The DOJ’s National Fraud Enforcement Division – which was created earlier this year – is getting clearer and clearer about its priorities and approaches. Last week, Colin McDonald, who leads “N-FED,” issued Directive 26-12 – “Corporate Enforcement in the Fight Against Fraud” – which outlines charging & resolution factors for all Fraud Division personnel to consider, investigative priorities, and principles.
The Directive further sharpens the Fraud Division’s focus on health care and government procurement fraud, signaling heightened scrutiny for health care companies and government contractors. Its emphasis on tax and trade fraud has broader implications for companies across industries. In particular, the integration of criminal tax enforcement into the expanding Fraud Division, together with the Directive’s prioritization of corporate tax misconduct, signals renewed attention to corporate tax fraud backed by greater prosecutorial resources and investigative capabilities. This focus also may further sharpen the division of labor between the new Fraud Division’s priorities and those of the Criminal Division’s White Collar and Corporate Enforcement Section.
As discussed in our August 14, 2026 client memorandum, the Fraud Division is expanding its use of data analytics and interagency coordination to identify potential misconduct. Together with its efforts to encourage whistleblowers, these capabilities increase the prospect that prosecutors will detect misconduct independently. Companies should therefore consider internal data review and stress testing and, where warranted, internal investigation and assessment of potential self-disclosure.
The Directive pairs these enforcement efforts with centralized review of cooperation, remediation, and compliance by the Corporate Enforcement Section. Companies reaching resolutions with the Fraud Division should therefore expect negotiated compliance measures to remain a focus of specialist review throughout the agreement’s term.
Finally, the Directive builds on the CEP by identifying enforcement priorities and factors that prosecutors must give particular weight in charging and resolution decisions. The CEP’s benefits for self-disclosure, cooperation, and remediation remain available where its requirements are met. Although the Directive’s factors may inform prosecutors’ assessment of aggravating circumstances, no listed factor automatically disqualifies a company from CEP benefits. Companies considering self-disclosure should therefore assess both their eligibility under the CEP and how their conduct measures against the Directive’s factors.
This week is “World Investor Week” – and with that, the SEC announced that it is coordinating with global financial regulators to raise fraud awareness. The regulators issued this joint bulletin to encourage long-term, resilient investment approaches and to flag common scams.
In addition to the increasing prevalence of phishing attacks and relationship scams, the bulletin says that the bad guys are getting good at AI impersonations. “Fake SEC filings” are also part of their disguise toolkit:
– Fraudsters might impersonate organizations or individuals to lure investors into scams. They might impersonate government agencies or employees, or legitimate investment professionals like brokers and investment advisers. Impersonators might be part of an advance fee scam, or might use personal information they obtain to steal an individual’s identity or misappropriate their financial assets.
– Communications — including phone calls, voicemails, text messages, messages sent via social media or apps, emails, letters, and certificates—might falsely appear to be from the SEC, FINRA, the CFTC, NFA, or other organizations. Be very skeptical if you’re contacted by someone claiming to be from the SEC, FINRA, the CFTC, NFA, or other organizations asking about your shareholdings, account numbers, trading activity, PINs, passwords, digital addresses, digital wallet private keys or seed phrases, or other information that might be used to access your financial accounts. This might be part of a scam to compromise your investment, financial, or other personal accounts. Fraudsters might also claim to be from an investor protection organization such as SIPC and falsely require payment from investors to obtain protection or the return of assets. SIPC will never require payment to obtain protection or assist in recovery. Call the organization using a phone number on their public website — not a number that’s provided by the contacting party — to verify the legitimacy of the ask before providing any personal information or sending any money.
– In some cases, fraudsters have made SEC filings and mischaracterized these filings in order to appear legitimate. Fraudsters have used SEC exempt reporting adviser (ERA) and Form D filings to falsely tell investors that they’re registered with the SEC or have shown investors a fake certificate from the SEC. They’ve also used Form 4 filings to claim that the fake filings confirm the investor’s purchase of shares, even though the trades were never made and the fraudsters might have simply stolen the money. Do not invest with anyone who misrepresents that they’re registered with the SEC or mischaracterizes SEC filings.
