Earlier this month, the Securities and Exchange Commission (SEC) released its Spring 2024 Regulatory Flexibility Agenda, which sets out the SEC’s rulemaking agenda for the upcoming year. Some observers may have been wondering if Chair Gensler and the SEC would plan to advance any further rulemaking actions before the November elections. It is true that actions could be taken ahead of the proposed dates in the agenda, but many signs point to the SEC proceeding deliberately and without undue haste with this round of rulemaking. Several agenda items in the proposed and final rule stages from prior RegFlex agendas have been postponed to April 2025.
Below are a few updates on the expected timing of certain proposed and final rules that may be of interest to retailers.
Final Rule Stage
- Rule 14a-8 Amendments (expected April 2025) – The SEC is considering adopting amendments regarding shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934 (Exchange Act), which governs the process for including a shareholder proposal in a company’s proxy statement and which has received a lot of attention in recent years. In 2020, the SEC adopted amendments to, among other things, impose new share ownership requirements, limit representatives from presenting more than one proposal at a meeting, and raise the resubmission thresholds for proposals previously voted on. In 2021, under a new administration, the SEC Staff issued new guidance in the form of Staff Legal Bulletin (SLB) 14L, which rescinded three previously issued SLBs and effectively made it more difficult for companies to exclude shareholder proposals that raise environmental and social policy issues. Then, in July 2022, the SEC proposed amendments that would revise certain substantive bases for exclusion of shareholder proposals by amending the substantial implementation exclusion to specify that a proposal may be excluded if the company has already implemented the essential elements of the proposal, the duplication exclusion to specify when a proposal substantially duplicates another proposal for purposes of the duplication exclusion, and the resubmission exclusion to provide that a proposal constitutes a resubmission if it substantially duplicates another proposal.
Proposed Rule Stage
- Human Capital Management Disclosure (expected October 2024) – The SEC is considering amendments to enhance disclosures around human capital management. In 2020, the SEC adopted principles-based human capital disclosure requirements regarding a registrant’s “human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that the registrant focuses on in managing the business (such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the development, attraction and retention of personnel).” Some groups have complained about the lack of specific metrics in the 2020 rules and have called for more qualitative and quantitative disclosures on human capital.
- Corporate Board Diversity (expected April 2025) – The SEC is considering amendments to the proxy rules to enhance registrant disclosures about the diversity of board members and nominees.
- Rule 144 Holding Period (expected April 2025) – The SEC is considering amendments to Rule 144, a non-exclusive safe harbor that permits the public sale of restricted or control securities if certain conditions are met. The proposed amendments would revise the holding period determination for securities acquired upon the conversion or exchange of certain market-adjustable securities of issuers that do not have securities listed on a national securities exchange.
- Regulation D and Form D Improvements (expected April 2025) – The SEC is considering amendments to Regulation D and Form D, including updates to the accredited investor definition. An SEC Staff Report on this topic was issued in December 2023, but the report only welcomed input from the public and did not make any specific recommendations on changes to the definition.
- Definition of Securities Held of Record (expected April 2025) – The SEC is considering amendments to the “held of record” definition for purposes of Section 12(g) of the Exchange Act. Currently, a company that reaches either 2,000 holders of record or 500 holders of record that are not accredited investors (whichever happens first) is required to register. Issuers looking through record ownership only to banks and brokers could be up for consideration.
Although the agenda provides good directional guidance on SEC rulemaking priorities, the SEC is not required to act on these matters by any date, nor is it precluded from acting on any matters not listed, so the timing of actions by the SEC may differ from what is on the agenda. Further, with the election looming in November, it is by no means certain that the SEC will act on these priorities by April 2025.
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