On June 15, 2021, the SEC announced a settlement with First American Financial Corporation for what the SEC found were inadequate disclosure controls and procedural violations, revealed in connection with a cyber incident last spring.

In a related development, recently the SEC’s Enforcement Division sent information requests to what appears to be a wide range of companies asking about how they responded to a high-profile software vulnerability that came to light in late 2020 involving an information technology company. The information requests in this new Enforcement sweep also ask recipients to provide information about other compromises, including those that were not disclosed at the time.

The authors of the article suggest that, with new Chair Gary Gensler now several months into establishing priorities at the SEC, it is possible that the First American settlement, in combination with the new Enforcement sweep, may signal the SEC Enforcement Division’s increasing scrutiny on cybersecurity disclosure policies and procedures.

Re­view the full text of the article.

The guide offers a brief in­tro­duc­tion to the changing corporate reporting landscape. It summarizes recent key de­vel­op­ments in sus­tain­abil­ity reporting including EU de­vel­op­ments and the sus­tain­abil­ity ini­tia­tive of the IFRS Foun­da­tion Trustees. It shows how sus­tain­abil­ity reporting is impacting the role of the ac­coun­tant and shaping the future of corporate reporting. It also high­lights how this area is likely to evolve going forward, offering sign­post­ing to further sources of in­for­ma­tion.

Please click to access the guide on the A4S website.

The network defines value accounting as: "The col­lec­tion, cal­i­bra­tion, and use of in­for­ma­tion about the relative value that an or­ga­ni­za­tion creates, preserves, or erodes for its stake­hold­ers, using common units. This in­for­ma­tion is used when making decisions for a variety of purposes."

The group has published agreed state­ments of com­mon­al­ity:

1. We firmly believe it is vital for busi­nesses, finance, and gov­ern­ments to base decisions on value accounting.
2. We aim to modernize accounting to transform gov­er­nance practices, decision making, and reporting.
3. We believe that we need generally accepted prin­ci­ples to account for value.
4. We believe that in­te­grated thinking, and a holistic sys­tems-based approach is essential.
5. We embrace and support the concept of ‘capital’ re­flect­ing stocks that can change over time and that underpin in­creas­ing or de­creas­ing flows of benefits to people, com­mu­ni­ties, the en­vi­ron­ment, and the economy.
6. We recognize the im­por­tance of accounting for holistic value creation, the value of impacts and de­pen­den­cies on different capitals.
7. We recognize that the value to society (in­side-out) and value to the entity (out­side-in) are both essential to assess and report value.
8. We believe that the trade-offs between capitals and between stake­hold­ers must be specified and addressed in decision making.
9. We recognize the im­por­tance of existing efforts, and we are building on the standards, frame­works and de­f­i­n­i­tions that have already been agreed.

The Value Balancing Alliance, one of the founding members of the Value Accounting Network, makes the following in­for­ma­tion available on its website:

• Joint Statement on Ad­vance­ments in Value Accounting
• Back­ground in­for­ma­tion on the Value Accounting Network

Since its launch on July 14, 2016, the OSC Whistleblower Program has received approximately 650 tips from whistleblowers across Canada and over 15 foreign jurisdictions. To date, the OSC has awarded more than $8.6 million to whistleblowers. Enforcement actions involving whistleblower tips have resulted in monetary sanctions and voluntary payments of approximately $44 million.

Additional highlights from the Whistleblower Program’s initial five years:

• The number of tips received has grown with each subsequent year as awareness of the program increases.
• Whistleblower tips included reports of potential misleading disclosure to investors, material misstatements in financial statements, illegal insider trading or tipping, market manipulation, abusive short selling, and reprisals against employee whistleblowers.
• Tips were received from individuals with specialized knowledge of misconduct. The whistleblowers were employees and company insiders as well as external analysts, industry professionals, and investors with unique knowledge about misconduct or the perpetrators of misconduct.
• Some whistleblowers reported anonymously through a lawyer.
• As a result of whistleblower tips, OSC staff identified persons and entities involved in misconduct in several industries, including financial services, natural resources, and technology.
• Awards are paid only after cases are concluded, and all rights to appeal have expired. Investigations and proceedings involving securities-related misconduct can be complex and may take several years to complete before an award can be made.
• The OSC values whistleblower tips and reviews each one carefully. In some cases, while not eligible for the OSC’s program, tips may result in a referral to another agency, for example, if a matter falls outside of the OSC’s jurisdiction.
• Robust whistleblower protections are built into the OSC’s Whistleblower Program. The details of each case are kept strictly confidential, and all reasonable efforts are made to ensure a whistleblower’s identity is protected.

