SEC drafts strategic plan for 2022 to 2026
On August 24, 2022, the US Securities and Exchange Commission announced that it had printed a draft of its strategic plan for fiscal years 2022 to 2026, with an accompanying request for public comment. The draft strategic plan lays out three overarching targets to: “(1) shield working households in opposition to fraud, manipulation, and misconduct; (2) [d]evelop and implement a strong regulatory framework that retains tempo with evolving markets, enterprise fashions, and applied sciences; and (3) [s]upport a talented workforce that’s numerous, equitable, inclusive, and is absolutely geared up to advance company goals.” The strategic plan additionally contains a number of parts for every major objective. For a extra detailed overview, discuss with this Cooley PubCo blog post on the SEC’s strategic plan.
SEC fees crypto firm with Part 5 violations
In our August edition of One-Minute Reads, we mentioned a latest novel insider buying and selling case by which the SEC discovered sure digital belongings to be securities, and the potential for this discovering to result in enforcement actions in opposition to crypto asset firms for the sale and provide of unregistered securities in violation of Part 5 of the Securities Act. As of August 16, this risk has come to fruition, because the SEC announced charges against a group of entities and their founder for his or her roles in unregistered crypto choices. In response to the SEC complaint, the corporate carried out an unregistered providing of a crypto asset, together with through an preliminary coin providing, illegally elevating over $16 million in proceeds by unregistered provides and gross sales of those securities. We are going to comply with this litigation because it progresses and proceed to watch for different SEC actions referring to digital belongings as securities topic to Part 5.
SEC chair feedback on the Sarbanes-Oxley Act
On July 27, SEC Chair Gary Gensler gave remarks on the Middle for Audit High quality on what we’ve discovered from the Sarbanes-Oxley Act (SOX) in commemoration of its twentieth anniversary. Gensler addressed the position SOX performed in restoring public belief after the Enron and WorldCom scandals, whereas additionally highlighting key areas the place there’s nonetheless room for enchancment. Notably, Chair Gensler requested the Public Firm Accounting Oversight Board (PCAOB) to contemplate including up to date auditor independence requirements to its agenda, and acknowledged that the SEC could “take a recent have a look at the SEC’s auditor independence guidelines as properly.” Gensler acknowledged the significance of SOX in establishing the PCAOB, however famous that it has been too sluggish to replace auditing requirements, although he expects there might be measurable progress on standard-setting within the subsequent yr. He additionally touched on auditing inspections, investigations and enforcement – highlighting the PCAOB’s position within the recent charges against Ernst & Young for dishonest by its auditors on ethics exams – in addition to the Holding International Firms Accountable Act (HFCAA) and the shortage of US inspections of audits and investigations in China. See this Cooley PubCo blog post on the HFCAA for added shade, and discuss with this Cooley PubCo blog post on SOX for extra data on Gensler’s remarks.
Semler Brossy points report on ESG govt compensation metrics
On July 18, Semler Brossy printed its ESG + Incentives 2022 Report, offering benchmark knowledge on the prevalence and varieties of environmental, social and company governance (ESG) metrics being utilized by the S&P 500 of their govt compensation packages. Per the report:
- 70% of the S&P 500 that filed their proxies between April 2021 and March 2022 included an ESG metric of their compensation packages (in comparison with 57% throughout the identical interval within the earlier yr).
- Of those firms, 95% included human capital administration metrics of their compensation packages (the commonest associated to variety, fairness and inclusion) – as compared, 23% included environmental metrics and 41% included different metrics, comparable to cybersecurity.
- Notably, 98% of all firms that integrated ESG metrics into their compensation packages have performed so of their annual incentive plans (ESG metrics in long-term incentive plans stay comparatively unusual, at simply 14%).
- Probably the most prevalent construction for ESG metrics is as a part of a scorecard (41%), adopted by a discretionary construction whereby ESG is included as an extra layer which may influence last payouts (23%).
Glass Lewis releases 2022 proxy season evaluate
On August 4, Glass Lewis launched its Proxy Season 2022 Briefing, offering an summary of its preliminary observations and voting suggestions from the 4,574 reviews on US publicly traded firms with an annual assembly held between January 1 and June 30, 2022. Some key takeaways from Glass Lewis’s report embrace:
- Help was advisable for 86% of administrators, with detrimental suggestions stemming mostly from preliminary public providing governance issues, inadequate board gender variety, no impartial lead or presiding director, and having an affiliate on a committee.
- Help was advisable for 84.3% of say-on-pay votes, with detrimental suggestions stemming mostly from regarding pay practices (extreme grants/compensation at 41.6%), poor program or award design construction (34.9%), pay/efficiency disconnects (34.7%), different regarding pay practices (16.7%), and inadequate responses to shareholders (15.8%).
- Help was advisable for 85.7% of fairness plans, with detrimental suggestions stemming mostly from the presence of evergreen provisions (44.7%), repricing provisions (27.3%), timing or extreme nature of grants (12.4%), prices of plan (13%), and extreme dilution/overhang (6.8%).
Cooley tax group highlights implications of Inflation Discount Act
On August 16, President Joe Biden signed the Inflation Discount Act (IRA) into legislation, which incorporates a number of vital tax provisions, amongst different vital objects. This client alert on the IRA from the Cooley tax group highlights a couple of key tax provisions of the act, primarily the company various minimal tax (AMT), which imposes a 15% AMT on US firms with income exceeding a sure threshold, and a 1% excise tax on the truthful market worth of any inventory repurchases by publicly traded US firms and sure US subsidiaries of publicly traded non-US firms, topic to a number of exceptions. The company AMT will apply for tax years starting after December 31, 2022, with the excise tax taking impact for relevant buybacks after this identical date.
PwC publishes abstract of SEC remark letter developments
PwC just lately printed its annual abstract of SEC comment letter trends, which particulars the developments in Division of Company Finance feedback on firm filings from July 2021 by June 2022. These are the highest 10 points by remark quantity, and in comparison with final yr:
- Non-GAAP (typically accepted accounting ideas) measures are up.
- Administration dialogue and evaluation (MD&A) are up.
- Phase reporting is down.
- Threat elements and local weather change issues are up.
- Income recognition is down.
- Honest worth measurement is unchanged.
- Disclosure controls and inside management over monetary reporting (ICFR) are unchanged.
- Stock and value of gross sales are unchanged.
- Type compliance and displays are unchanged.
- Enterprise combos are unchanged.
The PwC report additionally coated industry-specific comment letter trends.