The FSOC Climate Report views “climate-related financial risk as an emerging threat to the financial stability of the United States.” Here are our 10 key takeaways on a critical step in what will be a long and complex journey.
10 Key Takeaways
- U.S. financial regulators are in catch up mode
- In a press call on the Climate Report,1 an unnamed “senior administration official” stated, “Are we behind? Of course we are. This is the starting gun going off for the U.S. regulatory system.”2
- The Climate Report contains 35 recommendations for FSOC’s member agencies. It is a framework
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On March 4, the Securities and Exchange Commission announced a newly created Climate and ESG Task Force in the Division of Enforcement. The Climate and ESG Task Force will work closely with other areas of the SEC as part of the agency’s recently enhanced efforts to address climate and environmental, social and governance, or ESG, matters.
The 22-member task force will develop initiatives to identify ESG-related misconduct. Its initial focus will be to review public company disclosures to identify “material” gaps or misstatements regarding climate risks. The Climate and ESG Task Force will also review investment adviser and fund … Read more
A recent SEC conditional no-action position (the “No-Action Statement”) has further opened the regulatory door to trading of digital asset securities (“DAS”), by allowing certain limited purpose DAS-only broker-dealers to maintain custody of these securities on behalf of customers. As firms have sought to develop trading systems for DAS, questions regarding whether or how broker-dealers could custody these securities for customers in compliance with SEC rules has been one of the primary regulatory hurdles. Efforts to meet the SEC staff’s prior guidance that broker-dealers generally could not custody DAS for customers triggered somewhat cumbersome workaround attempts. … Read more
On April 24, the Securities and Exchange Commission charged Altaba Inc., formerly Yahoo! Inc., with misleading shareholders by waiting almost two years to disclose its 2014 data breach. Consenting to a cease-and-desist order, Altaba agreed to pay a $35 million penalty in the first SEC enforcement action against a public company relating to cyberbreach notification. The SEC’s action follows a trend by state attorneys general and other regulators in exacting significant penalties from companies that fail to provide timely breach notification. Yahoo! previously reached an $80 million settlement to resolve a class-action securities case for failure to disclose the … Read more
New revenue recognition rules (ASC 606 and IFRS 15) are required to be adopted by most public companies starting January 1, 2018 and most private companies starting January 1, 2019. These changes are widely regarded as some of the most significant accounting changes since the adoption of the Sarbanes-Oxley Act of 2002. Companies may choose between the full retrospective method and the modified retrospective method to implement the new rules.
- Companies implementing with the full retrospective method must revise and reissue fiscal 2016 and 2017 financial statements in connection with their Form 10-K for 2018
- Companies implementing with the modified
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The Federal Reserve’s proposed supervisory guidance on corporate governance is a breath of fresh air that should encourage banking boards to focus on their core responsibilities and avoid blurring the distinctions between executive and non-executive duties. It is also a signal that supervisors intend to move away from the blunt “check-the-box” approach to corporate governance that has especially burdened banking boards in recent years. We applaud this rebalancing in supervisory approach.
The following comments on this positive development are offered in the hope that the guidance, when finalized and as implemented, will avoid an overly prescriptive, “one-size-fits-all” approach.
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On July 13, the Securities and Exchange Commission issued a proposal aimed at eliminating or updating duplicative, overlapping and obsolete disclosure requirements. The proposal is welcome, but largely technical in nature and generally focused on duplicative requirements. As a result, if adopted, it will likely have only a small impact on the total amount of information companies are required to disclose. Needed reforms that would eliminate truly obsolete disclosure requirements will likely wait for the outcome of action on the SEC’s pending Regulation S-K concept release (our client memorandum and summary are available here and here).
The proposal is … Read more
In Marblegate Asset Management v. Education Management Corp. (S.D.N.Y. 2014), the Southern District of New York found that a proposed out-of-court debt restructuring to the detriment of non-consenting creditors likely violated provisions of the Trust Indenture Act of 1939 (TIA), a Depression-era federal statute intended to protect rights to payment under a TIA-qualified indenture, which is a feature of any U.S. public offering of debt securities. Unlike earlier TIA cases, a critical element of the proposed restructuring here was explicitly permitted by the governing indenture, and no consent was required under the indenture. Nonetheless, the Court read the TIA … Read more