Like a bad on-again, off-again relationship, tariffs were “off” early Friday when SCOTUS issued its opinion in Learning Resources v. Trump – ruling 6-3 that the International Emergency Economic Powers Act doesn’t give the president the authority to unilaterally impose a tax. Before the day was out, the White House issued a proclamation imposing a (mostly) across-the-board 10% import – beginning tomorrow, February 24th, lasting for a limited time period of 150 days, and subject to a list of product exceptions. Here’s the fact sheet.
Of course, in today’s world, you can’t just rely on an official fact sheet. The president said in a Truth Social post on Saturday that he planned to raise the Section 122 tariff to the statutory cap of 15% – and also indicated that the administration would continue to work to issue new tariffs. See this Politico article for more about that, this summary from GHY International (a customs brokerage) for key points on how the Section 122 tariff is expected to apply, this Global Trade Alert explainer for a comparison of the Section 122 tariffs to the IEEPA tariffs that were struck down, and this NYT article for other potential tariff avenues.
Similar to last year, this tariff drama is playing out at a time when many companies are finalizing their Form 10-K. For better or worse, companies have become somewhat accustomed to flip-flopping and uncertainty on this topic, so that may already be built into many tariff-related disclosures. We’ve also blogged about tariffs in one way or another over 3 dozen times since February of last year (compared to 4 mentions in the entire history of the blog before that) – and we continue to post resources in our “Trump Administration Tariffs” Practice Area for members – so these issues are relatively fresh in disclosure lawyers’ minds.
Nevertheless, the disclosure issues still require a fresh think each time around because the facts and circumstances are always evolving. And although it would be great if you could simply unwind your tariff disclosure to pretend like this all never happened, the reality is that things are still very uncertain and it’s unlikely we’ll return to the old status quo. So, I’ll recap a few key points:
– Risk factors should discuss material company-specific impacts (and ongoing uncertainties). This AP article gives an example of how tariffs (and their recission) affect companies in different ways. Keep in mind that even if a company is sourcing domestically, the global trade war may affect local supply and pricing. We’ve blogged many times about different types of risks that could arise – a few examples relate to prices, costs of goods, inflationary impact, supply chain disruptions, trade deal uncertainty, and adaptation decisions.
– Non-GAAP issues could come into play if the company has been adjusting for tariff impacts.
– As Meredith shared last fall, companies have been discussing tariffs in the MD&A (consider similar material issues as noted above for risk factors), Quantitative & Qualitative Disclosures About Market Risks, and even in the financial statements in some instances. Affected companies will need to consider whether to add, remove, or modify any of these disclosures.
– Reuters reported that thousands of companies have sued the administration over tariffs and are seeking refunds. Whether and when refunds will be distributed is very much up in the air. Especially for large companies, it may be a stretch to say that this type of thing is a material legal proceeding not incidental to the business, but securities lawyers should think through Item 103 of Regulation S-K to make sure. It doesn’t seem like this type of proceeding would generally involve a loss contingency either – but I’m not an accountant (or a litigator)! Companies should make sure to evaluate their particular circumstances.
John blogged last week that debt offerings are having a moment – in large part to fund AI-related capex – and “hyperscalers” are negotiating atypical terms. The AI boom is also one factor that’s driving a surge in convertible notes issuances, according to this Cleary memo.
In the converts space, PIPEs and pre-IPO issuances are becoming more common – and the notes often look different than their traditional counterparts. The memo says that PIPE convertible notes are including bespoke features such as:
– Governance rights, such as board or observer seats, and the right to vote the underlying shares on an as-converted basis.
– Consent rights over items such as changes of control, M&A or other extraordinary transactions; material asset sales, investments, expenditures, borrowings, or issuances; related party transactions; material changes to organizational documents or lines of business; and other material adverse changes.
– Guarantees or collateral.
– Financial covenants.
– Prepayment provisions.
– Purchase price adjustments beyond standard anti-dilution provisions in capital markets convertible notes – e.g., ratchets for lower-priced issuances within a certain period.
– Equity sweeteners, such as warrants.
– Paying interest cash or in kind (PIK interest), or a combination of the two.
– Alternative return calculations – e.g., based on a specified internal rate of return (IRR) or multiple on invested capital (MOIC).
– An extended lock-up or standstill for the investor, as well as restrictions on hedging and transfers.
– Registration rights to facilitate SEC registered resale.
– Issuing in the form of preferred stock, rather than debt.
The memo says that converts are also playing a growing role in the pre-IPO ecosystem, with pre-IPO convert deals often involving discussions of similar features as PIPE converts. See the memo for a more nuanced discussion. If you’re looking for more on converts, check out our “Convertible Debt” Practice Area for more resources.
