A few weeks ago, I had the honor of participating as a panelist at the SEC’s 44th Annual Small Business Forum, which took place at the SEC’s Washington, DC headquarters. The SEC has posted recordings of the first half and the second half of the program, and my panel took place during the second half. The panel was moderated by Sebastian Gomez Abero, who is Acting Deputy Director, Legal and Regulatory Policy in Corp Fin, and I was joined on the panel by Dr. Yunhao Chen, who serves as CFO of Massimo Group.
We focused our panel discussion on going public and operating as a public company, addressing some of the key challenges that smaller companies face when seeking to access the public capital markets, as well as once they are operating as public company. During the course of our conversation, I shared the following observations:
– While we observed increased IPO volume in 2024 and the first quarter of 2025, the IPO market largely shut down amidst the market turmoil that followed the U.S. government’s shift in trade policy, which demonstrates how quickly the market dynamic can change, and how companies that are seeking to go public have very little control over their IPO timeline given how the IPO window can so rapidly close.
– One of the biggest challenges for smaller companies seeking to go public is a problem that cannot be readily addressed through regulatory policy or legislative action, and that is the lack of infrastructure for completing small IPOs, as we have lost the regional investment banks and regional stock exchanges that existed 30 years ago.
– I noted that this challenge leads us to the need to rethink what is an IPO, because the traditional underwritten, fully-marketed IPO that is trading on a stock exchange is very much reserved for companies that have valuations that can support raising a hundred and fifty million, two hundred million dollars in proceeds, and that is why there was excitement with things like Tier 2 of Regulation A and the JOBS Act IPO on-ramp.
– For smaller companies that have gone public, one of their biggest challenges as a public company is the complexity of the disclosure requirements on top of the general compliance costs and the need for controls and all those things that come with operating as a public company. In this regard, I pointed out the complexity of navigating the SEC’s filer status rules.
– I also noted the volume of the disclosure required of smaller companies, and how the gap has narrowed between what a smaller company must disclose and what a larger company must disclose. I offered up that perhaps we should go back to having a completely separate disclosure regime for smaller companies, as we did in the times before Regulation SB was integrated into Regulation S-K.
– For any companies still thinking about going public when facing all of these challenges, I offered that you should act like a public company before you become a public company, because for the executive team, the financial reporting team, the lawyers and everyone else that might be involved, you really have to build that muscle of being a public company over time. This involves focusing on your compliance program, focusing on your internal controls and disclosure controls, a really thinking about how you will interact with investors and how you will communicate the company’s story.
– In terms of suggestions for regulatory changes, I offered that we should really step back and figure out what do we really mean when we are trying to categorize smaller companies, particularly for the purpose of effectively right-sizing their disclosure obligations to align with their size and sophistication. I also noted that we should enhance and expand the improvements that came about with the JOBS Act, while revisiting shelf eligibility for companies that are already public.
The SEC’s Small Business Forum was a very thought-provoking program at a time when we are experiencing some legislative and regulatory focus on capital formation for smaller companies. I encourage you to go back and listen to the archive or review the transcript if you were not able to watch it live.
Earlier this week, the SEC announced that the Division of Economic and Risk Analysis (DERA) has published new data and analysis on the key market areas of public issuers, exempt offerings, commercial mortgage-backed securities, asset-backed securities, money market funds, and security-based swap dealers. The announcement notes:
“These reports reflect important information that is valuable to investors, other market participants, and academics,” said Robert Fisher, Acting Chief Economist and Director of the SEC’s Division of Economic and Risk Analysis. “Understanding these markets is critical because Americans rely on them to fund their retirements, educations, and other priorities.”
In the report about reporting issuers, it is noted that in 2023 there were 8,351 reporting issuers that filed a Form 10-K, Form 20-F or Form 40-F. There were 4,789 non-accelerated filers in that timeframe, as compared to 942 accelerated filers and 2,461 large accelerated filers. Of that group there were 2,381 WKSIs.
In the report about exempt offerings, it is clear that Regulation D remains the dominant exemption, far outstripping the number of offerings and dollar amounts raised in reliance on Regulation A and Regulation C. No surprises there!
