Yesterday’s blog theme was bad news, and today we turn to less news. As we all anxiously await a proposal from the SEC addressing quarterly reporting, our northern neighbors have announced a voluntary pilot for semi-annual reporting that would exempt certain issuers from filing first- and third-quarter financial reports, including MD&A. This Torys alert explains the program in detail.
To be eligible for the reduced reporting, issuers must satisfy these conditions at the end of each three- and nine-month interim period:
– The issuer has been a reporting issuer in at least one jurisdiction of Canada for at least 12 months.
– The issuer is a “venture issuer”.
– The issuer has securities listed and posted for trading on the TSXV or the CSE.
– The issuer has revenue, as shown on its most recently filed annual audited financial statements, of no more than C$10 million.
– The issuer has filed all required periodic and timely disclosure documents with the regulator or securities regulatory authority in each jurisdiction in which it is a reporting issuer.
– During the preceding 12 months, the issuer (i) has not been the subject of penalties or sanctions (including a restriction on the use of any type of prospectus or exemption) imposed by a court relating to securities legislation or by a securities regulator (other than late filing fees); (ii) was not subject to a cease trade or similar order not revoked within 30 days of its issuance; and (iii) did not cease relying on the exemption provided by the Blanket Order.
– The issuer has issued and filed a news release specifying the initial interim period for which it does not intend to file an interim financial report and related MD&A in reliance on the Blanket Order, containing certain prescribed disclosure.
This part is key:
The SAR Pilot does not alter the disclosure required in connection with a prospectus offering or prospectus-level disclosure requirements in an information circular, takeover bid circular or an issuer bid circular. An issuer must cease relying on the exemptions in the Blanket Order if it has filed a base shelf prospectus and may not distribute securities under an existing shelf prospectus supplement.
I’m curious to see if an SEC proposal will be similarly limited in terms of eligible participants and offering disclosure requirements. I don’t know enough about the Canadian securities regime to know what these limitations will mean for semi-annual reporting adoption rates in Canada. But if U.S. registrants won’t be able to take advantage of semi-annual reporting when they need to raise capital (or even just have a shelf registration statement on file?), that’s going to really limit uptake since the smaller issuers (that might otherwise be the most likely adopters) frequently need to do just that. That said, if rulemaking changes the requirements for financial statements in registered offerings, wow. We’re in for an interesting few years as everyone wraps their heads around that and market practice evolves.
ICYMI: Corp Fin Director Jim Moloney issued a statement that accompanied the SEC’s announcement of an Interpretive Release clarifying the application of the securities laws to digital assets. Focusing on when an investment contract comes to an end, the statement was called “The Last Chapter in the Book of Howey.”
In the Interpretive Release, the Commission clarifies when, in its view, a non-security crypto asset would no longer be subject to an investment contract. In short, the investment contract terminates either upon: (1) the fulfillment of the representations or promises of essential managerial efforts, or (2) the failure to satisfy those representations or promises. In both of those situations, the investor is no longer expecting to profit based on the essential managerial efforts of others, a key element of Howey. I highly recommend that those who want to know more read the Interpretive Release in full to appreciate the examples and understand the Commission’s views of the considerations that go into a determination of whether and when either of these two situations may occur in the crypto asset context.
Jim notes that the application of this guidance could extend beyond crypto:
While the Interpretive Release is published in the context of modern-day crypto assets, the framework for assessing when an investment contract terminates can easily apply to that flourishing Floridian orange grove or other non-crypto assets. Howey could have fulfilled his representations and promises as indicated at the outset. For example, the maintenance contract could have been limited to watering and caring for the orange trees for so long as they were fruit-bearing. Alternatively, the investment contract could have terminated when Howey failed to satisfy his promises. For example, if a disastrous hurricane or disease completely destroyed the groves, Howey could have publicly and unequivocally told his investors that he was abandoning his intention to water and care for the trees, ending the investment contract. Beyond the orange grove example, more creative storytellers than I will no doubt start to imagine how this guidance could apply in other contexts.
If you joined PLI’s SEC Speaks, you probably heard Corp Fin Deputy Director Sebastian Gomez Abero refer to Jim’s statement as “a ‘Little Golden Book’ of Howey, including how an investment contract is formed and how it ceases to exist.” Well, the Corp Fin Staff has now taken the kids’ book theme a step further and made a Little Golden Book-inspired video with some of the content of that statement that gives the “TL;DR.”
While Sebastian suggested not reading Jim’s statement to your kids at night, the YouTube video might be quite digestible to kids – even in elementary school. Maybe our kids will finally understand what we’re saying when they ask what we do for work?
