In fact, its basic disclosure authorities (in Section 7 of the 1933 Act and Sections 12 and 13 of the 1934 Act) are augmented by additional specific authority to to prescribe the form or forms in which required information shall be set forth. If the Commission after fact-finding reasonably believes more detail is needed to protect investors about a concededly authorized topic, it is legally authorized to require more detail, as it has done through both rules and disclosure review since 1933. [7] See, e.g., Chris Bryant, Why Chamath Palihapitiya Loves SPACs So Much, Bloomberg Opinion (January 28, 2021) (citing Haystack, Alignment Summit Chats: SPACS (w/ Chamath Palihapitiya), YouTube (Dec. 2, 2020) (statement of Chamath Palihapitiya) (Because the SPAC is a merger of companies, youre all of a sudden allowed to talk about the future. As noted above, this claim is wrong because the securities laws already limit the Commissions power in two ways, to the use of disclosure (versus merits review) as a regulatory tool, and to the use disclosure for the protection of investors. These claims are further belied by a string of decisions in which courts have rejected attempts by the Commission to rely on disclosure and anti-fraud authority to engage in substantive regulation of corporate transactions or corporate mismanagement. LexisNexis and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information. John Coates Profiles | Facebook But the Commissions authorities go further, precisely because Congress recognized that investors need information beyond the moment of initial offer and sale, which are addressed by the 1933 Act. Three points about this text are worth emphasizing. As companies continue to disclose more in sustainability reports, they should already be evaluating those disclosures in light of existing anti-fraud obligations. In sum, the text and context of the 1933 Act itself gives the Commission broad authority to require disclosures about financial risks and opportunities beyond the inevitably incomplete initial lists of information and documents included in the statute. Proposal on Climate-Related Disclosures Falls Within the SEC's Authority Posted by John C. Coates (Harvard Law School), on Wednesday, June 22, 2022 Comments Off Print E-Mail Tweet Climate change, ESG, Investor protection, Legal history, Materiality, SEC, SEC rulemaking, Securities regulation, Sustainability More from: John Coates So, my background is, my introduction alluded to it, is the corporate and financial market side and I was blissfully ignorant of and happy to ignore everything that Bloomberg reports that, according to Coates, the new disclosure requirements will focus on three topics: diversity, equity and inclusion; climate change; and human capital management. As we address these questions, we should keep in mind some additional points. 104-369, 43 (November 28, 1995) (Congress created the safe harbor provision to enhance market efficiency by encouraging companies to disclose forward-looking information.). The new law creates a process for immediate disclosure for death or serious bodily injury. But critics claim that EPA authority repealed the Commissions authority is even more basically addressed by noting the significant differences in the two agencies organic statutes as applied to climate-related financial risk. 5 C.F.R. Because (they claim) the fictional new rule reflects climate change policy, and because climate change is new and important, the plain text of the Commissions statutory authority cannot really mean what it says. Harvard Law School Professor John C. Coates spoke at a briefing on Oct. 30 in Washington, D.C., to urge the Securities and Exchange Commission to require publicly traded companies to disclose their political spending. The ways investors may use the information are not predetermined by the rule, nor would the rule itself limit how companies speak about whether (for example) climate risks are currently being overestimated or producing excessive disinvestment. Finally, it is beyond argument that the Clean Air Act nowhere mentions the Commission much less modifies its disclosure authority. Although climate change overall indisputably raises important policy questions, those remain for Congress. Because the rule is an investor-oriented disclosure rule, it is within the Commissions expertise. Instead, basic principles of statutory interpretation support the Commissions authority to adopt the proposed rule. Often these requirements have been specific and prescriptive in nature. The safe harbor only applies in private litigation, and does not prevent the Commission from taking appropriate action to enforce the federal securities laws. 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. (forthcoming 2021); Minmo Gahng, Jay R. Ritter and Donghang Zhang, SPACs, Working Paper (Mar. Again, this difference is in keeping with the Commissions focus on investors. EPA, for example, exempts from reporting emission sources below source-specific thresholds. US public companies (e.g., the S&P 500) derive 40% of their revenues on average from non-US operations, and many have larger shares of their activities located offshore. Apr. Nonetheless, whatever one thinks about the incentives for companies to go public or private, that question only bears on the efficiency or capital-formation impacts of the proposed rule, and how they compare to its advancement of investor protection, not on its legality. The rule would create a framework for reliable disclosures of climate-related information that is potentially positive for investors, such as opportunities, and is not limited to risks. If a given climate risk or opportunity is large for a company, then its investors need and would under the rule obtain information about that risk or opportunity, even if (when compared to the overall impact of all human activity on the environment) the risk or opportunity is not large enough to require reporting under some other regime (such as the EPAs greenhouse gas reporting regime). Voluntary, unassured disclosures are more likely to include greenwashing, impairing investors ability to assess and price risk, and undermining honest companies ability to communicate with investors and build confidence; some greenwashing rises to the level of fraud, while other disclosures or omissions may not rise to the level of actionable fraud with proof of scienter. The basics of a typical