Fiscal 2025 was an outlier year for SEC enforcement. Activity dropped, according to White & Case, to its lowest levels in a decade, owing to several trends (e.g., staffing, the fall 2025 shutdown, and expanded requirements for Commission approval), some of which are continuing into fiscal 2026. It’s probably also due in part to the SEC’s “back to basics” enforcement approach to pursue “those who lie, cheat, and steal.” While that probably means we won’t see the “gotcha” type enforcement actions that really scare financial reporting professionals (like ones premised on allegedly deficient disclosure controls with no related disclosure violation), that doesn’t mean we won’t see disclosure cases continue to be brought by the current Enforcement Staff or that every accounting case will be based on claims as clear cut as fabricating revenue.
Just last week, the SEC announced settled charges against Archer-Daniels-Midland Company (ADM) and certain former executives for materially inflating the performance of a key business segment. This seems like a classic earnings management case (albeit one involving intersegment adjustments), so no surprise that this would still be in the crosshairs. But there’s more to take away from the settlement. Since it was announced during Northwestern Pritzker School of Law’s Securities Regulation Institute, the enforcement panels had a recent case to discuss, and I benefited from their wisdom.
During the “SEC Enforcement and Investigations” panel, Davis Polk’s Fuad Rana described the charges as involving real accounting issues that require judgment, noting that this was the first time this administration has pursued an accounting theory that wasn’t fabricating revenue or hiding expenses, and it still brought a scienter-based fraud charge. (ADM had restated its financials, and a criminal investigation had been opened, but closed with no charges.) He also said it was unclear what benefits the company derived from cooperation and remediation. It still received the highest charge and a penalty, although its penalty might have been lower than it would have been in the absence of the cooperation and remediation. He acknowledged there was a focus on individual accountability, but said this settlement looked similar to past accounting cases.
As John shared a few years ago, discussions about “meeting analysts’ expectations” and “making our numbers” should raise a big red flag for anyone who hears them. In the moment, they may be mis- (or accurately) interpreted as encouragement to improperly get creative with numbers, and even if they don’t, might at least give that impression if later viewed by a regulator or private litigant.
Continuing on the enforcement theme, there was more to share from the “SEC Enforcement and Investigations” panel at SRI. Goodwin’s Jonathan Hecht stressed during the panel that, while SEC leadership has focused on overt misconduct in speeches and statements, there are factors that keep less egregious disclosure cases in the SEC’s crosshairs (even when negligence is involved rather than knowing or reckless fraud). Specifically:
– The SEC is focused on individual accountability and measurable investor harm, both of which are implicated in disclosure cases. Senior executives are directly involved. They speak on earnings calls and have to certify SEC filings, so the risk of individual accountability and liability is high.
– The SEC perceives investor harm as acute when disclosures are at issue because they can point to the market reaction when corrective disclosures are made. That gives measurable materility of the investor harm (that could be addressed by a fair fund) from the misstatement or omission.
The speakers called out the life sciences space as an area that continues to be ripe for enforcement. For example, near the end of last month, the SEC settled proceedings against former executives of biopharmaceutical company Spero Therapeutics for omissions and mischaracterizations of the FDA’s communications regarding the efficacy of the company’s lead drug candidate that misled investors. As this Foley blog highlights, this case notably involved non-scienter-based charges, despite the factual allegations, that were only brought against individuals.
Needless to say, it behooves all securities lawyers to continue reading their clients’ disclosures with healthy skepticism and an eye for consistency. Now, I know no one’s going to reduce the rigor around their financial reporting process just because SEC leadership says it’s focused on lying, cheating and stealing, but it seems worth reiterating because everyone’s paying close attention to rapidly evolving areas like AI, where everything’s new and shiny and moving a mile a minute — and disclosure controls may be struggling to keep up.
We’ve posted the transcript from our recent webcast – “ISS Policy Updates and Key Issues for 2026.” ISS’s Marc Goldstein provided a recap of what transpired during the 2025 proxy season, discussed the proxy advisor’s recent policy updates and shared thoughts on some issues companies will face in the 2026 proxy season. Davis Polk’s Ning Chiu & Jasper Street Partners’ Rob Main joined the dialogue with Marc and shared their key themes for 2025 and tips for navigating 2026. They discussed:
– The factors driving director opposition
– When ISS might support a DExit proposal
– The change to ISS’s policy regarding responsiveness when support for Say-on-Pay was low the prior year
– The expected impact of the change from three to five years in part of ISS’s quantitative evaluation of a company’s pay program
– When ISS considers security spend levels to be an “outlier” and the supporting disclosure the proxy advisor looks for
– ISS’s case-by-case approach to E&S proposals
– Thoughts on popular governance proposal topics
– ISS’s FAQ on the omission of a shareholder proposal in the absence of no-action relief
– Plans to continue its benchmark policy
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.
