john coates financial disclosure john coates financial disclosure

In the Clean Air Act amendments of 1970, Congress gave EPA authority to require disclosures relating to the environment. Although the D.C. It proceeds in two stages. 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. 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). What lessons can we learn from earlier examples of evolving risks? Graphic Packaging is spending $600 million on the first paperboard line in the U.S. in decades, in part to lower carbon emissions. 11, 2019) (refusing to apply deferential review where special conflict of interest procedures were not applied ab initio); FrontFour Capital Group LLC v. Taube, No. The Commission is charged with protecting investors generally, and even if a subset of investors believe that they do not (or do) want or need particular information, their views should not necessarily control the Commission in the exercise of its expert judgment. The text, the ordinary meaning of its key words (that is, other and information), and their context (the title and relevant headings of the Commissions organic statutes), as analyzed above, are clear as to the Commissions ability to require the proposed disclosures for the protection of investors. He was in his eighties. Congress also recognized that full and fair disclosure would enhance investor confidence. Your article was successfully shared with the contacts you provided. 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. Simply put, any such asserted difference seems uncertain at best. Robust public disclosure has been a hallmark of effective securities regulation since the 1930s, said SEC Chair Gary Gensler. Although the rule is more limited than what an impact advocate would want, it is in one important way broader than anything EPA has adopted or is likely to have to power to implement: its geographic reach. He joined his billionaire sister and co-CEO, Denise, in 2001 to launch Bet365 after she . [6] SPAC Status by Year of IPO, SPACInsider (last visited Apr. Open in Who Shared Wrong byline? But that, too, is uncertain at best. If the person charged with reviewing an employee's report finds a conflict, he should impose a remedy immediately. The context for the authorizing sections of those statutes supports the Commissions authority: Canons against ineffectiveness and in favor of validity, and the general terms canon all caution against courts making up their own limits on textual authority, particularly on grounds such as: For the Commission programmatically to refuse to protect investors due to concerns about politics would itself be a political and controversial policy position. Coates' Canons NC Local Government Law. But beyond academic research, hardest for any neutral observer to challenge as evidence of the financial risks related to climateand the reasonableness of climate-related financial disclosures to protect investorscomes from public companies themselves. John Coates has few regrets on his way out the AOC door Even as he steps down from 32 years in the top job, the knowledge and contacts of Australia's Olympic supremo will be tapped for years to. The proposed rule specifies the details of disclosure, just as Congress directed the Commission to do. How much standardization can be achieved across industries? Second, forward-looking information can of course be valuable. Coates asked some of his former colleagues in London's City financial district to give him some time, and some spit. [16] Debate in Senate to Override President's Veto, 141 Cong. During the hearings, it was explicitly noted by a former FTC Commissioner and an advisor to President Roosevelt that: We are trying not to have this bill be too long. Finally, it is beyond argument that the Clean Air Act nowhere mentions the Commission much less modifies its disclosure authority. Aircraft manufacturers essentially have their own specialized program accounting, due to the unusually long and complex capital investment process they follow. In contrast to the specific mentions of these other federal agencies, the authorizing document, Reorganization Plan No. It may be time to revisit these issues. First, I am not pro- or anti-SPAC. Finally, critics sometimes argue that investors do not need protection of mandatory climate-related financial disclosures because companies are already voluntarily making such information available. The reason is simple: the public knows nothing about this private company. This statement does not alter or amend applicable law and has no legal force or effect. . Surveys of institutional investors published in peer-reviewed financial journals confirm this evidence. John Coates has conceded the Australian Olympic Committee's (AOC) brand has been damaged by a bitter presidency campaign in which he emerged victorious. But for the protection of investors, these limits are features, not bugsthey precisely show how the rule adheres to Congresss clear but limited delegation of disclosure specification to the Commission. The complete publication, including footnotes and annex, is available here. 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 financial disclosure that John Coates filed also offered a rare public peek into the costs of corporate compliance monitors. Financial disclosures released by former Secretary of State John Kerry indicate that until March of this year he held hundreds of thousands of dollars of investments in energy-related companies . Congress both expanded authorities and limited which and how specific types of companies and transactions are covered by its disclosure regime. To do so would turn the doctrines purpose against itself, turn courts into unelected mini-legislatures, and subvert rather than reinforce the separation of powers. 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. This demonstrates that the broader direction was consciously added during the legislative process. It is authorized by clear statutes, is consistent with settled understandings, and addresses disclosure topics covered by rules adopted long ago by the Commission and ratified by Congress. A process to create such standards is not likely to be simple, quick or easy. As a result, Congress, markets, analysts, and the SEC staff typically treat these introductions differently from other kinds of capital raising transactions. 