Justin Bis, the Director of Financial Fairness Alliance, has called on the Security and Exchange Commission (SEC) to reject the New York Stock Exchange's (NYSE) recent proposal. In a letter addressed to Vanessa Countryman, the Secretary of the SEC, Bis argued that the proposal would have negative consequences for American life and public investing.
According to the letter, Bis wrote on behalf of the newly formed Financial Fairness Alliance (FFA). The FFA has concerns about market fairness and the potential influence of special interests on well-established capital market rules. The FFA plans to submit a public comment regarding the SEC review of the NYSE's proposed rule change to adopt listing standards for Natural Asset Companies (NACs). The FFA believes that the SEC should reject this proposal, as it may not align with the public interest, investor protection, and capital formation goals outlined in securities law.
The proposed rule change to the NYSE Listed Company Manual introduces a new listing standard for NACs. NACs are defined as corporations whose primary purpose is to actively manage, maintain, and enhance the value of natural assets and ecosystem services. These assets, such as clean air, water supply, and wildlife habitat, are collectively valued at over $100 trillion per year. NACs are encouraged to engage in sustainable revenue-generating activities that support community well-being. However, they are prohibited from conducting unsustainable activities like mining.
Bis raised several concerns about the proposal in his letter. Firstly, he argued that NACs could be potential vehicles for fraud, as they acquire assets without clear economic value and use unconventional accounting methods. Secondly, Bis expressed national security concerns, stating that NACs could acquire rights to critical resources like food production or minerals, potentially granting access to lands near sensitive U.S. government facilities. He highlighted the lack of safeguards to prevent hostile foreign powers from gaining control. Thirdly, Bis pointed out the inherent conflict of interest within the NYSE due to its ownership by the InterContinental Exchange (ICE), which is listed on the NYSE. He emphasized the need to address the complex web of relationships and conflicts of interest. Lastly, Bis argued that NACs do not fit the standard criteria for listing on the NYSE, and therefore, there is no need for a new rule.
According to the letter, at the moment, the NYSE is considering allowing the listing of NACs, which are entities aiming to buy natural assets like land and mineral rights to remove them from economic use. To justify their profitability, the NYSE suggests using an untested accounting method that assigns value to factors like "community well-being" and "soil health." Bis said, “the proposal would be “comical were its consequences not so dire.” He said it carries significant consequences as it could empower a select group of social-purpose entities to mislead investors into backing the acquisition of essential resources such as farmland, water, minerals, and energy, diverting them from public accessibility. Director Bis concluded his letter by saying: “While this may enrich the promoters of the NACs and make others feel that they are contributing to “sustainable living,” in reality it will only harm the American way of life while inflicting harm on the investing public. The SEC must reject the NYSE’s proposal.”
In conclusion, Bis urged the SEC to reject the NYSE's proposal, stating that it would harm the American way of life and the investing public. The Financial Fairness Alliance believes that the proposal does not align with the public interest, investor protection, and capital formation goals outlined in securities law. The SEC will now consider the arguments presented by Bis and the FFA before making a decision on the NYSE's proposal.
