Last Thursday, the SCOTUS issued its long-awaited decision in Sripetch v. SEC, in which the Court unanimously held that the SEC may obtain a disgorgement award from a defendant in an enforcement proceeding without a showing of pecuniary loss to investors. In his opinion for the Court, Justice Gorsuch reviewed the history of the SEC’s use of the disgorgement remedy, the Court’s 2020 decision in Liu v. SEC limiting the agency’s use of disgorgement, and federal legislative responses to that decision.
Citing a variety of judicial precedent, Justice Gorsuch ultimately concluded that neither the Court’s decision in Liu nor traditional equitable principles required the SEC to establish pecuniary harm in order to use disgorgement as a remedy:
What all these and a great many other cases have in common is this: Applying traditional equitable principles, a court ordered the defendant to disgorge the value of the gain attributable to his invasion of the plaintiff ’s legally protected interests without requiring a showing of pecuniary loss. And to know that much is enough to know the answer to this case. Whatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.
This excerpt from Gibson Dunn’s memo on the case summarizes its implications:
– The decision preserves one of the SEC’s most powerful monetary remedies. The SEC may continue to seek disgorgement tied to a defendant’s net profits even where identifying individual investors or quantifying their losses would be difficult.
– The Court’s ruling limits defendants’ ability to resist disgorgement by arguing that the SEC must prove the same type of economic loss required in private securities-fraud suits. The focus remains on whether the defendant received unjust enrichment as a result of the securities-law violation and whether the disgorgement award is properly limited to that enrichment.
– Because the Court only assumed without deciding that disgorgement under Section 78u(d)(7) is an equitable remedy, defendants can still challenge SEC disgorgement requests seeking to provide the funds to the U.S. Treasury, instead of to investors, on the grounds that they constitute a penalty that implicates Seventh Amendment jury-trial concerns—a concern highlighted in Justice Thomas’s concurrence.
FTI Consulting’s Garrett Muzikowski recently passed along his firm’s thoughts the implications for firms pondering leaving Delaware of Exxon’s successful “JExit” from New Jersey to the Lone Star State. Here’s what FTI had to say:
– Some Support From Big 3 Likely: For Exxon’s proposal to receive 71% support from shareholders despite both ISS and Glass Lewis recommending against means that at least some large institutional investors voted in favor of the proposal. With each of the Big 3 splitting their stewardship teams into two separate groups with different teams and voting priorities, it’s likely these weren’t unanimous “FOR” votes. It’s even possible 1-2 institutions were more against than for. But 71% implies there was at least some large institutional support for this proposal. At the same time, we do know that at least one very large active manager voted against the proposal without much internal debate. We won’t know specifics for all investors until votes are disclosed later in 2026.
– Proxy Advisors Have Drawn a Line in the Sand: For the time being, companies proposing to redomicile to Texas can expect against recommendations from ISS and Glass Lewis. ISS has gone against 13 of 15 Texas proposals, while GL has gone against 12 of 13. Note that ISS has deemed ArcBest’s approach to the optional provisions in Texas as best in class (adopting charter provisions that opt out of higher thresholds for shareholder proposals or litigation). Even despite having identified this approach as “best in class” – ISS STILL recommended against the ArcBest proposal.
We fully expect ISS and Glass Lewis to include redomiciling in their policy surveys this upcoming fall, as they often do with “new” governance topics. We are less confident they will actually change their stance – but that remains to be seen. At a minimum, the survey will provide incremental clarity for issuers going forward.
– Exxon is a Bellwether for Redomiciling: Prior to Exxon, most companies who made such a move had a near-controlling shareholder and/or were small, unknown companies. Exxon is a massive, well-known, public company with a normal shareholder base. Exxon simply filing its preliminary proxy drove a lot of boardroom discussions on the topic. Now that the proposal has comfortably passed, we expect the conversations to pick up in volume and Boards to analyze this much, much closer.
– Key Factors for Investors: Unlike ISS and Glass Lewis, investors seem to be taking a case-by-case approach to redomiciling. For most investors, it’s an assessment of the tradeoff between economic benefit and a potential decrease in shareholder rights. While NPX vote data won’t be available until late September, our back of the napkin analysis of support levels to date (factoring in controlling shareholders) seems to suggest shareholders are assessing companies operational presence in Texas, the way they’ve approached Texas’ optional provisions, and the company’s governance history/profile.
– Hometown Heros are Likely Next: A key reason Exxon chose to reincorporate to Texas was that its headquarters and a significant amount of its people and operations are based in Texas. Texas is Exxon’s home. Companies who can confidently say they are Texas companies will be the next ones to move (and some already are). There’s a lot of variables at play beyond location of the business that go into investor support, but we think the next litmus test is if a company with little to no presence in Texas can also get shareholder support to redomicile. That’ll truly open the floodgates.
