Last year, Liz shared the annual report of the SEC’s Office of Inspector General addressing the agency’s top management and performance challenges. One of the concerns expressed was the SEC’s consideration of potential judicial scrutiny in its rulemaking process. The report noted that the OIG was also auditing the agency’s rulemaking process and internal controls — specifically the processes for giving interested persons an opportunity to participate in rulemaking and assessing and documenting the impact of proposed rules on efficiency, competition, and capital formation.
Just last week, the OIG issued its 25-page report of findings from its review of 24 rulemaking activities from January 2018 through December 2022. Here are the top takeaways from the summary:
– The SEC defined processes to give interested persons an opportunity to participate in rulemaking. The Agency provided a comment period ranging from 30 to 92 days.
– While the rulemaking divisions consistently collaborated with DERA and OGC in accordance with internal guidance, they did not always involve other divisions and offices in rulemakings within their subject matter expertise.
– The SEC also defined processes to assess and document the impact(s) of proposed rules on efficiency, competition, and capital formation. Yet, some SEC staff expressed concerns about limited data and time to perform economic analyses.
– The SEC further established processes to ensure staff with sufficient and appropriate skills, experience, and expertise are involved in formulating and reviewing proposed rules. However, an Agencywide assessment of the knowledge, skills, and competencies of rulemaking staff was not available until December 2024, and non-federal personnel who worked at the SEC under Intergovernmental Personnel Act (IPA) agreements and who were involved in rulemaking performed unauthorized supervisory functions.
– Technological errors impacted the SEC’s receipt of public comments, and SEC personnel released embargoed rulemaking information without authorization from the Commission.
The report notes that the OIG is not currently making formal recommendations because the SEC took actions during the audit to address these concerns and is continuing to assess its rulemaking process. Comment periods and the rulemaking process more generally have been cited in a number of Commissioner dissents on both sides of the aisle in recent years. In March, Commissioner Uyeda, then Acting SEC Chair, suggested some best practices — for example, a 60- or even 90-day minimum for comment periods depending on a rule’s complexity and more frequent use of reproposals or reopening a comment file to address rule changes in response to comments or the passage of time.
Did you know we have a Checklist on “How to Write SEC Rulemaking Comment Letters”? If you do not have access to our Handbooks, Checklists, and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
But, compared to Delaware and Texas, it’s a state I know relatively little about, and I’m guessing a number of our readers are in the same boat. Here are getting-to-know-Nevada icebreakers (from National Geographic Kids):
– Nevada is 36th state
– Nevada produces about 3/4ths of all of the gold mined in the U.S.
– Las Vegas gets more than 42 million visitors a year (including us, very soon, at our fall conferences!)
– The state transportation board named a 98-mile stretch of State Route 375 the “Extraterrestrial Highway” because so many people claim to have seen UFOs along it (even yours truly, a native Midwesterner who has spent very little time in Nevada, had a car radio make some mysterious sounds while driving through the Nevada desert once!)
But in all seriousness, there is some other stuff about Nevada that we probably should all be aware of. Enter this Paul Hastings alert. The headings organizing this alert comparing Nevada corporate law to Delaware do a great job of both getting our attention and highlighting major differences between the Silver State and the First State. For example:
– Nevada Has a Statutory Approach to Corporate Law
– The Business Judgment Rule Is the Sole Standard of Review in Nevada
– Director and Officer Exculpation in Nevada Covers Breaches of the Duty of Loyalty
– No Caremark Duty of Oversight
– Stockholders of Public Companies Have Limited Rights to Inspect Books and Records
– A Reverse Stock Split Can Be Accomplished Without Stockholder Approval
– Nevada Has a Business Court but the Judges Are Elected and Hear Cases in Other Areas of Law
– Nevada Business Court Dockets Are Not Available Online and Opinions Are Rarely Published
– The Nevada Secretary of State’s Office Does Not Process the Same Volume of Requests as Some Other States
– Nevada Has Poison Pill Endorsement, Control Share Acquisition and Freezeout Statutes, and Cash-Out Mergers of Public Companies Are Not Subject to Appraisal
– Nevada Does Not Have a Franchise Tax for Corporations
On the business court points above, the Nevada Supreme Court recently created a Commission to study the adjudication of business law cases in the state. That’s not all, and the alert also goes into detail on all of the above. Check it out!
If you want to get to know Nevada even better, experience it first-hand by joining us in person in Las Vegas for our Proxy Disclosure & Executive Compensation Conferences — in two weeks! That’s right! Everyone on our Editorial team will be there, and we hope we get to chat with all our members in attendance. Please say hi — or feel free to come tell me your Nevada UFO story. (Although I can’t promise my fellow editors will welcome that last bit!)
