Yesterday, the SEC announced the issuance of an Interpretive Release clarifying the application of the securities laws to digital assets. The CFTC joined in the issuance of the Release. Here’s the 68-page Release and here’s the three-page fact sheet.
The SEC’s press release says that the interpretation provides a coherent token taxonomy for a wide range of digital assets, addresses how digital assets that aren’t securities may be deemed to become subject to an investment contract under Howey (and when that status may terminate), and clarifies how the securities laws apply to “airdrops, protocol mining, protocol staking, and the wrapping of a non-security crypto asset.”
The Fact Sheet gets into some of the specifics. Here’s what it has to say about what digital assets are, and are not, securities under the interpretation:
– Digital Commodities – NOT Securities – Crypto assets that are intrinsically linked to and derive their value from the programmatic operation of a crypto system that is “functional,” as well as supply and demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others.
– Digital Collectibles – NOT Securities – Crypto assets that are designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things.
– Digital Tools – NOT Securities – Crypto assets that perform a practical function, such as a membership, ticket, credential, title instrument, or identity badge.
– Stablecoins – GENIUS Act Stablecoins NOT Securities – Defined in the GENIUS Act as “payment stablecoin issued by a permitted payment stablecoin issuer.”
– Digital Securities (or “tokenized securities”) – Securities – Financial instruments enumerated in the definition of “security” that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.
The interpretation clarifies that when a non-security digital asset is sold with representations of managerial efforts that create a reasonable expectation of profit, it becomes an investment contract under the Howey test. It also discusses the kinds of representations that can give rise to this characterization and when the investment contract may be deemed to end because of the fulfillment or failure of those representations.
The interpretation also says that “protocol mining,” “protocol staking,” and “wrapping” of non-security crypto assets don’t involve the offer and sale of a security, and that dissemination of digital assets via “airdrops” don’t involve an “investment of money” under Howey.
Over on the Section16.net Blog, Alan Dye addressed some recent guidance offering some relief from the today’s deadline for compliance by FPI insiders with the new Section 16(a) reporting obligations imposed by the Holding Foreign Insiders Accountable Act. Here’s what he had to say about a recent no-action letter extending the reporting deadline for certain FPI insiders impacted by the war with Iran:
The staff of the Division of Corporation Finance has issued a no-action letter which effectively delays the date by which officers and directors of a foreign private issuer must file Section 16(a) reports under the Holding Foreign Insiders Accountable Act (HFIAA) if the FPI is headquartered or organized in a jurisdiction in the geographical region directly affected by the military conflict in Iran and can represent that its ability to comply with the HFIAA’s March 18 deadline has been materially affected by the direct effects of the conflict. FPIs may rely on the no-action letter, which was issued to Israel-based Tower Semiconductor Ltd. (TSEM), until April 20, 2026, by which time insiders must file their Forms 3.
An FPI assessing whether the military conflict has directly affected its ability to comply with Section 16(a) might compare its circumstances to those TSEM described in its no-action request:
…temporary wartime restrictions on non-essential workplace activities remain ongoing and TSEM employees continue to be subject to shelter-in-place orders from time to time. In addition, several parts of Israel are experiencing intermittent loss of power, internet and telecommunications services, as Israel continues to endure severe disruptions to communications and infrastructure…. [T]hese war conditions have meaningfully impaired TSEM’s ability to collect, verify and assist its directors and officers in reporting the security ownership information required under Section 16(a). In addition, these restrictions impact access to company records and legal and compliance services, including notary services, that are necessary to complete the reports.
Alan also addressed some new FAQs providing guidance on transition issues under the Holding Foreign Insiders Accountable:
The staff of the SEC’s Division of Corporation Finance has issued two more FAQs addressing transition issues related to the Holding Foreign Insiders Accountable Act (HFIAA). The FAQs provide conditional “no-action” relief to insiders of both foreign private issuers (FPIs) and domestic issuers for late Section 16 filings resulting from failure to obtain EDGAR codes during the period between the HFIAA’s enactment (December 18, 2025) and its effective date (March 18, 2026). The FAQs are an acknowledgment that the processing of Forms ID, which had already been slowed by the transaction to EDGAR Next, was significantly impacted by “the unusually large number” of Forms ID submitted as a result of the HFIAA.