We’ve posted the transcript for our annual webcast “The Latest: Your Upcoming Proxy Disclosures” with Mark Borges from Compensia and CompensationStandards.com, Dave Lynn of Goodwin Procter, TheCorporateCounsel.net and CompensationStandards.com, Alan Dye from Hogan Lovells and Section16.net and Ron Mueller from Gibson Dunn. They broke down all you need to know for the upcoming proxy season. The webcast covered the following topics:
– Status of SEC Executive Compensation Disclosure Requirements
– Other Possible Topics for SEC Review
– Incentive Compensation – Disclosure Considerations for Tariff Challenges and Discretionary Adjustments
– Executive Security and Other Key “Perks” Disclosures
– Investor Perspectives: “Homogenization” and Performance Equity
– Proxy Advisors – Impact of the Executive Order
– Proxy Advisors – Voting Policy Updates for 2026
– Proxy Advisors – Impact of Announced Move Towards “Customization” of Voting Policies
– Proxy Advisors – Status of Legal Challenges in Texas and Florida
– New Challenges with Shareholder Engagement
– Clawback Policies – Lessons from 2025
– Compensation-Related Shareholder Proposals in 2026
– ESG and DEI Goals: Impact of Shifting and Conflicting Perspectives
– Managing Stock Price Volatility When Granting Equity
This program covered a lot of ground on how to anticipate and handle difficult proxy season issues. Members of this site can access the transcript of this program for free – as well as on-demand CLE credit. If you are not a member of TheCorporateCounsel.net, email info@ccrcorp.com to sign up today and get access to the replay and full transcript. It’s a great way to get up to speed!
While securities fraud claims based on alleged “hypothetical risk factors” aren’t likely to be a high priority for the SEC in the current environment, they continue to get some traction in private securities litigation. The 9th Circuit’s decision earlier this month in Const. Laborers Pension Trust v. Funko, (9th Cir.; 2/26) provides further evidence of that – and highlights the potential for these claims to preclude companies from relying on the PSLRA’s safe harbor for forward-looking statements. Here’s an excerpt from The 10b-5 Daily’s blog about the case:
In [Funko], the plaintiffs alleged that Funko’s “risk disclosures” about its ability to manage its inventory in the future “concealed the facts that Funko had already failed to manage its inventory and that its business, financial condition, and operations were already adversely affected.” The district court found that these risk disclosures were protected by the PSLRA’s safe harbor because the plaintiffs failed to adequately plead actual knowledge of their falsity. On appeal, however, the Ninth Circuit panel appears to have created a new exception to the safe harbor.
In particular, the panel concluded that because the alleged omission related to Funko’s current failure to manage its inventory, the risk disclosure “implicitly serves as a comment on the present state of affairs, because it suggests that the circumstance posing the risk has not yet occurred.” And, as a result, the risk disclosure “does not fall under the safe harbor for forward-looking statements because its falsity lies not in the failure to predict the future, but in the implicit assertion about the present that the risk identified has not happened yet.” In other words, if a plaintiff alleges an “affirmative misrepresentation theory” then the otherwise forward-looking risk disclosure is converted into a statement of present fact and is not subject to the safe harbor.
The blog notes that the 9th Cir.’s position here is unusual, and that taken to its logical conclusion could essentially gut the PSLRA’s safe harbor, because “virtually every forward-looking statement securities fraud claim is based on the alleged omission of some ‘undisclosed fact tending to seriously undermine the accuracy of the statement.’”
It’s worth pointing out that federal courts have long had a somewhat tortured relationship with the PSLRA safe harbor for forward-looking statements. If you’re interested in learning more about how judges have sometimes twisted themselves into a knot to avoid applying the safe harbor, check out this article that I wrote for The Corporate Counsel newsletter a few years ago.
Over on The Business Law Prof Blog, Ben Edwards provides some interesting statistics on the jurisdiction of incorporations for companies that went public in 2025. Those statistics come from a slide deck prepared by Houlihan Lokey’s Robert Rosenberg for a PLI M&A conference in which both gentlemen participated. Houlihan Lokey’s data indicates that while Delaware was the jurisdiction of incorporation for over 80% of IPOs conducted in 2022-2024, its share fell to just under 62% in 2025. Nevada was the jurisdiction of incorporation for nearly 17% of IPO issuers in 2025, while Texas came in at just under 4%.
Does this mean it’s time for Delaware to panic? Ben doesn’t think so:
Although I can’t speak for the other panelists here, I think we all expect that Delaware will remain king of the hill by a substantial margin. There have been some shifts and some companies moving, but Delaware will continue to grow both in terms of overall numbers from private entity formation, public company IPOs, and public companies deciding to move to Delaware from other jurisdictions.
