In October 2018, the SEC posted its latest version of its semiannual regulatory agenda and plans for rulemaking with the U.S. Office of Information and Regulatory Affairs. The Office of Information and Regulatory Affairs, which is an executive office of the President, publishes a Unified Agenda of Regulatory and Deregulatory Actions (“Agenda”) with actions that 60 departments, administrative agencies and commissions plan to issue in the near and long term. The Agenda is published twice a year.
Like the Spring 2018 Agenda, the fall Agenda is broken down by (i) “Prerule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame has jumped up with 36 items compared to 21 on the spring list.
Interestingly, following President Trump’s recent call to eliminate quarterly reporting for public companies, Chair Clayton remarked that “I don’t think quarterly reporting is going to change for our top names anytime soon. It was good of the president to raise it… as it could make sense to ease the requirement for smaller companies….” Of the three items in the pre-rule stage on the Fall Agenda, earnings releases and quarterly reports are one. Perhaps we will see a change in quarterly reporting requirements for smaller reporting companies. The other two items on the pre-rule list include the harmonization of exempt offerings to streamline the rules for exempt offerings and the modernization of investment company disclosures.
Eighteen items are included in the final rule stage, up from 11 on the Spring Agenda. Disclosure on hedging by employees, officers and directors remains in the final rule stage. The proposed rules were issued in February 2015 (see HERE) and will result in checking another box on the Dodd-Frank rulemaking list. Still in the final rule stage are amendment to the SEC’s modernization of property disclosure for mining companies, disclosure on order handling information, amendments to municipal securities disclosures, a few rule changes related to investment advisors and a few related to swaps, and implementation of FAST Act report recommendations (see HERE).
Auditor independence with respect to loans or debtor-creditor relationships moved up from proposed to the final rule stage, as did amendments related to fair access to investment research and amendments to the whistleblower program.
Amendments to the SEC’s Freedom of Information Act Regulations, which was included in the Spring Agenda final rule stage, were enacted in June 2018. Regulation S-K disclosure updates and simplification rule changes remain on the final rule change list even though some amendments have been recently implemented (see HERE). Likewise, a change to the definition of a smaller reporting company has been completed and thus off the list (see HERE) as has the adoption of inline XBRL (see HERE). Business, Financial and Management Disclosure Required by Regulation S-K remains in the proposed rule stage, continuing the topic of disclosure reform.
Although investment company reporting modernization and amendments to the Investment Advisers Act were included in the Spring Agenda final rule stage, no rule changes have been made and as mentioned above, in the newest Agenda, the modernization of investment company disclosures is listed in the pre-rule stage.
Eighteen items are included in the proposed rule stage. Items of interest in the proposed rule stage include amendments extending the testing-the-waters provisions to non-emerging growth companies (see current testing-the-waters provisions HERE); financial disclosures about acquired businesses, disclosure of payments by resource extraction issuers, filing fee processing updates, bank holding company disclosures, exchange traded funds, and fund of fund arrangements. As promised by Chair Clayton, amendments to the definition of an accelerated filer appear on the proposed rule change list.
Regulation A amendments are now included in both the long-term action list and proposed rule stage. I am hopeful that these amendments may include an increase in the offering limits. We continue to wait for the SEC to amend the Regulation A rules to allow reporting issuers to utilize the offering as required by the Economic Growth, Regulatory Relief and Consumer Protection Act (see HERE).
Rules on disclosure for unit investment trusts and offering variable insurance products, offering reform for business development companies, use of derivatives by registered investment companies and business development companies, Business, Financial and Management Disclosure Required by Regulation S-K, standards for covered clearing agencies, and amendments to marketing rules under the Advisors Act, are also included in the proposed rule stage. Amendments to the transfer agent rules remains on the proposed rule list although it has been almost three years since the SEC published an advance notice of proposed rulemaking and concept release on new transfer agent rules (see HERE).
Fifty-two items are listed as long-term actions, including many that have been sitting on the list for a long time now. Still on the long-term actions are rules related to reporting on proxy votes on executive compensation (i.e., say-on-pay – see HERE), universal proxy, Form 10-K summary, corporate board diversity, investment company advertising, and revisions to audit committee disclosures.
Highly debated and much needed, but still on the long-term agenda, are the amendments to the accredited investor definition (see HERE). Also remaining on the long-term action list are Regulation Finders. The topic of finders has been ongoing for many years, and I am extremely pleased to see it make the list. See HERE for more information.
Other items remaining on the long-term agenda include amendments registration of security-based swaps and a few other swap-related rule changes, stress testing for large asset managers, prohibitions of conflicts of interest relating to certain securitizations, definitions of mortgage-related security and small-business-related security, numerous proxy rule amendments, conflict minerals amendments, amendments to Guide 5 on real estate offerings and Form S-11, incentive-based compensation arrangements, exchange traded products, various broker-dealer-related rule changes, and risk mitigation techniques. Also remaining on the long-term action list include simplification of disclosure requirements for emerging growth companies and forward incorporation by reference on Form S-1 for smaller reporting companies (EGCs may already incorporate by reference – see HERE), and Regulation Crowdfunding amendments.
Rule 701 and Form S-8 amendments have been added to the long term action list following the SEC’s recent rule changes and concept release (see HERE and HERE). Other interesting items added to the long-term agenda are rule changes to short sale disclosure reforms and registration of alternative trading systems. Alternative trading systems have garnered interest for their potential use for securities token trading.
Still on the long-term agenda are future Dodd-Frank rules, including proposed regulatory actions related to pay for performance (see HERE), executive compensation clawback (see HERE) and clawbacks of incentive compensation at financial institutions.
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