Yesterday, the Commission, by a three-to-one vote, approved a policy statement that revisits the decades-long approach of the Staff not accelerating the effective date of registration statements for companies with mandatory arbitration provisions in their organizational documents, citing Securities Act Section 8(a), which allows the Commission to refuse to accelerate the effective date of a company’s registration statement upon considering, among other things, the adequacy of the disclosure in the registration statement, the public interest, and the protection of investors.
Historically, mandatory arbitration provisions have been viewed by the SEC as being inconsistent with the “anti-waiver” provisions of the federal securities laws, notably Securities Act Section 14 and Exchange Act Section 29(a), which state that any condition that would bind a person to waive compliance with those laws is void. In two specific instances over the course of the past forty years, the Staff in Corp Fin has refused to declare Securities Act registration statements effective when the issuer had included mandatory arbitration provisions in its organizational documents. The possibility of revisiting the SEC’s policy regarding mandatory arbitration provisions has been discussed over time, including during the first Trump Administration, but the policy has remained in place until now.
In the new policy statement, the SEC states:
This statement concerns requests to accelerate the effective date of registration statements filed under the Securities Act of 1933 (“Securities Act”) by issuers with a mandatory arbitration provision for investor claims arising under the Federal securities laws (“issuer-investor mandatory arbitration provision”). As discussed in further detail in section II.C. there have been a number of developments involving the U.S. Supreme Court’s (“Supreme Court” or “Court”) interpretation and application of the Federal Arbitration Act of 1925 (“FAA” or “Arbitration Act”) that inform such acceleration requests. In addition, as discussed in further detail in Section II.B., potential uncertainty exists regarding the intersection of the FAA and state law. For example, Delaware recently amended its General Corporation Law in a way that may prohibit certificates of incorporation or bylaws from including an issuer-investor mandatory arbitration provision. Other states may adopt different approaches on this issue. Notwithstanding these developments and potential uncertainty, the Commission has not spoken publicly on this topic even though, during the registration process, issuers have on occasion sought to include such a provision in their Securities Act registration statements.
In order to provide issuers with greater certainty concerning the Commission’s approach to requests to accelerate the effective date of a registration statement disclosing an issuer-investor mandatory arbitration provision, we are issuing this policy statement. For the reasons explained in this statement, we have determined that the presence of an issuer-investor mandatory arbitration provision will not impact decisions whether to accelerate the effectiveness of a registration statement under the Securities Act. Accordingly, when considering acceleration requests pursuant to Securities Act section 8(a) and Rule 461 thereunder, the staff will focus on the adequacy of the registration statement’s disclosures, including disclosure regarding issuer-investor mandatory arbitration provisions.
The policy statement goes on to note: “[n]othing in this statement should be understood to express any views on the specific terms of an arbitration provision, or whether arbitration provisions are appropriate or optimal for issuers or investors.” In expressing his support for the policy statement, Chairman Atkins stated:
While many people will express views on whether a company should adopt a mandatory arbitration provision, the Commission’s role in this debate is to provide clarity that such provisions are not inconsistent with the federal securities laws. It will fulfill that role through the issuance of the Policy Statement.
Commissioner Crenshaw opposed the SEC’s action, noting in a lengthy statement:
Mandatory arbitration forces harmed shareholders to sue companies in a private, confidential forum, instead of a court and without the benefit of proceeding in the form of a class action. While, in theory, arbitration could cut costs for companies, there are real downsides for investors. Arbitrations are typically more expensive for individual shareholders; they are not public; they have no juries; they lack consistent procedures; arbitrators are not bound by legal precedent; arbitration precludes collective action among shareholders; there are limited rights of appeal; and, ultimately, there is no assurance that two identical investors would get the same outcome. If that collection of things transpired in a courtroom without a party’s consent, judges would not hesitate to call it what it is: a violation of due process.
Today, the Commission takes two steps to advance this policy goal. First, the Commission issues a policy statement dictating that staff make public-interest findings without considering whether a corporation has forced its shareholders into mandatory arbitration. And, second, we amend the Rules of Practice to ensure that no Commissioner or third party can effectively intervene to challenge those public-interest findings.
The policy statement fails on many fronts. It fails to identify a problem. It fails to adequately address numerous and complex legal and economic issues. And it fails entirely to discuss the practical consequences of allowing public companies to mandate arbitration. If, however, we actually were to consider whether mandatory arbitration is in the public interest—an analysis required by the Securities Act—we would face overwhelming evidence that it is not. So, to start there, what are some of those consequences?