Delaware’s overall numbers depend on both DExits and DEntries. Companies sometimes shift their incorporation from one jurisdiction to another. As long as more are moving in than moving out, Delaware will continue to grow. Delaware has a dominant product. That isn’t likely to change anytime soon. But that doesn’t mean that there isn’t any room for other states to offer alternatives.
Traditionally, most companies confronted with an SEC enforcement action have opted to negotiate a settlement with the agency. However, this Dentons blog says that with the change in the SEC’s approach to corporate penalties and uncertainties regarding the continued viability of disgorgement in cases not involving investor harm, companies should give some thought to potentially litigating with the SEC:
Corporate penalties took a nose-dive following the change in administration, and this downward trend is generally expected to continue in 2026, with the possibility of a change in penalty policy. And expect the SEC to consider giving more credit for cooperation and remediation than before. There is also more uncertainty about the SEC’s use of the disgorgement remedy until the US Supreme Court decides later this year whether the SEC must show “pecuniary harm” to investors to obtain disgorgement.
Given this uncertainty, litigating instead of just settling should be carefully considered as an option in the defense toolkit. Litigation, or even the credible threat of litigation, can often yield better results, especially when regulators are seeking unreasonable monetary and non-monetary sanctions.
The blog also speculates on likely corporate enforcement targets, and says that companies with foreign ties, those with prior regulatory issues, and companies that are promoting new products (whether AI-related or not) may find themselves on the SEC’s radar.
Executive search firm CristKolder recently published its 2025 C-Suite Volatility Report, which focuses on C-Suite changes & demographics among Fortune 500 and S&P 500 companies. Here are some of the highlights:
– 78 CEO positions in this cohort of companies turned over last year, with the consumer sector leading the way at 24.4%, while the energy sector experienced the most stability with a turnover rate of just 9.0%.
– 120 CFO positions turned over, with nearly 20% of companies experiencing a change in CFOs last year. The services sector led the way with a 20.8% turnover rate, while the financial sector experienced only 7.5% CFO turnover.
– Only 16.5% of new CEOs and 12% of new CFOs were recruited externally last year. That’s much lower than the historical averages of 23% and 39%, respectively.
– The percentage of female CEOs and CFOs continues to trend upward, with female CEOs increasing to 9.1% and CFOs to 16.5%. The number of companies with female CEOs has nearly doubled in the past decade.
– CEOs and CFOs are also becoming more ethnically and racially diverse, with 14.6% of CEOs and 14.9% of CFOs being from diverse backgrounds.
The report is full of other interesting demographic tidbits, including the fact that more CEOs and CFOs come from public universities than private ones. That gives me an excuse to point out that two institutions to which I’ve paid considerable amounts in tuition topped the CEO leader board among public universities. The University of Virginia (where I went to law school) & Miami University (OH) (our youngest son’s alma mater) both accounted for 9 CEOs. They shared the top spot with Meredith’s alma mater, The University of Michigan.
Speaking of C-Suite turnover, a recent Weil memo addressing key corporate governance, engagement, disclosure and annual meeting topics highlights the importance of the board’s role in CEO succession planning:
With CEO turnover reaching record levels, boards face heightened pressure to reinforce succession planning processes and build deeper leadership pipelines. A November 2025 report by The Conference Board, Egon Zehnder, ESGAUGE and Semler Brossy notes that CEO succession announcements by S&P 500 companies over the last year increased to 13% as of October 2025 (up from 10% in 2024). This trend reflects broader market volatility, activist pressure, and shifting investor expectations around leadership stability.
In this environment, effective succession planning requires boards to evaluate a wider slate of candidates, prepare for both long-term and emergency transitions, and identify the mix of skills and strategic priorities that will reassure investors that strong leadership is both in place and actively being developed. Robust planning not only supports continuity but also mitigates the risk of disruption to strategy, operations, and overall performance.
Other areas addressed in the memo include risk oversight, board composition, human capital and executive and board compensation, and the shifting shareholder engagement landscape.
In order to fund their roughly eleventy squijillion dollars in projected AI-related capex over the next several years, prominent hyperscalers like Alphabet, Amazon, Alphabet, Meta, Microsoft, and Oracle have turned to the debt markets in a big way. According to this recent Reuters article, those companies have raised over $120 billion in corporate bonds last year. Not surprisingly, investor demand for these securities is very high, but Reuters points out that even by investment grade issuer standards, the covenants in some of these recent deals have been remarkably light:
Investment-grade borrowers with strong credit profiles typically include fewer covenants in debt agreements than their junk-rated counterparts. Yet most include basic investor guardrails, especially a standard change-in-control covenant protecting investors in the event of M&A or another change in ownership. Alphabet’s bonds do not carry these protections, noted Anthony Canales, head of global research at New York-based Covenant Review.