I also can’t promise you’ll get to know Nevada better if you join us virtually, but I can promise you’ll come away with loads of valuable insights & practical takeaways you can apply in your practice immediately. Our annual conferences this year will feature 15 panels and nearly 50 seasoned proxy experts and corporate practitioners discussing the latest developments, tested strategies and emerging trends in our industry to help you navigate an uncertain environment and tackle the 2026 proxy season head-on.
And we all need some expert guidance right now! As of the writing of this blog, we are five days into the government shutdown with no end in sight. While I very much hope that changes by the time we’re all gathering in Vegas, I’m looking forward to hearing our SEC All-Stars (with decades of experience and knowledge of the inner workings of the Commission) address working with the SEC Staff during times of change – including SEC operations during a government shutdown and practical implications for public companies and capital raising. Because — let’s face it — shutdowns or threats of shutdowns have come to feel like the new normal in recent years. Tuesday’s panel “The SEC All-Stars: Proxy Season Insights” will also discuss what’s new and what’s on the horizon for SEC guidance and rulemaking and current hot topics – including AI, geopolitical risk and shareholder engagement.
For even more of a “sneak peek” at specific topics each panel will cover, we’ve posted the detailed panel agendas for you to peruse. For everyone attending, we will be posting our “Course Materials” containing over 200(!) pages of practical nuggets to our conference platform this week. Our course materials are not just rule releases & old memos; they are full of originally crafted practical bullets & real-life examples from our expert speakers.
If you haven’t registered for our conferences, it’s not too late! You can sign up online – or contact our team by email at info@ccrcorp.com or by phone at 1.800.737.1271.
If you’re attending in person, please join us on Monday, October 20th from 4:00 to 7:00 pm for a casual reception celebrating CCRcorp’s 50th anniversary and offering you an opportunity to network with your fellow attendees, sponsors, exhibitors and our CCRcorp team!
Acting Corp Fin Director Cicely LaMothe — who has been serving double duty since the beginning of the year and is returning to her role as Deputy Director, Disclosure Operations this month — participated in the “Dialogue with the Director” program at the ABA Business Law Section’s fall meeting last month. During her remarks, she noted that a wide variety of companies across different industries are adopting crypto asset treasury strategies. In her comments (subject to the standard disclaimer), she addressed disclosures that the Disclosure Review Program Staff expect to see DATCos (digital asset treasury companies) provide. Specifically, the Staff looks for disclosures to:
– Discuss the assets that will be part of the strategy
– Provide a complete description of the strategy
– Discuss how the strategy will be financed
– Discuss the company’s policies for acquiring, holding and selling the assets
– Discuss how the strategy will impact existing operations
– Disclose material custody arrangements
– Disclose risks associated with the adoption and implementation of the strategy
It sounds like more Staff comment letters on this topic — including on the resale registration statements filed following a PIPE — will be made public in the coming days and weeks.
Over on Cooley’s CapitalXchange blog, Liz recently gave a rundown of the “main flavors of strategies for accessing public markets and launching digital asset treasury companies (DATCos).” In addition to IPOs, business combinations with SPACs, double dummy acquisitions and reverse mergers, she also discusses secondary acquisitions of majority interests and the phased acquisition or treasury-only strategy.
In the latter, the crypto company purchases a noncontrolling interest in a public company in a secondary transaction or by negotiating a PIPE. These have generally been priced at market in order to avoid triggering stock exchange approval requirements for greater than 20% issuances. However, Nasdaq has recently been taking a close look at these deals and engaging with listed companies on how the exchange’s shareholder approval rules might apply, raising concerns about the change of control implications, depending on the number of board seats negotiated, and when a deal is structured as an in-kind contribution.
Nasdaq isn’t the only SRO that has been more closely scrutinizing crypto treasury deals. As reported by the WSJ, FINRA has reached out to as many as 200 companies regarding unusual trading volumes and stock price spikes in the days leading up to public announcements that they would adopt a crypto treasury strategy.
Process aside, if you’re a public company considering becoming a dedicated public cryptocurrency treasury company or otherwise holding crypto on your balance sheet — especially if you’re an operating company that isn’t otherwise involved in the crypto sector — you need to be thinking through the attendant risks and complexities. Check out this Skadden alert on what public company boards need to know if they’re thinking of adding bitcoin to the balance sheet.
While we’re on the topic of crypto, the Corp Fin Staff posted this letter last week in response to a no-action request by the DoubleZero Foundation. The Division responded that it will not recommend an enforcement action against DoubleZero if certain programmatic transfers are not registered under Section 5 of the Securities Act and its 2Z tokens are not registered as a class of equity securities under Section 12(g) of the Exchange Act. This Mayer Brown blog describes the Foundation, the DoubleZero Network and the 2Z tokens:
The Foundation was formed to support creation of the DoubleZero Network, a “purpose-built internet optimized for distributed systems, like blockchains.” In its letter to the Commission, the Foundation argues that, while software and computing capabilities continue to improve, the hardware supporting networks has stagnated, and blockchain traffic must compete with all other public internet traffic for network capacity. Since large technology companies also compete for network space, many have built their own fiber networks—and many of these networks have existing idle capacity . . .
