Deal Diary

On September 20, 2023, the U.S. Securities and Exchange Commission (SEC) issued a final rule amending the so-called “Names Rule” (found here) that is “designed to modernize and enhance” protections under Rule 35d-1 of the Investment Company Act of 1940. The final rule is part of the SEC’s holistic efforts to regulate environmental, social and governance (ESG) matters, and is the SEC’s latest attempt to curb greenwashing in U.S. capital markets. The amendments require registered investment funds that include ESG factors in their names to place 80% of their assets in investments corresponding to those factors, thereby extending to ESG funds the SEC’s long-standing approach of regulating the names of registered funds to ensure they are marketed to investors truthfully. Fund complexes with more than $1 billion in assets will have two years from the final rule’s effective date (60 days after publication in the Federal Register) to comply, while fund complexes with less than $1 billion in assets will be given a compliance period of 30 months.

Chair Gary Gensler said “[t]he Names Rule reflects a basic idea: A fund’s investment portfolio should match a fund’s advertised investment focus. In essence, if a fund’s name suggests an investment focus, the fund in turn needs to invest shareholders’ dollars in a manner consistent with that investment focus. Otherwise, a fund’s portfolio might be inconsistent with what fund investors desired when selecting a fund based upon its name.” The sole dissenting vote against the rule modification, Commissioner Mark Uyeda, said “[w]ith these amendments, the Commission overemphasizes the importance of a fund’s name, as if to suggest that investors and their financial professionals need not look at the prospectus disclosures.” Commissioner Uyeda also expressed concern that fund investors will bear the increased compliance costs associated with the rule change.

We have released our 2023 ESG Survey which includes a collection of reports reflecting on significant ESG themes and trends from 2022, as well as what we believe to be key developments for 2023.

A recent Risk Alert issued by the Securities and Exchange Commission’s Division of Examinations examined investment advisers, registered investment companies and private funds engaged in environmental, social, and governance (ESG) investing. As investor demand for ESG data grows, investment firms must integrate compliance personnel into their ESG practices and put their ESG disclosures into action.

The world has changed a lot since our 2020 report. A global pandemic; a reckoning on race, inequality and social justice; a climate crisis; an economic shock; and increased political polarization have created challenging dynamics for companies and boards globally. The role of the board in managing risk and charting the course ahead is more critical today than ever before. This report delves into these wide-ranging and interlocking issues and offers insight on how directors and management must proactively embrace their stewardship roles in this brave new world.

On August 26, 2020, the Securities and Exchange Commission (SEC) voted to adopt amendments that modernize the description of business (Item 101), legal proceedings (Item 103) and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The amendments are intended to improve the readability of disclosure documents and discourage repetition and reduce the disclosure of information that is not material, as well as simplify compliance for registrants. The final amendments will be effective 30 days after publication in the Federal Register.

Akin Gump provides details on the June 23, 2020, Office of the Chief Accountant (OCA) of the Securities and Exchange Commission’s (SEC) statement on the importance of high-quality financial reporting in light of the impact of, and uncertainties related to, COVID-19.

Read more

Akin Gump provides details about the New York Stock Exchange LLC (NYSE) approved and declared rule change temporarily waiving through June 30, 2020 certain shareholder approval requirements required by Section 312.03 of the NYSE Listed Company Manual.

Akin Gump provides details on new measures taken by the Federal Reserve aimed at confronting the economic fallout from the COVID-19 pandemic and keeping credit markets functioning.