The unique handling this week of public remarks from SEC Commissioner Robert Jackson has piqued our curiosity. We’re talking, specifically, about the dissent he issued to a set of SEC rule changes that “modernize and simplify disclosure requirements for public companies,” as the official release puts it.
It’s highly unusual to see a dissent issued from SEC rules that were passed without an open meeting. In fact, we can’t remember that ever happening before. Notably, our Intelligize securities researchers first spotted the dissent when it appeared in the Columbia Law School’s Blue Sky Blog. The SEC then published Jackson’s remarks to its website as well.
Whatever the reason behind the atypical process, Commissioner Jackson raised two problems with the substance of the rules, which were passed under the authority of the FAST Act (short for Fixing America’s Surface Transportation Act). First, he laments the fact that rules do not require companies to disclose their “legal entity identifier” (LEI), the 20-character code that companies use as a kind of universal ID badge in global transactions. Second, he takes issue with the rules’ removal of the “requirement that firms seek staff review before redacting their filings.”
Jackson is a Democrat, but the partisan lines here are not clearly drawn. The FAST Act was signed into law by President Obama, and the impetus for the current rule changes dates back to former SEC Chair Mary Jo White’s Disclosure Effectiveness Initiative, which sought to modernize disclosure rules. Consistent with the general thrust of the Disclosure Effectiveness Initiative, the FAST Act, and the conclusions of a 2016 report required by that legislation, the new rules eliminate, streamline, and otherwise try to improve public company disclosure obligations.
We’re still digging our way through the 250-page rule amendments. In the meantime, we’re drawing insights from the many helpful law firm summaries; here, we pause to nod in the direction of Cooley and Mayer Brown, both of which put out excellent summaries.
We’ve also created a checklist of practical considerations around these rule changes. The checklist identifies specific action items that issuers can and should be taking to satisfy regulators and keep all of their stakeholders happy as they adapt to the new rules.
You can access our checklist here. Consider it a working document. We’ll be interested to hear about issuers’ experience with the rules, and possible pain points around them that we hadn’t considered. We are even open to dissenting opinions.