[T]he DoubleZero Protocol enables creation of a marketplace for this existing underutilized fiber capacity, which is then linked to form the Network. The more the Network grows by adding new participants, such as data center operators, with additional fiber links (“Network Providers”), the faster and more powerful it becomes. Importantly, there is no central promoter or sponsor responsible for operating the Network.
The Foundation and other Network participants launched a new 2Z token, which will be offered and sold as compensation to: (i) Network Providers for providing capacity to the Network, as outlined above, and (ii) Resource Providers for their calculation of Provider Payment amounts . . .
Network users will be able to acquire 2Z tokens on the secondary market and use these to pay Network fees in order to access the Network. In addition, the Foundation plans to maintain a Token Treasury of 2Z Tokens to support the growth of the Network . . .
The Foundation does not believe that 2Z tokens are an investment, will not promote the Network or 2Z as a way for 2Z token holders to earn passive investment returns, and publicizes the view that 2Z is a digital asset for use in connection with the Network, emphasizing its utility.
The request letter argues that the fourth element of the Howey test (“entrepreneurial or managerial efforts of others”) is not satisfied because “the actions of the Providers themselves determine the success of the Network” and even though a secondary market for the 2Z tokens is likely to develop, even speculators that buy and sell 2Z on secondary markets would not be basing any expectation of profit on the “entrepreneurial or managerial efforts of the Foundation, the Network Providers, the Resource
Providers or any other third party.”
Most importantly, this Cooley blurb touts this major milestone in the regulation of crypto assets — the first no-action letter granted by the SEC to a crypto project since 2020 — as a framework for a potential path that other crypto projects can follow to compliantly distribute tokens in the US. Mayer Brown also notes that the no-action letter is a sign that the Commission staff is “open to engagement” on the application of the securities laws to the activities of crypto market participants.
One of the things we used to be able to count on was a surge in SEC enforcement settlements during the last several weeks of September. The agency always seemed to time a healthy chunk of high-profile enforcement actions to coincide with the government’s September 30 fiscal year end, but that didn’t happen this year – and I’m not the only one who noticed. Here’s what Michelle Leder from Footnoted.com had to say:
For as long as I’ve been covering the SEC, September has always been something of a sprint, with the agency racing to file charges before the end of its fiscal year. Sometimes, there would be 5 or 6 enforcement actions on the same day! But not this year. While the SEC has put out 19 press releases this month, almost all of them have been about rule changes. I counted only a single enforcement action, which seems almost unbelievable! Compare that to last year, when there were 51 releases and 41 of those were enforcement-related.
This didn’t happen during the first Trump Administration under SEC Chair Jay Clayton. In September 2018, roughly two-thirds of the SEC’s releases were enforcement related.
It looks like the enforcement hiatus isn’t just a September phenomenon either. On LinkedIn, William Floyd pointed out that the SEC issued only one Accounting and Auditing Enforcement Release in the last 99 days – and that release involved the reinstatement of a previously barred person.
The Division of Enforcement’s inactivity on the settlement front may have something to do with the fact that a new Director was named just a little more than a month ago and may just be getting her feet on the ground. However, Enforcement was one of the areas that was particularly hard hit by the SEC’s staff reductions earlier this year, so resource constraints also may be a factor.
According to the various law profs who make up the “Shadow SEC,” it isn’t just the Division of Enforcement where things appear to be moving a little slowly. Citing an August 2025 OIG report on Corp Fin’s disclosure review program and research from Olga Osvyatsky, a recent blog from the Shadow SEC says that there’s been an alarming decline in the number of comment letters and points to this year’s staff reductions as the cause:
Data document that there has been a dramatic, and worrisome, decline in 2025 of staff comment letters and that there are longer delays in the letters. We note here that the SEC historically has managed its mandated Disclosure Release Program with fewer than 300 employees; this task is challenged by the report of Chair Atkins that since the beginning of 2025 there has been about a 10% reduction in the disclosure review staff and that he “did not rule out further reductions.”
SEC comments are valued by the market and contain new information that is not already priced into stock prices. As observed, we are witnessing a sharp decline in the number of SEC comment letters released on EDGAR between January and August 2025.