The first of the two new FAQs applies to officers and directors of FPI’s and provides that the staff will not recommend enforcement action for a late report as long as the insider:
Submitted a completed Form ID and the related required documents before March 18, 2026,
Did not receive EDGAR access codes by March 18, 2026, and
Files the required report as soon as possible after receiving EDGAR access codes (and no later than April 1, 2026).
The second FAQ provides no-action relief to insiders of domestic issuers as long as the insider:
Submitted a completed Form ID before the filing deadline for the Section 16 report and the deadline for filing the report was between December 18, 2025, and March 18, 2026,
Did not receive EDGAR access codes by the filing deadline, and
Files the required report as soon as possible after receiving EDGAR access codes (and no later than April 1, 2026).
Unfortunately, the staff did not offer relief from S-K Item 405, which requires domestic issuers (but not FPIs) to disclose their insiders’ reporting delinquencies. The staff did say that issuers can include in their Item 405 disclosure a statement that the insider relied on the staff’s no-action position.
In addition to receiving timely Section 16 updates via Alan’s members-only blog, Section16.net members have access to an ongoing Q&A Forum with Alan Dye and online versions of Romeo & Dye’s Section 16 Treatise and Reporting Guide and Alan Dye’s Section 16 Forms and Filings Handbook. Website membership also gives you access to Alan Dye’s annual webcast on Section 16 developments. Not a member? We can fix that. Contact us today at info@ccrcorp.com or call 800.737.1271 to sign up for a no-risk trial.
I don’t think they’ve made an official announcement, but if you visit the CDI page on the SEC’s website, you’ll discover that Corp Fin’s changed “Compliance and Disclosure Interpretations” to “Corporation Finance Interpretations.” Thanks, gang. That’s only gonna change about 12 quadrillion references in our Handbooks. Don’t you worry though – our members can count on our team of 100 Handbook editors (oddly, they’re all named Meaghan Nelson) to get right on the updating process.
As I was scratching my head trying to figure out why they might have done this, the thought, “what’s in a name?” popped into my head, and that naturally led me to remember one of Cleveland’s favorite sons, the late Harvey Pekar, and his “The Harvey Pekar Name Story.” Here’s Paul Giamatti’s riff on that story from the film, American Splendor.
Yesterday, the SEC announced that, after just seven months on the job, Director of Enforcement Judge Margaret Ryan has resigned from her position. Here’s an excerpt from the SEC’s press release:
“Our goal has been to the lead the Division of Enforcement back to Congress’ original intent: enforcing the federal securities laws, particularly as they relate to fraud and manipulation,” said SEC Chairman Paul S. Atkins. “I am pleased to report significant progress toward this objective.”
Chairman Atkins continued, “Judge Ryan has served with honor and distinction since joining the Commission last year, hallmarks that have served her incredibly well throughout her distinguished career and will continue to do so. Under her leadership, the division reprioritized enforcing the nation’s securities laws, with a focus on pursuing fraud. I thank Meg for her many contributions and wish her very well.”
“I extend my thanks to Chairman Atkins, the Commission, and the staff of the Enforcement Division for the opportunity to continue my public service in a different role,” said Judge Ryan. “As I recently said, I did not seek the role of Director of the SEC’s Division of Enforcement. Rather, this role found me. And for that, I am grateful. I am confident that the foundation I helped to shape – working together with Chairman Atkins – will continue to serve investors and the markets well.”
The press release says that Principal Deputy Director Sam Waldon will serve as Acting Director of the Division of Enforcement.
The SEC didn’t announce a reason for Judge Ryan’s departure, but the whole situation is very odd. Given her background as a military appellate judge and academic, Judge Ryan seemed an unlikely choice for the position in the first place, and she kept a very low public profile throughout her tenure. In fact, she made her first public remarks as Enforcement Director only last month. Now, she’s gone. Your guess is as good as mine as to why.