Last week, Vanguard announced the results of a survey of 1,000 investors which demonstrated a strong interest among investors in having the ability to participate in the proxy voting process. Like many other institutional investors, Vanguard has been conducting its Investor Choice pilot program, which allows investors to make a single policy selection from a range of proxy voting policy options that determine how their proportionate fund ownership is voted at shareholder meetings. Key findings from the survey include:
– Most investors (83%) believe it is important that asset managers consider investors’ preference when casting votes for their funds, with more than half (57%) interested in participating in voting programs.
– Two-thirds (66%) of investors say they would participate in a proxy voting choice program offered through their employer retirement plan.
– Fifty-eight percent of investors would be more likely to invest in a fund if they could influence the fund’s proxy voting decisions, while a third (33%) would be willing to change firms if another firm offered them the ability to influence proxy voting.
– Less than half of investors (47%) are aware that fund managers cast proxy votes at shareholder meetings.
Vanguard notes that the survey results highlighted those governance topics that are most important to investors: “Respondents selected executive pay (44%), issuing dividends (41%), and who sits on the board of the company (30%) as the three most important topics they would want to weigh in on through the proxy voting process.”
– Do the financial statement disclosures reflect changing risk factors, such as changes in supply chains, pricing decisions, loss of significant customers, and disruptions to production?
– Do the financial statement disclosures reflect subsequent events that were known or knowable before issuing the financial statements that users of financial statements will find meaningful and reflective of industry-specific considerations?
– Are controls over financial reporting adequate to respond to the effects of tariffs or the resulting economic uncertainty, including the risk of fraud?
– Will financial statement deadlines be affected by changes to procedures performed by the entity, its specialists, or the auditors?
– Is the committee meeting often enough with management and the auditors to address challenges as they arise?
– Is the committee keeping the board apprised of significant matters with respect to risk and disclosure?
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Wachtell Lipton recently published an updated version of its longstanding Audit Committee Guide. The 2025 edition spans 202 pages and includes helpful models for everything from an audit committee charter to an audit committee self-evaluation checklist. This introductory note explains how the guide can be used:
This Guide provides an overview of the key rules applicable to audit committees of NYSE- and Nasdaq-listed U.S. companies and best practices that audit committees should consider. This Guide outlines audit committee members’ responsibilities, reviews the composition and procedures of audit committees and considers important legal standards and regulations that govern audit committees and audit committee members. Although generally geared toward public company audit committee members, this Guide is also relevant to private company audit committee members, especially if the private company may at some point consider accessing the public capital markets.
A well-run audit committee—i.e., an audit committee composed of financially knowledgeable, independent members who are focused on the right areas of inquiry and intent on asking tough questions of management, internal auditors and the independent auditor—can assist the company in its financial reporting, risk management and compliance obligations. To this end, this Guide proposes specific practices designed to promote effective audit committees.
Members can access this guide, along with other helpful resources, in our “Audit Committees” Practice Area. If you do not have access to our Practice Areas, sign up today!
Yesterday marked the first 100 days of the second Trump Administration, and I am going to jump on the bandwagon here and reflect back on the SEC’s actions during those first 100 days. The first 100 days of a presidency became a benchmark during the first term of Franklin D. Roosevelt, when he promised swift action during the first 100 days of his administration amidst the Great Depression.
There is no doubt that the SEC hit the ground running under the leadership of Acting Chairman Mark Uyeda, as the Commission and Staff addressed a number of areas relevant to our practice. In the areas of capital formation and capital access, the actions included:
– Corp Fin issued updated guidance that enhances the accommodations available to companies for nonpublic review of draft registration statements.
– The Staff updated its Securities Act Forms CDIs to allow all Form S-3 eligible issuers to have their Form S-3 registration statements become effective between the date of the Form 10-K filing and the filing of the proxy statement containing forward-incorporated Part III disclosure (previously, this was something that only WKSIs were permitted to do).
– The Staff issued an interpretive letter indicating that an issuer may satisfy the verification requirements of Rule 506(c) by relying on minimum investment amounts of at least $200,000 for natural persons and at least $1,000,000 for legal entities and also updated the Securities Act Rules CDIs to address this interpretation.