SPAC are complex, but can be simplified as follows. That is because it is true that the Commissions authority does not run so far as to require disclosures for any reason, or for reasons not specified in its organic statutes. Introduction. But it remains true that IPOs are understood as a distinct and challenging moment for disclosure. At the time, companies were thought by some to be reluctant to provide forward-looking information at least in part due to the prevalence of so-called strike suits which, irrespective of the merits of the claim, were usually less costly to settle than to fight in court. That climate risks overall have been overstated by climate activists. What about the Private Securities Litigation Reform Act? No. Just as artificial manipulation tends to upset the true function of an open market, so the hiding and secreting of important information obstructs the operation of the markets as indices of real valueThe disclosure of information materially important to investors may not instantaneously be reflected in market value, but despite the intricacies of securities values truth does find relatively quick acceptance on the market. Consideration of such costs is important, as is getting clear about their causes. 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. On balance, research on the Act's net . Companies objectively do or do not have strategies that reflect transition risk or physical risks of climate change. June 21, 2019) (refusing to dismiss case challenging merger approved by shareholders on ground that disclosure prior to vote was inadequate); Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 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.. The SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost effective manner. After the de-SPAC, the entity carries on its operations as a public company. Evidence regarding the clear and present financial materiality of transition risk is discussed below. Professor of Law and Economics Harvard Law School 1875 Cambridge Street Cambridge, MA 02138, United States phone: 617-496-4420 e-mail: jcoates@law.harvard.edu *Corresponding Author Electronic copy available at : http ://ssrn.com /abstract = 2375396 COST-BENEFIT ANALYSIS OF FINANCIAL REGULATION: CASE STUDIES AND IMPLICATIONS No case is the contrary, and critics of the Commissions proposed rule cite none. MD&A: The 12-month period ended June 30, 2022, represents the first period in which companies were required to comply with the amended MD&A disclosure requirements adopted by the SEC in November 2020. As such, there is no one set of metrics that properly covers all ESG issues for all companies. 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. Overturning this rule as unauthorized on that basis would wipe out most of the Commissions disclosure rulebook. Among them were Alliance-Bernstein, Neuberger-Berman, Schroder and Wellington, as well as BlackRock and State Street. Liability risk is an important feature of the conventional IPO process. For example, they point to the broader ESG movement and claim the fictional new rule requires disclosure about ESG, or about environmental impacts not relevant to investors. [1] This statement represents the views of the Acting Director of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC or Commission). The Ferocious, Well-Heeled - Institutional Investor 1 The housing and financial crises of 2008 led to the Dodd-Frank Act, 2 which restructured the financial regulatory agencies, mandated more than 200 new rules, and required changes to many older rules. Not surprisingly, disclosure about these risks did not initially show up in SEC filings, but there too they went from invisible to increasingly disclosed. 22, 2019) (enjoining two cross-conditioned mergers due to disclosure inadequacies concerning special procedures used to mitigate conflict of interest). And thank you very much for the invitation to be in a place I don't usually go, right? [16] Debate in Senate to Override President's Veto, 141 Cong. Not long after Denise Coates convinced her family to bet big on internet gambling, the first . As to motivations, the long and extensive record leading to the proposal of the rule can be reviewed in its entirety and nowhere will any evidence be found that the purpose of the rule is other than to protect investors. This statement creates no new or additional obligations for any person. 2021; 2020; 2019; 2018; 2017; 2016; 2015; 2014; 2013; It is the first time that public investors see the business and financial information about a company. One of the primary purposes of the 1934 Act was to augment the 1933 Act by giving the Commission authority to require ongoing reports by companies whose securities were traded on stock exchanges. (IOC) (AOC) 2020IOC ICAS . Olympics 2021: John Coates savaged over 'garbage' response - Yahoo! 1 Twitter 2 Facebook 3RSS 4YouTube The idea that the SEC can go out and do more research on these issues, however, was dismissed by former SEC general counsel John Coates, now a professor at Harvard Law School, who wrote in his. [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. John Coates is the co-CEO of U.K. company Bet365, one of the world's largest online gambling businesses. New Corp Fin Director John Coates is fully on-board, making speeches and otherwise being vocal in his support of ESG centered disclosures. Volkswagen announced $180 billion of investments in electronic vehicles. PDF Statement of John Coates, Harvard Law School JOHN COATES, HARVARD - FEC Changes came as part of an omnibus criminal law Session Law 2021-138, Part XXI. If those emissions targets are serious, they will matter to investors by leading to major changes in corporate strategy and investment policy, and in the financial risks and returns companies will generate for investors. As background, noted in the proposing release, the Commission published a request for comment a year earlieron March 15, 2021so that its current process has already gone beyond the requirements of administrative law. It would have a relatively modest impact on the economy as a whole, and basically levels up disclosure requirements to disclosures already made by the majority of large companies. The rest of this post details Points I and II. Imposing further limiting principles may for some be appealing from a policy standpoint, but doing so has no basis whatsoever in the statutes text.. Protecting