The OSC intends to publish a detailed report early next year with more information about the program’s activities.

Re­view the press release on the OSC's web­site.  

Carney, has recently written a wide-ranging new book, “"Value(s): Building a Better World for All”. The 500-plus-page book lays out a framework for business leaders, investors, and policymakers as they embark on a green recovery. It’s also the latest rebuke of unfettered capitalism and free-market fundamentalism offered up by a high-profile figure from the world of finance.

In a recent interview with Strategy+Business from his home office in Ottawa, Carney spoke about the shape of the recovery and how businesses can contribute to a purposeful future.

For further details, see the article.

The com­mu­nique notes that the Finance Ministers and Central Bank Governors welcome the FSB report on promoting globally con­sis­tent, com­pa­ra­ble and reliable cli­mate-re­lated financial dis­clo­sures and its rec­om­men­da­tions. They stress that they will work to promote im­ple­men­ta­tion of dis­clo­sure re­quire­ments or guidance, building on the FSB’s Task Force on Cli­mate-re­lated Financial Dis­clo­sures (TCFD) framework, in line with domestic reg­u­la­tory frame­works, to pave the way for future global co­or­di­na­tion efforts, taking into account ju­ris­dic­tions’ cir­cum­stances, aimed at de­vel­op­ing a baseline global reporting standard. The communiqué notes:

To that aim, we welcome the work program of the International Financial Reporting Standards Foun­da­tion to develop a baseline global reporting standard under robust gov­er­nance and public oversight, building upon the TCFD framework and the work of sus­tain­abil­ity stan­dard-set­ters, involving them and con­sult­ing with a wide range of stake­hold­ers to foster global best practices.

The G20 Finance Ministers and Central Bank Governors expressly welcome the FSB roadmap for ad­dress­ing financial risks from climate change submitted to them on July 7, 2021.

Please click to access the full communiqué on the G20 website.

The IFRS Foun­da­tion has responded to the Communiqué and has published on its website a statement by Erkki Liikanen, Chair of the IFRS Foun­da­tion Trustees.

The roadmap, which is ac­com­pa­nied by several document, including a report on promoting cli­mate-re­lated dis­clo­sures, notes that the goal of international ini­tia­tives in the area of financial dis­clo­sures must be to achieve globally con­sis­tent, com­pa­ra­ble, and de­ci­sion-use­ful public dis­clo­sures by firms of their cli­mate-re­lated financial risks. To further this overall goal, es­tab­lish­ing international standards is important, including ac­com­mo­dat­ing in­ter­op­er­abil­ity between a global baseline of international standards and national and regional ju­ris­dic­tion-spe­cific re­quire­ments.

Therefore, the FSB welcomes the IFRS Foun­da­tion’s program of work to develop a baseline global sus­tain­abil­ity reporting standard under robust gov­er­nance and public oversight, built from the TCFD framework and the work of an alliance of sus­tain­abil­ity stan­dard-set­ters, involving them and a wider range of stake­hold­ers closely, including national and regional au­thor­i­ties.

The FSB surveyed its members in the first half of 2021 to explore national/regional practices (current or planned) of financial au­thor­i­ties on promoting cli­mate-re­lated dis­clo­sures. The survey responses indicated that most ju­ris­dic­tions strongly support the de­vel­op­ment of a common global baseline of international reporting standards on climate, with many ref­er­enc­ing the ongoing work of the IFRS Foun­da­tion. They also signaled that international co­or­di­na­tion on re­quire­ments to cli­mate-re­lated dis­clo­sures is critical and that reg­u­la­tory and su­per­vi­sory frag­men­ta­tion must be prevented.

The roadmap notes that the FSB can play an important role in global co­or­di­na­tion, including promoting adoption of the an­tic­i­pated international reporting standards developed by the ISSB, once developed and if endorsed, as a global baseline. Such in­ter­na­tion­ally agreed standards for dis­clo­sures as a global baseline would not preclude au­thor­i­ties from going further or at a faster pace in their ju­ris­dic­tions. The FSB states that it will continue to act as an international forum for sharing ex­pe­ri­ences across ju­ris­dic­tions, promoting best practices, and con­tribute to dis­cus­sions in other international fora (such as through COP26 and G7 / G20 meetings) and will continue to support the IFRS Foun­da­tion’s work to develop a proposal for a baseline global sus­tain­abil­ity reporting standard under robust gov­er­nance and public oversight. As part of this work, the FSB en­cour­ages the IFRS Foun­da­tion to address the con­nec­tiv­ity between proposed sus­tain­abil­ity reporting standards to be developed by the ISSB and existing financial accounting standards. Con­di­tional on the en­dorse­ment of this standard, the FSB will encourage FSB member ju­ris­dic­tions to consider the ISSB’s standard for use for cross-bor­der purposes and when setting sus­tain­abil­ity-re­lated dis­clo­sure re­quire­ments, within the context of in­di­vid­ual ju­ris­dic­tions’ reg­u­la­tory and legal re­quire­ments and in a way that promotes con­sis­tent and com­pa­ra­ble sus­tain­abil­ity dis­clo­sures across ju­ris­dic­tions.

