As Dave recently predicted, it was only a matter of time before the SEC entered the multi-front battle against major proxy advisors. Sure enough, the SEC announced late last week that it is suing ISS in federal court to compel compliance with an outstanding administrative subpoena. The SEC’s announcement and its Memorandum of Law reveal that Staff from the SEC’s Division of Examinations initiated an examination of ISS back in March. (ISS is a registered investment adviser, regulated by the SEC and subject to SEC oversight and examination.)
Among other things, the SEC examination team requested that ISS produce data relating to proxy recommendations and votes – which the SEC’s Memorandum characterizes as the core of ISS’s business — including information like the names of clients who received proxy recommendations and information about votes cast on their behalf, and requested that the information, which ISS maintains in its ProxyExchange system, be produced in Excel format. The Memorandum explains:
The Division of Examinations routinely obtains client information during examinations to
ensure that registrants are complying with the federal securities laws, including to determine
whether investment advisers are acting in the best interests of specific clients. This includes
reviewing recommendations to clients, sources of revenues, expenses, client agreements and
disclosures, and other information relevant to assessing conflicts of interest and potential breaches
of fiduciary duties. Likewise, the Division of Examinations obtains and reviews client profiles and
communications to evaluate whether investment advisers are acting with care and in accordance
with instructions. A proxy advisor could violate its obligations under the securities laws by, for
example, providing voter recommendations that advance its own interests over those of its clients or
failing to vote client shares in accordance with the client’s preferences.
As the SEC tells it, ISS produced a data sample that included info for a limited number of clients. After reviewing it, the SEC said it wanted that info for all clients from July 1, 2024 to February 28, 2026. ISS ignored the request and the nine follow-ups that ensued. So, the Enforcement Division got involved – serving an investigative subpoena in July that ISS also allegedly ignored. The SEC says its subpoena seeks documents “highly relevant” to its investigation of the proxy advisor’s compliance with federal securities laws, reiterating these open questions:
– Does ISS’s advice satisfy its fiduciary duties to its clients?
– Is ISS properly disclosing conflicts of interest to clients?
– Is ISS correctly and faithfully executing its clients’ instructions in voting?
– Is ISS maintaining appropriate and complete books and records?
The SEC’s Memorandum also gives a little more color about why ISS is pushing back on portions of the data request:
The first objection, ISS explained, related to the “high level of sensitivity associated with the requested information,” including ISS’s “voting recommendations under ISS’[s] and clients’ custom policies” and “data on how ISS’[s] clients have voted their shares.” Id. ISS stated that its clients “share their confidential voting strategies, priorities, and voting decisions with ISS with an expectation of confidentiality, just as American voters cast their ballots in the privacy of voting booths. . . .” Id. at 2. ISS further claimed that its clients may suffer competitive harm from “disclosure of the data at issue.” Id.
ISS’s second objection was “based on the First Amendment rights of ISS and its clients.” Id. ISS cited the President’s December 11, 2025 Executive Order 14366 concerning proxy advisors4 and expressed “concern[s] that the Subpoena, and Request 3 in particular, poses an unlawful effort to subject ISS to retaliatory actions for having engaged in protected speech.” Id. at 3.
Finally, ISS argued disclosure of ProxyExchange data might burden ISS’s and its clients’ freedom of association because clients could “choose not to associate with ISS” if their voting data were disclosed to the Commission. Id. at 4. Instead, ISS reiterated its proposal to retain an expert to completely “anonymize” the data, but ISS again provided no timeframe for completing that task.
The SEC disagrees with those objections, for reasons it explains in detail in its application to the court. At this stage, the SEC is just seeking a court order to compel ISS to comply with the administrative subpoena. The announcement notes that continuing its fact-finding investigation and, to date, has not concluded that any individual or entity violated the federal securities laws. And so, another chapter in the saga of proxy advisor is underway. . .
I blogged earlier this week about topics in the SEC’s Reg E-Delivery proposal that companies may want to consider commenting on before the designated comment period expires on September 21st. One concern that I’ve heard bubbling up from conversations with some community members is a perception that the proposal could actually increase companies’ printing and delivery expenses by eliminating the “Notice of Internet Availability” as a permissible delivery method for proxy statements. Please participate in this anonymous poll to share your thoughts:
If you want to provide input to the SEC, now is the time. We’re posting memos in our “E-Delivery” Practice Area that summarize the proposal and the requirements for electing to use electronic delivery as your default delivery method. Consider reaching out to your outside counsel if you need to get up to speed on how the proposal would apply to your specific company and the comment letters that are underway – you could participate in a comment letter if you’re a member of a trade organization that’s submitting one, or through your counsel.