For public companies and companies that are contemplating going public, the change in SEC policy now raises the question of whether the adoption of mandatory arbitration provisions for securities law claims is a possibility. As the Commission noted in the policy statement, whether issuer-investor mandatory arbitration provisions can be included in a company’s organizational documents depends on state corporate laws, and some states, such as Delaware, have enacted laws that may prohibit the implementation of such provisions. The Commission’s action will likely also prompt a broader debate over whether mandatory arbitration provisions are advisable from the perspective of issuers and investors. Through the policy, the Commission is not necessarily weighing in on this debate, but is rather getting out of the way (for better or worse) by not using the acceleration of effectiveness process to discourage the use of such provisions.
In an action related to the adoption of the policy statement on mandatory arbitration provisions, yesterday the Commission, by a three-to-one vote, adopted an amendment to Rule 431(e) of the SEC’s Rules of Practice, which is the rule addressing the Commission consideration of actions made by the Staff pursuant to delegated authority.
Many routine SEC matters that require Commission action are handled by the Staff pursuant to delegated authority from the Commission. This includes the acceleration of the effectiveness of a registration statement under the Securities Act. The Commission maintains the power to affirm, reverse, modify, set aside or remand for further proceedings, in whole or in part, any action made pursuant to delegated authority, and Rule 431 specifies the process by which the Commission considers any such action, which can be prompted by the filing of a petition for review by a third party or upon the Commission’s own initiative. Rule 431(e) provides for an automatic stay of an action made pursuant to delegated authority upon filing with the Commission of a notice of intention to petition for review, or upon notice to the SEC’s Secretary of the vote of a Commissioner that a matter be reviewed, except in specific circumstances. In the rulemaking action yesterday, the Commission added the acceleration of the effectiveness of a registration statement to the list of circumstances excepted from this automatic stay provision.
In his statement in support of the change, Chairman Atkins notes:
Currently, declaring a registration statement effective is not among the exceptions to a stay. However, stays of an effective registration statement may be extremely disruptive. A company, its underwriters, and other market participants may commence sales of the securities once the registration statement is effective. A stay of effectiveness could fundamentally interrupt the sales process. Investors – selling securities holders as well as purchasers — might be extremely disadvantaged. Market participants could incur costs as a result. A stay could also create uncertainty for issuers and underwriters that have sold securities. Rather than automatically trigger such adverse consequences, the Commission should have the opportunity to carefully weigh the equities involved before taking such a significant step.
Adding declarations of effectiveness of registration statements to the limited list of exceptions to the automatic stay requirement will help to alleoviate some of the aforementioned concerns. In the execution of its mission, the Commission should provide as much regulatory certainty as possible to market participants raising capital. Today’s amendments to rule 431 further that mission.
As with the policy statement on mandatory arbitration provisions, Commissioner Crenshaw opposed this action, noting in her statement:
It would be bad enough if all the Commission did today was issue the mandatory arbitration policy statement. But we simultaneously propose amendments to our Rules of Practice in order to eviscerate the procedural rights of those who might choose to challenge an issuer’s inclusion of mandatory arbitration.
Currently, when either a Commissioner or a third-party requests Commission review of almost any staff action made pursuant to delegated authority, those actions are automatically stayed pending Commission consideration. This consideration is an important backstop to delegated staff action. That all goes away with today’s amendments. From now on, the automatic stay, which provides the mechanism for meaningful Commission review of registration statements before an offering hits the market, vanishes. Accordingly, I also cannot support today’s amendments to the Commission’s Rules of Practice.
I must admit that in three decades as a practicing securities lawyer, including a decade spent inside Corp Fin, I never encountered a situation where a Commissioner or another party sought review of the Staff’s action in declaring a registration statement effective, so I am comfortable in concluding that the Commission’s amendment to Rule 431 of the Rules of Practice will likely not make much difference in our day-to-day practice.
It has been just eight months since Inauguration Day and a change in leadership at the SEC, but quite a lot has been going on during that short time! Here are some highlights:
– Beginning in February 2025, the Corp Fin Staff issued seven statements addressing various aspects of the application of the federal securities laws to crypto assets.
– On February 11, the Staff provided updated guidance regarding the filing of beneficial ownership reports by investors on Schedules 13D and 13G that had a significant impact on engagement during the 2025 proxy season.
– On February 12, the Staff issued Staff Legal Bulletin No. 14M on Rule 14a-8, rescinding previously-issued Staff Legal Bulletin No. 14L and signaling a return to a “case-by-case” approach on environmental and social proposals.
– On March 3, Corp Fin issued updated guidance that enhances the accommodations available to companies for nonpublic review of draft registration statements.
