The WSJ reported earlier this week that predictions market operator Kalshi is tightening its security measures and asking some traders to identify their employers in response to concerns about insider trading. This Sidley blog says that it’s time for public to tweak their own insider trading policies to address the issues presented by prediction markets, and for other organizations to implement formal policies of their own. This excerpt explains the rationale for that position:
Historically, insider trading compliance programs were implemented only at publicly traded companies and focused primarily on securities transactions involving publicly traded stock. Because the use of online prediction markets is a relatively new phenomenon, those programs have not explicitly addressed prediction market activity.
In addition, prediction market trading may involve contracts unrelated to publicly traded securities and may implicate confidential information held by private companies, nonprofits, universities, healthcare systems, government contractors, and other organizations that historically may not have maintained formal insider trading policies. As a result, employees and other personnel at public or private companies may incorrectly assume that existing restrictions on the misuse of confidential or proprietary information do not apply to prediction market activity, creating potential ambiguity and increased compliance risk for organizations.
The blog goes on to make specific recommendations for actions that public companies and other organizations should take to appropriately update existing insider trading policies or to include in newly adopted policies to address prediction markets.
Data centers increasingly play a key role in corporate investment, construction, procurement and utilization decision-making, and the issues associated with data center governance should be addressed at the board level. A recent Weil memo highlights some of the key questions boards should be asking about data center governance. Here’s an excerpt:
1. Strategy and Operations. How do data centers tie into the company’s strategy and operations (e.g., do we build, lease, invest, finance, supply), what is the interplay between data centers and our AI strategy, and how do we expect data centers to meet our computing power needs now and in the future? What is the expected obsolescence of the data centers that the company has built, contracted for or otherwise invested in, and are we in a position to retool/retrofit if needed?
2. Monitoring Performance and Oversight. Who on the management team is responsible for data center-related activities and how are those activities factored into their compensation? What financial metrics and other information are they expected to report to the Board and how regularly? Do we have an information reporting system in place to surface issues to the Board as appropriate? Do we have a Board committee tasked with oversight of data center-related matters and do our minutes and materials reflect that?
3. Risk Oversight. Do we understand the risks involved with our data center activity and how the company manages and mitigates those risks? Are those risks built into our enterprise risk management framework, business resiliency plans and policies, and risk oversight processes? (Examples of key risks include power source problems, interconnection delays/latency, community opposition, obsolescence and events that could impact operations such as security or cybersecurity breach, natural disaster, extreme weather, war or terrorist attack.)
4. Delegation of Authority. What data center-related agreements are required to come to the Board for approval? Is this clear under our delegation of authority (e.g., because they involve expenditure over a certain amount or are otherwise material)?
5. Disclosure. What disclosures about data centers have we made in our public filings and other documents, and are the company’s disclosure controls and procedures up to date? What are our peer companies disclosing about data centers?
Other areas of inquiry for the board of directors identified by the memo include sustainability issues, regulation and compliance, governmental relations and shareholder engagement concerning data center-related activities.
I’ve only visited Orlando once, when my parents took our family to Disney World over Christmas 1998. Our kids were ages 6, 5 and 3 at the time, and even though they were a little young, everyone had a great time. What I remember most about the experience was the efficiency with which the folks at Disney separated me from the contents of my wallet as we wandered around the parks. My kids were having so much fun that I didn’t even feel it – well, at least not until January, when the Visa bill arrived.
If you want to hold onto the contents of your wallet a little more tightly than I was able to, be sure to sign up now for our 2026 Proxy Disclosure and Executive Compensation Conferences on October 12th & 13th in Orlando to take advantage of our discounted “early bird” rate. With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
The folks at the SEC have made it clear that they’re not planning to stand still over the next few months, and we won’t be either. We’ll tweak our agenda as necessary to ensure that ensure that we’re bringing you the most up-to-date information on the SEC initiatives that mean the most to you and your clients.
Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
This recent PwC report that details Staff comment letter trends for Form 10-K and Form 10-Q filings. The report identifies the 10 most common topical areas for Staff comments during the period from April 1, 2025 through March 31, 2026, and includes both an analysis of the Staff’s inquiries and sample comments. Here’s an excerpt from the report’s discussion of MD&A comments:
The SEC staff’s comments on management’s discussion and analysis have emphasized the requirements in Item 303 of Regulation S-K and the related disclosure objectives, including a focus on:
– The discussion and analysis of results of operations, including the description and quantification of each material factor, offsetting factors, unusual or infrequent events, and economic developments causing changes in results between periods
– The discussion of known trends or uncertainties that are reasonably expected to impact near- and long-term results (e.g., supply chain disruptions, inflation, increase in interest rates)
Metrics used by management in assessing performance, including how they are calculated and period over period changes
– Critical accounting estimates, including the judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used
– Liquidity and capital resources, including clear discussion of drivers of cash flows and the trends and uncertainties related to meeting known or reasonably likely future cash requirements.
