Yesterday, Corp Fin released a batch of updates to the Financial Reporting Manual. I am very happy that the Staff keeps this resource current! As a young associate attempting to understand securities law, I remember feeling like I’d stumbled upon a hidden treasure when I first encountered the FRM in its current form almost 20 years ago (although I must confess that I still did not use it quite as much as TheCorporateCounsel.net, which of course covered the current Manual’s debut in a blog).
The latest updates follow a batch released in July and address a variety of items. The revisions that are likely of most interest to this crowd are the ones made for:
– The May 20, 2020 amendments to the S-X Acquisition Rules (S-X 3-05, S-X 3-14, S-X 8-04, and S-X 8-06) from SEC Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” which were effective January 1, 2021. The updated Sections are 1140.8, 2200.2, 2200.5, 2340 2345, 2360, 5210, 6120.11, 6220.7, 6340.2, 6410.8, 6410.10, 10220.5, and 12250.
– Exchange Act Reporting Requirements for Transition Period – Section 1360.2
– Acquired or To-Be-Acquired Business is Not a Foreign Business But Would Be an FPI – Section 2935.22.
– FPIs Voluntarily Filing on Domestic Forms – Section 6120.6.
– FPI Disclosures of Changes in Accountants & Disagreements – Section 6830.
As a reminder, the Staff includes a disclaimer on the FRM landing page, which states in part:
Because of its informal nature, the Manual does not necessarily contain a discussion of all material considerations necessary to reach an accounting or disclosure conclusion. Such conclusions about a particular transaction are very fact dependent and require careful analysis of the transaction and of the relevant authoritative accounting literature and Commission requirements. The information in this Manual is non-authoritative. If it conflicts with authoritative or source material, the authoritative or source material governs. The information presented also may not reflect the views of other Divisions and Offices at the Commission. The guidance is not a rule, regulation or statement of the Commission and the Commission has neither approved nor disapproved this information.
Reuters had reported that SEC Chair Paul Atkins was pushing for a delay, due to feedback from audit firms. Here’s more detail about the postponement, from the PCAOB’s announcement:
The Public Company Accounting Oversight Board (PCAOB) announced today that it is postponing for one year, to December 15, 2026, the effective date for QC 1000, A Firm’s System of Quality Control, and other new and amended PCAOB standards, rules, and forms adopted by the Board on May 13, 2024. The Board’s action also postpones the related rescission date of certain rules and standards that are currently in force.
In adopting QC 1000, the Board expressed the view that a 2025 effective date struck an appropriate balance between the benefits to investors of having QC 1000 take effect as soon as practicable and the need to allow sufficient time for registered public accounting firms to design and implement robust QC 1000-compliant quality control systems. Today’s decision by the Board to postpone the effective date takes into account information from various sources that some firms have encountered implementation challenges that, as a practical matter, may be insurmountable within the previously established timeframe. The Board believes that an additional year is sufficient time for firms that have encountered implementation challenges to overcome those challenges.
The Board has not made or proposed any changes to the text of the new and amended standards, rules, or forms from the text adopted by the Board. Nor is there any change to the Board’s previous statement that registered firms are permitted to elect to comply with the requirements of QC 1000 before the effective date (except as to reporting to the PCAOB on the evaluation of the quality control system).
It is too bad Dave wasn’t up on the blog this week, because I think he is our team’s biggest Swiftie. Even though I don’t know how he feels about the Chiefs, I imagine he has been busy celebrating this week’s engagement news.
As if the lady hasn’t already done enough for the economy, the Big News also gave a nice bump to a few stocks – and (as I saw “Overheard on Wall Street” joke on X) – could have given companies with not-so-great news a good opportunity for cover. Personally, the thing I most enjoyed was Uncle Jesse & Olaf finding the perfect way to celebrate together.
If you haven’t seen their video yet – and even if you don’t much care for “TNT”! – please let the antics of John Stamos and Josh Gad carry you into this holiday weekend with a smile on your face. We’ll be back with our blogs on Tuesday.