For those of you following the DExit trend, its official scorekeeper, UNLV Law School’s Ben Edwards, has recently updated his tally of the migratory activity of Delaware corporations. Spoiler Alert: Texas has been the favorite destination for Delaware emigres in recent months, but Nevada is coming on strong.
As we head into the height of annual meeting season, be sure to check out our informative 25-minute podcast with Cooley’s Reid Hooper & Michael Mencher on some of the key developments during this year’s proxy season. Topics include:
1. Impact of the Staff’s decision to no longer serve as Rule 14a-8 referee
2. Shareholder proposal trends and success rates
3. AI disclosures in proxy statements
4. How boards are dealing with new oversight demands
5. Changes in how companies are addressing DEI-related disclosures
6. Evolution of proxy advisor policies and strategies for responding to adverse recommendations
7. Outlook for the 2027 proxy season
If you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share with our members in a podcast, please email me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com. We’re always looking for new topics and we’d love to hear from you!
Last week, the SEC approved a proposed rule change by the National Securities Clearing Corporation (NSCC) that establishes an operating and clearing schedule for securities trading 24 hours a day, five days a week. As noted in the Commission’s order, NSCC (a subsidiary of DTCC) is a central counterparty and provider of clearance and settlement services for transactions in broker-to-broker equity, corporate and municipal bond, and unit investment trust transactions in the U.S. markets.
In light of the recent efforts of major U.S. exchanges to move toward 24-hour trading, the NSCC developed plans for facilitating extended trading hours. A recent report on the shift to 24-hour trading from DTCC and EY notes:
The recent announcements by the New York Stock Exchange (NYSE), Nasdaq, and CBOE to introduce near-24-hour equity trading mark a transformative change in U.S. equity market structure. The Depository Trust & Clearing Corporation (DTCC) and its equities clearing subsidiary, National Securities Clearing Corporation (NSCC), have taken concrete steps to support the industry’s evolution. In September 2024, NSCC extended its operating hours by opening its Universal Trade Capture (UTC) system for trading platforms to submit trades at 1:30 a.m. ET, approximately 2.5 hours earlier. Beginning June 28, 2026, NSCC plans to operate 24×5, from Sunday at 8:00 p.m. ET to Friday at 8:00 p.m. ET, subject to regulatory approval. This expansion enables NSCC to apply its central counterparty (CCP) guarantee immediately to overnight transactions, reducing counterparty risk and enhancing market resiliency.
While Alternative Trading Systems (ATS) have long offered extended hours access, national exchanges are now moving toward continuous trading, reshaping liquidity dynamics, global participation, risk management, and the operational and technological capabilities of member firms. By aligning NSCC’s UTC system with the extended hours of trading platforms, NSCC helps ensure seamless processing and mitigates counterparty exposure across time zones.
The report notes that implementation of the current 24×5 trading plans will occur in two phases, with the NSCC’s transition to a 24×5 schedule occurring on June 28, 2026, followed by the adoption of extended trading hours by national exchanges, which is expected between late 2026 into 2027.
The report also notes that it is expected that 1%-10% of total equity trading volume is projected to shift to overnight sessions by 2028, “creating new trading opportunities and enhancing global market access.”
As many of you know by now, when I am manning this blog in the month of June, I like to take a moment to remember my friend and colleague Marty Dunn, who passed away six years ago this month. For those who have not read my annual tributes, Marty was an extraordinary lawyer, great supporter of the SEC community and a friend and mentor to many folks in our practice. Six years ago, I paid tribute to Marty in this blog and in several episodes of the “Dave & Marty Radio Show.”
One of the things that I believe really demonstrates Marty’s enduring legacy is that, over the course of the past few years, I have often engaged in conversations with others about what Marty would think of current regulatory developments at the SEC. So many in our community looked to Marty for his wisdom and insight on everything going on at the SEC, and his constant presence on the speaking circuit cemented his reputation as the go-to commentator on the SEC’s agenda and actions, particularly as it related to capital raising, governance and public reporting.
I had the good fortune of working with Marty both at the SEC and in private practice, and he very much influenced my views on the role of the SEC and the positives and negatives of the regulatory process. Both of us found ourselves transitioning from SEC staffers to private practice commentators at around the same time, and we learned together how to navigate the complicated world of providing our commentary on the SEC’s actions while still being supportive of the Staff. I think Marty walked that line very well, and he was never shy about making his opinions known.
I can’t pretend to know how Marty might have reacted to any of the current rulemaking and Staff actions at the SEC, but I can certainly address how he looked at the topics that are at the top of the SEC’s agenda for capital raising and public companies based on some of the core principles that Marty lived by every day of his career as a securities lawyer.