The five major AI hyperscalers – Amazon, Alphabet, Meta, Microsoft, and Oracle – issued $121 billion in U.S. corporate bonds last year, according to a January report by BofA Securities.
Alphabet and Amazon did not respond to requests for comment, while Oracle, Meta and Microsoft declined to comment.
Oracle’s $25 billion note offering on February 2, and Meta’s $30 billion bond offering in October, similarly lacked change-in-control and other basic covenants, Canales noted.
The article cautions that smaller players may be in for a rude awakening if they think they’ll get similar terms for their own offerings. As with everything else that’s AI-related, size matters in the debt markets too.
In a speech delivered yesterday at the Texas A&M Corporate Law Symposium, SEC Chairman Paul Atkins provided some details about the kind of disclosure reforms he wants the agency to pursue. I’m going to take these one-by-one and try to summarize the key points Chairman Atkins raised during his remarks. But he had quite a bit to say, and you should definitely read his speech in its entirety. Anyway, let’s get started.
Executive Comp Disclosure. Chairman Atkins said that the three principles driving the SEC’s efforts to reform executive comp disclosures were rationalizing, simplifying and modernizing the rules governing those disclosure requirements. In terms of rationalizing the rules, he said that materiality should be the SEC’s “north star,” and stated that the current requirement to provide detailed compensation information for up to seven people isn’t consistent with that objective. He said that he agreed with commenters who said that the number of executives for whom compensation info is required should be reconsidered, and that the level of disclosure should be calibrated with its cost.
Chairman Atkins singled out the PvP disclosure rules when discussing the need to simplify compensation disclosures. He said that SEC disclosure requirements should be “intelligible by a reasonable investor and practical for a company to comply [with], without the need for a cottage industry of ultra specialized consultants,” and that the current PvP disclosure rules flunked this test.
With respect to the need to modernize comp disclosures, the Chairman called out the current treatment of executive security arrangements as a “perk.” He pointed out that we live in a different world than the one 20 years ago when the SEC decided that executive security arrangements were not “integrally and directly related to job requirements,” and that the SEC’s rules needed to keep up with modern business realities.
Regulation S-K. Chairman Atkins called out “disclose or comply” line items that indirectly compel companies to toe the line on specific governance practices by forcing them into awkward disclosures if they don’t. He cited some of Item 407’s requirements, such as the need for a company without a nominating or compensation committee to explain why that structure is appropriate, as examples of this kind of “shaming disclosure.”
Chairman Atkins characterized these requirements as an “attempt to indirectly regulate, or set expectations for, matters of corporate governance.” He said that absent a Congressional mandate, it wasn’t the SEC’s role to enforce evolving “best practice” governance standards through disclosure requirements.
Chairman Atkins also cited provisions of Reg S-K that forced companies to comply with impractical disclosure requirements, such as the need to track down beneficial ownership information for NEOs who departed during the prior year in order to complete the current year’s beneficial ownership table in the proxy statement required by Item 403. He also cited the broad definition of “immediate family members” used in Item 404’s related party transactions disclosure requirements as imposing potentially impractical obligations on public companies.
Risk Factors. The final disclosure reform topic that Chairman Atkins addressed was the need to curb the relentless expansion of risk factor disclosures. He suggested that the solution depends on whether one views risk factor disclosure as primarily a tool to communicate what management believes are the material risks facing the business to investors, or a means to establish litigation defenses.
If the former, Chairman Atkins suggested that one approach might be for the SEC or the company itself to “maintain a set of risks, which could be published separately outside of the annual report, that broadly apply to most companies across most industries,” which would serve as a sort of “general terms and conditions” for investments. If the latter, then he suggested the solution might lie in adopting a safe harbor “stating that failure to disclose impacts from publicized events that are reasonably likely to affect most companies” won’t create liability under the securities laws.
My guess is that we shouldn’t read the Chairman’s comments on these topics in isolation. For example, the principles of rationalizing, simplifying & modernizing disclosure requirements likely have application to the SEC’s review of Reg S-K line items beyond Item 402. Similarly, Item 407 isn’t the only S-K line item that involves potential “shaming disclosures” (Items 405 and 408 come to mind). Some of those line items may also get a close look from the SEC, although they may have policy justifications that don’t involve pushing governance “best practices.”
As for the ever-expanding length of risk factor disclosures, I’m not sure there’s a comprehensive fix to this problem. The SEC can only protect companies from liability under the securities laws, and unfortunately, that’s not the only source of potential disclosure-related claims public companies might face.
Chairman Atkins also gave a shoutout to Texas for its recent legislative efforts at corporate reform, and for its enactment of SB 29 in particular. Among other things, that statute allows Texas corporations to include jury waivers and exclusive forum provisions in their charter documents.