It is ironic that the scammers are doing compliance things as part of their fraud – the very things that all of us rule-followers worry that we’ll get in trouble for missing.
Last month, Dave blogged about implications of the SEC’s decision to grant a full review of Nasdaq’s previously-approved – but now stayed – $5 million continued listing requirement. Now, the SEC has posted notice of filing and immediate effectiveness of a proposed rule change that will modify the operative date of the standard in light of the stay. Here’s an excerpt:
Pursuant to the approved rule change, a company becomes non-compliant with the new $5 million continued listing requirement when it fails to maintain that minimum threshold for thirty consecutive business days. The Stay creates uncertainty around the application of the rule given that certain companies were below the threshold for the period between the rule’s approval and the implementation of the Automatic Stay. To eliminate any such uncertainty or confusion, Nasdaq is filing this proposed rule change to modify the operative date of SR-Nasdaq-2026-004.
As revised, the rule will become operative upon termination of the Stay and the first business day that Nasdaq will consider towards determining whether a company is noncompliant with Rules 5450(a)(3) and 5550(a)(6) (i.e., in determining whether the company’s Market Value of Listed Securities has been below $5 million for 30 consecutive business days) will be the business day immediately following the termination of the Stay. For example, if, hypothetically, the Stay is terminated on September 24, 2026, the first business day considered in determining whether a company is non-compliant with the $5 million Market Value of Listed Securities continued listing requirement would be September 25, 2026, and the company would first become non-compliant with the requirement if it remains below the threshold for thirty consecutive business days thereafter.
For clarity, no consideration would be given to the company’s market capitalization for the period between the rule’s approval on July 22, 2026, and the implementation of the Automatic Stay on July 29, 2026, nor during the operation of the Stay. Of course, if the proposed rule change is ultimately disapproved by the Commission, then Nasdaq would not apply it.
As Dave recently shared, the SEC has granted a 5-year exemptive order to “Tokenized Securities Venues” that are trading tokenized National Market System stock under certain conditions. This Gibson Dunn blog outlines what the relief does – and does not – do:
The Innovation Exemption does not grant any relief to the entity doing the tokenizing. The NMS Stock may either be tokenized by, or on behalf of, the issuer of the underlying NMS stock, or by a third party unaffiliated with the issuer, without the issuer’s involvement.
The tokenized security must represent actual underlying shares; synthetic products that merely provide exposure to an underlying security (e.g., tokenized linked securities and tokenized security-based swaps), as well as rights and warrants, cannot trade on a TSV. The tokenized stock must convey the same rights and privileges as the equivalent non-tokenized NMS stock, including dividends, voting and share of residual assets; a third-party tokenizer must make proxy materials and communications from the underlying company available to holders of the tokenized stock at no cost to the company or shareholders.
The SEC is soliciting public comment about possible modifications to the relief and potential next steps – but the TSVs can rely on the relief right now. That means that even if your company has no interest in tokenizing its own securities, you may receive a notice that a third party wants to do so. As this Covington memo explains, public companies have an opportunity to object to that:
A TSV seeking to trade a tokenized stock must provide written notice to the issuer at least 30 calendar days before trading commences, providing the issuer with an opportunity to object. TSVs are required to send the notice to the physical or email address for the issuer’s principal executive offices listed on the cover page of its Exchange Act reports, and include the TSV’s current, accurate contact information.
Companies that wish to object must provide written notice of objection to the TSV. Third party tokenized stock must have the same economic and governance rights of listed stock (i.e., the right to dividends, residual assets, and vote). The order does not permit any primary issuance or initial offerings on a TSV; companies should not, at this stage, view tokenizing securities as a capital raising opportunity, unlike the SEC’s recent Regulation Crypto Assets proposal.
The Covington team also walks through how the TSVs operate, open questions that are not addressed in the SEC order, potential benefits and risks of tokenized securities, and next steps. If, like me, you are wondering how the tokens get issued in the first place, the Gibson team addresses that, along with other mechanics and impacts:
– More than 13,000 public issuers of Reg NMS securities are potentially impacted. Timely objecting to the Issuer Notice is the only way for an issuer to prevent a TSV from making a third party’s tokenization of its securities available for trading.