First and foremost, Marty was very much an institutionalist when it came to the SEC. He respected the agency and its mission and was a strong adherent to the administrative process. As a rule-writer and interpreter of the federal securities laws, Marty always had a sixth sense about when we might be stepping over the line on an interpretation or when there was an authority issue with a proposed rulemaking. Marty was always cognizant of the history of anything that we were working on, and valued the weight of precedent in making any judgments. Today, I think Marty would be relieved that the Commission and the Staff have pivoted to the rulemaking phase of the agenda rather than relying on aggressive interpretive or process actions.
Second, Marty was highly attuned to the plight of smaller companies, and like me he grew up in a small business background that informed his views about capital access. His views were further developed when one of his first major regulatory projects at the SEC was working on the small business issuer rulemaking under the leadership of SEC Chairman Richard Breeden, and Marty would often recount stories from that time. On balance, I think Marty would view potential changes that could improve access to capital markets for smaller companies and reduce their regulatory burdens in a responsible way as a positive development for the markets.
Third, Marty was the best Securities Act lawyer that I ever met, and during his tenure at the SEC he was instrumental in bringing the mid-2000s securities offering reform proposals to life, ushering in a world of WKSIs and automatic shelf registration statements. While I am sure that he would have some critical observations about certain aspects of the recent shelf registration proposal, I do think that he would have been grateful to see that the securities offering reform framework was so successful that the Commission was comfortable extending it to a much larger group of issuers.
Fourth, I think that one of Marty’s most endearing skills was his ability to make very complicated things simple for everyone to understand. In this regard, while at the SEC, Marty traveled around the country preaching the benefits of plain English and was instrumental in changing the way we write prospectuses and periodic reports. Given his penchant for trying to simplify things as much as possible, I do think that he would generally support efforts to streamline filer status determinations and reporting requirements, while balancing the need to promote investor protection.
And that brings me to my last point, which is if you asked me what one thing that I learned from Marty has really stuck with me to this day, it is that the SEC has to be always vigilant about carefully balancing the promotion of capital formation and the preservation of investor protection. This topic informed everything that we did at the SEC, with the investor always there in the room when making regulatory decisions. I know that the Staff takes this concept very seriously, and I am confident that this will continue to inform their future actions.
I am thrilled to announce the latest episode of the “Mentorship Matters with Dave & Liz” podcast, which delves into the very interesting topic of the portrayal of securities law issues and securities lawyers in movies and television shows. Liz and I were joined by Charles Lee, who serves at the SEC as Senior Advisor, Office of the Chairman, and Ted Yu, who serves at the SEC as Associate Director of Specialized Policy & Disclosure in the Division of Corporation Finance. Note that Charles and Ted were speaking on the podcast in their individual capacities, the SEC disclaims responsibility for any private publication or statement of any SEC employee or Commissioner, and this podcast expresses the speakers’ views and does not necessarily reflect those of the Commission, the Commissioners or other members of the SEC staff.
1. What led Charles and Ted to become securities lawyers and join the SEC.
2. Top securities law movies and tv shows.
3. Securities law surprises in “Wall Street.”
4. Disclosure quandaries from “Succession.”
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 Liz or me by LinkedIn or email.
As Meredith noted in the blog back in early March, Nasdaq had proposed to adopt IM-5101-4, which would provide the exchange with the authority to delist a security in a situation where the Commission has previously suspended trading of that security under Exchange Act Section 12(k), and Nasdaq determines that it is appropriate and in the public interest to proceed with the delisting. The Nasdaq proposal was not approved by the Commission as it was originally submitted, and on April 16, 2026, the Commission designated a longer period within which to take action on the proposed rule change. Nasdaq submitted a superseding amendment on May 21, and the Commission published a notice and order to solicit comments on the amendment yesterday. The Commission specified that the rule change will go effective on the thirtieth day after the date of publication of notice in the Federal Register.
The Commission’s notice describes Nasdaq’s proposal, as amended, as follows:
The Exchange proposes to adopt Nasdaq Rule IM-5101-4 to provide that where a security exhibits trading activity that is indicative of potential manipulation, and the Commission has implemented a temporary trading suspension of that security pursuant to Section 12(k) of the Act (“Section 12(k) suspension”), the Exchange may exercise its authority under Nasdaq Rule 5101 to delist the security when it determines that doing so is necessary to protect investors. As proposed, the Exchange would be permitted to exercise the discretionary authority even when the security and the listed company otherwise satisfy all applicable Nasdaq listing standards at the time of determination.
The Exchange states that it would exercise its discretion to delist a company on a case-by-case basis, and in applying that discretion, it would consider whether the listed securities may be susceptible to manipulation based on factors related to concerns the Exchange and other regulators have identified with companies that previously were the subject of problematic or unusual trading, including considerations related to the company’s advisors (including auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers that are currently or have in the past worked for the company). In particular, in making the determination to delist a security, the Exchange will consider all relevant facts and circumstances [including a list of specified facts and circumstances described in the SEC’s notice].