Corp Fin Staff has said on the record, “don’t expect a quiet summer,” and promised that a series of “blockbusters” (major rulemaking proposals!) are forthcoming. For us, that means both gearing up for our 2026 Proxy Disclosure and Executive Compensation Conferences and staying flexible because, as previous attendees know, we will pull out all the stops to cover the latest developments. With our conferences happening in October, they’ll be well-timed to bring you up to speed in advance of next proxy season on rulemaking proposals plus the steady stream of high-impact staff-level guidance we’ve been seeing from Corp Fin.
Do yourself a favor and register for our 2026 conferences now. It’ll be reassuring to know that you’ve already carved out time in October to hear from the “think tank” we’re bringing together in Orlando and participate in discussions that could shape final rules. In addition to peace of mind and the opportunity to weigh in, registering this week will save you money. Our super early birdrate is ending on Friday. This is the best rate we’ll be offering for both in-person and virtual attendance. Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271 by Friday, April 3rd, to lock in the best price.
Over on the Small Cap Institute website, Adam Epstein encouraged companies not to “engage in linguistic games to try and camouflage bad financial news.” He lists several ways companies try to do this. Do you recognize any from your past earnings releases?
– Serial, italicized, headline subtitles that refocus attention away from key financial results
– Overemphasis upon non-GAAP results, and even discussing them to the exclusion of GAAP results
– Introducing completely new reporting metrics – just for the quarter – to highlight data that might distract investors from the poor results
– Long-winded CEO quote setting forth how “unbelievably excited” they are about some of the “extremely transformative” things the company is working on that make them “incredibly optimistic”
– Changing the comparative reporting periods to opportunistically highlight sequential results, since the year-over-year comparisons are bad
– Lengthy, bullet-pointed lists of “business highlights” that are predominantly comprised of immaterial information
– Introduction of new initiatives that investors don’t hear much about thereafter
Adam says investors don’t buy these tactics. And, if anything, they actually hurt investor perception of the company. Not surprisingly, some of these are really similar to some “pet peeves” listed in our “Checklist: Earnings Releases – 54 Pet Peeves.”
I loved that checklist so much it inspired me to do a deep dive on press releases, which we’ve turned into “Checklist: Legal Review of Earnings & Other Press Releases” that attempts to summarize the factors that in-house or outside counsel should consider when preparing or reviewing a press release. This is a resource I really wish I had as an associate, since I feel like I learned these lessons piecemeal, sometimes on my own and sometimes through more formal training. Check it out when you have a moment, and please feel free to share any feedback. I hope it helps guide some junior attorneys or that senior attorneys find it helpful for training.
Investors may not buy the sugar coating, but sometimes, after bad news, insiders buy up stock, presumably because they think it’s undervalued and a good investment after a price dip, and, in the back (or front) of their minds, believe there’s an added benefit of signaling their bullishness to the market. Last month, the WSJ looked at how these purchases impact stock prices in the short and long term.
To find out how often these insiders get it right, we analyzed about 1,400 publicly disclosed insider purchases at S&P 500 companies over the past five years. Since 2020, insiders at 327 of them have spent a collective $3.7 billion on stock purchases of more than $100,000 each, according to data from financial research firm Verity.
Most purchases took place after the share price had declined over the previous 30 days, often after disappointing results or other negative news. In such instances, executives and directors often buy shares in clusters to amplify their vote of confidence in the strategy—as they did in a quarter of the trades analyzed, according to the Verity data.
They found that, “The move generally works—to a point.”
Share prices climbed a median 2% a month after the insider purchases, but their recoveries tended to taper off after that. Just 15% fully rebounded from where they had fallen in the 30 days before the share purchase. “It sort of wears off,” said Ben Silverman, Verity’s head of research, of the bullish signal that insider purchases send to the market [. . .] About 60% of trades made some money, but not all fully erased previous declines.
So if your insiders want to buy your stock because they think it’s a good investment – and you have an open window, no MNPI, etc. – great. But if they’re doing it in the hopes of having a long-term positive impact on the stock price, know that it often doesn’t play out that way.
Speaking of bad news, a joint study (available for download) by ISS STOXX and ISS-Corporate recently examined just how much one type of bad news – reporting a cyber incident – impacts a company’s stock price. You might be surprised at what the summary refers to as the “depth and duration of damage.” The study examined the impact of reported cyber incidents on share values across the U.S. Russell 3,000 index from 2022 through 2024. They found that, “while share price underperformance manifests quickly, it is also sustained and builds over time.” Specifically:
– [F]irms reporting significant cyber incidents underperform the market (as measured by share price) by nearly 5% on average.
– This study confirms continued share price underperformance at one full year after incidents are first reported, with a peak negative average impact of nearly -4.9% after 250 trading days.