– Third-party tokenization will require the offer and sale of those tokens to be registered under the Securities Act or qualify for an exemption from registration. Currently, third-party issuers of tokenized U.S. publicly registered equities are offering and issuing those securities abroad – for example, in the Abu Dhabi Global Market or the Island of Jersey, typically in reliance on Regulation S. Although the Order provides a pathway for secondary trading on a TSV, it does not itself provide Securities Act relief for the creation or distribution of the tokenized security, calling into question whether structures currently used for offshore tokenized equities can be replicated for U.S. investors.
– Trading on a TSV can be made available directly to retail investors without an intermediary, and those investors may self-custody the securities in their own digital wallet.
– The TSV Exemption attempts to encapsulate many of the regulatory provisions for oversight of national securities exchanges, broker-dealers and alternative trading systems through limited reporting and recordkeeping requirements and extensive disclosure requirements. In this regard, the Commission is returning to first principles, relying on disclosure to inform investors and markets of risks and potential benefits of trading on TSVs.
– A TSV must be a U.S. person required to comply with OFAC-administered sanctions requirements and maintain access-permissioning procedures, including identity verification and wallet controls, designed to address OFAC sanctions and applicable AML/CFT requirements.
– Under the TSV Exemption, TSVs are not subject to the fair access requirements applicable to registered national securities exchanges and ATSs, and accordingly may set their own permissioning criteria to determine which persons may access trading on the TSV—including by denying or limiting such access—and may differentiate among TSV Participants with respect to access, trading procedures, market data, and fees, with such denials, limitations, or differences in treatment not being subject to SEC review.
There are a few things that public companies can do right now to prepare for “innovations” in their securities. Check out my next blog to get started.
If today’s first blog was still a little too technical for you, this Ashurst Perkins Coie memo gets straight to the point. It lays out five reasons why public companies tend to be uneasy about third-party tokenization in particular:
– Market activity is imminent: Tech-forward exchanges and third parties are moving quickly to tokenize public company stock, often with little advance notice to public company issuers. From both market and regulatory perspectives, a public company’s inaction or delayed response to a third-party TSV’s notice of plans to tokenize and trade the issuer’s stock will be interpreted as consent that cannot later be revoked.
– Time-pressured response: The exemption requires rapid review and coordinated responses. Public companies have only 30 calendar days to object before token trading can begin.
– Investor relations and market complexity: Shareholder records, engagement, and communications will grow more complex if, and when, stocks circulate as tokens in digital wallets.
– Litigation and reputational risk: Misunderstandings regarding tokenized securities or an inadvertent failure by the issuer to object to a TSV’s notice could create uncertainty, or even possible liability, with respect to market participants, shareholders, or regulators.
– Strategic flexibility: Decisions about whether to object to or collaborate with TSVs, or explore self-tokenization, may significantly affect a public company’s future options and risk profile.
The memo also walks through practical considerations and suggests these action steps:
Audit and update SEC-listed contacts: Confirm that executive office addresses and emails in SEC filings are current and monitored frequently. Train your mailroom and other staff to escalate such notices immediately to legal and compliance teams.
Prepare rapid objection protocols: Draft template objections and establish internal review and escalation processes. The 30-day deadline is inflexible and strictly enforced—missing the deadline is irreversible.
Enhance investor and public communications: Prepare FAQs, market alerts, and public statements in advance to address company policies on tokenization. Actively monitor media and trading venues to detect market misstatements or investor confusion that may require clarification.
Cross-functional coordination: Ensure legal, compliance, finance, IT, governance, and IR teams are aligned and ready to respond together, including developing playbooks for rapid coordination if notice is received.
Regular monitoring: Employ technology and monitoring protocols to track the market for unauthorized or synthetic tokenized versions of your stock. Act promptly if you detect noncompliant offerings and consider legal, regulatory, and communications remedies.
Weigh strategic opportunities: If the company may wish to explore tokenization in the future, now is the time to consider criteria for partnership, potential use cases, and appropriate disclosures.
Engage in public comment: The SEC is actively seeking feedback concerning the Innovation Exemption. Submitting thoughtful comments will help shape the evolving regulatory framework, and it is important that public companies make their concerns heard.
