It’s fair to say the SEC is continuing to keep the financial community on its toes when it comes to revising, proposing and introducing new regulations. As the self-proclaimed ‘investor’s advocate’, the SEC’s areas of focus and scrutiny lately include the execution of retail orders, a review of crypto trading firms and amendments to ESG-related disclosures. With no slowing down of these wide-ranging regulatory overhauls in sight, Ruth Venning, executive director for investor relations and ESG at global biotech company Horizon Therapeutics, shares her views on the changes and how the shifting regulatory landscape is impacting her IR activity.
In your experience, what are the main regulatory changes the IR industry is focusing on at the moment?
In the US, the SEC has been on overdrive over the past couple of years, putting out new proposed regulations and revising others. And while the majority will no doubt impact IR in some form or another, the SEC’s proposed climate-change disclosure rule is one that could have significant implications for many IROs, depending on what the final rule looks like.
As it currently reads, the rule would entail significant and detailed disclosures in the 10K (the comprehensive report filed annually by public companies about their financial performance), some of which may depend on third-party data. Given that the 10K is a legal document, this could present multiple headaches, particularly for companies in industries where the environmental footprint has not previously been deemed material.
Several of the other rules – such as those around cyber-security and enhanced human capital management disclosure – will require the release of additional information and are likely to generate increased investor interest. It will be important for IROs to keep abreast of what their company is doing in relation to both of these areas, and how they can best communicate that activity most effectively. Additionally, the changes highlight the importance of having a crisis plan in place ahead of time. This will be vital preparation in the event that a company encounters a cyber-breach or major HR issue.
How are you changing your operations in response to regulatory developments?
My company is a biotech and, given that neither our investors nor SASB have viewed climate change as all that material, we haven’t really made changes to the way we operate. Instead, we are working to ensure we have the data required for the disclosures and we’ve also spoken with consultants to fully understand what we need to do to comply with the reporting requirements. That said, the climate disclosure rule is not yet finalized, so we’re in somewhat of a holding pattern, particularly as there’s been a lot of investor pushback on the proposed rule.
What concerns do you have about the impact of regulatory changes?
The climate-change disclosure rule is prescriptive and industry-agnostic, and it will result in a great deal of additional work and expense. The resulting disclosure may well allow investors to compare data across companies, but if climate change is not that material a factor for your company or industry, is it worth that additional expense, especially for younger companies that don’t have a lot of additional funds available? Furthermore, the way the proposed rule is currently written means it discourages companies that haven’t yet set out public climate-related goals from doing so. I can’t imagine this is what investors would want.
How do you communicate regulatory changes within your organization – for example, to the C-suite?
We monitor the regulatory environment and, in conjunction with our government affairs department, we regularly update the C-suite and board on the evolving regulatory environment both in the US and Europe. It’s a topic of great interest to them and to management in general. This can be seen in a recent National Association of Corporate Directors survey of more than 300 board directors, the results of which show that increased regulatory requirements were the fifth-highest trend they see as having the greatest effect on their company over the next 12 months.
What advice do you have for your fellow IROs who may be struggling to adapt to regulatory changes?
It’s vital to keep up to date on the evolving regulatory environment, and to keep your senior management and board informed of developments. NIRI offers a lot of resources in this regard, including webinars on the regulatory environment, and its advocacy web page offers useful information. Many chapters also have advocacy ambassadors, who can help IROs access additional information. Better yet, IROs can look into becoming an ambassador for their own chapter – it’s a great way to keep on top of regulatory developments and get to know other like-minded individuals.
Do you have any other comment on regulation issues?
I’m really pleased NIRI is working to encourage the creation of a public company advisory committee within the SEC. The SEC has multiple advisory committees, such as the investor advisory committee and the asset management advisory committee. Public companies are the only SEC registrant and constituent that doesn’t currently have an advisory committee. We, as corporate issuers, could provide valuable input to the SEC not only on a range of regulatory issues, but also on proposed regulations – such as the climate-disclosure rule – before they are issued for public commentary.