The other topical areas included in PwC’s report are non-GAAP measures, segment reporting, revenue recognition, debt, quasi-debt, warrants and equity, goodwill and other intangibles, business combinations, disclosure controls and ICFR, research and development, and inventory and cost of sales. A separate section of the report also explores industry-specific comment trends.
I think most of us who’ve drafted disclosure for public companies over the years have resigned ourselves to the fact that, aside from the plaintiffs’ bar & a few other folks who get paid to review corporate disclosures, pretty much nobody else reads them – including most investors. Since that’s the case, the question becomes, “What’s the point?” A recent CLS Blue Sky Blog post discussing a new paper, “The Hidden Work of Disclosures” takes a stab at answering that question.
Although the paper approaches this issue from the perspective of mutual funds, I think much of what the authors say has relevant to those who work on the corporate side. They argue that the discipline of disclosure strengthens internal governance, and that this pays dividends to investors whether they read those disclosures or not. This excerpt summarizes their argument on the governance benefits of disclosure:
First, disclosure empowers lawyers.Funds typically assign responsibility for drafting and revising disclosures to fund counsel, and that designation is consequential. Stewardship of the disclosure process elevates the authority of lawyers within organizations that financial professionals would otherwise dominate. SEC-enforced disclosures give lawyers the authority to rein in straying portfolio managers and to say, “This is in your prospectus.… This is how it’s disclosed to shareholders, and this is what we need to do.”
Second, disclosure builds a culture of compliance. Drafting a prospectus and updating it annually is a cross-department exercise recruiting portfolio managers, risk teams, accountants, marketing personnel, compliance officers, and independent trustees into periodic collaborations. Leading this process, in-house lawyers and outside counsel work collaboratively, discerning SEC priorities and requirements for internal teams and translating complex financial frameworks for external audiences.
In-house lawyers acquire the character of “good inspectors” rather than enforcement cops, building trust and gaining access to information, while anticipating problems before they arise. Outside counsel provide an industry-wide view by benchmarking funds’ practices against market trends, which tells funds whether they are safely “in the antelope herd” or “about to get picked off by the lions.” Compliance culture isn’t about altruism. A fund’s reputation for doing the right thing is a highly prized asset that establishes its status within the industry, the trust that the SEC has in the fund, and most important, its brand value among investors.
Disclosure forces institutional learning. Annual reviews compel funds to revisit their disclosures, kick the tires, and reconcile public representations with operational reality. Interviewees described disclosures as the “blueprint,” the “playbook,” and “gold standard,” guiding fund operations from top to bottom with current information. Lawyers, in turn, cross-pollinate among funds—sharing best practices related to disclosure drafting and revision through bar committees, trade associations, law firms, and professional contacts. Disclosure language and compliance methods spread through this network, producing a degree of industry-wide convergence that command-and-control regulation alone could not deliver.
Over on The Business Law Prof Blog, Prof. Ann Lipton cites this paper in support of her opposition to the SEC’s semiannual reporting proposal. As she puts it, “a switch to semi-annual reporting may not simply mean less information to investors; it loosens the obligations of boards, and managers, to oversee the company.”
Meaghan Nelson continues to blog up a storm over on “The Mentor Blog,” which is available to members of TheCorporateCounsel.net. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply clicking the link on the left side of the blog and entering their email address. Here are some of Meaghan’s recent entries:
You’ll love Meaghan’s stuff – she brings a unique perspective to our team and is confronting many of the same challenges a lot of our members face in juggling a career in corporate law with the responsibilities of a young family. I think we probably get more positive feedback from our members on Meaghan’s blogs than just about anything else on the website. If you’re not reading her blogs, you’re missing out!
The SEC’s recent semiannual reporting proposal has given public companies and their lawyers plenty to think about and so has Nasdaq’s decision to move to 23/5 trading later this year. One of the big questions that people are asking is “what’s everyone else planning to do?” To help answer that question, we’ve put together this 18-question anonymous survey in collaboration with our friends at Fenwick & West and Orrick.
This one’s a little longer than our typical quick survey, but it covers a lot of ground, including the likelihood of adopting semiannual reporting, anticipated changes in disclosure practices, insider trading policies, and reactions to Nasdaq’s extended trading hours.