The SEC’s Office of the Inspector General recently audited the work carried out by Corp Fin’s Disclosure Review Program in the 2023 and 2024 fiscal years. Yesterday, it issued a 22-page report with the results of the audit. Here are the 3 main recommendations:
• Update policies and internal guidance to (a) require that staff document the reasons and relevant risk factors for conducting elective annual report reviews, (b) provide clear direction for scoping annual report reviews, and (c) require that staff document scoping decisions.
• Coordinate with the SEC’s Office of the General Counsel to finalize Sarbanes-Oxley Act of 2002 section 408 guidance, including a description of all six factors to be considered and an interpretation of the minimum review period mandate.
• Consider developing a plan that prioritizes DRP goals and requirements in the event of significant staffing decreases and/or significant workload increases.
The DRP is a big task for Corp Fin, and it’s staffed with nearly 300 employees. In order to comply with the Sarbanes-Oxley Act requirement to review filings on a “regular and systemic basis,” the DRP annually selects for review a portion of the 7,400 annual reports that are filed by public companies – as well as selected transactional filings. The intent is that each company will cycle through a review at least once every 3 years.
The report says that the purpose of the Inspector General’s audit was to assess whether the DRP uses a risk-based process to concentrate resources on critical disclosures, and whether it is meeting its statutory requirements. The OIG says its recommended improvements are important for several reasons:
• Staff turnover may lead to a loss of institutional knowledge
• Potential new rules for crypto assets and other issues may create issues warranting the DRP’s attention
• The current regulatory environment may increase new issuer transactional filings
The Inspector General also encouraged the DRP management to leverage automation and technology where feasible and advisable – with a separate report on the SEC’s information technology systems. The report is full of good info about how the DRP was organized and staffed during the audit period, recent comment letter trends, and more.
We also give an overview of how Corp Fin’s Disclosure Review Program works – and how to respond to the comments that you might receive when it’s your company’s turn for review – in our “SEC Comment Letter Process Handbook.” If you do not have access to our Handbooks, Checklists, and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
I recently shared trends on The Proxy Season Blog about disclosing the board’s approach to AI oversight. Specifically, I noted that during the 2025 proxy season, more companies said that they had assigned oversight to a committee (typically the audit committee).
A related question is whether board composition is changing to reflect the impact of AI opportunities and risks. We talkeda lot about the similar topic of “cyber experts” back when everyone started to realize that incidents could affect companies across a wide variety of industries, and interest from investors and Congress in oversight & expertise eventually contributed to the SEC adopting the cyber disclosure rules in 2023 (which built on Commission-level guidance from 2018).
2. Replacing retiring directors due to mandatory retirement or tenure policies, and
3. applying the results of board and director evaluations.
Interestingly, though, the “human dynamic” seems to remain just as important. When the Chairs were asked why they felt certain directors had overstayed their welcome, they said:
– Too long of a tenure (57%),
– Cultural mismatch (26%), and
– Being too busy outside the boardroom (22%).
Notably, “cultural mismatch” nearly doubled year over year from 14% to 26%, indicating greater issues around interpersonal dynamics and cultural alignment rather than technical qualifications. This is the first year that tenure was listed as a reason for replacement.
So, culture still matters. And remember that AI in the boardroom may come in the form of tools rather than individual experts. I also blogged last year that lengthy director tenures could be catnip to some activists – and shared trends in mandatory retirement policies.
More good news for companies. The California Supreme Court decided a case late last month – EpicentRx, Inc. v. Superior Court – that gives more comfort about forum selection clauses. As described in this Gibson Dunn memo, the case centered on the enforceability of a company’s mandatory forum selection clauses in its charter and bylaws. This excerpt summarizes the holding:
The California Supreme Court unanimously reaffirmed that forum-selection clauses are presumptively enforceable and rejected the argument that courts may refuse to enforce them when they would deprive plaintiffs of the right to a jury trial.
