The Staff’s latest announcement that it is completely getting out of the business of serving as the Rule 14a-8 referee sparked both admiration and jealousy on my part, because I can distinctly remember sitting in a room late at night at the SEC, poring over a stack of memos from the Rule 14a-8 task force, and saying to whoever was sitting there with me: “How can we get out of this nightmare?” Apparently, all that we had to do was issue an announcement saying “We are out!” Sometimes, the most obvious solution is the best one.
While Rule 14a-8 no-action letters were our favorite task to complain about in the Corp Fin Chief Counsel’s office back in those days, at the same time they were also kind of fun. My old friend Marty Dunn would often lament that shareholder proposals got too “corporate” in more recent years – back in the day, the realm of shareholder proposals was populated by some particularly colorful characters that made things very interesting, such as Evelyn Y. Davis, with whom I had some of the weirdest conversations of my professional life.
Further, the shareholder proposal task force that was hastily assembled each year to tackle all of the incoming Rule 14a-8 no-action requests was comprised of an elite group of up-and-coming talent in the Division, and they were always energized by the time-constrained season and the epic Lucy-in-the-Chocolate-Factory amount of work that was necessary to consider the incoming requests. Getting selected for the shareholder proposal task force was a professional honor, and it often served as a pipeline for talented lawyers to end up in the Chief Counsel’s office or one of the Division’s other “support” offices.
What I think we all enjoyed most about working on the Rule 14a-8 no-action letters was that it was the closest thing in the work of the Division to what “real” lawyers do, in that you would have to research precedent, consider the application of that precedent to the particular fact pattern, and write a cogent, persuasive memo supporting the outcome that you proposed, which were all tasks that were very different from writing comments on disclosure in the branches. There was certainly the interesting legal aspect of it all, but there was also the more exciting policy and political elements that needed to be carefully weighed.
In my time in Corp Fin, everyone involved in the process zealously guarded the ramparts of stare decisis when it came to considering each Rule 14a-8 no-action request in the context of what the Commission and the Staff had decided on important policy and legal questions. Bill Morley and Marty Dunn would not have had it in any other way, because they recognized that both the companies and the proponents involved in the process deserved fairness and certainty in the outcomes, otherwise the whole process would lack credibility and the parties would just move to the courts to resolve their differences. In recent years, this ethos was most certainly lost in the Rule 14a-8 realm, as the Staff positions articulated in successive Staff Legal Bulletins shifted wildly with the political winds, erasing any sense of credibility and demonstrating little mooring to the previously articulated Commission and Staff positions that we all worked so hard to protect.
I think the greatest takeaway from those days of working on Rule 14a-8 no-action requests was the camaraderie and teamwork that came with trying to do an impossible task within a very tight timeframe. I thoroughly enjoyed hearing the constant give-and-take between members of the shareholder proposal task force, the wise words from Bill Morley and Marty Dunn, the griping about the deadlines and avalanche of requests, and – perhaps most importantly – the end of year wrap parties, which were epic. Following one of the wrap parties at which I may have been overserved, I ended up sleeping through my train stop in Baltimore and was then summarily thrown off the train in Wilmington, Delaware in the middle of the night, with no trains heading back the other way – I am sure Odysseus could relate to my off-course experience.
But I do not intend this story of my shareholder proposal odyssey as an ode to the Staff’s now cast-aside no-action letter process – rather, it is dirge to an old friend that had outlived its usefulness. Some things just don’t make sense anymore in the face of the relentless passage of time and changing norms. The constantly shifting Staff positions on key issues corrupted the process, calling into question the utility of the Staff’s no-action positions when the Staff’s approach could radically change following the next election cycle. The Staff’s resources are significantly constrained, and it is certainly valid to question whether responding to Rule 14a-8 no-action requests is the Staff’s highest and best use. And there is some merit to the argument that we have plenty to go on thanks to all of the Staff’s hard work over the course of decades of answering Rule 14a-8 no-action requests and drafting Staff Legal Bulletins, so maybe it is our turn as outside practitioners to make the hard calls without the Staff as our crutch. I tend to think that we are up for it, but maybe we should start organizing our own wrap parties for the end of the season – at least that would give us something to look forward to!