investors has been the Commissions job since 1934. In the budget rider, Congress made no mention of any other agency, nor can the text of that law be reasonably interpreted to displace any agencys authority. Ch. Even if the safe harbor clearly applies, its procedural and substantive provisions do not protect against false or misleading statements made with actual knowledge that the statement was false or misleading. The institutions included both passive index funds and actively managed funds, as well as pension funds and other kinds of institutions. Such a conclusion should hold regardless of what structure or method it used to do so. We can and should continue to adapt existing rules and standards to the realities of climate risk, for example, and the fact that investors increasingly are asking for ESG information to help them make informed investment and voting decisions. Executive compensation is its own, complex and specialized area of management and finance, leading companies to hire expert advisors to develop compensation plans. John Coates failed to apologise for his comments towards Annastacia Palaszczuk. Far from calling for lengthy or complex sustainability reports of the kind most S&P 500 companies already publish, these requirements could be met with relatively succinct disclosure for companies with minimal climate-related risks. Instead, as summarized by the D.C. That is true for companies being acquired, as well as for companies going public. Professor Coates served as General Counsel and as Acting Director for the Division of Corporation Finance for the SEC. I fear, though, that participants may not have thought through all the legal implications of these statements under the circumstances of these transactions. Importantly, supporting letters came from many public companies (e.g., Adobe; Bank of America; BNP Paribas; Chevron; Dow Credit Suisse; Etsy; Microsoft; Paypal; Salesforce.com). A public company might have a large amount of transition risk due to many different emission sources, each of which is below EPA thresholds. They will go unresolved by this proposed rule. Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst. It is true that the subject matter of the financial risks and opportunities raised by climate change are complex, and climate experts have specialized knowledge about climate science. It is not clear that claims about the application of securities law liability provisions to de-SPACs provide targets or anyone else with a reason to prefer SPACs over traditional IPOs. 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. PDF ISSN 1936-5349 (print) HARVARD - Harvard Law School He has been the . ESG issues are global issues. These decisions show that the Commissions delegated power is limited, and that the statutory limits (protection of investors and markets) are intelligible and have bite. He steps down from the AOC on Saturday, less than 12 months after helping Australia win its third Games bid, this time in Brisbane in 2032, but retains his exalted IOC status. The Commission cannot shirk its duty to protect investors even if that duty to an extent overlaps with EPAs duty to protect the environment. They argue that because the fictional new rule requires disclosure of environmental impact, the Commissions authority was silently removed when Congress authorized the Environmental Protection Agency (EPA) to address that impact. To view this content, please continue to their sites. Some may view these limits as creating incentives for public companies to go private, or for private companies to not go public. 2019-0100-KSJM, 2019 WL 1313408 (Del.Ch. The secondemissions datais widely used as measures of transition risk, that is, the risk that energy costs and policy responses by other lawmaking bodies (not the Commission) (some of which are already reflected in treaty commitments or other enacted policies of the US and other countries in which US public companies do business) will force companies to expend money to reduce their emissions or mitigate their impacts. In the first stage, it registers the offer and sale of redeemable securities for cash through a conventional underwriting, sells them primarily to hedge funds and other institutions, and places the proceeds in a trust for a future acquisition of a private operating company. The question of whether the proposed disclosures would in fact be an all-in good idea, cost-justified, appropriately considering efficiency, competition and capital formation is not a legal question. Don't miss the crucial news and insights you need to make informed legal decisions. No one at the time of NRDC v. SEC in 1979 argued that the creation of EPA in 1970 had overridden NEPA, or limited the 1933 or 1934 Acts, as the Commission itself would have done (because, recall, it was being sued in the 1970s for not doing enough to require environmental disclosure). It is not a rule, regulation, or statement of the SEC. Contrary to some critics, letters from individuals also supported climate-related disclosures and were cited several times in the proposing release. The subject of a disclosure is new, when the nature of business and investment is dynamic. For EPA, those emissions may not be a priority. About Us| Letter to the Stakeholders of the Olympic Movement - Olympic News 2 years ago | By John Coates | Olympics.com Nor does the proposal purport to be authorized by a newly discovered power in the securities lawsthe power is disclosure, as it has been for nearly a century. Earnings statements, analyst call scripts, investor presentations, and the regular flows of press releases, investor relations communications and other ways companies supplement disclosure requirements are commonly longer or more complex than anything required by the Commissions rules. E.g., In re Tesla Motors, Inc. 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. Investors need to know about sponsors and their financial arrangements, the procedural protections of the SPAC structure, and what kinds of returns the SPAC is likely to generate for investors absent a de-SPAC transaction or for those who choose to exit before the de-SPAC is completed. Congress could not have predicted the wave of SPACs in which we find ourselves. Statements about current valuation or operations have been viewed as outside the safe harbor by some courts, even if they are derived from or linked to forward-looking projections or statements.