The memo explains that this decision may make parallel litigation less likely – and shares these takeaways:
• The Court explained that forum-selection clauses are presumptively enforceable, but made clear that there can be reasons of public policy to refuse to enforce them. The Court left for another day the question what those public-policy grounds for refusing enforcement might be; it decided only that the loss of a jury-trial right alone is not enough to invalidate a forum-selection clause.
• The Court suggested that the fundamental nature of a policy may be revealed by the Legislature’s inclusion of an antiwaiver provision in a statute. If a statute itself makes clear that the rights it conveys cannot be contracted away, the forum-selection clause may not be enforceable.
• The combination of forum-selection clauses and the perception that California law is more favorable to plaintiffs in certain types of cases has often resulted in parallel litigation, with one party suing in the forum chosen in an agreement and the other party suing in California. The Court’s decision may discourage the filing of California complaints where the only policy supposedly standing in the way of enforcing a forum-selection clause is the potential loss of the right to a jury trial.
• In cases where plaintiffs continue to sue in California notwithstanding a forum-selection clause pointing to another state, defendants may continue (1) filing motions to dismiss on grounds of forum non conveniens and (if unsuccessful) petitions for a writ of mandate challenging orders refusing to enforce forum-selection clauses; and (2) filing and litigating responsive suits in the forum chosen by the parties. In those cases, the parties will race in different jurisdictions to a final judgment that may have preclusive effect in the other case.
I was a little surprised to read in this recent NYT DealBook newsletter that of the 59 companies that went public in the U.S. last quarter, 41 of them were SPACs – according to data from S&P Global. I blogged last month that the SPAC/de-SPAC route has been useful for digital asset treasury companies, but these stats show there may be room in the tent for other types of companies as well. This Dealmaker newsletter from The Information (sign-up required) points to cloud providers and defense tech firms as potential de-SPAC candidates.
Meanwhile, this SPAC Insider article says that part of the reason for the SPAC resurgence is the “SPAC-truism” that they tend to thrive when the general IPO market is also improving. Additionally, it attributes this year’s first-half stats to the view that SPACs offer an attractive middle-of-the-road approach for small and mid-cap companies. Here’s more detail:
While SPACs have enjoyed two strong quarters of IPO issuance, Traditional IPOs have lagged that momentum. However, not for long. May and June saw eToro, Circle, and Chime IPO use the traditional route to great success. Interestingly, two of those deals, eToro and Circle, were previously SPAC combination companies. However, the previous administration severely curtailed any crypto-related deals leading to both of these combinations becoming terminated SPACs.
Nonetheless, going the traditional IPO route was the shot in the arm the IPO market needed. As a result, the window is opening only for large, well established companies. On the other hand, the Traditional IPO has also become the provenance of micro and nano-cap companies, which continue to see strong numbers opt for this route as well. For the small and mid-cap companies sandwiched in between these two IPO sizes, perhaps the SPAC route provides a viable option.
However, it should be noted that tariff announcements starting in April significantly curtailed all traditional IPO activity. As a result, SPACs are currently accounting for a larger share of the overall IPO market than we’ve seen in recent quarters. In fact, in Q1-2025, SPACs accounted for 26% of all IPOs, whether that was via Traditional or SPAC route. As of the end of Q2-2025, that percentage is now 39%. However, it is anticipated there should be increased traditional IPO activity in Q3 and the percentage comprised by SPACs should come down to a more normalized level.
It seems like every day there is either a boom or bust predicted for IPOs, so we will stay tuned on how this all shakes out. While I’m not advocating for one path or another here, part of any securities lawyer’s “IPO readiness toolkit” should be understanding the different options and how they might be a fit for different clients and different market conditions. Meredith had shared potential benefits of SPACs a few months ago. And we’ve shared variousthoughts over the past year about being ready to hit the ground running!