The actions and de­liv­er­ables are described in detail in the roadmap with an in­dica­tive timeline for each of these actions and de­liv­er­ables provided in tabular format on page 12 of the document. Please click for the following ad­di­tional in­for­ma­tion on the FSB website:

• FSB Roadmap for Ad­dress­ing Cli­mate-Re­lated Financial Risks
• Report on Promoting Cli­mate-Re­lated Dis­clo­sures
• Access to ad­di­tional documents published

The Insight document published by Davis Polk summarizes thirty comment letters that they consider both important and representative of differing stakeholder views, in anticipation of a formal SEC proposal expected in or before October 2021.

Re­view the Insight document on the Davis Polk website.

• National Instrument 45-110 is intended to facilitate securities crowdfunding for start-ups and early stage issuers on a national basis.
• New exemptions will include a prospectus exemption, as well as an exemption from the dealer registration rules for funding portals.
• National Instrument 45-110 will replace the local exemption orders currently in force on a province-by-province basis.
• Assuming Ministerial approvals are obtained, the new national instrument will take effect on September 21, 2021.

Read more

Mr. Liikanen began his speech with a strong statement:

There is a path to global sus­tain­abil­ity standards if we, on the one hand, can create a global baseline of sus­tain­abil­ity-re­lated dis­clo­sures to fa­cil­i­tate com­pa­ra­bil­ity for in­vest­ment decision making and, on the other, work with ju­ris­dic­tions to ensure com­pat­i­bil­ity between this global baseline and their own ini­tia­tives.

He then explained that while gov­ern­ments can establish policy frame­works, it is the investors that price in­vest­ment capital based on how those policies will impact companies in the long term. This in turn provides companies with an incentive to embrace sus­tain­able business models. Whether this process works smoothly depends on high-qual­ity, globally com­pa­ra­ble in­for­ma­tion on which investors can assess sus­tain­abil­ity risks and make informed decisions.

Mr. Liikanen then explained that this is the place where an in­vestor-fo­cused international stan­dard-set­ter such as the IFRS Foun­da­tion comes in.

Firstly, the IFRS Foun­da­tion's approach to global standards is market and demand led. The Foun­da­tion provides a setting where investors, reg­u­la­tors, companies, academics and stan­dard-set­ters from around the world can work and solve problems together. This work follows a trans­par­ent and inclusive due process that has evolved and proven valuable over time.

And secondly, the IFRS Foun­da­tion's ex­pe­ri­ence in international stan­dard-set­ting can help to overcome a situation where many ini­tia­tives attempt to improve com­pa­ra­bil­ity, but their numbers have led to greater diversity. The major players in the field, including the TCFD, the VRF and the CDSB, affirm that con­sol­i­da­tion is required and have welcomed the IFRS Foun­da­tion's proposals to establish a new International Sus­tain­abil­ity Standards Board within the gov­er­nance structure of the IFRS Foun­da­tion. Mr. Liikanen declared:

Our shared ambition is to introduce a global baseline of standards for sus­tain­abil­ity-re­lated dis­clo­sures which are focused on meeting the in­for­ma­tion needs of investors globally when assessing en­ter­prise value. En­ter­prise value is a key concept, designed to capture expected value creation for investors in the short, medium and long term, and is in­ter­de­pen­dent with value creation for society and the en­vi­ron­ment.

Mr. Liikanen then turned to the question of how ju­ris­dic­tional and international standards can be rec­on­ciled. He noted that the approach advocated by IOSCO and others is to establish a global baseline of sus­tain­abil­ity-re­lated dis­clo­sure standards to meet investor needs, which would be made available for use by ju­ris­dic­tions as a base for public policy needs. This approach would provide global com­pa­ra­bil­ity for investors in a way that allows ju­ris­dic­tions to combine the global standards with their own ad­di­tional re­quire­ments. He concluded his speech by stating:

To make this work will require political will, com­pro­mise and flex­i­bil­ity from all parties — including the IFRS Foun­da­tion. Success is by no means certain, but if you want global sus­tain­abil­ity-re­lated dis­clo­sures for investors, this offers a path.

For further information, refer to full text of Mr Liikanen's speech on the IASB website.