In Tuesday’s TheCorporateCounsel.net blog, John wrote that Paul Atkins has been sworn in as the new SEC Chair, along with his likely priorities.
“Chairman Atkins’ testimony during his confirmation hearing provides some clues. This excerpt from a recent Meridien Compensation Partners memo summarizes the key themes that he raised during his testimony:
- Reaffirmation of the SEC’s Foundational Mission. Reiterating the agency’s statutory objectives, Chair Atkins called for a ‘reset of priorities’ to restore ‘common sense and effectiveness’ in regulation, reinforcing that the SEC’s primary function is to support well-functioning markets that foster economic opportunity and protect investors.
- Emphasis on Practical, Investor-Focused Regulation. SEC regulations must be ‘smart, effective, and appropriately tailored, with a focus on implementation that achieves intended outcomes without creating undue burdens. Chair Atkins acknowledged the gap that often exists between legal drafting and business application, underscoring the importance of translating complex regulatory requirements into actionable practices.
- Investor Disclosures and Transparency Reform. Current disclosure requirements overwhelm rather than inform investors. Chair Atkins expressed his intent to simplify disclosures to better serve investor understanding and decision-making, which may signal future reforms to corporate reporting obligations.
- Commitment to Capital Formation and Market Competitiveness. The current regulatory environment is overly complex, politicized and discouraging to investment. Chair Atkins pledged to advance policies that encourage innovation and capital access, particularly for U.S. businesses seeking to grow and compete globally.
- Digital Asset Regulation as a Priority. The development of a ‘firm regulatory foundation’ for digital assets is a top Commission priority to remove the current regulatory uncertainty which has become a barrier to innovation.
- Depoliticization of Securities Regulation. SEC rulemaking and enforcement must be free from political influence, with the SEC’s work squarely on investor protection and market integrity, rather than on politically driven priorities.”
Sounds like a playbook for eliminating the SEC’s 2014 conflict minerals disclosure rule – the enforcement of which was already suspended eight years ago. Complaints against the rule at its outset align with multiple points above. The rule was originally conceived under the guise corporate responsible sourcing practices being material to investor decisions broadly, but that never, uh, materialized. During my time at the Responsible Minerals Initiative, I tried to push for an investor engagement initiative but there was no demand for it externally and therefore no internal support. Even today, it is unclear how important conflict minerals matters are to investors or in ESG ratings.
Should we cue up The Doors The End? Maybe not. The conflict minerals rule was not developed at the discretion of the SEC – it was mandated by Congress in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 so the Commission has its hands tied to a large extent. Beyond regulatory compliance, many companies incorporate conflict minerals requirements into supplier agreements and Codes of Conduct, creating other legally-binding requirements for conflict minerals due diligence (although perhaps not disclosure itself). And let’s be real – the conflict minerals disclosure is not Atkins’ or the SEC’s priority. We still await regulatory amendments responding to the 2017 District Court’s remand of the rule to address the Court’s compelled speech finding.
Atkins may eventually address the rule in some manner, but probably not soon. Companies should continue filing conflict minerals disclosures.
Members can learn more about responsible sourcing here.
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