Although Friday brought news of a funding deal and suggestions that the current shutdown isn’t *supposed to* continue past today or tomorrow, Corp Fin Staff posted pre-shutdown guidance late Friday afternoon. (The Staff has to wait for the green light from elsewhere in the government to be able to post that guidance.)
In terms of how this guidance compares to the last shutdown:
– It continues to reflect the helpful update Corp Fin released a week into the last shutdown regarding reliance on Rule 430A to omit your offering price when filing a registration statement that would become effective after 20 days pursuant to Section 8(a).
– It now addresses another pain point from the last shutdown relating to upsizing an offering using Rule 462(b). New Q&A 13 says:
Q: Can I rely on Rule 462(b) to file a registration statement that becomes effective upon filing to register additional securities of the same class(es) as were included in an earlier registration statement for the same offering if the earlier registration statement went effective by operation of law pursuant to Section 8(a) of the Securities Act?
A: Because the staff will not be available to review or accelerate the effectiveness of registration statements during the shutdown, as long as the other conditions of Rule 462(b) are met, we will not recommend enforcement action to the Commission if a company relies on Rule 462(b) when the earlier registration statement went effective by operation of law due to staff being unavailable to review or accelerate effectiveness during the shutdown.
– It also formalizes guidance that the Staff had informally shared earlier last week — that it was willing to accelerate registration statement effectiveness for IPO issuers that had cleared comments and flipped public but were still waiting for the 15 days to run if they requested effectiveness as of 4 pm ET or later on Friday, January 30, prior to the shutdown. New Q&A 8 reads:
Q: I originally submitted a draft registration statement for confidential review and subsequently filed the registration statement, and all non-public draft submissions, publicly. The 15-day waiting period referenced in Section 6(e)(1) of the Securities Act and the Division’s Enhanced Accommodations for Issuers Submitting Draft Registration Statements (March 3, 2025) will not expire prior to the shutdown. Will the Division consider an acceleration request?
A: Yes, if the company has publicly filed the registration statement and all non-public draft submissions, the Division will consider a request for acceleration as long as (1) there are no outstanding staff comments on the registration statement, (2) the company requests acceleration of effectiveness as of 4:00 p.m. or later on the final business day (Friday, January 30, 2026) prior to the shutdown, and (3) the company represents in its request for acceleration that it will not commence a road show or, in the absence of a road show, conduct any sales, until at least 15 days after it filed the registration statement publicly. A company considering this option should submit its acceleration request as soon as possible.
Hopefully, to the extent this was relevant to issuers, their counsel was in contact with the Staff before this guidance came out or was able to move quickly once it went live. While it seems this opportunity has expired, it’s something to keep in mind for the next shutdown. It’s also yet another example of Corp Fin Staff’s willingness to make reasonable accommodations so deals can get across the finish line despite shutdown roadblocks. (And evidence, more generally, of the Staff continuing to show its commitment to facilitating capital formation.)
* Senate Democrats and the White House reached an agreement late last week to fund most of the federal government until September 30 and fund the Department of Homeland Security for 2 weeks while discussions continue on immigration enforcement. Appropriations still lapsed as of 12:01 Saturday morning because the modified, Senate-approved spending package has to go back to the House, which is supposed to vote tonight or tomorrow. If it passes (it could go either way), it won’t be the shortest shutdown ever (which lasted a mere 6ish hours), but at least it will mean avoiding the challenges that come with the SEC being furloughed for weeks.
Last month, NYSE American filed a proposal with the SEC to amend its initial listing requirements (historically viewed as more flexible) to closely align with Nasdaq’s by adding a new minimum market value, focusing on unrestricted publicly held shares, and increasing the minimum listing price. This Morgan Lewis alert describes the changes. Here are two excerpts:
Under NYSE American’s proposal, each of the four initial listing standards in Section 101 would be amended to require a minimum market value of Unrestricted Publicly-Held shares at the $15 million level for standards 1, 2, and 3, and $20 million for standard 4. Any company listing in connection with an IPO or other underwritten public offering would be required to satisfy the Unrestricted Publicly-Held Shares requirement solely from offering proceeds. “Restricted Securities,” even if not held by insiders or 10% holders, would no longer count toward satisfaction of this requirement.