2019-0100-KSJM, 2019 WL 1313408 (Del.Ch. [9] I am far from alone in noting the litigation risk attached to SPACs. Existing rules already cover material climate risks is the first point she makes. The title of the 1933 Act states its purpose as creating a regime of full and fair disclosure.. 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. Are current liability protections for investors voting on or buying shares at the time of a de-SPAC sufficient if some SPAC sponsors or advisors are touting SPACs with vague assurances of lessened liability for disclosures? We'll send you a myFT Daily Digest email rounding up the latest Denise Coates news every morning. EPA, for example, exempts from reporting emission sources below source-specific thresholds. Multiple paths to dispersed ownership now exist, including not only SPACs, but also direct listings and dual-track IPO/M&A processes. What Joseph L. Rini Knows, Attorney Rachel Y. Marshall A Pillar of Strength for the Community, SpotDraft Raises $26 Million in Series A Funding for AI-Powered Legal Software. Recognizing innovation in the legal technology sector for working on precedent-setting, game-changing projects and initiatives. For years, asbestos-related risks were invisible, and information about asbestos would likely have been called non-financial. Over time, those risks went from invisible to visible to extremely clear, and clearly financial. 1, 2005) (Where the failure to make such disclosure is negligent, an issuer would violate Section 14(a) of the Exchange Act and Rule 14a-9 thereunder). [5] For studies of SPACs, see, e.g., Michael Klausner, Michael Ohlrogge and Emily Ruan, A Sober Look at SPACs, Yale J. Reg. 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. It would not affect how mutual funds and other collective investment vehicles market themselves, even as to the climate risks in their portfoliosthat topic is within the Commissions authority, but it is not addressed in this proposed rule. Funding, governance and public accountability are all critical elements of a reliable, trusted disclosure system. Would it have resulted in more timely, clear and useful information for investors about asbestos manufacturers, sellers and insurance companies? General Motors announced it plans to sell only electric passenger vehicles by 2035. This is for the obvious reason that investors in the parent company face the consequences of all economic results created by that company. The Commission has neither approved nor disapproved its content. If an officeholder has filed their annual financial disclosure statement, then a pdf of the filing will be posted. These claims raise significant investor protection questions. New Corp Fin Director John Coates is fully on-board, making speeches and otherwise being vocal in his support of ESG centered disclosures. [14], But, lest the safe harbor swallow the entire securities disclosure regime, the PSLRA specifically excludes from the safe harbor statements made in connection with specified types of securities offerings. Some critics argue that investor demand should not be equated with investor protection, and it is true that the Commission has not (for good reason) attempted to survey investors in setting its own rulemaking agenda. John C. Coates is the Acting Director of the SEC's Division of Corporation Finance. By contrast, the focus of traditional environmental regulationincluding EPA reporting rulesis solely the reversethe impact of companies on climate change. 2, 2021). 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. The safe harbor only applies in private litigation, and does not prevent the Commission from taking appropriate action to enforce the federal securities laws. [2] It permits significant differences in how companies respond to a variety of mandatory requirements, including in many cases disclosing items if and only if they are material. He served as a Department of Justice-appointed independent monitor for a large, systemically important financial institution and as an independent consultant to the SEC in one of the first Fair Fund distributions. Shareholder Litig. Claims that disclosure would incentivize companies only to reduce or mitigate climate change impacts are not well considered. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas. Rep. No. John Coates, acting director of the SEC's Division of Corporation Finance, similarly stated in a recent speech that 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," noting in particular the task of adapting existing rules and What about the Private Securities Litigation Reform Act? E.g., In re Tesla Motors, Inc. 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. As discussed in Point II, each attack is mistaken and misleading because the proposed rule is not the critics fictional new rule. Statement (PDF) . This statement does not alter or amend applicable law and has no legal force or effect. [10] See infra note 12. It does not impose a carbon tax or create a cap-and-trade regime. Even if some may find resistance to the rule (or new regulation generally) to be appealing from a policy standpoint, doing that here has no basis whatsoever in the statutes text.. That ESG no longer needs to be explained illustrates how important these issues have become to todays investors, public companies and capital markets. Should the SEC reconsider the concept of underwriter in these new transactional paths? The result is a continuously adjusted, detailed system of disclosure specifications, reflecting the Commissions fact-finding and expertise. John Coates Acting Director, Division of Corporation Finance March 11, 2021 Statement Published in Connection with Remarks at the 33rd Annual Tulane Corporate Law Institute [1] Not long ago, the title of this statement would have needed to unpack "ESG" into Environmental, Social and Governance. I am pleased to welcome Renee to the SEC and look forward to working with her., I am excited to join the Division of Corporation Finances team of experienced and dedicated public servants, said Jones. It is the first time that public investors see the business and financial information about a company. All those sources here align with the 1933 Acts plain, ordinary meaning, and so confirm the above conclusions. In part, that is because of one of the key limits on the Commissions authorityit is delegated the job of specifying information for disclosure, not the job of merits review, which would require it to have far more substantive expertise in those specialized areas. 