– On March 12, the Staff issued guidance regarding the verification of an investor’s status as an accredited investor when an issuer is relying on Rule 506(c) of Regulation D when conducting a securities offering.
– On March 20, the Staff revised its approach to declaring registration statements effective in the “gap period” between Form 10-K and proxy statement filings.
– On March 27, the SEC announced that it had voted to discontinue its defense of the climate disclosure rules in litigation pending in the Eighth Circuit.
– On June 4, the SEC issued a concept release soliciting public comment on the definition of foreign private issuer.
– On June 12, the SEC withdrew proposed amendments to Rule 14a-8.
– On June 26, the SEC convened a Roundtable on Executive Compensation Disclosure Requirements.
– On September 4, the SEC released its Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions.
– On September 10, the SEC announced the appointment of Jim Moloney to as Director of Corp Fin.
– On September 17, the SEC adopted a policy statement and amendments to its Rules of Practice revisiting the Commission’s policy on mandatory arbitration provisions.
Given all of these SEC developments and our expectations about what is coming from the SEC and its Staff, now is the time to sign up for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” to be held on October 21-22 at The Virgin Hotels in Las Vegas. Be sure to check out our packed agenda and our outstanding lineup of speakers. You can register online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
I have admittedly reached a stage of my life where technology, for all of its many benefits, has become a persistent burden. I am bombarded with requests to update my hundreds of passwords in accordance with ever-increasing complexity standards, implement two-factor authentication, check multiple devices for authentication codes, download numerous authentication apps and avoid phishing emails like the plague. My rational mind recognizes that we live in an extraordinarily active cybersecurity threat environment, and all of these requests are prompted by a genuine desire to protect me from the bad guys. My irrational mind (which is prone to screaming “get off my lawn,” but only to myself) feels under siege as a result of this avalanche of protective measures, and inevitably encourages me to unplug and retreat to somewhere off the grid, where the oppressive cybersecurity infrastructure would leave me alone to whittle sticks and churn butter.
It is against this complicated emotional backdrop that many of us received the news of the SEC’s EDGAR Next initiative at around this time last year. As we note in the July-August 2025 issue of The Corporate Executive:
EDGAR Next replaces the current approach of utilizing EDGAR access codes to file on EDGAR with a more secure, two-factor authentication access security system. EDGAR Next generally limits filing access to persons specifically authorized by the filer and requires everyone that accesses the EDGAR filing system to have individual login credentials that are supplied by the U.S. federal government’s Login.gov service. The enhanced EDGAR Next security facilitates the tracing of every filing to the specific individual who made the filing.
While we knew that this significant change in approach was ultimately good for us, the prospect of migrating filers to the new EDGAR Next platform rightfully seemed daunting, and inspired a sort of Y2K-style panic in some quarters of the filer community. While the SEC gave us a generous year-long transition period, that somehow did not seem like enough time in our collective irrational minds for herding the appropriate cats to accomplish the objective. For a variety of reasons, the transition was not always easy. As Liz noted in this blog from June, a post on the Q&A Forum described the transition as “truly horrendous,” citing persistent system problems, delays and issues dealing with an overwhelmed SEC Staff.
For those of you who may have been off-grid whittling sticks of churning butter for the past year, we reached a major EDGAR Next milestone last Friday, and at least anecdotally it seems that generally the filer community has made the transition without too much drama. Legacy access to the SEC’s EDGAR filing system ended at 10:00 p.m. Eastern Time last Friday, and as of Monday morning this week, the SEC’s EDGAR Next filing platform is the exclusive means to electronically file documents with the SEC. As we noted in our last-minute EDGAR guide in the latest issue of The Corporate Executive:
There is no reason to panic if you have somehow missed the EDGAR Next train so far this year, but now is the time to enroll. The enrollment period for EDGAR Next opened on March 24, 2025, and will remain open until December 19, 2025. During this time, filers can avail themselves of the SEC’s short-form enrollment process that does not require the submission of a power of attorney or a notarized Form ID, and instead just requires the submission of basic contact information and the designation of initial account administrators for the filer’s EDGAR account. The enrollment process does require Staff action, but such action typically occurs promptly following submission of the required information.
It is important to note, however, that those existing filers who have not completed the EDGAR Next transition process by 10 p.m. ET on Friday, September 12, 2025, will no longer have access to the EDGAR system as of 6 a.m. ET on Monday, September 15, 2025. Therefore, to avoid any interruption in a filer’s access to the EDGAR system, it is advisable to complete the enrollment process before the September 12 cut-off date.