Yesterday the PCAOB announced it had adopted amendments to certain provisions of QC 1000, A Firm’s System of Quality Control, and related amendments to PCAOB forms and the QC reporting rule. You might recall – though I won’t fault you if you don’t – that the PCAOB had convened an open meeting back in June to discuss the amendments. As Dave noted at the time:
QC 1000 was approved by the SEC back in September 2024, and the effective date of the new standard was postponed last August. At the time, Reuters had reported that SEC Chairman Paul Atkins had pushed for a delay, due to feedback from audit firms. Earlier this year, the Financial Times reported that new PCAOB Chairman Jim Logothetis had indicated that he planned to seek narrow changes to the new standard.
The amendments remain subject to SEC approval. However, the amendments do not change the effective date of QC 1000, which is December 15, 2026. If approved by the SEC, the amendments to QC 1000 and to the related PCAOB rule and forms will become effective on December 15, 2026. The PCAOB summarized what the amendments will do if approved:
– Rescind the “design-only” requirement so that QC 1000 imposes requirements only on firms that are required to comply with applicable professional and legal requirements with respect to any “engagement”;
– Provide increased flexibility in filling certain specified roles in the QC system by permitting roles to be assigned to non-firm personnel and divided among multiple individuals;
– Rescind the requirement to have an External QC Function;
– Narrow and simplify communication requirements relating to metrics that the firm communicates to external parties about its audit practice, firm personnel, or engagements;
– With respect to identified engagement deficiencies, require evaluation of whether similar engagement deficiencies exist on other engagements only if the identified deficiency resulted or could result in (i) a failure to obtain sufficient appropriate evidence to support the conclusion reached on an engagement or (ii) an inappropriate overall conclusion on the subject matter of an engagement;
– Revise the definition of QC deficiency to make clear that, when firms have implemented more than one quality response to address the same quality risk, they can take those other quality responses (e.g., compensating responses) into account when determining whether a QC deficiency exists;
– Allow firms to select the date as of which they annually evaluate the effectiveness of their QC system, rather than requiring firms to evaluate as of September 30;
– Revise the QC system evaluation conclusions to align more closely with the conclusions in other quality management standards, while retaining a structured process, including specified factors for consideration, to guide the evaluation; and
– Simplify the requirements for retention of QC system documentation and abbreviate the retention period from seven to five years.
While not everyone reading this blog works on securitizations, the announcement says that the accommodations are intended to facilitate capital formation without diminishing investor protection. That ties back to the Commission’s broader goal to modernize the path to public markets and, in my opinion, shows that the Staff is continuing to look under the couch cushions for incremental improvements at the same time the Commission is considering bigger reforms. Here’s an excerpt from the announcement:
We will now review draft initial registration statements, and any revisions thereto, submitted under the Securities Act on either Form SF-1 or Form SF-3 on a nonpublic basis so long as the ABS Issuer confirms in a cover letter to the nonpublic draft submission that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to any road show or, in the absence of a road show, at least 15 days prior to the requested effective date of the registration statement.
We will continue to publicly release staff comment letters and responses to those letters on EDGAR no earlier than 20 business days following the effective date of a registration statement.
This review is limited to the following registration statements (“Initial Registrations”):
1. The initial registration statement of a depositor that has not previously filed a Securities Act registration statement on either Form SF-1 or Form SF-3.
2. A new registration statement on Form SF-3 filed by a depositor who, at the time of filing the draft registration statement, does not have an effective registration statement.
3. A new registration statement on Form SF-1 or Form SF-3 filed by a depositor registering an offering of ABS in an asset class for which it does not currently have an effective Securities Act registration statement.
The announcement says the Staff will monitor practices under the expanded processing procedures and may make modifications to limit or terminate these procedures. We will post memos on this topic in our “Asset-Backed Securities” Practice Area!
