A Challenge for Disclosure Lawyers: The Holding Pattern Over Upcoming SEC Rules

When I recently have asked disclosure practitioners about what was their top challenge this proxy season, the answer I have heard most frequently was the feeling of paralysis over tackling the numerous topics that will be impacted by new SEC rules soon.

The SEC has quite a few proposed rulemakings outstanding – and other rulemakings that haven’t even yet been proposed but that we know are coming – that could be finalized in time for next year’s proxy season or the one after that. Climate, cybersecurity, maybe even human capital management. But in the interim, the question looms, “What to disclose?”

People were loath to establish precedent and disclose details that might not be required by SEC rules once they are adopted. Practitioners felt tension in balancing what shareholders and other stakeholders want to see on these hot topics now against whether those disclosures would actually be material enough to belong in a SEC filing. Even if a company is reporting under one – or more – of the common ESG disclosure frameworks, there is still a lot of leeway about what to disclose.

Not only was there confusion about what to disclose, there also were challenges about where to disclose it. In the proxy or the 10-K? Maybe the glossy annual report? Or even outside the SEC filing stream and put it in the ESG report. And where should it be disclosed within a document once we decide in which document to stick it? It gets confusing and it is complicated.

For once, people want to see a final SEC rule…

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