The SEC’s Strategic Plan for Fiscal Years 2022-2026 emphasizes the importance of registrants making full and fair disclosures to investors on an ongoing basis. Disclosure-related rulemakings are a key way the Commission pursues this goal. Expected actions for 2023 include:
Rulemakings focused on promoting consistent, comparable climate-related disclosures
A final rule is widely anticipated on the SEC’s March 2022 proposal on public company climate-related disclosures. It is intended to enhance and standardize disclosures from public companies about climate-related risks, targets and goals, and greenhouse gas (GHG) emissions. It also would require registrants to quantify the effects of certain climate-related events and transition activities in their audited financial statements and adhere to climate-specific governance requirements. The proposal generated extensive public input from stakeholders ranging from Congress to investor groups, the business community and academics. Much of the public commentary on the proposal has indicated that there is notable support for some mandatory climate-related disclosures. However, there is a broad range of perspectives on specific elements of the proposal. Republican Commissioners Hester Peirce and Mark Uyeda have voiced concerns about it, including that it is overly prescriptive and would require disclosure of immaterial information. They also have challenged whether the proposal would provide benefits such as comparable, consistent and reliable disclosures. The rule is expected to be finalized by April 2023; once issued, it is likely to face court challenges based on statements made by various stakeholder groups. In the meantime, the SEC’s staff is expected to continue monitoring issuers’ climate-related disclosures and has expressed the expectation that issuers consider the Commission’s published guidance regarding climate change-related disclosures.
Adoption of cybersecurity risk governance disclosure rule
The SEC’s March 2022 rule proposal on public company disclosures relating to cybersecurity risk governance would require current reporting from registrants about material cyber incidents and periodic disclosures regarding a company’s policies and procedures — as well as management’s role and expertise — for identifying and managing cybersecurity risks. The proposal also would require issuers to disclose information about their board oversight of cybersecurity risks. The SEC has suggested it will finalize this rule by April 2023, and in the meantime continues to remind issuers to refer to the Commission’s published guidance on public company cybersecurity disclosures.
Adoption of disclosure proposal for share repurchase modernization
In December 2022, the SEC reopened the comment period for the 2021 proposal on share repurchases reporting and disclosures to allow for additional input in light of the potential economic impact of the Inflation Reduction Act of 2022 on share repurchases. The proposal would require more timely disclosure regarding purchases of equity securities for each day that an issuer, or an affiliated purchaser, makes a share repurchase, as well as periodic reports on the rationale for the repurchases. These disclosures would be provided on a new Form SR. The SEC suggests it will consider a final rule on this proposal sometime in 2023.
Adoption of special purpose acquisition company–related disclosure rule
The SEC suggests it will also act on a final rule on disclosures related to special purpose acquisition companies (SPACs) by April 2023, which would require new disclosures when a SPAC conducts an IPO and when it combines with a private operating company in what is known as a de-SPAC transaction, among other changes. When the rule proposal was released in March 2022, Gensler stated that SPACs function as alternative IPOs and that the proposal is intended to provide the same investor protections that are available for a traditional IPO.
Release of human capital–related rule proposals
The SEC has communicated plans to propose disclosure rules relating to human capital in the year ahead, including a human capital management disclosure proposal that the SEC suggests it will consider by April 2023, and a corporate board diversity disclosure proposal on the SEC’s regulatory agenda for consideration by October 2023. Gensler has been a proponent of human capital disclosures throughout his tenure, and Democratic Commissioner Jaime Lizárraga also has championed diversity, equity and inclusion — noting that human capital disclosures provide an opportunity for investors to benefit from meaningful insights on diversity.
Dodd-Frank Act disclosure rulemaking
In 2022, the Commission finalized a 2010 Dodd-Frank Act (DFA) rule on erroneously awarded compensation (also known as clawbacks), as well as a “pay versus performance” disclosure rule. More DFA rulemakings are on the SEC’s 2023 agenda. This includes a proposal to amend a rule, which took effect in March 2021, on resource extraction disclosures; the rule requires resource extraction issuers to make annual disclosures about payments to foreign governments or the US federal government for the commercial development of oil, natural gas or minerals. It is not clear what changes to the rule are under consideration.