– The Finance and Banking sector, as well as the Health Care sector, show higher negative average impacts to relative share price in the months following a reported cyber incident (peaking at -8.5% and -8.3%, respectively).
Those two industries also experienced the majority of the total incidents in the three-year period.
If you were alerted yesterday to an off-cycle Schedule 13G Amendment from Vanguard Group, Inc., you weren’t alone. Howard Dicker of Weil Gotshal pointed out to us that as of 6:40 pm ET, Vanguard Group, Inc. had filed about 1,010 Schedule 13G Amendments – here’s the current list of filings by this entity.
The filings largely stem from the realignment at Vanguard that I blogged about last year – I noted at the time that companies may need to make name changes in their beneficial ownership tables when the realignment was finalized. In the amendments, Vanguard Group, Inc. is reporting that it beneficially owns zero shares of the company. The filings state:
On January 12, 2026, The Vanguard Group, Inc. went through an internal realignment. In accordance with SEC Release No. 34-39538 (January 12, 1998), certain subsidiaries or business divisions of subsidiaries of The Vanguard Group, Inc., that formerly had, or were deemed to have, beneficial ownership with The Vanguard Group, Inc., will report beneficial ownership separately (on a disaggregated basis) from The Vanguard Group, Inc. in reliance on such release. These subsidiaries and/or business divisions pursue the same investment strategies as previously pursued by The Vanguard Group, Inc. prior to the realignment. Further in accordance with SEC Release No. 34-39538 (January 12, 1998), The Vanguard Group, Inc. no longer has, or is deemed to have, beneficial ownership over securities beneficially owned by such subsidiaries and/or business divisions.
Yesterday’s flood of Schedule 13G/As was preceded by initial Schedule 13G filings that started in February 2026 by Vanguard Portfolio Management LLC. These filings actually do show shares owned (not zero), stating:
On January 12, 2026, The Vanguard Group, Inc., the parent entity of Vanguard Portfolio Management LLC, went through an internal realignment. As of that date, The Vanguard Group, Inc. no longer performs portfolio management services or administers proxy voting. Such services are performed by Vanguard Portfolio Management LLC. In accordance with SEC Release No. 34-39538 (January 12, 1998), Vanguard Portfolio Management LLC anticipates that it and certain other subsidiaries or business divisions of subsidiaries of The Vanguard Group, Inc., that currently have, or are deemed to have, beneficial ownership with The Vanguard Group, Inc., will report beneficial ownership on a disaggregated basis from The Vanguard Group, Inc. in reliance on such release. These subsidiaries and/or business divisions pursue the same investment strategies as previously pursued by The Vanguard Group, Inc. prior to the realignment.
This Schedule 13G reflects the securities beneficially owned, or deemed to be beneficially owned, by Vanguard Portfolio Management LLC and the following affiliates of Vanguard Portfolio Management LLC or business divisions of such affiliates: Vanguard Fiduciary Trust Company. This Schedule 13G includes securities held by Vanguard funds, or sleeves thereof, over which Vanguard Portfolio Management LLC exercises dispositive power, in addition to securities held by clients over which the affiliates or business divisions of such affiliates indicated in the previous paragraph exercise dispositive and/or voting power. This Schedule 13G does not include securities, if any, beneficially owned by other affiliates of Vanguard Portfolio Management LLC or business divisions of such affiliates.
What’s with the timing, though? The internal realignment occurred on January 12, 2026. It’s not clear to me what’s driving the “zero” filings by Vanguard Group Inc. – but when it comes to Vanguard Portfolio Management LLC, it might have filed initial Schedule 13Gs in February instead of waiting until after quarter-end because its post-realignment beneficial ownership exceeded 10% for the applicable companies. Rule 13d-1(b)(2) says:
The Schedule 13G filed pursuant to paragraph (b)(1) of this section shall be filed within 45 days after the end of the calendar quarter in which the person became obligated under paragraph (b)(1) of this section to report the person’s beneficial ownership as of the last day of the calendar quarter, provided, that it shall not be necessary to file a Schedule 13G unless the percentage of the class of equity security specified in paragraph (i)(1) of this section beneficially owned as of the end of the calendar quarter is more than five percent; however, if the person’s direct or indirect beneficial ownership exceeds 10 percent of the class of equity securities prior to the end of the calendar quarter, the initial Schedule 13G shall be filed within five business days after the end of the first month in which the person’s direct or indirect beneficial ownership exceeds 10 percent of the class of equity securities, computed as of the last day of the month.
If that hypothesis is correct, you might notice Vanguard Portfolio Management LLC making additional Schedule 13G filings after quarter-end for ownership in companies above 5% but below 10%. Hopefully this background helps anyone who is fielding questions about unexpected filings!