As we noted in early-summer blogs about this year’s reincorporation votes – in particular, to Texas, whether from Delaware or elsewhere – investors seem to be taking a case-by-case approach. Now, institutional investor voting disclosures are beginning to give more color on large asset managers’ voting decisions. This WSJ op-ed from a Research Director at UT-Austin shares:
On Aug. 28, BlackRock’s voting disclosures showed it backed almost every public company seeking to reincorporate in Texas. From April 1 to June 30, the peak season for shareholder votes, 12 publicly traded companies voted on plans to reincorporate in Texas, according to Southern Methodist University’s Shane Goodwin, whose tracker follows these moves. BlackRock supported all but one.
The op-ed says that BlackRock even backed proposals that the broader shareholder base rejected – which may be surprising, especially if you are comparing the activity to 2020 proclamations from Larry Fink, as the op-ed does. But even in 2024 and 2025, institutional investors weren’t providing across-the-board support for companies that proposed reincorporating, according to this Cooley memo. That said, the prior voting data was more keyed to Nevada being on the ballot.
In the year 2026, Texas has made strides. Let’s not forget that BlackRock holds a stake in the Texas Stock Exchange and, as Axios put it last year, the asset manager has been having a “Texas Revival.”
According to this Bloomberg Law article, the recent N-PX filings confirm that other asset managers have also supported reincorporation proposals:
Investment stewardship teams at BlackRock Inc. and State Street Corp., as well as one of the largest passive funds at Vanguard Group Inc., voted in favor of [a large energy company] and [a large technology company] reincorporating to Texas.
The voting records illuminate some of the largest institutional investors’ attitudes toward the increasing number of company bids to leave their longtime legal domiciles — typically Delaware — for the Lone Star State. Texas has ramped up efforts to bring companies under its legal jurisdiction but caught flak from shareholder proponents for the restrictions it allows companies to set on certain lawsuits and investor proposals.
The asset managers’ votes broke with recommendations from the world’s largest proxy advisory, Institutional Shareholder Services Inc.
All that said, these reports are still relatively early. There will surely be more parsing of the numbers to come – as well as views on whether any data is pronounced enough to be a “trend” and what this all could mean for other companies’ incorporation decisions.
Here’s something that John blogged last week on DealLawyers.com: Lewis Brisbois’s Francis Pileggi and Aimee Czachorowski recently authored a Bloomberg Law article highlighting some of the significant practical advantages that Delaware offers its corporations compared with its leading competitors. The article focuses on business filings, and while it notes that Texas has recently announced a “Texas Express” service for expedited filings, this excerpt explains that what The Lone Star State offers still doesn’t compare to Delaware’s expedited services:
While this announcement is an improvement for Texas entities, the Delaware Division of Corporations provides a superior level of speed, responsiveness, efficiency, and cost.
For example, it doesn’t appear that Texas offers the one-hour service that Delaware offers. In Delaware, one can confirm the formation of an entity or receive confirmation of a filing within a matter of hours. The Delaware Division of Corporations will process the request within the requested time (such as one hour) and a filer can request a confirmation email.
Delaware also offers more options for expedited filings, with the most expedited services offered by Delaware being unavailable in Texas. For the two services — same-day and next-day — which are also offered in Texas, Delaware still proves to be less expensive, and easier to actually file.
The Delaware Division of Corporations provides several options to allow entities to request expedited service both for corporate filings or for uniform commercial code filings for a fee in addition to the normal filing fee.
While Delaware offers one-hour service, which can be requested for $1,000, it appears that the same level of expedited service is unavailable in Texas. Delaware also provides two-hour service for an additional fee of $500; Texas doesn’t offer two-hour service. Texas also announced that it will charge an additional fee for same day-service and next-day service, which Delaware already provides.
While these “back office” issues don’t get much attention from the media or others engaged in the DExit debate, for transactional lawyers and the companies they represent, the Delaware Secretary of State’s office to provide expedited services for a wide array of filings is incredibly important, and states that are serious about getting into the game need to be able to offer filing services that are on a par with those offered by Delaware.
Liz here again: Speaking of Secretary of State services, hat tip to Keith Paul Bishop and his Substack newsletter for the reminder that the Nevada Secretary of State is transitioning business filings to a new website. As part of the transition, there is a planned outage beginning today at 5pm – lasting until 5am Monday, September 14th. During this time, you’ll need to submit filings in an old-fashioned way: by facsimile transmission, e-mail, mail or walk-in. Nevada is also updating its forms – find more information about those on the “ORION Portal“!
