Yesterday, the SEC issued notice of a proposed NYSE rule change that, if approved, will extend the transition period in which a listed company must establish an internal audit function. Currently, companies listing in connection with an IPO, carve-out or spin-off transaction have a one-year transition period to establish an internal audit function. The proposal would change that to 5 years. Here’s some color on why the NYSE is proposing this change:
Section 303A.07(c) of the Manual states that each company listed on the Exchange must have an internal audit function. The purpose of the internal audit function is to provide an issuer’s management and audit committee with ongoing assessments of the issuer’s risk management processes and system of internal controls. The function may be outsourced to a third-party service provider other than an issuer’s independent auditor.
Like other elements of the Exchange’s corporate governance rules, Sections 303A.00 and 303A.07 provide a transition period for certain issuers to become compliant with the internal audit function.3 Pursuant to Section 303A.07 issuers must have an internal audit function in place no later than the first anniversary of their listing date. Over time, issuers have expressed concern that developing a capable internal audit function within the first year of listing presents challenges as issuers adjust to life as a newly public company. Accordingly, the Exchange is proposing to extend the transition period to implement an internal audit function from one year to five years.
In expressing concern over the current one-year compliance period, issuers often cite competing business and regulatory obligations requiring management’s attention and the challenges of building an internal audit function to assess a company’s internal control environment while a company is still in its early stages and continuing to grow. The Exchange continues to believe that having a robust internal audit function is a key component of sound corporate governance, but agrees that providing issuers with additional time to develop such function will result in a more effective function.
In this regard, the Exchange notes that newly public companies are typically in the process of upgrading their accounting systems and internal controls and hiring additional staff to meet the greater demands placed on public companies. Given the oversight role of directors — and members of the Audit Committee, in particular — with respect to risk management and internal controls, the Exchange believes it is appropriate to extend the transition period for compliance in order to provide a new slate of directors with sufficient time to assess an issuer’s operations to help design a valuable internal audit function.
NYSE believes that other listing requirements will provide assurance that companies are sufficiently managing risk during the 5-year transition period. For example, companies must have an Audit Committee that receives an annual report from the company’s independent auditor describing internal quality control procedures, and the Sarbanes-Oxley Act requires assessments and (for some companies) attestations of the effectiveness of internal controls, as well as CEO and CFO certifications. NYSE says that SOX was adopted after the exchange had adopted its internal audit requirement – and because the internal audit requirement can now be viewed as a supplement to the statutory protections, a longer phase-in period shouldn’t raise investor protection concerns. NYSE also contends that its proposal to extend the transition period shouldn’t raise concern because Nasdaq doesn’t require listed companies to maintain an internal audit function at all.
Interested persons are invited to submit comments. To do that electronically, use the Commission’s internet comment form or send an email to rule-comments@sec.gov (include file number SR-NYSE-2026-37 on the subject line).
Never mind! Yesterday, the SEC announced that it had cancelled the open meeting that had been scheduled for today and was just announced on Monday evening (a departure from the typical 7-day notice). I will survive, but I’ve gotta say I had been kinda excited about the open meeting since there haven’t been very many with Chair Atkins!
As I shared earlier this week, the purpose of the meeting was to consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets. An open meeting isn’t required to issue a proposal since the Commissioners can also vote by seriatim (see this 2015 statement from former Commissioner Commissioner Luis A. Aguilar for how that works). The SEC’s “crypto assets” proposal was still listed as pending review on the OIRA dashboard as of yesterday afternoon.
(At the Congressional level, the CLARITY Act vote has also been bumped to (at least) September and the WSJ editorial board published a piece that pointed out problems with it, which in turn has generated more commentary from those in favor of it, etc.)
A proposal from the SEC on Pay-to-Play Reform under the Investment Advisers Act is also on the dashboard now…
The latest issue of The Corporate Counsel newsletter has been sent to the printer. It is also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format. The issue includes the following articles:
– SEC Proposes to Make E-Delivery the New Default
– Prediction Markets: What Should Companies Do Now?
– Stay In-the-Know with TCC & the 2026 PDEC Conferences
Email info@ccrcorp.com or call 1.800.737.1271 to subscribe to this essential resource!
As I recently shared in this Cooley CapitalXchange blog, the market seems to be receptive to a variety of types of securities offerings right now. That’s a good thing for highly levered companies, as this Weil alert notes:
A wave of near-term debt maturities, persistent covenant pressure, and a financing market that rewards speed and certainty over marketed processes have pushed balance sheet management to the top of the agenda for management and boards of highly levered companies. For companies navigating this environment, the equity capital markets offer a variety of means of raising new capital, including some effective but less frequently used alternatives. Used deliberately, they are balance sheet management tools in their own right, capable of improving liquidity, reducing leverage and strengthening a company’s position in creditor negotiations.
Three equity financing techniques are particularly well suited to these objectives, each addressing a different balance sheet need. At-the-market programs (ATMs) provide flexibility and low cost of capital, allowing companies to raise capital incrementally over time at prevailing market prices. Registered direct offerings trade some of that pricing efficiency for confidentiality and execution certainty, raising committed capital in a single negotiated transaction with terms that can be agreed upon before any public announcement. Debt-for-equity exchanges reduce leverage directly, retiring outstanding debt without requiring new cash. Together, these tools give public companies a range of options for managing liquidity, leverage and refinancing risk as financing needs evolve.
The alert points out that preparation is key: To use these alternative offerings effectively, companies need to understand their advantages and limitations ahead of time. The Weil team walks through that in detail in the memo for each alternative – and provides this handy chart to summarize key tradeoffs:
The alert also discusses how the SEC’s currently proposed changes to the shelf registration framework would affect companies’ access to capital. We’re continuing to post memos about the SEC’s proposal in our “Shelf Registration” Practice Area.
For the latest episode of “Mentorship Matters with Dave & Liz,” Dave and I were honored to talk with Chaka Patterson, who recently published the book “The Hot Seat: Mastering the Public Company General Counsel Role.” Chaka is Founder and CEO of Chaka Strategy, a leadership and strategic advisory firm that helps Chief Legal Officers and General Counsels of publicly traded companies become more effective enterprise leaders, and he is also a lecturer at the University of Chicago Law School.
During his career, Chaka has served in the roles of General Counsel, VP of Treasury and Investor Relations, outside counsel, and enforcement attorney for the Illinois AG’s office – so he has a well-rounded perspective and shared a lot of helpful advice during our 23-minute conversation. We discussed:
1. Mentors who influenced Chaka’s career path in private practice, enforcement, and in-house roles – and the important lessons they shared.
2. What inspired Chaka to write “The Hot Seat: Mastering the Public Company General Counsel Role” – and why he felt that now was the right time to publish this field guide.
3. Chaka’s advice for building and strengthening important relationships with the C-suite, board and other stakeholders.
4. Skills and experiences that lawyers should actively seek if they aspire to have a general counsel role and thrive in “the hot seat.”
5. How to overcome common patterns that hold lawyers back.
Among other takeaways, I appreciated Chaka’s advice to move away from the “volume mindset” and his thoughts on shifting from a technical expert to a strategist.
Thank you to everyone who has been listening to the podcast! If you have a topic that you think we should cover or guest who you think would be great for the podcast, feel free to contact Dave or me by LinkedIn or email.
We know that the search function on TheCorporateCounsel.net hasn’t exactly been one of our strong points, and that’s why we’re pleased to announce that we’re rolling out an enhanced search tool for our members to take for a test drive. We’ve tested this with smaller groups, but we want to give everyone a chance to use the beta version of the tool and provide us with feedback about how we can improve it. (We’ve included a feedback button in the upper right corner of the tool’s homepage for your convenience).
Our enhanced search tool will allow you to access the guidance you need in fewer clicks. It features a reformatted user interface and search algorithm that’s designed to surface relevant and timely content. It also features “Smart Mode”, where you can get direct answers to some of your questions via a very basic AI chatbot.
We’ve intentionally kept this AI chatbot simple, in order to reduce the likelihood that it will do weird AI stuff – you know, like identifying Greg Sankey as the Chairman of the Securities and Exchange Commission. Anyway, if you have complex questions, please continue to post those on our Q&A Forum.
You can access the enhanced search tool by clicking here, or by clicking the box in the top right corner of TheCorporateCounsel.net homepage.
We know some members would like to vet AI elements prior to use. Our enhanced search uses a lightweight AI function when Smart Mode is enabled. Please contact Editor Zachary Barlow at zbarlow@ccrcorp.com if your firm or company would like us to disable Smart Mode pending approval.
Yesterday, the Treasury Department’s Financial Crimes Enforcement Network – known as “FinCEN” – announced that it had issued a final rule that permanently removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCEN under the Corporate Transparency Act. The rule will be effective upon publication in the Federal Register. Additionally, FinCEN will delete from its database information previously reported by U.S. persons. Thanks to Weil’s Howard Dicker for alerting us!