NYSE American’s proposal would also impose a uniform $4.00 minimum initial listing price across all initial listing standards. This represents an increase from current NYSE American requirements, which permit minimum initial listing prices of $2.00 or $3.00 per share depending on the applicable listing standard.
Once approved (the SEC hasn’t posted this proposal for notice & comment on its website yet), these changes will make it harder for companies to list on NYSE American, with broader implications for the market — and for the goal of getting more companies to go public.
Historically, issuers have chosen NYSE American in part because its initial listing standards offered greater flexibility than those of Nasdaq, particularly with respect to liquidity, public float composition, and the ability to rely on legacy or resale shares to satisfy listing requirements. Such flexibility has made NYSE American an attractive venue for smaller or earlier-stage companies, companies with significant insider or employee ownership, and issuers seeking to limit dilution by keeping primary offerings smaller at the time of listing.
The proposed changes would significantly narrow that flexibility. Employee equity and other outstanding shares would no longer support initial listing eligibility as shares issued under employee equity plans, shares subject to lockups, or other restricted securities would not count toward initial listing liquidity thresholds.
Issuers listing in connection with an IPO would need to size their offerings to independently satisfy the $15 million market value of unrestricted publicly held shares requirement, potentially requiring larger primary offerings and resulting in increased dilution. Further, by requiring liquidity thresholds to be met using only unrestricted publicly held shares, the proposal would reduce the ability of issuers to structure listings around resale or legacy float and further narrow the practical differences between NYSE American and Nasdaq with respect to initial listing liquidity standards.
With Nasdaq’s many proposals to tighten listing standards and purge the exchange of stocks that maybe shouldn’t be listed on an exchange anymore — or ever have been listed in the first place, it seems to be getting dicey out there for microcap companies. I understand why the exchanges are pursuing these updates, but there’s also the SEC’s goal of bringing back small-cap IPOs to think about.
On Friday, the SEC announced the appointments of Demetrios (Jim) Logothetis as Chairman and Mark Calabria, Kyle Hauptman, and Steven Laughton as Board members of the PCAOB. The SEC stated that George Botic will continue to serve as a Board member and will remain Acting Chairman until Mr. Logothetis is sworn in.
Demetrios (Jim) Logothetis serves on the board of The Republic Bank of Chicago and on the advisory council of a privately owned consultancy firm. He previously spent 40 years at E&Y.
Mark Calabria is currently an Associate Director and Chief Statistician with the U.S. Office of Management and Budget and a Senior Advisor to the Office of the Director of the Consumer Financial Protection Bureau.
Kyle Hauptman is currently the Chairman of the National Credit Union Administration. He previously served on the Senate Banking Committee staff, as a staff director and as Economic Policy Counselor to a senator.
Steven Laughton is currently Board Counsel to PCAOB Board Member Christina Ho. He spent more than thirty years with the U.S. Department of the Treasury, including as Senior Counsel to the General Counsel.
In Chairman Atkins’s statement, he thanked the current board members and noted that the transition to the new board will occur very quickly over the next few weeks.
Last month, John observed that “DExit” hasn’t been a stampede by any stretch, based on the (limited) number of reincorporation proposals and high percentage of Delaware-incorporated IPOs that occurred in 2024 and 2025.
A recently published dataset for entity formations, gathered by Professor Andrew Verstein at the UCLA School of Law, takes that one step further – Delaware experienced a “sharp increase” in incorporations in 2025, on an absolute basis as well as relative to other states. Here’s more detail from this HLS blog:
The Corporate Census is a draft paper and accompanying dataset that tracks entity formation in the United States. It presents a near-complete dataset of entity formations — including corporations, LLCs, and other business forms — for all U.S. states, dating back to the nation’s founding. It allows entity-by-entity, week-by-week, analyses and comparisons across states. The database includes about 100 million formations and allows for granular, longitudinal analysis of state popularity, entity-type trends, and legal or economic shocks.
And:
About 30% more Delaware corporations formed in 2025 than in 2024, greatly exceeding the prior trendline. This, while national incorporation levels remained flat.
This was an absolute increase, not driven by a decline in formation in other states. While Delaware averaged 1090 new corporations per week in 2020-24, that number increased by 309 in 2025. The rest of the nation as a whole enjoyed no statistically significant increase in corporate formation, nor did any other state individually. Plainly, something happened in 2024 or was anticipated for 2025 that rendered Delaware more attractive as a site of formation in 2025.