Earlier this week, the SEC shared a bit of good news for companies considering a public offering this fall. Its first filing fee rate advisory for the 2026 fiscal year says:
The fees that public companies and other issuers pay to register their securities with the Commission will decrease from $153.10 per million dollars to $138.10 per million dollars, effective October 1.
The new fee rate will be applicable to the registration of securities under Section 6(b) of the Securities Act of 1933, the repurchase of securities under Section 13(e) of the Securities Exchange Act of 1934, and proxy solicitations and specified tender offers under Section 14(g) of the Securities Exchange Act of 1934.
This Wilson Sonsini blog links to helpful instructions from the EDGAR Filer Manual – and gives a couple of practical implementation reminders:
From and after October 1, 2025, any fee calculation materials will need to be updated to reflect this new fee rate including, for example, any materials (e.g., Excel worksheets) used to calculate the fee amount for registering the offer and sale of additional shares on a Form S-8 or of company securities for a follow-on offering on a Form S-3.
This year’s annual fee rate adjustment represents the first decrease since 2021. Keep in mind, the Commission doesn’t set the fees arbitrarily. The announcement shares this rationale for the decrease (for even more detail, see the SEC’s Order):
The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the Securities Act of 1933, which also adjusts the annual fee rates under Sections 13(e) and 14(g) of the Securities Exchange Act of 1934 as well as Rule 24f-2 under the Investment Company Act of 1940. The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts.
The Commission’s projections are calculated using a methodology developed in consultation with the Congressional Budget Office and the Office of Management and Budget. The Commission determined the statutory target amount for fiscal year 2026 to be $887,800,554 by adjusting the fiscal year 2025 target collection amount of $864,721,147 for the rate of inflation.
The July-August issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– Long Live the Term Sheet — When Term Sheet Provisions Survive the Execution of Definitive Agreements
– Termination Fees: Breaking Up Usually Comes with a Price
– M&A Due Diligence: What You Miss Can Cost You
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
Yesterday, I shared a couple of reasons why the distinction between alleged omissions versus alleged misleading statements is an important one for securities litigation – and therefore should also be an important concept for disclosure lawyers to understand at the front end. One way this issue can arise in practice is when a company is considering whether to provide earnings guidance – and if so, how precisely.
As Meredith blogged earlier this year, some companies ceased providing guidance during the early stages of this year’s tariff announcements – but as time went on, the more common practice shifted to modifying the way in which guidance was presented, with very few companies precisely quantifying the expected impact of tariffs.
This Woodruff Sawyer blog from Lenin Lopez points out that this builds on a trend that began during pandemic times:
It’s important to note that during and after the COVID-19 era, companies across industries chose to resist the pressure to guide precisely. Instead, many now provide narrative commentary or broad ranges—an approach better suited to the current operating environment, which has been and continues to be characterized by evolving regulatory and political dynamics, longer commercialization runways, and so much more.
As an example, we have seen life science companies increasingly issue milestone-driven updates tied to clinical trials or US Food and Drug Administration (FDA) engagement, rather than revenue forecasts. Artificial intelligence and semiconductor companies, meanwhile, may offer qualitative guidance reflecting customer demand and capacity trends, rather than committing to specific quarterly bookings or earnings.
This pivot to a more cautious approach may be attributed, in part, to some companies getting punished by the market after guidance surprises that led to stock price drops, and plaintiffs’ firms filing securities class action lawsuits as a result.
Lenin shares a couple of striking data points to emphasize that a significant portion of securities class action suits follow a company’s lowering or withdrawal of guidance. He points out that projections that missed the mark can also be fodder for government enforcement actions, especially if the SEC is prioritizing “fraud.” Lenin also provides a few best practices to balance demands of “the Street” with the risks of litigation and enforcement, including suggested responses to help maintain discipline in analyst Q&As and recommendations for modeling risks that could affect projections. Check out his blog for more detail!
For additional resources on this topic, members also can visit our “Earnings Guidance” Practice Area. If you do not have access to the Practice Areas and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
