Bottom Line Inside Scoop

The SEC’s General Counsel Rusty McGranahan: 12 Things to Know

Updated on 4 min read

Here are 12 key takeaways from my interview with SEC General Counsel Rusty McGranahan that I blogged about last week:

  1. Be Bold and Creative:  Rusty repeatedly encouraged companies and lawyers to actively consider the new options being proposed by the Commission.  It can be an opportunity for counsel to add value and find new ways to minimize risk.“If we throw open the prison door, don’t be afraid to come into the light.”
  2. Public Service and Regulatory Impact Motivated the Move to the SEC: Rusty said he joined the SEC to fulfill a long-standing interest in government service and because he wanted to be part of an administration and Commission focused on actively reforming markets and regulation rather than maintaining the status quo.
  3. His Public Company GC Experience Shapes His Regulatory Perspective: Having served as a public company general counsel, he believes he brings a practical understanding of how SEC rules affect issuers, CEOs, CFOs, investors, and analysts in real-world settings.  “After attending a number of meetings with investors and analysts, you start to realize that many of the things they are interested in are not what the SEC is requiring in 10-Ks and 10-Qs.”
  4. The SEC Wants to Return Disclosure Requirements to Materiality-Based Principles: A recurring theme was reducing line-item disclosure mandates that focus on every issue of the day and instead emphasizing disclosures that are material to investors.
  5. “Make IPOs Great Again” Is a Core Policy Objective: It’s not just a slogan, this Commission is focused on reducing regulatory burdens that may discourage companies from going and staying public.  He sees this as very important, not just to improve the process, but to increase the opportunities for everyday Americans to participate in the growth of the economy.  
  6. The SEC’s Office of General Counsel Serves as an Independent Legal Check: OGC provides independent advice to the Chairman and Commissioners, reviews rulemakings for legal authority, evaluates enforcement matters and helps ensure SEC actions can withstand judicial scrutiny.
  7. Rulemaking Is Driven by Litigation Risk and Judicial Review: Rusty explained that lengthy SEC rule releases are necessary because rules are frequently challenged in court. Significant effort goes into building the legal and economic record needed to defend them.
  8. The Commission Is Pursuing Significant Disclosure and Offering Reforms: He highlighted recent proposals involving filer status reform and shelf registration reform and signaled that additional reviews were underway on executive compensation, Regulation S-K modernization and broader disclosure and IPO process simplification efforts.
  9. Semiannual Reporting Is Intended to Create Flexibility: The proposal for voluntary semiannual reporting is designed to give issuers alternatives to the traditional quarterly reporting framework and encourage innovative investor communication practices. “Maybe a company will choose semiannual reporting, but provide monthly KPIs of a different sort that investors really care about.” Companies shouldn’t rely on the same calendar and checklist that they have been using for 10 years.
  10. Shareholder Proposal Reform Is Under Active Review: Rusty suggested the SEC is taking a fresh look at the shareholder proposal process under Rule 14a-8, questioning whether the agency should continue serving as the primary arbiter of proposal disputes through the no-action process. He noted that the current framework has evolved significantly from its more modest origins in 1942 and emphasized that all options are on the table as the Commission evaluates potential proxy system reforms.
  11. Enforcement Priorities Are Shifting Toward Traditional Fraud Cases: Rusty emphasized that the SEC has eliminated “regulation by enforcement.” Instead, enforcement efforts will focus on fraud, insider trading, market manipulation and serious compliance failures.
  12. The SEC Is Actively Seeking Input from Issuers and Practitioners: He repeatedly encouraged companies and their lawyers to submit comments, meet with SEC staff – and provide ideas on rulemaking, IPO reform, shareholder proposals, proxy advisors, retail investor access and other policy initiatives.  He feels that issuers reach out less than other market participants.  

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Portrait photo of Broc Romanek over dark background

Broc Romanek

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