The SEC should not be in the business of trying to select the parties among the definitions of the competitive idiom of materialism beyond material impact on investment.
The Biden administration approved a number of new requirements for corporate disclosure through SEC roll -making during its last year. Supporting these requirements, the purpose of “Increasing climate Discoveries and Standards for Investors” was aimed at engaging in large quantities of publicly disclosures to publicly -trading companies. These companies would have been in conjunction with their financial possibilities and annual discoveries regarding their financial prospects and status.
Eagle -eyed reader will have at least two questions. First, why was the SEC issuing these rules? However, we already have an environmental protection agency, whose role is to implement environmental regulations on private companies. Second, why will the SEC request such revelations in the first place?
The answer to both questions revolves around a developing definition Materialism
17 CFR § 230.405 SEC’s working definition of what kind of material is material for the purposes of annual corporate discoveries: “The term content, when used to be eligible for any article is used to offer information, restricts the information required in these cases, which has a significant investment or any significant investment.
More straightforward words, material revelations are the ones that a reasonable investor will depend on when deciding to buy security. But who is a reasonable investor? What kind of information do they give privileges when making investment decisions?
There is a lot of writing on this topic in the legal community. Some scholars have proposed a “minimum normal dominator” test. He asks whether the most unwanted investor will be interested in the contents of any revelation when it is published. Others have advocated this question to democratic, to conduct a wide range of investors to see what kind of commodities they care about when investing. Some believe that materialism is very wide for globalization. They argue that the content that is different will be different in the company and that it is almost impossible to organize the area fairly. This question is unlikely to answer at any time soon, but we must acknowledge that there is a deep difference between it Class In particular, investors, entrepreneurs and individual investors can give various aspects of a company to their material protection.
Individual investors have a much more personal relationship with the stock market. They will not have a large investment firm or millions of diverse assets of the bank and can only be invested in a few companies to make a little extra money to complete their salaries. Although their investment decisions may not be fully based on investment or financial health of their assets, how individual assets perform during the year will be more important for these small dollar investors. Non -financial elements of a company’s business, as needed, will be less important for these investors. Thus, traditional financial revelations will be material .I will consider where they are relatively extraordinary investment.
Due to large quantities of capital that they can invest in diverse assets, when it comes to the construction of their portfolio, there is more flexibility among institutional investors like banks, actism groups and asset management companies. Instead of any company or asset, an institutional investor needs to perform well for the financial solvence, these investors are more insulation for the failure of any company as long as their holding is performing well. Thus, although investment return is still material for institutional investors, these companies can also freely understand the secondary measurement as the content of their investment strategies. These reservations may not be fully based on potential profit. You can see clear examples of firms in people who limit their investment to organizations that align with the matriculation of internal values, investing in companies that are in line with their views on environmental policy, social activity, or sustainable source of content.
In this way, due to a significant amount of difference in interests, the interests of small dollar investors face differences with institutional investors, and these disputes can arise in a high level -approved rules.
With an art for environmental interested investment policies, institutional investors have achieved a significant achievement with the rules of the Biden administration’s environmental disclosure. Confirmation of this You just need to see the footnotes contained in the final rules within the Federal Register: SEC often relied on the climate responsibility promises such as Blackrock, Calvart Research and the Wingard Group. They are concerned how important the climate impact is on their investment decisions, and these certificates helped justify the federally compulsory climate disclosure rules.
The Biden SEC would have both expensive and time to create such disclosure requirements. There is no need to mention that the Novel Novel analysis or programs may be fully needed to research on potential climate effects for compliance. In this way, the SEC was imposing the rules of the air under the guise of financial services. Moreover, such extensive steps would be removed from the profits of every company as they started running to ensure their regular compliance. It is likely that the interests of both companies and small investors are likely to be closed by the SEC earlier this year by implementing this disclosure principle.
Unfortunately, the SEC now has a track record of giving non -financial elements a privilege to benefit from the institutional investors. It has nothing to prevent or prevent the SEC’s future board of directors from implementing other non -financial reservations as “material” as “material” and then in collaboration with the sector regulation in collaboration. Also, as a court, it has not yet been talked about the SEC climate commitment to materialism. In this way, we have no clear answer to whether or not to violate the commitment of the administrative procedure. Accordingly, the Congress or the administration should be angry with the SEC to adopt the rules of financial material, where the agency, especially the SEC’s SEC, prevents non -financial measurement as part of the SEC disclosure.
Fortunately, the government has a reference that should be prohibited. Until 2022, under the Labor Department, the Ersa Retirement Plan jurists were not allowed to consider non -fixed factors when investing. As a result, the case is a huge volume of law and debate, which is under this standard. When this prohibition can be re -implemented by rule according to the Executive Order 14173, a parallel rule imposed in the SEC related to the disclosures will be a useful step to protect companies from regular burden of extraordinary disclosure.
Although the interests between the institutional and small investors can turn, the two groups should widely agreed that the return on investment is always material for a responsible investor. The SEC should not be in the business of trying to select the parties among the definitions of the competitive idiom of materialism beyond material impact on investment. Other items can be left on the better decision of companies that they think must be disclosed. If these companies try to hide material information, the SEC can then handle its proper role and force these revelations.
In short, leave the SEC financing, and the rest in the market.