In remarks during the course of the first 100 days, Acting Chairman Uyeda noted the following potential areas for regulatory action in the context of capital formation:
– Expanding the relief from disclosure requirements provided to emerging growth companies under the JOBS Act;
– Revisiting the qualification thresholds for emerging growth company status and the duration of emerging growh company status;
– Reviewing the “accelerated filer” and “large accelerated filer” thresholds;
– Reviewing disclosure requirements to identify those that should apply only to the largest companies;
– Allowing unlisted companies with a public float of less than $75 million to use shelf registration statements for primary offerings;
– Exploring regulatory changes that enable greater retail investor participation in the private markets, whether through modifications to the accredited investor definition or otherwise; and
– Simplify some of the regulations governing exempt offerings.
The Staff also revisited interpretations relevant to shareholder engagement, including:
– The Staff issued Staff Legal Bulletin 14M, which clarifies the Staff’s views on the scope of the “economic relevance” and “ordinary business” bases for excluding shareholder proposals under Exchange Act Rule 14a-8.
– The Staff updated CDIs regarding beneficial ownership reporting to expand the nature and scope of activities viewed as “influencing control of the issuer” to include exerting pressure to adopt governance measures, particularly tied to ESG or political policy matters.
– The Staff updated CDIs addressing the interpretation of the rules relating to Notices of Exempt Solicitation, which have been used by shareholders to express their views on shareholder proposals.
In the realm of public disclosure, the SEC voted to end its defense of the climate disclosure requirements that the SEC adopted in March 2024. The Staff has updated CDIs regarding clawback disclosures, Rule 10b5-1 and tender offers. Public companies have dramatically altered the disclosure that they provide in annual reports and proxy statements regarding diversity, equity and inclusion based on Executive Orders targeting such practices that were issued by the Trump Administration. Public companies have also had to address the impact of tariffs on their business, the financial markets and the economy.
With respect to crypto, a variety of actions have been taken:
– Commissioner Peirce is leading the SEC Crypto Task Force with mission of providing regulatory clarity for crypto assets.
– The SEC has solicited feedback held several roundtables on crypto regulatory issues.
– Litigation has been dropped or stayed in various crypto-related cases.
On the SEC operations side of things, a significant portion of the SEC Staff has left or is in the process of leaving as a result of the DOGE “fork in the road” offer and the SEC’s early retirement program. Anecdotally, it appears that these staffing cuts have been disproportionately comprised of senior Staff members with significant experience and institutional knowledge.
It is wild to think that all of this activity occurred before Chairman Paul Atkins was sworn in last week. Now that the SEC has a Chairman in place, I think that we can only expect this pace of change to continue.
For more coverage of the first 100 days of the Trump Administration, check out Goodwin’s New Directions Audio Series.
As Liz reported yesterday over on the Proxy Season Blog, the Business Roundtable has published a white paper that proposes:
– Restoring Rule 14a-8 to its original intent by precluding shareholder proposals that advance broad ideological agendas.
– Preventing the abuse of proxy rules through strengthened submission and resubmission thresholds for shareholder proposals.
– Reining in the outsized influence of proxy advisory firms by prohibiting “robovoting” (the practice of mechanically voting in line with proxy advisor recommendations), requiring vote recommendations to be supported by economic analysis and addressing conflicts of interest.
– Affirming the SEC’s authority to regulate proxy advisory firms and enforce standards for transparency and accountability.
Liz notes that, on the topic of shareholder proposals, the white paper presents the Business Roundtable’s view that the SEC has assumed a “quasi-judicial” role through an “inconsistent, opaque and arbitrary” no-action process, and calls on Congress “to enact legislation precluding the inclusion of shareholder proposals relating to environmental, social and political issues in a company’s proxy statement.” If Congress does not take such action, it is suggested that the SEC should amend Rule 14a-8 to add an exclusion for proposals relating to environmental, social and political issues and update Commission guidance to eliminate: (i) the significant social policy exception under Rule 14a-8(i)(7); and (ii) the broad social or ethical concern exception under Rule14a-8(i)(5).
