SEC Urged To Mandate Virus Disclosures From Public Cos.

By Jack Queen
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Law360 (June 16, 2020, 8:33 PM EDT) -- A Wall Street reform group Tuesday called on the U.S. Securities and Exchange Commission to make public companies disclose how they are protecting workers from COVID-19, saying that the information is critical to investors and public health.

Americans for Financial Reform said in a letter to SEC Chairman Jay Clayton that the agency should mandate new disclosures to help shareholders analyze how companies are protecting workers, limiting the spread of the coronavirus in workplaces and using the trillions of dollars in bailout funds doled out by the federal government in recent months.

The letter comes as the U.S. economy emerges from months of lockdown, with some states easing restrictions even as they set new records for daily COVID-19 case counts and hospitalizations. The authors, including nearly 100 investors, state treasurers and securities law experts, said transparency on pandemic mitigation efforts will be critical to the recovery.

"Investors are becoming increasingly aware that businesses that take appropriate action to protect workers and supply chains are ensuring their ability to continue operations at an appropriate capacity through the crisis," the group said. "Businesses that institute responsible worker safety and health practices are also helping to limit the damage to their suppliers and customers."

The SEC should give its recent COVID-19 guidance the force of law by mandating that firms provide "consistent, reliable data to investors about the economic impact of the pandemic on their business, human capital management practices, and supply chain risks," according to the nonprofit, which was formed in the wake of the 2008 financial crisis to advocate for Wall Street reform.

The letter recommended disclosures in 11 categories, including workplace COVID-19 protection plans, compliance with quarantine and reopening orders, and the impact of coronavirus-related disruptions on balance sheets.

Pandemic mitigation is critical to both public health and the interests of shareholders, the group said, noting that failure to prevent the spread of COVID-19 in workplaces can lead to costly business interruptions and supply chain disruptions that ripple across the economy.

The letter cited recent outbreaks of COVID-19 at meat processing facilities. The resulting disruptions to the meat supply chain are expected to cost hog farmers $5 billion this year, according to the letter.

"The impact of the losses on shareholders will be significant," the letter said. "Investors, however, are being forced to rely on news reports to try to understand how the crisis is impacting companies in their portfolios and how those companies are responding."

In April, the SEC's top brass urged companies to make "high quality" disclosures about their COVID-19 mitigation efforts as they prepare first-quarter earnings reports, saying boilerplate statements wouldn't cut it amid a global pandemic that has snarled global supply chains and left tens of millions of Americans jobless.

Those statements from Clayton and SEC Division of Corporation Finance director William Hinman came on the heels of agency guidance issued the month prior, when SEC staff offered detailed recommendations for how firms should assess and communicate COVID-19 risks.

"This was a step in the right direction but more needs to be done to ensure that investors and the public have access to consistent, comprehensive information," the letter said.

The SEC did not immediately respond to a request for comment Tuesday.

--Additional reporting by Al Barbarino. Editing by Alanna Weissman.

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