Now that the Corp Fin Staff has stripped back their process around Rule 14a-8 exclusion requests to no longer offer an option of providing a response to a company’s representation that it has a reasonable basis to exclude the proposal, the inevitable question arises as to what will we say in our Rule 14a-8(j) notices going forward. Meredith recently addressed this issue in the Proxy Season Blog here on TheCorporateCounsel.net. Her blog notes:
Now that Corp Fin has issued its announcement that it will discontinue responding to Rule 14a-8 no-action requests entirely and indefinitely, and no longer respond with a letter indicating that it will not object if a company omits a proposal, companies now know that the process they will follow if they want to exclude a shareholder proposal in the 2027 proxy season will be similar to the 2026 season – but slightly different. This Gibson Dunn blog extrapolates on what Rule 14a-8(j) notices will still include, and what they won’t.
“Companies can expect continued engagement with shareholder proponents as part of their overall shareholder engagement activities, and will need to carefully evaluate any shareholder proposals they receive. As noted above, if a company determines to exclude a proposal because the proposal or proponent has not satisfied Rule 14a-8, the company must still notify the Division and the proponent of its intention to exclude the proposal. However, as the Division will no longer issue a ‘No Objection’ letter, the exclusion notice will not need to include an ‘unqualified representation’ that the company has a ‘reasonable basis’ to exclude the proposal, which is what the Division requested in exchange for the Division’s issuing a ‘No Objection’ letter in the 2025-2026 proxy season.
Under Rule 14a-8(j), the exclusion notice nevertheless should include ‘an explanation of why the company believes that it may exclude the proposal, which should, if possible, refer to the most recent applicable authority,’ and a supporting opinion of counsel when such reasons are based on matters of state or foreign law. That explanation will continue to be closely scrutinized by other shareholders and by proxy advisory firms, as well as by shareholder proponents, and remains subject to potential legal challenge. As such, companies should continue to work closely with inside or outside counsel to assess the merits of their arguments before deciding to exclude a proposal.”
Practices will no doubt continue to evolve as we move through this uncharted territory in the time leading up to the proxy season, and we will keep you apprised of all of the developments. The Proxy Season Blog is available to subscribers of TheCorporateCounsel.net. If you do not have a subscription – which provides access to all of the amazing resources on our website – I encourage you to email info@ccrcorp.com or call 800-737-1271. You will not regret it!
It is hard to believe that the summer is winding down and our October Conferences are just a little over a month away. Our “Proxy Disclosure & 23rd Annual Executive Compensation Conferences,” which are taking place on October 12-13th in Orlando and virtually, could not be coming at a better time. This is indeed a season of change, and our goal at these conferences is to provide you with the knowledge and tools that you will need to navigate through these very interesting times. You can register online or contact us at info@CCRcorp.com or 1-800-737-1271. I look forward to seeing you there!
Prediction markets are all the rage these days. If you have a strong hunch as to what the high temperature at Los Angeles International Airport is going to be on Saturday, then prediction markets may be the thing for you! As a securities lawyer, I have generally perceived prediction markets to be largely outside of my purview, because the actual instruments underlying prediction market transactions are swaps that are referred to as “event contracts.” The CFTC is the federal regulator of event contracts that do not have a security component, first addressing the topic way back in 1992 in a no-action letter to the Iowa Electronic Markets, which is acknowledged to be the first U.S.-based prediction market platform. Given the regulatory divisions established by the good ole’ Dodd-Frank Act, the SEC has jurisdiction over security-based swaps, while the CFTC oversees all other swaps.
The landscape may be changing soon, as the exchange operator MEMXannounced earlier this month that it had filed a proposed rule change with the SEC seeking to allow the exchange to list Equities Based Exchange Prediction Contracts, or EPCs. The announcement notes:
MEMX’s EPCs are event contracts on publicly traded companies designed to provide investors with targeted exposure to objective, quantifiable measures of a company’s financial performance, including earnings, revenue, sales and other key issuer-specific metrics.
Investors would be able to trade complementary YES and NO contracts with prices ranging from $0.01 to $0.99. The proposed contracts would trade on MEMX Options, a registered national securities exchange, and would benefit from central clearing, know-your-customer requirements and MEMX’s existing regulatory and market-surveillance programs.
Subject to the SEC’s approval of the proposed rule change and the achievement of operational readiness, MEMX is targeting an early 2027 launch for EPCs.
In its notice seeking comment on the proposed rule changes for MEMX, the SEC notes:
[T]he Exchange’s proposal responds to this growing market demand for event-based products by establishing a framework for the listing and trading of securities event contracts as standardized options on the Exchange. In doing so, the proposal would bring these securities products within the established regulatory infrastructure applicable to listed options, including exchange trading and surveillance, standardized disclosure, and centralized clearance and settlement through a registered clearing agency, as further described below. To implement this framework, the Exchange proposes to adopt new Chapter 30 of the Exchange Rules governing the listing and trading of securities event contracts on MEMX Options.
