Ac co u n ti n g CORNE R
// By Corey Fischer, CPA
ESG is Coming Down the Regulatory Pipeline
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’m often asked by clients what they can expect in the way of new financial reporting regulations that may be in the regulatory pipeline. This question is mostly asked around year end, but more often and with greater intensity in an election year when there is a change in presidential administrations.
A change in administrations obviously comes with a new president and vice president, but it also comes with new agency heads. With new agency heads come a reshuffling of priorities. When Gary Gensler took the helm as Chairman of the Securities and Exchange Commission on April 17, 2021, he wasted no time in setting new priorities for his agency. By June, the SEC disclosed a list of 49 proposed rule changes that were on the Commission’s agenda. REGULATORY PRIORITIES That agenda, which is continually updated, can be found in the SEC’s Agency Rule List. The list includes some notable proposed rules including:
Act of 2010, including incentive-based compensation arrangements, and conflicts of interest in securitizations. •• Enhancing shareholder democracy. •• Special purpose acquisition companies. •• Mandated electronic filings and transfer agents.
COVERING THE PRIVATES •• Disclosures relating to climate risk, human capital, including workforce diversity and corporate board diversity, and cybersecurity risk. •• Market structure modernization within equity markets, treasury markets, and other fixed income markets. •• Transparency around stock buybacks, short sale disclosure, securities-based swaps ownership, and the stock loan market. •• Investment fund rules, including money market funds, private funds, and ESG funds. •• 10b5-1 affirmative defense provisions. •• Unfinished work directed by the Dodd-Frank Wall Street Reform and Consumer Protection
32 MicroCap Review Magazine
Clearly, regulators are addressing a wide swath of areas, and its regulatory footprint may increase even wider. In a recent CNBC interview Chairman Gensler said his staff is reviewing new rules that would require more transparency from private companies as well. If such new rules are approved, it likely would affect large private companies which have opted to seek growth capital through private capital markets. The SEC may consider tightening the qualifications of investors who participate in private funds and may change rules on how those investors are counted.
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