New SEC “Wake-Up” Rules Create Cost Problems For Business Owners – .

SEC chief prepares “wake-up call” rules and plans to reduce market “gamification” – –

Business groups are trying to figure out how much money state-owned companies might have to shell out to comply with the Securities and Exchange Commission’s new “awake” disclosure rules, and early estimates aren’t pretty.

FOX Business has discussed the costs with Wall Street executives, analysts and think tank executives, and while no exact estimate can be determined, the SEC’s new disclosure mandates involving everything from the environment diversity on the board, will likely cost US state-owned companies billions. of dollars.

Securities and Exchange Commission Chairman Gary Gensler, known for his progressive leanings, has head of the commission’s voting agenda new rules that will require disclosure of information on so-called ESG or environmental, social and governance issues . These questions involve an open society’s commitment to mitigate climate change and other non-financial disclosures.


Gensler met with President Biden and other leading financial regulators on Monday to discuss climate-related financial risks and how regulators can advance the president’s green and social agenda through edicts targeting state-owned enterprises . Gensler said such disclosures are being demanded by a new generation of investors seeking to make American businesses more socially responsible.

But critics such as business groups and GOP lawmakers say the SEC decision is part of a larger effort by the Biden administration to force companies to adopt a progressive social agenda. They also argue that the commission is overstepping its authority which has traditionally focused on protecting small investors from financial fraud.

Gensler is moving forward, however, and given the political makeup of the committee, with Democrats outnumbering GOP commissioners by a 3-2 majority, he is likely to push forward his new disclosure mandates may – to be by the end of the year, say people with knowledge of the president’s thought.

According to the proposed new disclosure standards, companies must “increase disclosures about their climate change risks” and “improve (corporate) disclosures on the diversity of board members and nominees”.


While there is a controversial debate about the need for such disclosures, one thing is certain: companies will spend significant amounts of money on lawyers and consultants on how best to disclose a company’s carbon footprint and new mandates. of diversity.

For example, the Heritage Foundation, a conservative think tank, estimates that new corporate disclosure rules will cost “billions of dollars” and possibly lead to lower returns for shareholders. The group also warns of massive legal liabilities as progressive activists challenge the veracity of information leaked by companies, as the SEC rule, at least in its proposed current form, is amorphous and therefore leaves room for various interpretations. .

“It’s not a one-size-fits-all approach,” says Chris Whalen, president of Whalen Global Advisors. “ESG reports are so vague that there’s really no way to quantify them. ”

An SEC spokesperson declined to comment, but the awakened disclosure rules have their backing in certain areas of financial activity that have focused on ESG investing. Blackrock, the world’s largest fund manager, offers a host of new ESG funds that select companies that meet ESG standards, but also charge investors higher fees than other funds the company offers.

Blackrock CEO Larry Fink has been an advocate for social investing and using Blackrock’s influence (he manages nearly $ 9 trillion) to lobby for these reforms in companies. in which it invests. The company recently voted to place three activist shareholders in the ESG fund, Engine No 1.

“I think spending billions (on these disclosures) is overkill,” said Columbia law professor John Coffee, an expert on corporate governance. “And as the No.1 engine proved with Exxon, shareholders seem willing to vote for such goals. “

Some Wall Street analysts claim that the cost of such disclosures could easily run into the billions of dollars, as they spend money on consultants to prepare for the additional disclosure, and in the case of banks, it can also cost them. be prohibited from doing business with companies that are considered fully engaged in revival policies.


“Mandatory disclosures could have an impact on (banks) results as they could be forced not to lend to companies and companies that do not meet ESG standards,” said Dick Bove, analyst at Odeon Capital.

In addition, the costs will fall disproportionately on small state-owned enterprises that do not have the same cash on hand and the staff to deal with new legal issues.

“This whole ESG business is just a huge waste of time and money,” added Whalen Global Advisors head Chris Whalen, “It’s just a big show that only benefits consultants and lawyers who make money from it. “


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