Even if a filer misses the September 12 deadline, filers with their current EDGAR access codes could still complete the streamlined enrollment process before December 19 and obtain their EDGAR Next filing credentials in a timely manner to then reestablish their ability to submit filings on EDGAR; however, filers that do not have access to their EDGAR access codes, including the passphrase, will need to follow the long-form Form ID process before making any electronic filings.
In our last-minute guide in The Corporate Executive, we offer some suggestions for what to do now if somehow you missed the EDGAR Next boat as the final December 19 deadline approaches. It you do not have access to all of the practical guidance that we provide in The Corporate Executive, I encourage you to give it a try – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. To subscribe to this essential resource, please email info@ccrcorp.com or call 1.800.737.1271.
Yesterday, the SEC announced four new members to fill vacancies on its Investor Advisory Committee. These new members join the 16 current members of the committee and will serve four-year terms. The announcement notes:
The newest members of the Investor Advisory Committee are:
– C. Rodney Comegys, Global Head of Equity Investment Group at Vanguard
– James R. Copland, Senior Fellow and Director, Legal Policy at Manhattan Institute
– John A. Gulliver, Executive Director, Committee on Capital Markets Regulations and Program on International Financial Systems
– Sergio G. Rodriguera Jr., Co-Founder, Straylight Systems, Inc.
The Investor Advisory Committee was established pursuant to Section 39 of the Securities Exchange Act of 1934, and it “advises the Commission on regulatory priorities and initiatives to protect investors and promote the integrity of the U.S. securities markets.”
One of the many aspects that I am looking forward to at our upcoming “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” to be held on October 21-22 at The Virgin Hotels in Las Vegas is that we will be celebrating 50 years of practical guidance from The Corporate Counsel and all of the related publications and websites in the CCRcorp universe.
On Monday, October 20 from 4:00 to 7:00 pm, we will host a casual evening reception for 2025 PDEC attendees, sponsors and exhibitors to network, collect credentials, and enjoy CCRcorp’s 50th Anniversary. At the reception, we plan to hoist our glasses for a celebratory toast to 50 years of corporate counsel resources!
If you are interested in the history of our publications and websites, check out this Deep Dive with Dave podcast from 2022, where my guest was Jesse Brill, who is the Founder & Former President of EP Executive Press (now known as CCRcorp). You can also check out this Special Supplement to the March-April 2010 issue of The Corporate Counsel, which marked the 35th Anniversary of The Corporate Counsel by including Jesse’s memories and highlights of the development of our community!
To be a part of our October Conferences (either in-person or online), you can register online or reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271.
I do not believe that public company reporting matters often find their way into President Trump’s posts on the Truth Social platform, but yesterday the President posted a message indicating that “Companies and Corporations” should no longer “Report” on a quarterly basis, but rather report on a six-month basis. As this Reuters article notes, President Trump called for an end to quarterly reporting of financial results by U.S. public companies (subject to SEC approval), noting “[t]his will save money, and allow managers to focus on properly running their companies.” The post goes on to note: “Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis??? Not good!!!”
If this post somehow feels to you like “déjà vu all over again,” your hunch is correct, because back in August 2018, President Trump (during his first term) announced via Twitter that he had asked the SEC to study the possibility of moving from quarterly to semi-annual reporting for public companies. As we noted in this blog, in November 2018 the SEC included an agenda item in the Sunshine Act Notice for a Commission open meeting that contemplated a request for comment on the nature and content of quarterly reports and earnings releases. The SEC ended up being closed on the day of the open meeting due to a national day of mourning for George H.W. Bush, but the Commission later issued a 31-page request for comment in December 2018. The request for comment was broader than just addressing a change in frequency of periodic reports, raising questions about the relationship between Form 10-Q and earnings releases in addition to questions about changing the frequency of periodic reports. In July 2019, the SEC held a roundtable on short-term/long-term management of public companies, the periodic reporting system and regulatory requirements. The SEC’s efforts did not result in any rule proposal during the first Trump administration, but the topic of the frequency of periodic reporting remained on the SEC’s Reg Flex Agenda even after the end of the first Trump Administration until, as this Thomson Reuters article notes, the rulemaking plans were quietly dropped in the June 2021 version of the SEC’s Reg Flex Agenda.