Securities event contracts are cash-settled, European-style binary options that are based on the outcome of an event question related to the financial performance of an issuer of an NMS stock. A securities event contract provides a fixed payout if the condition specified in the contract terms occurs in the manner specified in the contract terms and expires without a payout if that condition does not occur. The proposed rules are intended to support securities event contracts based on objective, verifiable events relating to the financial performance of the issuer of an underlying security. Under the proposal, the Exchange would initially list securities event contracts based on an underlying financial metric, such as whether an issuer announces earnings, revenues, sales, or another key financial metric that is equal to or exceeds a specified threshold. At the same time, the proposed framework preserves flexibility for the Exchange to propose additional securities event contract types in the future, including contracts based on other events affecting the issuer’s financial performance that may not involve an underlying financial metric, subject to a separate proposed rule change.
We will be monitoring this development, as the availability of EPCs or other securities-based event contracts could have significant implications for public company insider trading policies and compliance efforts.
We recently addressed the buzz around prediction markets in the July-August 2026 issue of The Corporate Counsel, which is on store shelves now – just kidding, you can only get access to The Corporate Counsel newsletter by emailing us at info@ccrcorp.com or calling us at 800-737-1271!
In writing the article about prediction markets, I learned quite a bit that I did not know about this rapidly evolving area. Here my top five highlights:
1. Prediction markets are nothing new. Beyond the obvious fact that futures and forward contracts have been fueling speculative bubbles for ages, the modern concept of prediction markets dates back to the late 1980s in the U.S., when I was busy wearing paisley shirts and listening to The Cure in college. I wish I could have entered into an event contract back then predicting that The Cure’s frontman Robert Smith would do a collaboration with Olivia Rodrigo in 2026 – I could be retired at this point. Even if I can’t be retired, I can still very much enjoy that epic collaboration!
2. The CFTC is in the midst of actively updating its rulebook for prediction markets in light of the growth and popularity of these markets in recent years. As I mentioned a few weeks back, the solo CFTC Chairman is acting with a one-man-band level of proficiency, seeking comment on a wide range of issues concerning the regulation of the event contracts that are traded on prediction markets, issuing a Staff advisory directed at the Designated Contract Markets where the event contracts are traded, and proposing rules in June that specifically address the types of event contracts that can be listed on CFTC-registered prediction markets.
3. While the CFTC is reviewing its regulatory purview and working to update its rules, the states are fighting for their piece of the regulatory pie. Last month, 44 state attorneys general submitted a comment letter to the CFTC arguing that the agency does not have any authority over sports-related event contracts. The attorneys general representing Florida, Georgia, New Hampshire, Missouri and Texas did not sign that letter.
4. Prediction markets obviously also operate internationally, and so they face a myriad of regulatory approaches outside of the U.S. Some prediction markets only operate outside of the U.S. so as to avoid CFTC or state oversight. Surprisingly, even though we have had prediction markets operating in the U.S. for over thirty years, in many ways it feels like we are still in the early stages of development when it comes to the regulation of prediction markets. It will be very interesting to see how this all unfolds.
5. The problem of information asymmetry is a big concern in prediction markets. Earlier this year, the CFTC’s Division of Enforcement issued an advisory following the release of two enforcement cases involving the misuse of nonpublic information and fraud with respect to certain event contracts, warning Designated Contract Markets to be vigilant in their surveillance and enforcement of rules addressing these areas. As I note in the article, the potential insider trading complications of prediction markets have recently come to the attention of public company general counsels and outside counsel as they now have had to grapple with the ever-present problem of rampant information asymmetry in the markets. Overall, I think that companies need to pay attention to this issue and revise the appropriate policies accordingly, but perhaps there is a greater need to educate employees about the risks of using inside information when engaging in prediction market transactions.
I encourage you to read the full article, “Prediction Markets: What Should Companies Do Now?” in the July-August 2026 issue of The Corporate Counsel newsletter. Please feel free to reach out to me if you have any questions!
