Today, there seems to be a constant stream of changing rules and regulations that businesses must follow. This dynamic regulatory environment can be increasingly difficult to navigate for emerging businesses, especially those in heavily regulated sectors and those operating across borders. As startups present their growth and development plans and consider potential exit strategies, it is important that they anticipate these changes and incorporate compliance planning into their processes.
The SEC recently announced proposed rule changes that would require all public companies to include certain disclosures in their registration statements and periodic reports regarding climate-related risks and the companies’ oversight and governance of those risks. The announcement follows another set of proposals released by the SEC earlier in the month aimed at “improving and standardizing” public company cybersecurity disclosures. These new proposals add to the growing list of disclosures that registrants are required to include in their regular annual, quarterly and periodic reports to the SEC. While these rules apply to public companies, any startup considering an IPO should be aware of these requirements.
Developments in cryptocurrency regulation are also taking place. President Biden recently issued an executive order directing US government regulatory agencies to review the risks and benefits of cryptocurrencies. The order sets out a national policy for digital assets, including industry oversight and internal coordination among government agencies. Similarly, the UK government recently revealed a detailed plan, establishing a dynamic regulatory framework for crypto, regulating stablecoins, and working with the Royal Mint to create a non-fungible token (NFT). Businesses will need to watch these new regulations closely to ensure they can continue to operate in this changing landscape.
Changes in the application of antitrust laws should also be taken into account by companies. The EU’s Digital Markets Act, or DMA, targets big tech companies, forcing them to let their services interoperate with those of their competitors. In the United States, there has also been a lot of action around antitrust reform targeting the tech industry, with legislation introduced in Congress, an executive order, and an FTC focus on overhauling antitrust enforcement ( resulting in particular in the failure of the acquisition of ARM by Nvidia).
Privacy is another area where ensuring compliance can be daunting. With heightened consumer concerns about data privacy, regulators are moving quickly to protect their constituents’ data. Not only do businesses need to monitor privacy regulations in other countries such as GDPR and PIPL, but the United States has a patchwork of privacy regulations in states such as California, Colorado and Virginia, with even more states now introducing their own laws. In fact, Utah just enacted the Utah Consumer Privacy Act (UCPA), to protect the personal data of Utah residents and prevent companies from using that data inappropriately.
Advances in technology are accelerating the pace of change in a regulatory environment that is striving to keep pace with business innovation. It is essential for startups to have a comprehensive understanding of all existing regulations governing their industry, as well as those that are looming on the horizon. A proactive approach to establishing a compliance framework strengthens a company’s business model, makes it more attractive to potential investors, and can help mitigate potential regulatory actions.
Understanding and keeping up with an evolving regulatory landscape can be overwhelming, but having a great team of internal and external advisors will help growing emerging businesses manage this challenge and embed regulatory compliance into the roadmap to success and the various potential pathways. Release.