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. 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. . 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. Second, in thinking about ESG disclosures, we should not view ourselves as forced into a stark choice between voluntary and mandatory disclosure. [13] See, e.g., In re Quality Systems, Inc. Securities Litigation, 865 F.3d 1130, 1142, (9th Cir. John CoatesActing Director, Division of Corporation Finance. With Such Low Win Rates, Should Law Firms Respond to So Many RFPs? A company in possession of multiple sets of projections that are based on reasonable assumptions, reflecting different scenarios of how the companys future may unfold, would be on shaky ground if it only disclosed favorable projections and omitted disclosure of equally reliable but unfavorable projections, regardless of the liability framework later used by courts to assess the disclosures. The rule is limited to companies from which the Commission has traditionally required full disclosure. [9] Indeed, in some ways, liability risks for those involved are higher, not lower, than in conventional IPOs, due in particular to the potential conflicts of interest in the SPAC structure.[10]. In the nature of corporate investment, investors in multinational US public companies bear climate-related financial risks and have opportunities to profit from their global activities. Previously, she represented private and public companies on corporate and securities matters at Hill & Barlow law firm. He observed first-hand the powerful emotions driving traders. Often these requirements have been specific and prescriptive in nature. 6LinkedIn 8 Email Updates. 6LinkedIn 8 Email Updates, What a SPAC Believer Thinks of SPAC Mania. Letter to the Stakeholders of the Olympic Movement - Olympic News 2 years ago | By John Coates | Olympics.com Indeed, the texts are so clear thatin contrast to the many times the Commission has been challenged on anti-fraud rulemakings, where authority has been interpreted as limited by common law anti-fraud principlesfew attempts have been made to challenge the Commissions use of its basic disclosure authorities to require disclosure. The Commissions authority, to reiterate, includes discretion to promulgate rules governing corporate disclosure. Nothing at stake in this proposed rule justifies such judicial lawmaking. 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. Large multinationalseven in the oil and gas or energy sectors, even actively emitting greenhouse gases in the USwould be unaffected if they list no securities in our markets. 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. 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. As discussed in Point I, critics of the rule cannot plausibly attack premise one. There are 300+ professionals named "John Coates", who use LinkedIn to exchange information, ideas, and opportunities. This statement creates no new or additional obligations for any person. It does not embody a general policy to address climate change, or engage the range of social and economic issues that climate change raises. The release cites a number of studies to this effect. 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. 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. 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. But as some critics do ignore the plain language of the statute, it should be emphasized that they find no more support for the notion that the Commission lacks authority in the legislative history, or in generations of legislative, executive, and judicial understanding of the statutes meaning. They sometimes specifically point to the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward-looking statements, and suggest or assert that the safe harbor applies in the context of de-SPAC transactions but not in conventional IPOs. John Coates had copped further backlash for his comments towards . [4] SPACs What You Need To Know, Investor.gov (Dec. 10, 2020). P.C. Because, finally, the disclosures are financial and do not extend to the large part of the economy owned by private companies, they would not constitute general climate change policy, such as a carbon tax or emissions cap-and-trade scheme. [4] With the unprecedented surge has come unprecedented scrutiny, and new issues with both standard and innovative SPAC structures keep surfacing. Renee brings deep expertise in corporate governance and securities law to the Division of Corporation Finance. 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. The information, including financial statements, relevant to evaluating the investment changes dramatically in the de-SPAC because the private target has operations unlike the SPAC; and initial SPAC investors commonly have the right to and do sell or have their shares redeemed. Large asset managers are already having to comply with similar requirements in Europe (regardless of where their portfolio investments are located). Don't miss the crucial news and insights you need to make informed legal decisions. Coates, Lindsey. Statement (PDF) . Instead, the rules limitsto public companies with securities trading in the U.S.again underscore how it is well within the scope of traditional securities law, designed for investor protection, and not for other goals. 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. 