The July-August issue of the Deal Lawyers newsletter was just sent to the printer and is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– Chancery Decision Highlights Need for a “Remedy Hierarchy” in a Post-Closing Purchase Price Adjustment Provision
– A Purchase-Price Adjustment Is Not the End of the Road with Indemnification on the Table
– Are Hints Disclosures? Delaware Supreme Court Revives M&A Fraud Claim Despite Buyer’s Red Flags
– AI Meets National Security — Implications for Private Equity and M&A
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
Yesterday, I dropped my youngest daughter off at college for her junior year, bringing to a close a decade of participating in that time-honored ritual of moving my children into on-campus housing. It is an experience that always involves a distinct mix of excitement, chaos, trepidation and relief. While, as a parent, I have always experienced mixed emotions on this day, this year felt particularly poignant, as my wife and I wrapped up a decade-long chapter of our lives that has most certainly seen its ups and downs. There will no doubt be plenty of move-ins to come (including into off-campus housing for our daughter’s senior year), but there is something unique about carting plastic totes and blue bags into campus housing in a rushed attempt to beat the deadline and have time to assemble furniture comprised of one thousand parts!
I too am feeling the back-to-school pressure this week, as the course I co-teach kicks off tomorrow. Now in my sixth year of teaching the course, I feel the same sort of back-to-school jitters that I am sure that my daughter feels going back to college. The course focuses specifically on exempt securities offerings, so I have been thinking about what to say to the class about the SEC’s current agenda as it relates to the exemptions from the registration requirements of the securities laws.
Obviously, the biggest news on that front happened just last week, when the Commission proposed Regulation Crypto Assets, which contemplates two exemptions from the registration requirements of the Securities Act for certain investment contracts involving crypto assets. It is not that often that we see the Commission adopting an entirely new set of exemptive rules, especially without a Congressional directive (such as the JOBS Act), so this is certainly a big deal to note for the class.
As for the SEC’s other actions on the exempt offering front, much remains to be seen. During the course of the class this semester, we will no doubt be discussing a number of the items that the SEC has identified on its latest Reg Flex Agenda, as some or all of these proposed rulemakings may see the light of day. These proposed rulemakings, all expected by October 2026, include:
On the topic of Rule 144, we expect the SEC to propose rule changes that would expand the safe harbor for resales of restricted and control securities to provide for more instances in which the safe harbor would be available to those selling securities who are not an issuer, underwriter or dealer. We certainly hope that this effort will involve revisiting the dreaded Rule 144(i), particularly in the context of de-SPAC companies, so that investors will have improved liquidity in those situations. It is also possible that the Commission will reconsider the definition of “accredited investor,” consistent with an overall push to expand investor access to private capital.
As for the proposal to update exempt offering pathways, we expect that the Commission would seek to build on the exempt offering harmonization rulemaking from 2020 to expand opportunities for issuers to raise capital in transactions exempt from the registration requirements of the Securities Act. This rulemaking could involve raising offering thresholds in existing rules (such as Regulation A, Regulation CF or other exemptions), creating new offering exemptions, and revisiting conditions for existing exemptions, as well as other potential changes.
On the topic of enhancing retail exposure to private markets, in addition to revisiting the accredited investor definition, we may see the SEC propose changes on the regulated entity side (e.g., investment advisers, funds, brokers) to make it easier for retail investors to participate in private capital transactions.
Finally, the Commission has indicated a willingness to tackle the age-old problem of finders, which has been a regulatory gray area for the entire time that I have been practicing securities law. The rulemaking would likely provide more clear guidance as to what activities finders could engage in without having to register as a “broker” under the Exchange Act.
Suffice it to say, this semester promises to be a very active one on the regulatory front when it comes to exempt offerings, so we should have no shortage of current events to discuss! I hope your back-to-school experience, whatever it may be, goes well over the coming days.
As we shift into back-to-school mode and the summer winds to a close, I anticipate more discussion of what we can expect next from the SEC as it pursues its regulatory agenda focused on public companies and capital raising. At the risk of undoubtedly being wrong in my prognostications, here is what I am anticipating over the next few months.
As we approach the final stages in anticipation of the mid-term elections in November, there will no doubt be an effort to demonstrate progress across the regulatory spectrum, and the SEC will certainly be a part of that. To that end, we could expect to see the SEC move to adoption of the semiannual reporting, filer status and registered offering reform proposals. Moving these proposals to final rule amendments in such a short period of time is a monumental task, but it appears that the Staff has dedicated significant resources to these projects to move them forward quickly. It is difficult to predict exactly when these proposals will be adopted and what sort of transition periods may be contemplated, but it is conceivable that some or all of these rule changes will be in effect going into calendar-year 2027.
