While Washington is consumed with the elections next week, the Securities and Exchange Commission is continuing to consider numerous rulemaking proposals that could significantly increase the reporting and disclosure requirements of corporate America.
The SEC is considering two proposals Wednesday. One would adopt additional rules around how companies report proxy votes. Among other measures, the proposal could require funds to categorize the votes so they are easier to find and provide the vote outcome in a machine readable format.
A second would address the redemption of mutual fund shares and address the liquidity needs for funds when there are significant redemptions.
These are fairly technical proposals. However, SEC Chair Gary Gensler has more than two dozen other proposals that are in final rule stage, meaning the agency is still considering public comments, but they could be voted on and adopted sometime in the near future. These include pay vs. performance, climate change disclosure, cybersecurity risk governance, proxy voting advice, share repurchase disclosures, money market fund reforms, short sale disclosure reforms, and the loan or borrowing of securities.
These proposals are moving slowly from the “proposed” stage to the “adopted” stage; all or part of his agenda could be adopted in 2023.
If there is a single theme emerging from the SEC under Gary Gensler, it would be that he is seeking many new rules that would provide increased disclosures for everything from climate risks to private equity. Gensler has said this would increase market transparency.
Republicans disagree. There is likely to be vociferous pushback on more controversial proposals such as climate disclosure.
The elections next week are unlikely to change that. While the Republicans could harass the SEC by calling for more hearings next year, or could also refuse to authorize the higher SEC budget Gensler has pushed for, he has a 3-2 majority and will continue to maintain that edge into 2023.
However, Republicans could turn to the courts. It’s key to remember that last June, in West Virginia v. Environmental Protection Agency, the Supreme Court ruled that the “major questions doctrine” limited the scope of powers that Congress granted to the Environmental Protection Agency under the Clean Air Act. The Supreme Court said that Congress must provide clear direction to the EPA, not just a broad delegation of power, to regulate greenhouse gas emissions.