Rule 15c2‑11 generally prohibits brokers from publishing quotations for OTC securities unless specified, current information about the issuer is publicly available. Yesterday, the SEC announced proposed amendments that would limit the Rule’s application to equity securities only. Here’s the 76-page Proposing Release and here’s the one-page Fact Sheet. This excerpt from the Fact Sheet explains what this proposal is about:
In 2020, Rule 15c2-11 was amended to require that specified information be current and publicly available for brokers and dealers to publish a quotation for, or maintain a continuous quoted market in, a security in a quotation medium. Following the adoption of the 2020 amendments to Rule 15c2-11, numerous industry participants stated that they never understood Rule 15c2-11 to apply to non-equity securities and expressed concerns with the potential burdens of applying the amended rule to fixed-income securities.
After industry participants shared their concerns regarding Rule 15c2-11’s application, the Commission provided exemptive relief and the staff issued a no-action letter addressing the vast majority of fixed-income securities. Accordingly, the Commission is proposing amendments to Rule 15c2-11 to replace the term “security” with “equity security,” as defined in Exchange Act Rule 3a11-1.
Comments on the proposal are due 60 days after publication in the federal register.
In other rulemaking news (and at the risk of “burying the lede”), the WSJ is reporting that the SEC may issue its long-anticipated proposal to eliminate mandatory quarterly reporting as soon as next month. Stay tuned.
Be sure to tune in at 2 pm Eastern tomorrow for the CompensationStandards.com webcast – “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition” – to hear Morgan Lewis’s Timothy Durbin, Alpine Rewards’ Lauren Mullen, Cooley’s Ali Murata, Pearl Meyer’s Aalap Shah, and Latham’s Maj Vaseghi share practical guidance on key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life. Our panelists will also address questions submitted by members in advance (the deadline was March 13th).
Topics include:
– Assessing Existing Arrangements and IPO Impact
– Designing and Adopting New Equity Plans and ESPPs; Share Pool Strategy
– Managing “Cheap Stock” Issues; 409A Valuations
– Designing and Communicating Special IPO Awards
– Negotiating New Employment Agreements; Change-in-Control and Severance Terms
– Navigating Lockups, Blackout Periods and Post-IPO Selling Mechanics
– Establishing the Post-IPO Executive Compensation Program
– Building Compensation-Related Policies, Governance and Controls
– Communicating with Executives and Employees Through the Transition
– Transitioning Director Compensation (time permitting)
– Q&A: Answering Questions Submitted in Advance (15 minutes)
Members of CompensationStandards.com can attend this critical webcast (and access the replay and transcript) at no charge. Non-members can separately purchase webcast access. If you’re not yet a member, you can sign up for the webcast or a CompensationStandards.com membership by contacting our team at info@ccrcorp.com or at 800-737-1271. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this one-hour webcast. You must submit your state and license number prior to or during the live program. Attendees must participate in the live webcast and fully complete all the CLE credit survey links during the program. You will receive a CLE certificate from our CLE provider when your state issues approval, typically within 30 days of the webcast. All credits are pending state approval.
This program will also be eligible for on-demand CLE credit when the archive is posted, typically within 48 hours of the original air date. Instructions on how to qualify for on-demand CLE credit will be posted on the archive page.
Whenever I watch international sporting events, I’m always struck by just how many of the world’s countries have national anthems that you don’t have to be Whitney Houston to sing properly. Ireland is one of those countries – and I’d place its unofficial anthem, “Ireland’s Call,” among the very best. So, in honor of St. Patrick’s Day, here’s the Irish rugby team and thousands of proud Irish men & women belting it out:
I have several professional Irishmen in my family (my last name’s Jenkins, but my other 3 grandparents last names are Kennedy, Keefe and Gallagher), and I know I’d hear from them if I didn’t point out that Ireland’s Call isn’t the Republic of Ireland’s official anthem, and that it’s used at rugby matches for reasons that reflect the Emerald Isle’s sad & divided history.
