“It is not unethical for a company to decline to disclose information about the racial, gender, and LGTBQ+ characteristics of its directors,” the ruling stated. “We are not aware of any established rule or custom of the securities trade that saddles companies with an obligation to explain why their boards of directors do not have as much racial, gender, or sexual orientation diversity as Nasdaq would prefer.”
With those words, the Fifth U.S. Circuit Court of Appeals in New Orleans ruled this week, by a 9-8 vote, that Nasdaq cannot require diversity on the boards of companies that list on the exchange.
The decision upends a 3-year old SEC approved Nasdaq proposal to require companies listed on its exchange to add more women, racial minorities and LGBTQ+ people to its corporate boards.
The rule also mandated if companies did not adhere to the prescribed quotas it must explain why it didn’t and disclose demographic composition of their boards and their board selection process.
In a just released statement in response to the court ruling, Nasdaq asserted that it stands by its policy. “We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors. That said, we respect the Court’s decision and do not intend to seek further review.”
The SEC also responded to the ruling. “We’re reviewing the decision and will determine next steps as appropriate,” an SEC spokesperson said in a statement.
President-elect Donald Trump has nominated former SEC Commissioner Paul Atkins to Chair the SEC, signaling an easing of the regulatory environment.
Atkins is viewed as an experienced Washington insider known for his conservative stance and advocacy for deregulation. If approved by the Senate, he is expected to bring a less aggressive regulatory approach to Wall Street.
Atkins’ nomination was welcomed by business, including the crypto industry, and those opposing the new ESG rules approved by the SEC in March 2024. The latter requires companies to disclose climate-related information in registration statements and periodic reports. The SEC paused implementation of the ESG rules pending the outcome of lawsuits filed against the SEC by 25 states and a variety of business entities.
When the Gensler SEC first proposed the new climate-related disclosure rules in March 2022, Atkins and former SEC commissioners penned an opposition comment letter saying the proposal “oversteps the Commission’s congressionally delegated regulatory authority.” If Atkins is confirmed, it is expected that the ESG rule would not go into effect.
The crypto industry has been a key regulatory target under Gensler’s SEC, which sued multiple crypto firms for alleged SEC rule violations. Atkins currently is CEO of Patomak Global Partners which he founded in 2009. Patomak is a Fintech and risk management consultancy, and according to its website, “has deep experience in helping financial institutions navigate the emerging risks and opportunities related to crypto-assets, market trends and public policy developments.”
Prior to founding Patomak, Atkins served as SEC Commissioner from 2002 to 2008, where he advocated for transparency, consistency, and the use of cost-benefit analysis at the agency. Atkins also currently serves as Co-Chair of the Chamber of Digital Commerce’s Token Alliance, a lobbying group for the crypto industry.
Shortly after Trump was re-elected, Gensler announced that he would be stepping down from the SEC on inauguration day, even though his term wasn’t due to expire until June 5, 2026. An SEC-issued press release announcing his resignation noted that during Gensler’s tenure, “The Commission filed more than 2,700 enforcement actions and obtained approximately $21 billion in penalties and disgorgement orders between fiscal years 2021 and 2024.” It noted that $2.7 billion of the $21 billion was returned to investors.
To read Atkins’ letter to the SEC opposing the ESG Rule:
A federal district court in Texas has issued a temporary preliminary injunction which prohibits the enforcement of the Corporate Transparency Act (CTA) and the beneficial ownership information (BOI) reporting requirement, calling the CTA “quasi-Orwellian.”
The injunction was issued December 3rd in the case of Texas Top Cop Shop, Inc. et al, v. Merrick Garland. According to the court, the injunction applies nationally, the CTA and BOI reporting requirement cannot be enforced, and that companies do not have to comply with the January 1, 2025 compliance deadline, pending further review by the court.
Starting January 1, 2024, many companies have been required to report information to the US government about who owns and controls their companies. This was the result of the September 2022 Corporate Transparency Act, a part of the Anti-Money Laundering Act of 2020. The CTA requires “reporting entities” to file “beneficial ownership” information with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
BOI filing requirements under the CTA encompass a broad swath of business entities, though it primarily affects non-publicly traded companies. Individuals failing to comply are subject to civil fines up to $500 per day for each day past their filing deadline, and criminally could face prison time.
Both the AICPA and CPA groups from all 50 states and US territories had asked the US Treasury and FinCEN to suspend enforcement of BOI reporting requirements until the resolution of pending court cases, one of which was the Texas Top Cop Shop case. The Texas court determined that both the CTA and the BOI reporting rule are “likely unconstitutional as outside Congress’s power,” further citing that a “nationwide injunction is appropriate in this case”.
On December 5th, the government filed its appeal with the US Court of Appeals for the Fifth Circuit, seeking to reverse the Texas court’s temporary injunction decision. In the interim, businesses are given a filing reprieve. The AICPA, however, is advising companies to “stay ready”.
To read the Court’s opinion in the Top Cop case, see:
Wall Street is expected to increase year-end bonuses for the first time in three years, with the highest increases going to investment bankers in the debt-issuance business, which could see their bonuses rise by as much as 35%.
That’s according to a report by compensation consultancy Johnson & Associates, which said that a surge in corporate debt underwriting has led to increased revenue for those bankers, triggering higher bonuses for 2024.
Johnson surveyed 12 subsectors of the financial services industry and reported that, except for retail and commercial banking, almost every subsector saw revenues rise in 2024.
Some of the highest year-end bonus increases are expected to be found in the following areas:
Debt underwriters: 25% to 35%
Equity Underwriters: 15% to 25%
Equity trading and sales professionals: 15% to 20%
Bank Management/Staff: 10% to 15%
Wealth management & Asset Management: 7% to 12%
Fixed-income sales & trading professionals: 5% to 10%
Commercial and retail bankers are expected to receive either the same bonuses as in 2023, or 5% less than last year depending on the institution, according to the report.
DISCLAIMER:
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