Proposed Nasdaq Rule IM-5101-4 specifies that because trading activity that is indicative of potential manipulation may occur when a security lacks sufficient public float, investor base, or trading interest to support the depth and liquidity necessary to maintain a fair and orderly market, the Exchange may use this authority even where the potential manipulation appears to be driven by third parties with no known connection to the company, and even where Nasdaq cannot determine whether the company or any associated individual was involved. Further, the Exchange will consider evidence provided by the company that there is sufficient public float, investor base, or trading interest.
Under the proposal, Exchange Staff will issue a Staff Delisting Determination under Nasdaq Rule 5810(c)(1) if the Exchange determines to delist a security pursuant to this authority. A company can seek review of such a Staff Delisting Determination pursuant to Nasdaq Rule 5815.
One of the areas of comment on the original Nasdaq proposal focused on the discretion that Nasdaq may exercise in determining whether to delist a security in this situation, and the Commission notes that the factors are based, in part, on factors used in Nasdaq Rule IM-5101-3, which provides that the exchange may use its discretionary authority under Nasdaq Rule 5101 to deny initial listing to a company based on factors that make the company’s security susceptible to manipulation, and also include additional considerations “specific to continued listing and Section 12(k) suspensions, including, but not limited to, trading patterns, evidence of third-party social media activity, disclosure of material news, and recent securities issuances.” The notice also indicates that proposed Nasdaq Rule IM-5101-4 provides that the exchange will consider “any other material information, whether mitigating or concerning, provided by the company or otherwise available in the record of the matter; and will consider evidence provided by the company that there is sufficient public float, investor base, or trading interest to support a fair and orderly market.”
As acknowledged in the notice, Section 12(k) suspension proceedings remain very rare, but this rule change will provide Nasdaq with an ability to react to those unusual circumstances when warranted.
Yesterday, the PCAOB announced that it will convene an open meeting on June 9 to consider proposed amendments to QC 1000, A Firm’s System of Quality Control, the PCAOB’s audit firm quality control standard, which is set to go effective on December 15, 2026.
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.
May was indeed a very busy month on the SEC rulemaking front, and all indications are that we have more rulemaking action to come from the agency on a variety of fronts. While sometimes there is not as much interest in potential rule changes at the proposing phase, I would say that many people are very interested in the SEC’s latest round of proposed amendments, given the potential impact of these proposed changes on public companies, their advisors and the markets. With all of this potential change going on, you will not want to miss our 2026 Proxy Disclosure and Executive Compensation Conferences on October 12th & 13th in Orlando, Florida. We have put together an outstanding agenda and a great group of speakers who will address all of the latest developments.
If you register now, you can take advantage of our substantially discounted “early bird” rate! You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271.
Yesterday, the SEC announced that it had published its draft strategic plan for fiscal years 2026 through 2030. The SEC is soliciting public comment on this strategic plan. The announcement highlights the following three goals:
1. Renew our regulatory policy focus to support innovation, capital formation, market efficiency, and investor protection — This goal promotes clear, fit-for-purpose rules that foster responsible innovation and deter misconduct. Modernizing and simplifying disclosure practices, expanding access to private markets, and enabling new capital-raising pathways are essential to ensuring that entrepreneurs and small businesses can thrive. One objective is to provide a firm regulatory foundation for digital assets and distributed ledger technologies through a rational, coherent, and principled approach.
2. Shift our regulatory practices to increase stakeholder engagement, facilitate compliance efforts of market participants, and effectively return our enforcement approach to Congress’ original intent — This goal seeks to increase staff engagement with business and industry groups while restoring an enforcement approach that polices violations of established law such as fraud and manipulation rather than expanding regulatory reach through ad hoc enforcement actions. Other objectives include periodic, retrospective reviews of existing rules as well as an assessment of the agency’s administrative law framework.
3. Optimize our operational efficiency by enhancing our organizational structure, modernizing our technology, reforming employee performance management, and implementing robust internal performance reporting that incorporates accountability for resources and program success — This goal prioritizes technology modernization as a critical enabler of regulatory effectiveness. A comprehensive review of legacy systems – such as EDGAR – and the adoption of secure, scalable infrastructure will enhance data integrity, reduce operational risk, and support advanced analytics. The responsible use of artificial intelligence and blockchain technologies can further improve oversight, reduce costs, and unlock new efficiencies.
We covered the SEC’s last strategic planning process back in 2022, when the strategic goals were: (1) protecting the investing public against fraud, manipulation, and misconduct; (2) developing and implementing a robust regulatory framework that keeps pace with evolving markets, business models, and technologies; and (3) supporting a skilled workforce that is diverse, equitable, and inclusive and is fully equipped to advance agency objectives.