I am very sad to note the passing of my dear friend and mentor Cathy Dixon. Cathy was a wonderful person who accomplished so much during her time at the SEC and in private practice, and who taught me a great deal about the securities laws and the profession.
Following judicial clerkships, Cathy started her legal career as a trial attorney in the DOJ’s Antitrust Division and then joined the SEC in the appellate litigation section of the Office of the General Counsel. Cathy also served as counsel to Commissioner Steven M.H. Wallman. In the Division of Corporation Finance, Cathy served as Chief of the Office of Mergers & Acquisitions and the Office of Disclosure Policy, and then as Chief Counsel of the Division.
Cathy served as co-author of the well-known treatise on the federal proxy rules, Aranow and Einhorn on Proxy Contests for Corporate Control, a book that I refer to often! Cathy also taught a course on mergers & acquisitions at Georgetown University Law Center for a number of years. I had the opportunity to work closely with Cathy when she served as chair of the ABA Business Law Section’s Federal Regulation of Securities Committee, particularly when I served as her vice-chair. Cathy was a partner at Weil for the past 25 years, acting as a true thought leader in our profession and as a trusted counsel to public companies, boards and financial intermediaries.
As Liz and I have been exploring in our podcast series “Mentorship Matters with Dave & Liz,” mentorship is so critical to us as professionals at any stage of our career. I greatly appreciate Cathy’s mentorship at various stages of my career, including at the SEC and when making the leap to private practice. In many ways, I have modeled my career trajectory after Cathy’s, whether consciously or subconsciously. In fact, I always credit Cathy with providing me with the advice that has guided me for the past 18 years of my post-SEC career. She advised me that you can leave the SEC and five years later no one will recall that you were the Chief Counsel of Corp Fin, or you can instead do everything that you can to distinguish yourself as a leader in the profession, and people will recognize your SEC experience and all of your contributions since that time. I feel like I have been faithful to Cathy’s advice and it has truly made me the lawyer that I am today.
So it is with great sadness that I bid farewell to Cathy, who was truly a legend in everything that she did. My condolences go out to her family, friends and colleagues. Her life will be celebrated in Washington, DC next Thursday, May 8.
The Financial Times reported over the weekend on draft legislation prepared by Republican lawmakers that would, if enacted, shut down the PCAOB and fold its operations into the SEC. This draft legislation, which was published on Friday by the leadership of the House Committee on Financial Services, is intended to be included in a large tax and spending bill that is being worked on in Congress. As John noted back in December, elimination of the PCAOB is one of the policy objectives outlined by Project 2025.
The draft legislation contemplates the transfer of intellectual property retained by the PCAOB in support of its programs for registration, standard-setting and inspection to the SEC and the referral of pending PCAOB enforcement and disciplinary actions to the SEC and other regulators. All duties and powers of the PCAOB would be transferred to the SEC and employees of the PCAOB would be offered equivalent positions at the SEC. The legislation contemplates the transfer of any unobligated funds collected by the PCAOB to the U.S. Treasury and an end to collection of the accounting support fee.
The Financial Times article notes that this legislative initiative does face some additional hurdles:
It faces procedural hurdles, however. The full House Committee on Financial Services will consider the legislation in the coming days, but whether it will be included in the tax and spending bill, known as a reconciliation bill, will depend on negotiations within the Republican leadership in the House and Senate and whether it is deemed a budgetary measure.
While the Sarbanes-Oxley Act provisions that directed the establishment of the PCAOB represented a bipartisan effort seeking to address significant concerns with the accounting profession highlighted by the corporate scandals of the early 2000s, the regulator has been a lightning rod for criticism since its inception. For example, then-SEC Chairman Harvey Pitt resigned following criticism of his selection of Judge William Webster to serve as the first Chairman of the PCAOB, after reports emerged that Pitt failed to inform the other SEC Commissioners that Webster once served on the board of a company accused of fraud. In 2017, the entire PCAOB board was replaced, and subsequently Harvey Pitt was brought in to evaluate the PCAOB’s governance when issues about the Board’s leadership were identified through whistleblower complaints. For more on the history of the PCAOB, check out the SEC Historical Society’s Gallery: “Auditing the Auditors: Creating the Public Company Accounting Oversight Board.”