Monday, May 10, 2021
While the U.S. Securities and Exchange (SEC) has not been very active in holding companies accountable for failing to report climate-related information, litigation under state provisions and the growing urgency of climate-related risks has shown the need for more active enforcement.
In recent years, states have pursued companies for allegedly making misleading financial disclosures in violation of state statutes. In 2015, for example, the New York Attorney General entered into a settlement with Peabody Energy Corporation involving misleading disclosures under New York-specific statutes. After subpoenaing internal records that showed the company had made internal market projections showing severe negative impacts from certain potential laws and regulations and had failed to disclose those projections to the public, the company
Gensler Says SEC Will Enforce Reg BI ‘As Written’ In a testimony before the House Committee on Financial Services, the new SEC Chair noted the regulator would evaluate Reg BI, and update and freshen it if need be.
During a congressional hearing this week, Securities and Exchange Commission Chair Gary Gensler told lawmakers the agency would make sure firms are complying with Regulation Best Interest “as written.” But investor advocates say there is still latitude to add more teeth to the rule through additional guidance.
“It’s important that investors actually have brokers take their best interest at heart,” Gensler said, in response to a question about Reg BI from Rep. Ann Wagner (R-Mo.). “And that’s what we’re going to do; through examination, enforcement, and guidance, ensure that the rule is fully complied with as written.”
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Tomorrow at 10:00 am, the Senate Banking Committee will meet to conduct a hearing on the
nominations of Gary Gensler to be chairman of the Securities and
Exchange Commission (SEC) and Rohit Chopra to be director of the
Bureau of Consumer Financial Protection (CFPB). Both are strong
advocates of the Biden administration s policy agenda and have
longstanding relationships with progressive Democrats. The hearing
is certain to underscore the political and philosophical divide
between Democrats and Republicans, for example, over what role
social issues and policies should have in SEC and CFPB
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Tomorrow, Treasury Secretary Janet Yellen will lead a meeting of the Financial Stability
Oversight Council (FSOC). The preliminary agenda for the open
session includes climate change and its potential impacts on
financial stability.
Appearing before Congress last week, Secretary Yellen stressed
the importance of FSOC and its unique role in coordinating
responses to issues like climate change. She specifically noted
that climate change is a top priority of the Biden
[a]dministration and FSOC can play a role in arranging
discussions among financial regulators all of whom have
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During his Senate confirmation hearing for chair of the Securities and Exchange Commission (SEC), Gary Gensler said he would adhere to the U.S. Supreme Court’s view of materiality: Information is material (and should therefore be disclosed) if there is a substantial likelihood that a reasonable investor would consider the information important in making an investment or voting decision. He then noted that many shareholders are calling for disclosures on climate risk, human capital and political spending, suggesting that they may be material.
Since the start of the Biden administration, then-Acting Chair Allison Herren Lee and the SEC staff have clearly focused on environmental, social and governance (ESG) in all facets of the SEC’s operations. Highlights include: