As John shared, the SEC’s proposal to modernize the regulatory scheme for transfer agents includes a new rule that will have implications for issuers because it would require transfer agents to establish a reasonable basis for removing restrictive legends on a security and provide a related safe harbor. This White & Case alert notes that the proposal would likely standardize requirements around the Rule 144 legend removal process, which have been inconsistent over the years depending on the transfer agent you’re working with, but also potentially complicate things by making the process more document and analysis intensive across the board.
Under the safe harbor, there are two ways a transfer agent can establish a reasonable basis: (1) an opinion of counsel or (2) reaching its own conclusion, documented in writing. As John noted, the legend removal opinion cannot be given by an affiliate, officer, director, or employee of the issuer or the holder and proposal’s language around “red flags” may invite “skittish transfer agents to see ghosts.” The memo suggests some other ways that the proposal, if adopted, could change the process for issuers. For example:
[F]or every issue it services, a transfer agent would be required to keep a current list of the issuer’s own employees who are authorized to give it instructions on legends, and refuse instructions from anyone off that list. Only issuer employees can be on the list, so counsel, underwriters, and paying agents who have historically given legend instructions on an issuer’s behalf will need another route to the transfer agent.
Many transfer agents today accept shorter opinions where the opinion giver is relying almost entirely on representations given by holders and brokers. However, the safe harbor’s opinion checklist would require considerably more detail in the opinion itself (naming the documents reviewed, walking through a specific exemption, and reaching a transaction-specific conclusion).
[W]hat would [more] significantly increase the diligence burden is the requirement that transfer agents consider what could constitute a “red flag,” as discussed above. The proposed safe harbor cannot be met by simply ruling out the specific red flags enumerated by the SEC, but instead requires an opinion giver to have conducted a thorough investigation into a highly fact-dependent field of subtle distinctions and reached considered conclusions to identify problematic trades, which will dictate whether an opinion can be delivered.
Because the rule includes a broad definition of “unregistered securities transaction” and would encompass unregistered original issuances or transfers by an affiliate, that same “reasonable-basis analysis” would be required in “private placement closings, PIPE issuances, note conversions, warrant exercises, equity compensation deliveries, and affiliate transfers of every kind, many of which have never before required a transfer agent-facing legal opinion.”
Notably, note conversions and warrant exercises in particular are included in this list. These two actions historically have not been an area of concern for the SEC because any safeguards would have been applied to the initial issuance. By including these types of transactions within the scope of Rule 17ad-31, the SEC may be adding an additional layer of friction to these transactions. Equity compensation deliveries follow a similar pattern: equity compensation is largely regulated at the time of the initial issuance, and including it in the new rule’s coverage could make it somewhat more difficult for companies to align employee compensation with shareholders’ interests by tying compensation to future performance.
Ultimately, the memo concludes that the requirements transfer agents are likely to impose if these rules are adopted as proposed will make legend removal cost more and take longer at a time when settlement timing is very short, and the associated challenges may fall on issuers. Certain issuers, like those with significant affiliate holdings, may want to comment before the November 3rd deadline.
I recently shared on The Proxy Season blog that the number of investors participating in Vanguard’s investor choice program increased 6x from 2025 to 2026 according to its 2026 How Investors Vote Report. The significant increase in participation wasn’t limited to Vanguard. This report (available for download) on the 2026 proxy season from tumelo (which provides infrastructure that enables pass-through voting, including for Vanguard) shares that voting choice tripled and that the number of companies in the U.S. where an investor on tumelo’s platform could direct a vote went from 475 in 2025 to 720 in 2026.
Three seasons of pass-through voting have given us something we didn’t have before: enough data to say with confidence how investors behave once they have a choice over their vote [. . .] The measure we watch is divergence: how often an asset owner, given the choice, votes differently from what their pooled fund would have done by default.
They found that at least one proposal was voted differently at 89% of meetings and 24% of proposals were voted differently from the fund’s default.
Those two numbers feel like a good depiction of reality. Asset owners and their fund managers agree on about three-quarters of individual resolutions. The default is, most of the time, a perfectly good answer. But hand an asset owner a full meeting agenda and they will nearly always find one item where their own policy points a different way, and they vote accordingly.
What this means Voting choice isn’t being used to overturn the fund’s position on every single proposal, it’s being used where it matters to the investor. That matches what we hear in the market: asset owners are often broadly happy with their manager’s voting, but there are specific themes, proposals or individual companies where they want a say of their own.
They also found that that divergence reflected the consistent application of the investor’s policies and, in some cases, the need to direct individual votes because “no policy can perfectly anticipate every situation.”
Yesterday, the SEC announced that it plans to host a roundtable on the use of machine-understandable data and Super Intelligence (SI) on November 9 from 8:00 am to 3:30 pm ET at the SEC’s headquarters (registration required to attend) and streamed live on SEC.gov. The roundtable will include two panel discussions exploring “how market participants use SI and machine‑understandable data, the associated risks and costs, and ways the SEC can further support and enhance the use of these technologies.” According to the agenda, the panels will tackle these questions:
How Does the Market Use Super Intelligence (SI) and Machine-Understandable Data?
What risks and costs related to SI and machine-understandable data should the SEC consider?
How could the SEC better facilitate SI and machine-understandable data?
Liz recently blogged about the SEC’s recent Section 21(a) report addressing the actions of certain members of Climate Action 100+ (“CA100”) during the 2021 proxy contest targeting Exxon Mobil. This Cooley memo highlights some of the key insights to be drawn from that report:
– No enforcement action, but a clear warning. The SEC’s investigation raised serious concerns, and the SEC used the report to provide guidance for investors participating in similar organizations. Coordinated action prompted by an intermediary’s pressure on members to align regarding the acquisition, holding, disposition or voting of securities may provide circumstantial evidence of an agreement or understanding sufficient to create a “group” as determined under Sections 13(d)(3) and 13(g)(3).
– Disclaimers alone are not enough. Investors may reserve independent voting discretion and disclaim “group” status, but the SEC emphasized that actual conduct controls. At the same time, parallel voting, ordinary-course communications, independent voting decisions and passive receipt of an activist solicitation do not, standing alone, establish a “group.”
– Schedule 13G eligibility presents a separate risk. Even if investors have not formed a “group,” a qualified institutional investor or passive investor holding more than 5% may lose eligibility to report on Schedule 13G if its activities have the purpose or effect of changing or influencing control of the issuer. The report suggests that this analysis can extend beyond a director contest to coordinated efforts targeting specific management or policy outcomes.
– Proxy advisers are a natural area to watch. The report repeatedly focuses on intermediaries that organize investors around shared objectives and voting outcomes. That framework closely tracks the December 2025 executive order, which specifically directed the SEC to consider whether a proxy adviser can facilitate coordination among investment advisers sufficient to create a “group” as determined under Sections 13(d)(3) and 13(g)(3).
This Sheppard Mullin blog discusses the Third Circuit’s recent decision in In re Ocugen, Inc. Securities Litigation in which a three-judge panel repealed its decades old “Oran-Burlington rule.” The Third Circuit, unlike the Second and Ninth Circuits, had previously applied a categorical defense to securities fraud claims — “if a company’s stock price did not decline (or quickly recovered) after a purported corrective disclosure, the misstatement was immaterial as a matter of law.”
The Oran-Burlington rule originated in the Third Circuit’s 1997 decision in In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410 (3d Cir. 1997), and its 2000 decision in Oran v. Stafford, 226 F.3d 275 (3d Cir. 2000). The rule established a test for determining the materiality of alleged misstatements: if the company’s stock price exhibited little or no movement (or a quick rebound) after a corrective disclosure, then the misstatement was immaterial. Both Burlington and Oran rested on a strict application of the efficient market hypothesis, which posits that markets immediately incorporate any material information into stock prices, such that the absence of a price movement following a disclosure indicates the market did not consider the disclosure material.
In Ocugen, the Third Circuit held that the Supreme Court’s later decision in Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011), foreclosed a bright-line materiality test based solely upon stock-price movement (or lack thereof). The panel traced the origins of the materiality standard to TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), in which the Supreme Court held that an omitted fact is material if there is a substantial likelihood that its disclosure would have been viewed by a reasonable investor as having significantly altered the “total mix” of information made available. Twelve years later, in Basic Inc. v. Levinson, 485 U.S. 224 (1988), the Supreme Court adopted the same standard for Section 10(b) claims while rejecting a Third Circuit bright-line rule that deemed pre-merger discussions per se immaterial until the parties reached an agreement-in-principle on key terms. In Matrixx, the Supreme Court rejected another categorical rule, this time a Seventh Circuit rule that rendered statistically insignificant adverse event reports per se immaterial, reaffirming that materiality requires a fact-specific inquiry.
The blog notes that this decision removes a barrier to claims in the Third Circuit. But it’s important to note that the case was brought following the announcement that the company would restate 15 quarters of financial statements. The Third Circuit vacated the district court’s judgment and, despite the announcement that the financials were “materially misstated,” on remand, instructed the district court to assess the misstatements under the “total mix” standard.
The Court cautioned that it was not replacing the Oran-Burlington rule with another categorical rule; thus, bare allegations of a restatement that occurs when errors are material to the prior period financial statements, without explanation of what the restatement means, may still fail to meet the materiality standard. [. . .] [T]he decision preserves materiality as a meaningful ground for defense, especially given the court’s warning that restatements are not per se proof of material falsity.
The defendants pointed to other language in the bylaw requiring disclosure of a “participant” in the solicitation. Citing federal case law interpreting the term participant under the federal proxy rules, Vice Chancellor Will observed that these decisions rejected attempts to classify individuals as “participants” unless they either financed the proxy contest or directly participated in the solicitation. Applying this precedent and common law interpretive principles, the Vice Chancellor concluded that the investor was not a participant in the activist’s proxy solicitation.
Vice Chancellor Will’s conclusion that the investor was not a participant in the solicitation proved fatal to another argument put forward by the defendants that the nominations could be rejected. The defendants pointed to a bylaw provision requiring disclosure of any information required to be disclosed in a proxy statement under Schedule 14A. While Item 5(b) of Schedule 14A requires disclosure of the participants in the solicitation, the Court’s conclusion that the investor wasn’t a participant precluded this argument.
The Delaware Supreme Court also affirmed VC Will’s conclusion that the defendants waived legal theories they had not advanced until late in the expedited proceedings. More from John on the Chancery Court’s decision:
The defendants attempted to “pivot” and contended that Rule 14a-9, which prohibits false and misleading statements or omissions in proxy materials, required the activist to disclose this information in order to comply with Schedule 14A. Vice Chancellor Will rejected this argument, noting that the letter rejecting the activist’s nominees didn’t cite Rule 14a-9, and that it would not be permitted to subsequently raise that as a basis for rejection:
“When a board rejects a nomination, it must give the nominating stockholder sufficient notice of the contractual basis for rejection. Having grounded its rejection in the asserted failure to disclose [the other investor] as a participant, the defendants cannot wait until trial to abandon that basis and advance a different theory of contractual noncompliance. Advance notice bylaws are not moving targets.”
Yesterday, Corp Fin issued six new and two revised CFIs. With the exception of one CFI addressing the timing of Form 4 filings for transactions on a foreign stock exchange, the CFIs cover Form S-8 and Rule 701-related topics. Here’s the list along with a brief summary of each new or revised CDI:
Securities Act Rules
Section 240. Rule 457 — Computation of Fee
New Question 240.19 – Addresses use of Rule 457(o) for offerings of defined contribution plan securities
Section 271. Rule 701 — Exemption for Offers and Sales of Securities Pursuant to Certain Compensatory Benefit Plans and Contracts Relating to Compensation
New Question 271.28 – Addresses the use of Form S-8 to register shares to be issued upon vesting of restricted stock awards and the securities underlying outstanding stock options and RSUs granted prior to the time the issuer became an Exchange Act reporting company.
New Question 271.29 – Addresses an acquiring company’s ability to rely on Rule 701 for restricted stock and the securities underlying stock options and RSUs held by employees terminated prior to the acquisition.
Securities Act Forms
Section 126. Form S-8
Revised Question 126.14 – Addresses an acquiring company’s ability to register on Form S-8 shares of the acquiror that are associated with the compensatory awards held by former employees of the target and assumed by the acquiror.
Revised Question 126.19 – Addresses the contributions under a 401(k) plan that would require the issuer to pay a registration fee in situations where Securities Act registration is required.
New Question 126.46 – Addresses an issuer’s ability to apply the filing fees associated with the securities underlying the forfeited RSUs to future registrations of offers and sales of securities underlying the RSUs.
New Question 126.47 – Addresses an issuer’s ability to register common stock issued upon settlement of RSUs by the date of vesting instead of the date of the grant.
Exchange Act Section 16 and Related Rules and Forms
Section 135. Form 4
New Question 135.05 – Addresses the Form 4 filing deadline for transactions effected on a foreign securities exchange.
Because tokens are often thinly traded during off-hours, they are susceptible to sharp price moves when users buy or sell more than the markets can handle.
Regulators have also warned that such tokenized assets create opportunities for bad actors to engage in insider trading and market manipulation while circumventing oversight. In the U.S. stock market, exchanges use surveillance to identify suspicious activity and the people behind it, while brokerages must know the identity of their customers. But such controls don’t currently exist with tokenized stocks
.As we see the proliferation of various tokenized versions of public company stocks, whether issuer sponsored or not — companies should be considering whether their existing insider trading policy language adequately covers the potential risk of employees trading tokenized versions of company stock.
Said differently, you shouldn’t be able to circumvent insider trading rules by trading in a tokenized version of your company’s stock when you’re prohibited from trading the company stock. This might seem obvious, but as third party tokenized stocks come online this strikes me as a new potential risk that may not be explicitly covered by an existing policy because the token wouldn’t be “company stock.”
On Wednesday, the SEC announced that its Small Business Capital Formation Advisory Committee will meet on Tuesday, October 27th at 10:00 am Eastern. Here’s the agenda for the meeting, which, as this overview from the SEC’s press release indicates, will continue the Committee’s discussions on how to encourage more IPOs as well as potential tweaks to Regulation Crowdfunding:
Building upon ideas generated during prior committee meetings, the morning session will focus on ways to encourage more companies to go public. The committee will consider ways to modernize the IPO process and potential regulatory reforms to improve the offering process, IPO communication rules, and analyst coverage and support.
During the afternoon session, the committee will consider Regulation Crowdfunding (Reg CF), including the current regulatory framework, successes to-date, challenges, and whether there are potential policy changes to Reg CF that could improve the exemption in order to further expand access to early-stage capital raising. To facilitate the discussion and deepen the committee’s understanding of the Reg CF landscape, members will hear from several experienced professionals in the crowdfunding space.
The meeting will be open to the public and livestreamed on SEC.gov.
A new study says that how companies talk about CEO departures can have a tangible impact on the success of their succession efforts & their former CEO’s success in obtaining new employment. Here’s the abstract:
This study examines whether the frequently used, seemingly platitudinous, euphemistic language common in CEO departure announcements has real economic consequences. We analyze 1,330 forced exits at U.S. publicly listed firms between 2016 and 2025, where incentives to soften negative information are strongest and euphemistic framing appears in 27% of cases.
Our Employment Outcomes Hypothesis predicts that such framing benefits departing CEOs by muting adverse reputational signals. Accordingly, euphemistically described forced departures are associated with an increase in the odds of reemployment within a year and a reduction in job search duration.
Our Succession Outcomes Hypothesis predicts that euphemistic framing dampens negative inferences about the firm, facilitating faster and stronger successor matches. When no immediate successor is appointed, euphemistic narratives are associated with a shorter succession search, lower odds of early successor turnover, and the appointment of high-quality successors. These findings are robust to alternative specifications, endogeneity corrections, and additional tests.
Overall, our results suggest that the language firms use to explain forced CEO departures is not merely boilerplate but a consequential disclosure choice that shapes labor-market outcomes for departing CEOs and succession outcomes for firms.
I guess the bottom line is that taking the high road pays dividends for everyone involved in the CEO’s departure. Of course, there’s sometimes a fine line between positive spin and pure fiction – and it’s one that companies cross at their peril.
