Date changes on the SEC agenda reflect shifting priorities and unanticipated complexity. Dates for climate risk and HCM have now been pushed back to December 2021 (though the month is now half over) from a previous listing of October 2021, suggesting that writing rules for entirely new, likely prescriptive, disclosure requirements is taking additional time. Clawbacks and proxy advisory reforms were moved up the schedule from April 2022 to December 2021 to reflect newly-proposed rules and amendments. The Dodd-Frank pay for performance rules will be reproposed with a reopening of the comment period scheduled for April 2022.
Proposed SEC rules on insider stock trading plans (Rule 10b5-1 plans) and share buyback disclosure accelerated: The Commission published proposed rules covering each during an open meeting on December 15, 2021. The proposed changes to 10b5-1 plans include mandating a 120-day cooling off period prior to trading under a new plan, an attestation that the officer or director is not in possession of material non-public information at the time of establishing the plan, limits on single-trade plans, and enhanced disclosure requirements for sales made under the plans. The SEC’s buyback proposal, which is being driven in part by concerns by some that executives are timing stock sales around buyback decisions, would require enhanced and more frequent disclosures including the rationale for the buyback and determination on the size of the buyback. Companies would have to report buybacks the following business day (currently, the requirement is for quarterly disclosures on monthly buybacks). The proposal would also require firms to indicate whether any executives bought or sold shares within 10 business days of the announcement of a buyback program.
Outlook: With clawbacks, 10b5-1 plans, and stock buybacks being frequent targets of progressive lawmakers and a Biden administration priority, the SEC has felt some pressure to address those concerns. Further, the rush of proposals may serve to clear the Commission’s schedule for headline disclosure requirements related to climate risk and human capital metrics, which are currently under development.