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. 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. What is the right balance between principles and metrics? [8] In re Netsmart Technologies, Inc., Shareholder Litig., 924 A.2d 171 (Del. So, instead, like a cuckoo putting its eggs into anothers nest, critics have resorted to mischaracterizing the proposal, and inventing their own, fictional rulenot actually proposedto attack premise two, and claim the Commission lacks authority for their fictional new rule. Where and how can disclosures be aligned with information companies already use to make decisions. Over time, the Commission has used its authorities under the 1933 Act and the 1934 Act to specify the details of required disclosures about a range of matters, both in and outside corporate financial statements, as illustrated in detail in Annex A to this post. It is not a rule requiring or limiting opinions or controversial speech, and raises no First Amendment concerns. To the extent that those who disfavor consideration of legislative history truly give primacy to legislative text and structure, there is no plausible basis on which to argue the Commission lacks authority to adopt the proposed rule. To be sure, projections are woven into the fabric of business combinations. 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. 22, 2019) (enjoining two cross-conditioned mergers due to disclosure inadequacies concerning special procedures used to mitigate conflict of interest). The law went beyond combating affirmative fraud, where intent, materiality, and damages had a role to play, and added to it a general philosophy of seller beware, in which all pertinent facts must be disclosed before a company sells stock, and liability could attach even without traditional hallmarks of fraud, albeit with separate limiting conditions. 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. The Commission has not substantively amended the definition of blank check company since the passage of the PSLRA, but of course, it could consider doing so in the future. [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). 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? These investors included individuals and institutions. He previously worked for Goldman Sachs and ran a trading desk for Deutsche Bank in New York. A movement is afoot to impose cost-benefit analysis (CBA) on financial regulation (CBA/FR). 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. Annex A contains just a samplingmany more additions and refinements have been adopted in the decades since 1933. 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. 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. But Congress has never cut back on the Commissions general obligation to specify the contents of its disclosure regime, such as by editing or reversing prior disclosure specifications. Based on a review of current sustainability reports that cover the same topics as would be required by the proposed rule, companies with material climate risks could create compliant disclosure that would take up a relatively small share of a typical annual report. 5-min read. In simple terms, the PSLRA excludes from its safe harbor initial public offerings, and that phrase may include de-SPAC transactions. Few of the requirements in Annex A directly involved current or even near-term financial cash flows of the kind required to be reflected in financial statements, such as reserves for contingent liabilities or non-cash commitments to invest in the future. . The institutions included both passive index funds and actively managed funds, as well as pension funds and other kinds of institutions. In its overall framework, the proposed rule builds on the Task Force on Climate Related Financial Disclosure (TCFD), whose leadership includes the CFO of Unilever, the General Manager of Mitsubishi, and the former CAO of HSBC, and whose work has been supported by Bank of America, Barrick Gold, Dupont, Hewlett Packard, and Pepsico, among scores of other companies. My remarks here do not attempt to answer those or the multitude of other questions about ESG disclosures. Dec. 21, 1995) (statement of Sen. Diane Feinstein, The provisions [of the PSLRA] are only available to companies with an established track record. and I understand the safe harbor does not apply to a new company, but only applies to seasoned issuers.). Modern finance and valuation techniques focus on risk and expected future cash flows. The brief historical review in Annexes A and B (and much more detail could be added) shows that nothing about the current proposed rules contents (discussed more below) should be legally surprising in any meaningful way, to Congress or to companies or their investors. In other words, public companies disclosures were expected to go beyond basic financial statements. The resulting awareness of the need for detailed specification of disclosures led to the delegation reflected in the 1933 Act. The focus of the actual rule is the impact of climate change on companies, and not vice versa. EPA was created in 1970. 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. At hearings on what became the 1933 Act, the Senate heard testimony advocating longer or shorter periods of time for financial statements, specific proposals for additions to or eliminations from the list of disclosure items, arguments about whether audits should be done by reference to industry peers, and how expensive audits would be. For example, the famous phrase full and fair disclosure is in the full title to the 1933 Act, and so part of its statutory meaning. Another peer-reviewed, published study finds that exposure to sea level rises and flooding is causally reducing property values, consistent with physical risk already being actively if imperfectly priced in property markets, which in turn expose investors in public companies that own real estate to related financial risks. He had been serving as the independent monitor for the U.S. Justice Department in the prosecution of Boston-based State Street Corp.