There are still a lot of open questions on this topic, and we’ll be discussing them next week at our “Proxy Disclosure & 23rd Annual Executive Compensation Conferences.” Among other informative sessions on our agenda, join Era Anagnosti of DLA Piper, Eun Ah Choi of Nasdaq and Reid Hooper of Fannie Mae on Monday, October 12th at 1:30 pm ET to hear about the latest trends in tokenization & blockchain – and what they mean for public companies. You can still register. Sign up online, email info@ccrcorp.com or call our team at 800-737-1271 today.
In another example of “market modernization,” 23/5 trading is coming to US markets whether you like it or not – here are a couple of blogs about the SEC’s recent 24-hour trading roundtable. With December 6th only two months away, listing exchanges are continuing to update rules and procedures to accommodate extended overnight trading.
Yesterday, the SEC posted notice of this automatically effective Nasdaq rule change to the exchange’s market-wide circuit breaker procedures, which hopefully gives some comfort that the overnight session will not be a complete free-for-all. Here’s an excerpt:
The MWCB mechanism under Equity 4, Rule 4121 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when U.S. securities markets experience extreme broad-based declines. All U.S. equity exchanges and the Financial Industry Regulatory Authority (“FINRA”) (collectively, the self-regulatory organizations or “SROs”) adopted uniform rules relating to the MWCB mechanism in 2012, which are designed to slow the effects of extreme price movement through coordinated trading halts across U.S. securities markets when severe price declines reach levels that may exhaust market liquidity.5 Currently, market-wide circuit breaker rules provide for trading halts in all U.S. cash equities and equity options markets during a severe market decline as measured by a single-day decline in the S&P 500 Index during Regular Market Hours.
Pursuant to Equity 4, Rule 4121, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. If a Level 3 Market Decline occurs at any time during the trading day, trading in all stocks will halt on the Exchange for the remainder of the trading day and will resume the following trading day at 4:00 a.m. ET during the Pre-Market Hours Session.
In light of the move to 23/5 trading, Nasdaq (and other SROs) are proposing to preserve downtime when a Level 3 Market Decline is triggered. The notice states:
The MWCB mechanism described in Equity 4, Rule 4121 is an important, automatic mechanism that is invoked to promote stability and investor confidence during periods of significant stress when U.S. securities markets experience extreme broad-based declines. The proposed rule change would ensure that the Exchange’s resumption time following a Level 3 halt continues to apply when the Exchange and various other U.S. equities exchanges begin trading on a 23-5 basis, notwithstanding current rule text implying that the resumption time would coincide with the start of overnight trading on the Exchange.
Rather than leave the rule in place as is, which could result in an earlier resumption time than originally contemplated when the rule was adopted, the Exchange, the other U.S. equity exchanges, and FINRA met alongside industry representatives to determine the appropriate resumption time. Following those discussions, the Exchange determined, in coordination with other SROs, to retain a morning resumption time, notwithstanding the fact that an earlier resumption time would be possible with the introduction of 23-5 Trading. The proposed rule change codifies this decision into the Exchange’s rules. The Exchange understands that the other SROs will also be filing similar proposed rule changes. As a result, the market as a whole, including on- and off-exchange, will continue to be subject to harmonized rules for the resumption of trading following a Level 3 Market Decline.
The notice goes on to explain that while the SROs had previously decided to tie the resumption time following a Level 3 halt to an SRO’s normal hours of operation, the upcoming transition to 23/5 Trading raises various concerns that warrant a change from the current approach. For example:
– First, the MWCB mechanism was designed to provide a cooling off period where market participants would be provided with additional time to evaluate the market events that led to the decline before determining how to position their trading activity for the next day. With the introduction of 23-5 Trading and the start of the Night Session at 9:00 p.m. ET, however, this cooling off period could be materially shortened, reducing one of the key benefits that the MWCB mechanism was designed to provide in the first place. Rather than shorten the cooling off period and risk this benefit, the Exchange believes the market would be better served by a change to the length of the associated trading halt that mirrors coordinated market practice. As is the case today, the Exchange would reopen for pre-market trading at 4:00 a.m. ET or later on the following trading day.