Last week, the New Civil Liberties Alliance announced that it had filed a petition asking the US Supreme Court to hear a challenge the SEC’s “gag rule.” As we’ve shared in the past, the gag rule – more neutrally known as the “no-admit/no-deny policy” – says that defendants settling civil claims with the Commission can’t go out afterwards and deny the allegations. The policy is codified in 17 CFR § 202.5(e).
The NCLA filed the petition on behalf of a group that lost a case in the 9th Circuit last summer, which was premised on a First Amendment challenge. The way the appellate court saw it, the policy isn’t facially invalid because defendants are voluntarily waiving their First Amendment rights when they agree to a settlement. But as Meredith noted at the time, the policy may not feel “voluntary” to enforcement targets – and the court even left the door open to the possibility that the policy may be unconstitutional as applied.
Not surprisingly, the NCLA announcement leans into that perspective. Here’s an excerpt from their press release:
The Bill of Rights explicitly forbids Congress from abridging Americans’ freedom of speech or press. Yet the SEC, a mere agency, claims power Congress itself lacks. The rule is not narrowly tailored, serves no legitimate or compelling government interest, restricts speech based on content and viewpoint, and restrains future speech, violating the First Amendment. Criticizing this policy, SEC Commissioner Hester Peirce has said it is designed to improperly hide agency actions from the public.
The petition is the latest in a string of efforts to overturn this rule. In late 2023, the NCLA submitted a rulemaking petition on the topic, which it previously submitted in 2018. The NCLA is the same organization that orchestrated the end of the Chevron defense, as well as challenges to the SEC’s use of administrative law judges. We don’t know yet whether the “gag rule” challenge will make it onto SCOTUS’s docket – but it’s not NCLA’s first rodeo.
The SEC’s Enforcement Division is not the only game in town when it comes to public company litigation risks – there are also private plaintiffs to worry about. A Texas statute – part of the “SB 29” overhaul to the Texas Business Organizations Code that was signed into law last year – tries to mitigate one dimension of that risk by allowing companies to impose ownership thresholds in their articles or bylaws that prevent shareholders with small ownership percentages from instituting derivative suits.
This Gibson Dunn memo flags a recent district court case that upheld the new statute in the wake of a shareholder challenge – holding that a company could impose a threshold even if the bylaws were amended to add it after the shareholder sent a demand letter. The memo shares these key takeaways:
– Public companies incorporated in Texas now have a clear and judicially validated pathway to significantly limit exposure to shareholder derivative litigation by adopting ownership thresholds in their bylaws or certificate of formation.
– By dismissing the complaint with prejudice, the decision signals that courts will enforce those thresholds strictly and scrutinize plaintiffs’ attempts to plead around them.
– After this decision, future constitutional challenges to SB 29 – particularly retroactivity and “open courts” arguments—will face an even steeper uphill battle.
– The court’s decision underscored that directors’ fiduciary duties run to — and derivative claims belong to — corporation, not individual shareholders. This enduring principle limits shareholders’ ability to assert “vested” rights or individualized injury from bylaw amendments.
The memo says that the decision reinforces the commitment of the Lone Star State to cultivate a pro-business environment that attracts incorporations.
Last week, the Staff of the SEC’s Division of Economic & Risk Analysis announced an update to its “Statistics & Data Visualizations” page to reflect the latest stats on IPOs and other public and private offerings. Here are a few high points:
Market activity increased across several categories in 2025. The updated statistics show that in 2025 there were 374 IPOs raising over $70 billion in proceeds, up from 246 IPOs raising $39 billion in 2024. The number of follow-on registered offerings increased slightly in 2025, while the amount of capital raised in the offerings decreased slightly. Amounts raised in unregistered offerings also increased in 2025. There were 34,553 Regulation D offerings in 2025 compared to 32,554 Regulation D offerings in 2024. These offerings raised $2.1 trillion in capital in 2024 and $2.4 trillion in 2025.
In 2025, there was a slight decrease in the number of corporate bond offerings—from 1,795 to 1,694—but the amount raised increased slightly from $1.17 trillion to $1.25 trillion. There were 2,320 ABS issuances in 2025, an increase from 2,032 in 2024. The number of CMBS issuances also increased with 348 issuances in 2025 compared to 302 in 2024.
Since this new page was just launched last August, it may not be top of mind – but if you’re ever looking for data, it should be! The DERA Staff said last week at PLI’s SEC Speaks that they’re committed to updating the data frequently to support more transparency around market activity. Stats on public offerings and Reg D offerings are updated quarterly – and Reg A and crowdfunding data gets a semi-annual refresh. Data on the number of reporting issuers is updated annually.