On Friday, the Corp Fin Staff published four new “Securities Act Forms” CFIs to clarify the availability and mechanics of incorporation by reference on Form S-1. Here they are:
Question: A company was not eligible to incorporate by reference when it filed a registration statement on Form S-1 and did not utilize historical or forward incorporation by reference. Can the company subsequently utilize incorporation by reference in its next pre- or post-effective amendment if, at the time it files the amendment, it meets all conditions for use of incorporation by reference?
Answer: Yes. The staff believes that a registrant that becomes eligible to use historical or forward incorporation by reference may do so at any time by filing a pre- or post-effective amendment, as applicable, by analogy to Securities Act Rule 401(c) which permits use of a shorter form registration statement at the time of any amendment to a registration statement. The pre- or post-effective amendment to add incorporation by reference must include the information required by Item 12 of Form S-1. [Sept. 4, 2026]
Question: If a smaller reporting company complies with Item 12(b) of Form S-1 by indicating that it has elected to forward incorporate on Form S-1, must it meet all of the eligibility requirements and conditions to using incorporation by reference set forth in General Instruction VII of Form S-1 in order for the documents subsequently filed by the registrant to be incorporated into the registration statement?
Question: If a company that is eligible to forward incorporate by reference on Form S-1 has elected to forward incorporate information filed after the effective date of the registration statement under Item 12(b), must it also incorporate by reference into the prospectus contained in the registration statement the documents required to be specifically incorporated by Items 12(a)(1) and 12(a)(2) of Form S-1?
Question: A prospectus in a Form S-1 registration statement, unlike Form S-3, does not require incorporation of any other document by reference. If a registrant eligible to forward incorporate by reference elects to do so, does forward incorporation of subsequent Exchange Act filings always provide all of the itemized disclosure required in a prospectus in a Form S-1?
Answer: No. In order to determine whether a registrant has a complete prospectus at the time of any sale, a registrant that has elected to forward incorporate by reference must consider whether any item of Form S-1 requires disclosure not included in any Exchange Act filings subsequently filed by the registrant that the Form S-1 has incorporated by reference. To the extent such registrant needs to add such disclosure to its prospectus, it will need to evaluate whether to file a post-effective amendment to the registration statement or prospectus supplement. However, if the information required by Form S-1 appears in incorporated documents under headings that differ from the Form S-1 item headings, incorporation by reference still satisfies the form’s requirements. [Sept. 4, 2026]
This may not be a groundbreaking rulemaking proposal like some in our community were hoping for before Labor Day, but it’s still helpful clarification for companies not eligible to use Form S-3. Meanwhile, the Commission’s current proposal on registered offering reform could make it easier for many (but not all) companies to use the short form (S-3), while also extending the availability of forward incorporation by reference on Form S-1 to more issuers. We’re continuing to post law firm memos about the proposal in our “Form S-3″ Practice Area.
Question: A filer attempted to register the offer and sale of securities on a Securities Act registration statement by claiming an offset against fees paid on a preliminary merger Schedule 14C [PREM14C] filed for a different transaction. The filer cited Rule 457(b) as the basis for the offset. May the filer claim this offset?
Answer: No. This offset is not available because the PREM14C was filed in connection with a different transaction. Rule 457(b) and the analogous Exchange Act Rule 0-11(a)(2) only ensure that, for any single transaction, the total fee paid for that particular transaction is to be calculated based on the overall transaction rather than requiring a fee for each step of the transaction. See Release No. 33-6617 (Jan. 9, 1986). [Sept. 4, 2026]
Remember that issuers can use Rule 457(p) to carry forward fees in some circumstances. We’ll be updating our “Filing Fees” Handbook for the new CFI – members can use this resource for a practical explainer on how all this works.
We are seeing quick turnaround these days with publication in the Federal Register – so we didn’t expressly call out that the SEC’s proposed “Regulation E-Delivery” was published back in late July, not too long after the proposal was issued. As I mentioned in this blog on the various outstanding proposals, comments are due September 21st.
