Last week, the SEC publicly announced a settled enforcement case against Keurig Dr. Pepper.  The case focused on the company’s disclosure in its annual reports on Form 10-K on whether its K-Cup pods could (or would) be recycled.  The SEC action focused on allegedly incomplete disclosure:  In testing the reliability of recycling K-Cup pods, the SEC alleged that the company had received negative feedback from two significant recycling companies on the commercial viability of such recycling, but its 10-K disclosure did not reflect that uncertainty.  The SEC noted in its allegations that some portion of the company’s customers viewed the environmental impact as a factor in their purchasing decisions. 

In bringing prior “greenwashing” cases, the SEC enforcement staff has been primarily focused on the funds industry. The Keurig case is significant because it may indicate that, when it comes to ESG disclosure, the SEC’s enforcement staff is turning its attention to public companies as the courts weigh its new disclosure rules for public companies on climate change, notwithstanding recent reports that the SEC’s Enforcement Division has disbanded its ESG enforcement task force. 

Although companies should exercise care in preparing public disclosure, both filed with the SEC and non-filed, they should pay special attention to their disclosure about climate change and other ESG subjects. The SEC’s action highlights the importance of ensuring disclosures are materially complete, and of carefully considering whether the disclosure, although accurate, could be viewed as materially misleading in light of other, undisclosed information. The interpretation or characterization of public disclosure can be subjective.  Like some other recent agency enforcement actions, the Commission’s view of the case and of the company’s disclosure was not unanimous. In her dissent, SEC Commissioner Peirce stated that Keurig’s disclosure that the pods “could” be recycled should not have been read as an implicit assertion that the pods “would” be recycled.  

With respect to filed reports, the SEC has been focused on the strength of public companies’ required “disclosure controls and procedures,”  which are internal controls designed to ensure that disclosure is timely, accurate, and complete.  Even if the SEC does not ultimately agree with a company’s disclosure decisions, companies are no doubt in a stronger position vis-à-vis regulators if they can demonstrate adequate disclosure controls and procedures on whether certain statements are materially complete.

The SEC likewise has been reviewing companies’ sustainability reports and other non-filed disclosure for light that it might shed on filed reports, and instances where the non-filed information differs from disclosure included in reports filed with the SEC.  The SEC’s new climate change rules have been stayed pending the resolution of several lawsuits consolidated in the 8th Circuit U.S. Court of Appeals. While the rules as adopted are due to take effect for some companies for their 2025 fiscal years (See previous posts The SEC Adopts Extensive Climate Change Disclosure Rules and Court Temporarily Stays New SEC Climate Change Disclosure Rules Amidst Widening Legal Challenges), it seems likely that the SEC will delay their effectiveness for at least one year in light of the litigation and stay. 

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Photo of Frank Zarb Frank Zarb

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies…

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies, hedge funds and family offices, and market intermediaries and other financial institutions on a wide range of transactional and securities regulatory compliance matters including:

  • Equity investments and dispositions in public and private companies
  • Public company registration, disclosures and preparation of periodic reports
  • Tender offers, equity lines, proxy contests, SPACs, and other highly regulated transactions
  • Regulation M, Regulation SHO, Forms 13F and 13H, insider trading and other trading issues
  • Corporate governance and stock exchange listing standards
  • Federal and state proxy requirements as well as shareholder proposals and communications
  • Regulation of financial intermediaries, including trading of public and private equity, and complex and novel trading structures
  • Advocating with the SEC on behalf of a market intermediary related to back-office processing matters.

Frank’s practice is both domestic and international, beginning with his experience in senior positions with the Securities and Exchange Commission. As a member of the staff of the SEC’s Office of International Corporate Finance, Frank advised U.S. companies seeking to do business in the EU, Asia and the Middle East, as well as companies from those regions doing business in the U.S., or otherwise seeking to comply with the U.S. securities laws.  In the Office of Chief Counsel, he focused on federal proxy rules, and supervised a team of staff members that provided guidance in the course of proxy season.

Prior to joining the Firm, Frank was deputy general counsel/chief securities counsel for Bristol Myers Squibb Co. in a new position required by the SEC. Prior to joining Bristol-Myers, Frank was a corporate partner with Morgan, Lewis & Brockius.

Social Responsibility

Frank is a Trustee of the Gerald R. Ford Presidential Foundation, and he provides significant pro bono assistance to non-profit social service institutions in the Washington, D.C. area.

Photo of Louis Rambo Louis Rambo

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and…

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and shareholder activism. Prior to joining the Firm, Louis served as an attorney in the Division of Corporation Finance with the Securities and Exchange Commission.