I was on the edge of my seat after reading that line, but the paper doesn’t arrive at any firm conclusion about what may have driven Delaware’s popularity last year, and we also can’t predict for sure whether the trend will continue. Nevertheless, it’s helpful to have numbers, instead of just “vibes,” about where Delaware stands.
We’ve known for a while that companies have been staying private longer and raising lots of capital along the way. The recent report from the SEC’s Office of the Advocate for Small Business Capital Formation confirmed that once again. The Staff found:
– The number of comapnies remaining private eight years or more after receiving their first VC round had quadrupled from 2014 to 2024, and
– 45% of unicorns are 9+ years old.
But hope springs eternal, and 2026 may be the year when more of them (finally, hopefully) move forward with a public debut.
These mega deals bring a different dynamic to the table when it comes to structuring the IPO and everything that goes into it. For example, this article from The Information gives a reminder that “innovative” lockups are on the table. Here’s an excerpt:
At least two large banks largely ruled out a standard IPO lockup period of either 90 to 180 days and are discussing how to design a staggered lockup release for the companies.
. . .
One option is staggering the dates to prevent a wave of selling on one day. IPO bankers and lawyers said investors could be allowed to sell a portion of their holdings every 20 to 30 days. Releases can also be triggered when the stock hits a certain price, they said.
The article notes that some companies that are believed to be in the pipeline have raised tens of billions of dollars privately. So, banks are looking to mitigate the risk of a mass selloff while also giving key insiders a path to liquidity.
Lockup variations aren’t unprecedented. Overall, underwriters have gotten more comfortable with early release mechanisms and see them as a tool to help with public float – e.g., early release based on stock price performance (as noted above), accommodating a release if the lockup is set to expire during a quarterly blackout period, or both. But there are still sensitivities, especially close to the IPO. Keep in mind that immediate sales might have collateral impacts on Section 11 liability as well – which is something I blogged about a few years ago in the lockup context. Meredith gave an update last summer on where this theory stands.
In this 21-minute episode of the Women Governance Trailblazers podcast, Courtney Kamlet and I spoke with Wei Chen – who serves as Chief Legal Officer and Executive Vice President of Government Affairs at Infoblox, and also founded The Atticus Project. We discussed:
1. Key leadership lessons that have shaped Wei’s approach to governance and compliance across different corporate cultures.
2. Wei’s vision for The Atticus Project to use AI tools to transform contract review and M&A diligence in corporate legal environments.
3. Practices boards can adopt to oversee technology risks and opportunities — including how to prepare for evolving regulations and use cases.
4. How governance professionals can credibly add value to corporate AI practices, in order to encourage responsible use of AI while also harnessing opportunities.
5. Wei’s vision for how AI will reshape corporate governance and the role of legal advisors in the next 5-10 years, and Wei’s advice for the next generation of women governance trailblazers.
To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.
As of the time of this blog, it’s looking pretty likely that our government will shut down this weekend. I’m not sure whether to call it “good news” that we still have muscle memory from the last time around – but if nothing else, those recent experiences help us know what to expect. As a refresher:
– Ahead of the shutdown, we typically see the SEC post an operations plan and the Corp Fin Staff post pre-shutdown guidance – the August/September 2025 documents are here and here, respectively. The catch is that the Staff has to wait for the green light from elsewhere in the government to be able to post the guidance – and with the last go-round, that came very late in the game.
– Last time, the Corp Fin Staff provided a helpful update mid-shutdown, which we expect to carry forward, and I won’t be too surprised if the guidance also addresses some other pain points that were under discussion last fall.
– The exchanges are likely to step into more of a gatekeeping role.
– The Staff is still working through a large backlog of registration statement reviews, which is affecting turnaround times. Those will continue to pile up if the Staff gets furloughed again. A shutdown may also affect rulemaking priorities.
– Thankfully, this year’s Rule 14a-8 process means that the shutdown won’t derail proxy season. In the past, a proxy season shutdown would not only exacerbate the backlog that the staff would need to address upon their return, but everyone would be waiting for no-action letters and wringing their hands over how to proceed.
– We have a handful of helpful post-shutdown insights into how things will work when the government eventually reopens, which clients will surely be asking about and will help you with your game plan.
Every shutdown is unique, so we can’t be certain that everything will be handled the same way as it was last fall. But at least we know the general playbook and what to watch for. Stay tuned.
