International Politics and the SEC: Regulator Focuses on Brexit and Sanctions

September 23, 2019

Chaotic international politics—particularly the uncertainty surrounding Brexit and the Trump administration’s increasing use of sanctions as a foreign policy tool—are complicating public companies’ SEC compliance obligations.

The SEC has been “sharpening its focus on corporate disclosures about the risks associated with the U.K.’s exit from the European Union” since at least November 2018, according to reporting by The Wall Street Journal. In December 2018, Chairman Jay Clayton identified Brexit as one of three market risks (together with the transition away from LIBOR and cybersecurity) the SEC would be monitoring in 2019. Chairman Clayton said he “would like to see companies providing more robust disclosure about how management is considering Brexit and the impact it may have on the company and its operations.”

Chairman Clayton also referenced Brexit during a September 9 speech before the Economic Club of New York: “I encourage our issuers, financial services firms and other market participants to fight off the complacency and fatigue that is endemic to situations of this type. I encourage you to continue to prepare for—and reasonably inform your investors of—the potential impacts of Brexit.”

Receiving comparatively less attention in the press is the SEC’s focus on sanctions. According to a recent article in The Wall Street Journal, the SEC “is increasingly questioning public companies about compliance with U.S. sanctions as the nation’s blacklist of individuals and entities grows.” Citing data from Audit Analytics, the article reports that the proportion of SEC comment letters related to sanctions grew from 1.5 percent in 2014 to 4.5 percent in 2018.

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