Gensler Agenda Comes Into View

The Securities and Exchange Commission has released updated plans for its rulemaking agenda, with new proposals on climate change, corporate share buybacks, and insider stock sales coming soon; followed by plans to revisit rules adopted during the Trump Administration on whistleblower awards, shareholder proposals, and disclosure of payments companies make to foreign governments for mining rights.

The SEC publishes an update to its rulemaking calendar twice a year, and this latest agenda (posted Friday) was the Spring 2021 update. It’s the first one published under new SEC chairman Gary Gensler and under the Biden Administration generally.

In total, the update lists more than two dozen items in the “proposed rule” stage, which means they could come up for discussion at the SEC any time in the next six months or so. The exact timing depends on the SEC staff drafting a formal proposal for the SEC to consider, plus Gensler’s discretion about when he wants to put a proposal before his fellow SEC commissioners. 

The items on Gensler’s agenda that are most relevant to compliance officers include… 

• Disclosures relating to climate risk, human capital (including workforce diversity and corporate board diversity) and cybersecurity risk
• Disclosures related to share repurchase programs
• 10(b)5-1 plans, used to govern stock sales by corporate insiders
• Updates to rules for “disclosure of payments by extractive resource issuers,” which is a fancy way of saying “disclosure of the money mining companies pay to foreign governments for land rights
• Shareholder access to the proxy for director nominations and other proposals
• Revisiting reforms to the whistleblower awards program that were adopted last year
• Special purpose acquisition companies

The updated agenda also includes plenty of more technical items too, such as market structure, custody rules for investment advisers, and broker-dealer stress testing, if that’s your thing.

Honestly, none of these rulemaking priorities should surprise anyone who’s been paying attention. Gensler has talked numerous times about reforming 10(b)5-1 plans, as well as about climate change and other ESG disclosures. Even his predecessor, acting chair Allison Herren Lee (now back to her day job as regular SEC commissioner) talked about forthcoming changes to climate change disclosure earlier this year. 

One interesting side note: Gensler also just named Renee Jones director for the Division of Corporation Finance, which is a crucial role for developing pretty much all the pending rule proposals we outlined above. Jones most recently was a law professor at Boston College. 

Jones succeeds John Coates, who had been acting director since January. Coates, however, will now be general counsel for the SEC. So Gensler has two senior aides in place whom he’ll need as he pushes this agenda forward. 

Republican Commissioners Do the Usual

Meanwhile, Republican SEC commissioners Hester Peirce and Elad Roisman published a joint statement expressing the predictable outrage at Gensler’s news plans. Basically, they’re unhappy that Gensler is reopening a bunch of rules that the Republican-led SEC adopted during the Trump Administration. 

“A change in administration naturally brings changes in policy, and the Agenda reflects that shift in the form of new rulemakings, but reopening large swathes of work that was just completed without new evidence to warrant reopening is not normal practice,” they said. “The inclusion of these rules in the Agenda undermines the Commission’s reputation as a steady regulatory hand.”

Cry me a river, commissioners. Yes, Gensler’s actions are a break from normal practice — but the four years of the Trump Administration were anything but a normal presidency. 

One example: the SEC’s battle to curb large awards under its whistleblower program. That effort began with then-chairman Jay Clayton proposing to cap large awards at $100 million, an idea with not the faintest tether to the language of the Dodd-Frank Act. When the whistleblower lobby threatened to sue, Clayton substituted new language that claimed inherent power to curb large awards. Based on what analysis? Thin air, as far as I could tell. So why wouldn’t Gensler want to revisit such an ill-considered rule, rammed through on a 3-2 vote? 

This is, in fact, the second joint statement Peirce and Roisman have published lately expressing outrage at Gensler. They also objected to him firing PCAOB chairman William Duhnke earlier this month and telling the remaining board members they’re on their way out. Never mind that a Republican lawsuit against the constitutionality of the PCAOB gave Gensler the legal authority to fire everyone, and that the PCAOB was a mess of ineptitude. 

The plain truth is that Gensler is the chairman and Joe Biden is the president, and voters put them into office to pursue their policy goals. That’s what Gensler is doing. Compliance officers should take note and plan accordingly, because those policy moves are coming.