We expect that this anonymous, multiple-choice survey will take you about 10 minutes to complete, and we’ll share the results on this website. You don’t have to be a member of TheCorporateCounsel.net to take the survey, so we invite all of our readers to take a few minutes to complete it. We think you’ll find that it’s worth the effort!
This recent article from Gallagher’s Lenin Lopez addresses the need for companies to update their social media policies in order to ensure that they appropriately cover the issues associated with artificial intelligence. This excerpt discusses how companies should think about AI when crafting social media policies:
AI-enabled tools are increasingly part of how content is created, edited, summarized and shared. Employees may view these tools as convenient when preparing posts, responding to industry developments, drafting captions, summarizing company announcements, translating content or making something technical more accessible. Even when an employee is well-intentioned, the output could be inaccurate, incomplete, off-brand or based on confidential or proprietary information that shouldn’t have been entered into the tool in the first place.
AI isn’t the primary focus of most legacy social media policies and companies don’t necessarily need a separate policy to address these risks. However, they should consider targeted updates within the existing universe of their policies, like those covering social media, confidentiality, communications and information security.
For example, companies may want to consider clarifying that:
– Employees remain responsible for content they post, regardless of whether it’s generated or assisted by AI.
– Confidential or proprietary information shouldn’t be entered into unauthorized tools.
– AI-assisted communications are subject to the same approval, accuracy and recordkeeping expectations as any other content.
These additions can help reinforce existing obligations rather than creating entirely new ones. That is, the underlying regulatory themes — like accuracy, supervision and accountability — remain unchanged, even as the tools evolve.
Other topics covered by the article include social media policy basics, the people who should be involved in drafting the policy, the need for review by outside counsel, what to think about when creating a policy, and how often the policy should be refreshed.
If you’re interested in the use of AI for proxy voting recommendations in contested elections, check out Meredith’s recent podcast with Kekst CNC’s Co-CEO Lyndsey Estin and the co-leader of the firm’s Investor Relations and Contested Situations Practice, Nick Capuano. Lyndsey and Nick joined Meredith to discuss Kekst’s recent analysis of how voting recommendations from LLMs compare to those from the major proxy advisory firms across nearly 50 proxy contests. Topics covered in this 24-minute podcast include:
– How Kekst Conducted their Study
– The Headline: LLM Recommendations Lean toward Activists
– Beyond the Headline: Digging into the Data
– How LLM Recommendations Differed from Each Other
– The Sources and Rationales that Most Persuaded the LLMs
– The Sources and Rationales that Held Less Sway with the LLMs
– What this Means for Company Communications in Proxy Contests
We’ve been cranking out podcasts lately and we have several more in the hopper that we expect to post during the next month. If you’re interested in sharing your insights on a topic that you think would likely be of interest to members of TheCorporateCounsel.net or our other sites, we’d love to hear from you. You can contact me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
Last Thursday, the SCOTUS issued its long-awaited decision in Sripetch v. SEC, in which the Court unanimously held that the SEC may obtain a disgorgement award from a defendant in an enforcement proceeding without a showing of pecuniary loss to investors. In his opinion for the Court, Justice Gorsuch reviewed the history of the SEC’s use of the disgorgement remedy, the Court’s 2020 decision in Liu v. SEC limiting the agency’s use of disgorgement, and federal legislative responses to that decision.
Citing a variety of judicial precedent, Justice Gorsuch ultimately concluded that neither the Court’s decision in Liu nor traditional equitable principles required the SEC to establish pecuniary harm in order to use disgorgement as a remedy:
What all these and a great many other cases have in common is this: Applying traditional equitable principles, a court ordered the defendant to disgorge the value of the gain attributable to his invasion of the plaintiff ’s legally protected interests without requiring a showing of pecuniary loss. And to know that much is enough to know the answer to this case. Whatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.
This excerpt from Gibson Dunn’s memo on the case summarizes its implications:
– The decision preserves one of the SEC’s most powerful monetary remedies. The SEC may continue to seek disgorgement tied to a defendant’s net profits even where identifying individual investors or quantifying their losses would be difficult.
– The Court’s ruling limits defendants’ ability to resist disgorgement by arguing that the SEC must prove the same type of economic loss required in private securities-fraud suits. The focus remains on whether the defendant received unjust enrichment as a result of the securities-law violation and whether the disgorgement award is properly limited to that enrichment.
– Because the Court only assumed without deciding that disgorgement under Section 78u(d)(7) is an equitable remedy, defendants can still challenge SEC disgorgement requests seeking to provide the funds to the U.S. Treasury, instead of to investors, on the grounds that they constitute a penalty that implicates Seventh Amendment jury-trial concerns—a concern highlighted in Justice Thomas’s concurrence.