Here are 12 FAQs about the final rule. The announcement shares these key points about what it does:
– adopts the exemptions set out in the interim final rule issued in March 2025, making the rollback of beneficial ownership reporting by U.S. companies permanent;
– exempts U.S. persons who have obtained FinCEN IDs from any obligation to update or correct the information they originally provided to FinCEN to obtain their FinCEN IDs;
– eliminates the requirement for foreign companies to report U.S. person “company applicants” (i.e., the individuals who helped those foreign companies register to do business in the United States);
– exempts foreign pooled investment vehicles registered in the United States from reporting the beneficial ownership information of a U.S person in control of the investment vehicle; and
– confirms that FinCEN will delete information about any individuals—company applicants, beneficial owners, or recipients of a FinCEN ID—that FinCEN reasonably believes is a U.S. person (e.g., the information is linked to a U.S. passport or U.S. driver’s license).
Under the final rule, foreign entities that are reporting companies will still be required to report beneficial ownership information for foreign individuals.
The announcement notes that guidance on FinCEN.gov will be updated to reflect the final rule.
In late July, the California Privacy Protection Agency announced its first sectoral audit – focused on “gig economy” platforms. CalPrivacy says this is the first in a series of sectoral audits that evaluate compliance with the California Consumer Privacy Act. CalPrivacy is especially focused on compliance with consumers’ rights to access and exercise control over their personal information.
This Freshfields blog says the audit signals a focus on effective governance and controls around privacy requirements, and that companies in other industries should treat it as a preview of coming attractions. Here’s an excerpt:
The distinction between a single-business enforcement focus and an industry review is notable. Where a traditional investigation asks whether a business has complied with applicable privacy laws—often triggered by a particular incident, complaint, or event—a sectoral audit explores how a business implements privacy obligations across its business functions and whether it achieves compliance on an ongoing basis. For example, regulators may look beyond simply checking whether businesses fulfilled access or deletion requests and instead evaluate whether a business has built the underlying architecture to maintain compliance. Specifically, regulators may look at how businesses:
– Receive, track, and fulfill access and deletion requests across systems
– Monitor and enforce statutory deadlines
– Establish privacy governance structures
– Allocate privacy compliance responsibilities across teams and departments
– Audit, document, and verify compliance with legal obligations.
In short, a sectoral audit looks past isolated compliance outcomes to examine the processes and accountability mechanisms that produce them.
The blog recommends testing whether privacy compliance is operationalized. Check out our “Data Privacy” Practice Area for other recent developments and resources on risk management.
We’ve posted the transcript for our recent webcast: “The SEC’s Proposal to Simplify Filer Status & Reduce Reporting Burdens.” This program featured Luna Bloom of the SEC’s Division of Corporation Finance, Howard Dicker of Weil Gotshal, Raquel Fox of Skadden, and Dave Lynn of Goodwin (and, of course, TheCorporateCounsel.net). They discussed:
– Overview and Policy Objectives of the Proposal
– Revisions to Filer Classifications and Definitions
– Expanded Accommodations and Scaled Disclosure
– Initial and Annual Determinations of Filer Status; Transition Rules
– Requests for Comments and Potential Changes to the Proposed Rules
– Considerations for Companies Considering Scaled Disclosure
– Relationship of the Proposal to Other SEC Initiatives
Members of TheCorporateCounsel.net can access the transcript of this program. If you are not a member, email info@ccrcorp.com to sign up today and get access to the full transcript – or call us at 800.737.1271.
The Center for Audit Quality, together with KRC Research, recently published this 24-page institutional investor survey on the use of artificial intelligence in research and analysis for investment decision making.
The survey was conducted in May 2026 and represents views from 100 investors with $500 million or more in assets under management (the appendix has a lot of detail about job titles, type of investor, etc.). It follows a CAQ survey that Dave blogged about earlier this summer on how investors felt about using GenAI in public company audits.
Here are a few key findings:
– Earnings calls are one of the most common “use case” – with 16% using AI all the time to analyze earnings calls transcripts, 45% using it often, 14% using it occasionally, 13% using it rarely, and 13% never. If you don’t have your math hat on, that means 60% of investors said they use AI tools “always” or “often” to analyze earnings calls.
– For company filings like 10-Ks and 10-Qs – 16% of investors are using AI to analyze filings all the time, 25% often, 33% occasionally, 13% rarely and 14% never.
– Investors are also using AI tools on risk assessment scenario analysis (49% always or often), financial modelling and projections (46% always or often), and screening investment opportunities (45% always or often).
The survey gives this additional color on how AI tools are used to review company filings:
– Extracting specific financial or operational metrics – 60%
– Summarizing key sections like the MD&A, risk factors, etc. – 58%
– Comparing filings across similar companies in the same industry – 50%
– Identifying inconsistencies between narrative and financials – 48%
– Comparing filings across time periods for consistency or significant changes – 47%
– Synthesizing insights across multiple disclosures – 46%
– Identifying anomalies or red flags – 45%
– None of the above – 2%
Companies are already using AI to quality-check filings, but this investor-sourced list might help with your prompts.