The Spring 2026 Reg Flex Agenda also contemplates a slew of proposals by October of this year, which would likely include the executive compensation disclosure rulemaking that the SEC signaled could be coming back in June 2025. Based on everything that the Staff and Commissioners have said and the comments received to date, this proposal could involve a significant paring back of the executive compensation disclosure requirements. Given the timing here, we are not likely to see the relief in time for the 2027 proxy season.
Also slated for October is the “Rationalization of Disclosure Practices” rulemaking, which I read to be the Regulation S-K project. I tend to think that proposing amendments to Regulation S-K in October is a very ambitious goal given the scope of this project, but I know that the Staff is working very hard on this effort, so it is certainly possible. As with the executive compensation disclosure project, a proposal in the Fall of this year means that we likely would not see actual changes on the disclosure requirements until the middle of 2027 at the earliest.
Finally, perhaps the most mysterious of the SEC proposals slated for this Fall are the “Shareholder Proposal Modernization” and “Amendments to Certain Proxy Rules” proposals listed in the Spring Reg Flex Agenda. I do not think that it is too dramatic to say that the fate of Rule 14a-8 hangs in the balance with the shareholder proposal rulemaking, and we still do not have a clear picture of whether the SEC will go in the direction of amendments to Rule 14a-8 or a repeal of the rule. We can also expect proxy rule changes targeting proxy advisory firms, based on the Executive Order issued at the end of last year. Given that we are now on the eve of potential proposals, we will not see changes taking effect before the 2027 proxy season.
For the latest discussion of all of these events as they are happening, go back to school and sign up for our 2026 Proxy Disclosure Conference and 23rd Annual Executive Compensation Conference. These Conferences are taking place in Orlando on October 12-13 and via live webcast.
On Friday, the SEC posted a new Fee Rate Advisory announcing that the fees issuers must pay to register securities will decrease from $138.10 per million dollars to $87.00 per million dollars, effective October 1, 2026.
This new fee rate applies to the registration of securities under Section 6(b) of the Securities Act, the repurchase of securities under Section 13(e) of the Exchange Act, and proxy solicitations and specified tender offers under Section 14(g) of the Exchange Act.
Though Chancellor Allen characterized a Caremark duty-of-oversight claim as “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment,” Delaware courts appeared to be more accommodating to Caremark claims for a number of years. Among the cases in which the Delaware Court of Chancery allowed Caremark claims to proceed past the pleading stage was the derivative litigation filed against Boeing’s board alleging inadequate oversight of safety issues, which ended in 2021 with one of the largest derivative lawsuit settlements ever, per the D&O Diary.
After a mechanical failure in 2024 involving a jet’s door plug, a new derivative suit was again filed against Boeing directors and officers, alleging oversight claims premised on Caremark. Plaintiffs did not make a demand on the board, so, in a mid-August decision addressing the defendants’ motion to dismiss, the Chancery Court analyzed whether more than half of the board faced a substantial likelihood of liability on the claims, which would make, as plaintiffs argued, a demand on the board futile and therefore excused. Vice Chancellor Zurn found that they did not, and dismissed the claims.
“Caremark liability centers on a particular type of bad faith: ‘intentional dereliction of duty’ or ‘conscious disregard for one’s responsibilities’.” “Only ‘a sustained or systematic failure of the board to exercise oversight . . . will establish the lack of good faith that is a necessary condition to liability.’” The directors must know that they were not discharging their fiduciary obligations. Caremark’s scienter requirement differentiates disloyal bad faith from gross negligence that breaches the duty of care.
Plaintiffs’ allegations fell short on every front, failing to support a rational inference that the directors acted in bad faith. Rejecting plaintiffs’ theory that nearly every update the board received about Boeing’s manufacturing risks amounted to an ignored red flag, the Court observed that they sought to “recast[] the volume and depth of Boeing’s reporting from a best practice into evidence of disloyalty.”
The Court also found many of the purported red flags too disconnected from the January 2024 incident, explaining that a red flag must be “sufficiently similar” to the corporate trauma it precedes, not a general risk. And the Court rejected plaintiffs’ contention that Boeing consciously shirked regulatory compliance for profit, noting that the pleading-stage record showed the company’s production plans were based on informed management assessments of risk and feasibility.
The blog characterizes this decision as a “welcome reminder” that a “good-faith effort to implement and monitor an oversight system, appropriately documented, remains a bulwark against Caremark liability.” A well-documented board process may help avoid Caremark claims altogether if the documents produced in response to a books-and-records request dissuade plaintiffs’ counsel from filing litigation.