We are continuing to post memos about the proposal in our “E-Delivery” Practice Area. This Gibson Dunn memo shares a few questions that companies may want to weigh in on during the comment period:
• Whether electronic addresses collected by an issuer’s transfer agent or proxy solicitor, or a NOBO list, could be used for default e-delivery;
• The retention of the NOIA process (and related 40-day deadline) as an alternative for proxy statements;
• The extent of an issuer’s obligation to identify and remediate e-delivery failures (e.g., bounce backs);
• The definition of PFI, including whether it should exclude addresses and general brokerage information; and
• The creation of a hybrid solution for shareholder lists under Rule 14a-7 so issuers could agree to forward electronic communications from third parties while providing requestors with mailing addresses.
Also check out Dave’s and Meredith’s earlier blogs on the proposal:
If you’ve ever seen me in person, you probably guessed from the mustard stains on my shirt (not to mention my waistline) that I love hot dogs. It’s pretty clear that I’m not alone in that sentiment. According to the National Hot Dog & Sausage Council, Americans consume over 7 billion hot dogs during “hot dog season,” which the Council says runs from Memorial Day to Labor Day. Since Monday is Labor Day, and because frivolity around holidays is one of this blog’s traditions, this seems like an appropriate time for me to pay tribute to my beloved frankfurters.
On Labor Days past, I’ve shared my views on summer cocktails and the right way to cook corn on the cob. And on most Labor Days you can usually find me on my patio grilling corn and some kind of protein over charcoal and enjoying a Dark ‘n Stormy or two. I can’t say that the corn was always accompanied by hot dogs, but they certainly have been a regular part of the rotation over the years.
Sadly, this year finds me on the grilling disabled list. I had a hip replacement a couple of weeks ago and so I’m currently limping around on a cane when I’m not confined to my recliner. Of course, knowing that I can’t prepare some grilled dogs on my own only makes me pine for them more – which in turn gave me the idea for this late summer reverie.
I’ve had hot dogs all across this great land of ours and have yet to encounter a frank I didn’t like. From the dirty water Sabrett hot dogs in Midtown Manhattan to the Lucky Dogs on Bourbon Street to the Chicago style dogs with radioactive relish and a salad on top to the legendary $1.50 Costco hot dogs, I’ve only got good things to say about them. I even like the very average dogs they sell at the Cleveland Guardians games, which are transformed into something special when you cover them in MLB’s best mustard.
Notwithstanding my embrace of all hot dogs, I have some special favorites, which I will now inflict on those of you who are still reading.
All Hail Western New York! If you’re going to grill your hot dogs, then Western New York is the place to get them. Rochester has Zweigle’s and Buffalo has Sahlen’s, both of which brands offer hot dogs in natural casings that split open when you grill them, snap when you bite them, and taste absolutely sublime. For a unique taste of my home town, try Zweigle’s White Hots. These are one of Rochester’s three great culinary contributions to our nation – the other two being Chicken French and, of course, Nick Tahou’s Garbage Plate.
Love that Dirty Water. There’s nothing like a dirty water hot dog from a hot dog cart. They’re a reliable choice in any city, but if you’re in Cleveland and want something unique from a hot dog cart vendor, give a Polish Boy a shot. You won’t leave hungry – or with a clean shirt.
Where’s the Beef?. When it comes to all-beef franks at the supermarket, my go to brands are Nathan’s and Hebrew National. No offense to Sabrett, which I know the elites at The New York Times fancy, but you can’t get that brand around here. Anyway, I think I like the taste of Hebrew National a little more than Nathan’s, although I may be biased by the classic ads I grew up watching. Still, Nathan’s hot dogs are easier to find than Hebrew National where I live and, because I’m a fat pig, I value the availability of their Colossal Quarter Pound Beef Franks.
While I’ve sampled hot dogs near and far, there remain several styles that I’ve yet to try. For example, even though I lived in the Detroit area for a few years when I was very young, I’ve never had a Coney. I’ve also never tried a Sonoran Dog, a Seattle-style Dog, or an LA Street Dog. These are all on my bucket list, and since Americans are infinitely creative, I’m sure I’ll discover others to add to my list as time goes by.
Of course, I’m mindful of the need for moderation in pursuit of completing my hot dog bucket list, because these things aren’t made of kale. I want to hang around long enough for my new hip to wear out, and if I’m too aggressive in my pursuit of hot dog heaven, I might hit my expiration date a lot sooner than my hip does.
Have a great Labor Day, everybody. Our blogs will be back on Tuesday.