The SEC’s Spring 2025 Reg Flex Agenda that John blogged about earlier this month does not include a rulemaking line item specifically addressing changes to the frequency of periodic reports, but it does list a proposed rulemaking titled “Rationalization of Disclosure Practices,” which is described as follows: “[t]he Division is considering recommending that the Commission propose rule amendments to rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to that information.” It certainly seems that potential changes to the frequency of periodic reporting would fit within that rulemaking framework. The Staff and the Commission already have a strong base of comments and other information to work with as they prepare a proposal, given the 2018 request for comment and the 2019 roundtable. Nonetheless, any changes may ultimately take a while to implement, because the agency will have to vote on a proposal, solicit comments on that proposal, and ultimately consider final rule amendments, all against a backdrop of opposition that will inevitably come from the investor community. With all that said, I would advise to start collecting those Form 10-Qs now, because this time around they may become a rare historical relic!
The topic of eliminating quarterly reporting had actually resurfaced again earlier this month, when the Long-Term Stock Exchange announced plans to petition the SEC to allow public companies to report earnings semi-annually instead of quarterly. The announcement notes:
The petition potentially affects thousands of publicly traded companies currently bound by quarterly reporting requirements. While the Securities Exchange Act of 1934 provided the legal framework for periodic reporting, the SEC initially required only semi-annual reports starting in 1955 before moving to quarterly reporting in 1970.
LTSE Founder and best-selling author Eric Ries said, “This has been a longtime dream of the business community and represents the culmination of efforts by many long-term investors, companies, and policymakers over decades. The time has come to create a capital markets system that rewards patient capital and long-term thinking.”
The proposal addresses longstanding concerns about quarterly reporting’s impact on corporate decision-making. Business and political leaders, including the Trump administration (in 2018) and the U.S. Chamber of Commerce, have suggested that companies should report every six months instead of quarterly. Extensive academic research has documented the negative effects of quarterly reporting pressure on long-term value creation.
For long-term investors, the change could lead to more strategic company insights while reducing short-term volatility and better alignment of corporate management to investor interests. Under the proposed guidelines, all companies would retain the option to release quarterly earnings but would not be required to do so.
This focus on long-term value creation directly addresses systemic market pressures that currently favor short-term thinking.
“As CEOs, we absolutely have to deliver on short-term metrics; both our customers and investors depend on it,” said Maliz Beams, CEO of LTSE. “But the key is including short-term targets as deliberate mile markers on the path to long-term value creation. This petition takes a critical step toward enabling genuinely long-term companies to focus on sustainable growth rather than quarterly noise.”
As of this morning, no petition from the Long-Term Stock Exchange appeared on the SEC’s website. It may no longer be necessary at this point, because I suspect that Truth Social posts are more effective at motivating SEC action than rulemaking petitions.
Given the very active regulatory agenda at the SEC, we have added a session to our upcoming “Proxy Disclosure Conference” featuring Sebastian Gomez Abero, who serves as Corp Fin’s Acting Deputy Director of Legal and Regulatory Policy & Associate Director of the Disclosure Review Program. We are very fortunate to have Sebastian join us for this session, during which Sebastian and I will discuss all of the latest Corp Fin developments that you need to know about as the SEC’s regulatory reforms gear up in the coming months.
Now is the time to sign up for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” to be held on October 21-22 at The Virgin Hotels in Las Vegas. In addition to my conversation with Sebastian Gomez Abero, we have an outstanding agenda featuring other exciting panels and a great group of speakers who will provide you with the practical guidance that you need in this time of significant changes at the SEC and beyond. If you are not able to travel to Las Vegas, we have a virtual option available for the event. You can register online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
Last week, the SEC announced that its Crypto Task Force will host a public roundtable on financial surveillance and privacy on Friday, October 17 from 1 pm to 4 pm Eastern time at the SEC’s headquarters. The announcement notes:
Following the Spring Sprint Toward Crypto Clarity series of roundtables, the President’s Executive Order on Digital Assets, and the President’s Working Group on Digital Assets report, Commissioner Peirce directed the Crypto Task Force to take additional steps to promote United States leadership in digital assets and financial technology while protecting economic liberty. The Financial Surveillance and Privacy roundtable will bring together panelists who are at the forefront of developing technologies designed to protect individual privacy. It will also facilitate an in-depth discussion on policy matters related to financial surveillance.
“Technology that helps Americans protect their privacy is critically important as it enables people to choose when and with whom to share sensitive data about themselves so they can be protected from bad actors,” said Commissioner Hester M. Peirce. “Understanding recent developments in privacy-protecting tools will assist the SEC and other financial regulators as we work on policy solutions in the crypto space.”
The SEC notes that the roundtable will be open to the public, and registration is required for in-person attendance only. The roundtable will be streamed live on SEC.gov, and a recording will be posted at a later date. The agenda and roundtable speakers will be posted on the Crypto Task Force webpage.