The SEC has lost 27 of its 299 disclosure review employees since February according to an August 26 Office of Inspector General Report. “When experienced regulators depart in large numbers, the SEC will have fewer employees with a deep understanding of securities regulation and agency practices. With these experienced employees leaving so abruptly, the remaining staff will find it difficult to take overactive cases or begin new investigations both due to knowledge gap and the increased workload.”
Olga’s a little more circumspect when it comes to attributing the decline in comment letters to staff reductions, noting that it’s “difficult to attribute the decline in released comment letters to a specific cause because both the total number of reviews conducted and the SEC staff’s materiality judgments about whether to issue comments are unobservable.”
On the other hand, Olga says the delay in the release of comment letters is very evident. Olga points out that in the past, the Staff usually adhered to its internal guidance calling for those letters to be released within 20 business days following the issuance of a closing letter. That dissemination lag grew from 28 days in April 2025 to 100 days in August 2025.
Of course, the government shutdown isn’t going to improve this situation one bit. According to this Government Executive article, the SEC’s Shutdown Operations Plan calls for over 90% of the agency’s employees to be furloughed during a government shutdown.
It’s only been a couple of days since the government shutdown began, and there’s already been significant collateral damage. Fresh on the heels of a triumphant farewell tour with the rest of The Wu-Tang Clan, Ghostface Killah was set to go on tour with his new album this month. Unfortunately, that’s been delayed by the shutdown. This HotNewHipHop.com article has the details:
In support of the new project, Ghostface Killah was set to go on tour starting this month. Unfortunately, however, plans have changed. Last night, he took to Instagram to announce that the tour has been postponed. According to him, the decision was made due to the United States government shutdown.
“Peace family,” the post begins. “I gotta let y’all know — because of this government shutdown, we’re postponing the upcoming Supreme Clientele Sessions. This one hurts me, because I was looking forward to building with y’all face-to-face — sharing the stories, the laughs, the jewels. But I also know everybody’s feeling the weight of what’s going on right now.”
It turns out that Ghostface Killah’s tour may not be the only Wu-Tang Clan adjacent matter that might face shutdown-related delays. As you may recall, an outfit called PleasrDAO acquired the only copy of The Wu-Tang Clan’s “Once Upon a Time in Shaolin” from the DOJ a few years ago, and sold NFTs last year in order to raise sufficient funds to release the album to the public.
That Wu-Tang Clan album was originally owned by convicted fraudster Martin Shkreli (which is how it came into the DOJ’s possession), and he was prohibited from copying it. However, he apparently did, and PleasrDAO sued him. Last month, a federal judge ruled that PleasrDAO could proceed with trade secrets claims against Shkreli, but there’s unlikely to be much action in the lawsuit with the government shut down.
Barnes & Thornburg’s Jay Knight flagged a comment letter exchange in which the Staff questioned the timeliness of a company’s Form 8-K reporting a director’s resignation. Form 8-K CDI 117.01 says that an Item 5.02 8-K reporting obligation is triggered by a director’s notice of a decision to resign. The guidance is pretty clear, but as Klotho Neurosciences’ response to a Staff comment challenging its S-3 eligibility illustrates, the trick is applying it:
The Company respectfully submits that it is eligible to use Form S-3 at this time.
While the Company’s Form 8-K filed on August 30, 2024, originally stated that the resignation of director Edward Cong Wang occurred on August 25, 2024, this was later clarified and corrected in Amendment No. 1 to the Form 8-K, filed on July 22, 2025. As explained in that amendment, although Mr. Wang submitted a written resignation via e-mail on Sunday, August 25, 2024, the Company contacted him on Monday, August 26, 2024, to confirm his resignation and ask whether he intended to exercise his contractual right to designate a successor. Mr. Wang responded later that day and confirmed that he would not be appointing a replacement. Accordingly, the Company reasonably determined that the resignation became finalized and effective on Monday, August 26, 2024—the date on which the necessary corporate steps were complete and the Company could determine the resulting board vacancy and compliance implications.
Thus, the Company filed the original Form 8-K within four business days of August 26, 2024, consistent with Item 5.02 of Form 8-K and Instruction I.A.4 to Form S-3, which requires timely filing of all required reports. The correction made in the amended Form 8-K/A was intended solely to clarify the effective date in line with the Company’s good-faith interpretation of when the resignation was finalized.
The good news is that the Staff didn’t comment further on this issue, but Jay says there are some lessons in this comment letter exchange that all public companies should keep in mind. These include the need to provide directors and officers with a “rules of the road” memo that helps them understand nuances associated with determining when a director resignation triggering event has occurred, and the need to ensure that appropriate disclosure controls and procedures are in place related to director resignations.
If you’re looking for some guidance on director and NEO resignation issues, check out our Form 8-K Handbook. We have Q&As in the Handbook that address a bunch of different “did they or didn’t they?” scenarios.