Still, it’s a terrific song and one that both North & South are increasingly proud to sing together. I think that’s something we can all lift a glass to on this St. Patrick’s Day.
Happy St. Patrick’s Day to all of you actual or honorary sons & daughters of Erin!
The SEC’s decision to withdraw from its role as Rule 14a-8 referee has generated bipartisan howls from leading participants in the shareholder proposal industry about “silencing shareholder voices.” However, early returns suggest that companies are taking a cautious approach about telling their shareholders to “shut up.” Check out this excerpt from a recent Bryan Cave blog discussing ISS’s Proxy Season Preview (which Liz recently blogged about over on our “Proxy Season Blog”):
As discussed in our November 19, 2025 post, in most cases, companies can now decide themselves whether to exclude shareholder proposals – subject only to documenting a reasonable basis for exclusion.
However, according to ISS, a smaller percentage of companies (22%) are omitting proposals so far this year compared to 2025 (28%). This suggests that companies “may be reassessing the strategic value of omissions and the risks associated with it.”
For example, as noted in our post, companies may face litigation risks from proponents. Last month, three lawsuits were filed, with two of the companies quickly settling and agreeing to include the proposals. In one case, the complaint alleged inadequate disclosure in the company’s notice filing with the SEC.
Glass Lewis noticed the same thing in its review of how companies are handling shareholder proposals so far:
While the SEC’s change can be interpreted as giving boards free rein to set their meeting agendas, some companies appear to be taking a more cautious approach. A number of companies that filed exclusion notices prior to the November 17 announcement (Analog Devices, Apple, Costco, Starbucks and Tyson Foods) did not receive any response from the SEC, did not withdraw or refile their notices, and ultimately allowed these shareholder proposals go to a vote.
Like ISS, Glass Lewis also highlights the changing risk environment that companies face in the absence of the no-action process as likely contributing to this cautious approach. Participants in the shareholder proposal industry have proven willing to litigate, and institutional investors and proxy advisors have indicated that there will be consequences to boards that exclude proposals without solid justification.
Disclosure of executive security arrangements is a topic that’s received a lot of attention over the past year, including from SEC Chairman Paul Atkins, who suggested that the SEC’s continued treatment of executive security arrangements as a perk doesn’t reflect modern business realities. While Chairman Atkins’ comments may give companies reason to hope that perk disclosure of these arrangements may soon end, for this year at least, the old rules continue to apply.
So, with all the attention being paid to executive security, what should companies disclose about these arrangements in their proxy statements? Over on Real Transparent Disclosure, Broc recently provided some answers to that question. Here’s an excerpt:
– Rapid Growth in Executive Security Spending: Personal security services (home security, cybersecurity, security personnel, travel security) are increasing in prevalence and cost. Disclosure rates show 64% of the S&P 100, 35% of the S&P 500 – and 10% of the Russell 3000 provide executive security services, with expectations of continued growth.
– ISS’s Evolving Position on Security Perks: While ISS historically cited security expenses critically in negative Say-on-Pay recommendations, it recently relaxed its stance. ISS now indicates it is unlikely to raise significant concerns if companies provide robust proxy disclosure explaining the rationale and assessment process behind security programs.
– Disclosure Expectations from Proxy Advisors: Adequate disclosure should describe:
-The nature of the security program
– The benefit to stockholders
– The internal or third-party security assessment
– The arm’s-length decision-making process
Broc also says that companies expecting a significant increase in executive security expenditures need to involve the compensation committee and the relevant executives early on in order to ensure a robust assessment and approval process. These companies should also provide clear disclosure of that process in the CD&A in order to mitigate any criticism they might receive from proxy advisors.
Check out our latest “Timely Takes” Podcast featuring Cleary’s J.T. Ho & his monthly update on securities & governance developments. In this installment, J.T. reviews:
– New CDIs – Notices of Exempt Solicitations
– New CDIs – Broker Search Timing
– New CDIs – Spinoff Exec Comp Disclosure
– Rule 14a-8 Litigation
– Updates on Fallout from DEI Executive Order
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