– Second, the new Night Session may be subject to different liquidity and participation considerations than the current pre-market session. Notably, while retail investors have expressed interest in overnight trading, the Exchange expects that institutional investors will take more time to transition to a round-the-clock model. However, such institutional participation may be of heightened importance following a Level 3 halt as these investors are likely to have views on the underlying market events that led to the Level 3 Market Decline in the first place. The Exchange is concerned that opening during hours that such participants do not normally trade may impact the quality of price discovery at a time of significant market volatility. Waiting until 4:00 a.m. ET or later to resume trading would facilitate broader participation and therefore price discovery.
– Finally, the Commission recently approved an amendment to the Plan to Address Extraordinary Market Volatility that would establish new price protections from 9:00 p.m. ET to 4:00 a.m. ET. While these price bands would help to assure a fair and orderly market during normal market conditions, it is possible that they would instead prevent normal price discovery following a Level 3 Market Decline. Rather than allowing trading to resume with such price bands in effect, which would represent a change from the current reopening following a Level 3 Market Decline, the Exchange believes that waiting until 4:00 a.m. ET to resume trading would ensure that price discovery can occur during pre-market trading, as it does today, which may further inform prices going into the opening auction and regular market hours trading following a Level 3 halt.
Given those factors, Nasdaq is amending its rule to state that trading in all NMS stocks should not resume until 4:00 a.m. ET or later following a Level 3 halt. Nasdaq expects other SROs to effect amendments that say that trading will resume on or after 4:00 a.m. ET or the applicable morning resumption time depending on the normal reopening time of each SRO. As noted above, this update is in addition to the 20% Limit Up-Limit Down protections that will apply to individual equities. Members can visit our “Trading Window Procedures” Practice Area for additional resources.
Disney marked its anniversary by looking back at what has endured since 1971 — while also pointing out just how much has changed along the way. That feels on point for this year’s Conferences too. Some proxy season issues are perennial favorites, but so many changes are underway that there will plenty of new things to talk about too. The Conferences will help you understand the practical impact of these developments on companies, disclosures and boards – and how all the moving pieces fit together.
On October 12th, our agenda will focus on proxy disclosures – starting with an interview with Corp Fin Deputy Director Christina Thomas. Among other topics, we’ll discuss the fate of shareholder proposals, the current shareholder activism environment, common securities lawyer mishaps (and how to avoid and resolve them), tokenization, proposed SEC filer status changes, shareholder engagement and voting, and advising boards during times of uncertainty.
On October 13th, the 23rd Annual Executive Compensation Conference turns to executive pay, with the SEC All-Stars, potential changes to the SEC’s compensation disclosure rules, insights from leading compensation consultants, perks and executive security, and the latest from ISS and Glass Lewis.
For those attending in person, the fun actually starts a little early: we’ll have a welcome reception Sunday, October 11th from 4:30–6:00 p.m. in the Orange Foyer, and PDEC attendees are also invited to the NASPP opening celebration immediately after Monday’s programming.
As always, the two days are bundled together, and you can join us in person at the Hilton Orlando or virtually. And in addition to live and on-demand access to all of the CCRcorp sessions, Conference attendees get exclusive access to our Course Materials – which include unique & practical bullet points and examples from our experienced speakers on each topic we’ll be covering. Our speakers go the extra mile to provide usable takeaways. The Course Materials and on-demand replays are invaluable resources to refer back to as proxy season approaches!
For those seeking CLE credit, here’s a list of states in which credit is available – and CLE FAQs about live, virtual and on-demand credit.
Act Now: The Conferences begin next Monday, October 12th. With 14 sessions over 2 days, you’ll walk away with action items to help support director elections and say-on-pay, see around corners for changes to rules and market mechanics that affect companies, and avoid costly mistakes. You can still register. Sign up online, email info@ccrcorp.com or call our team at 800-737-1271 today.
Lastly, if you have registered, remember that your unique access link and attendance instructions will be emailed to you from no-reply@events.ringcentral.com. Here’s more detail on what to watch for.
Hope to see many of you in Orlando – please come say hi at any time!
Spencer Stuart is out with its 2026 Board Index – here’s an excerpt:
While boardroom continuity is valuable, many U.S. boards are still taking a too-cautious approach to refreshment. New S&P 500 director appointments in 2026 are at the lowest level since 2016, and director turnover declined year over year to 0.7 new directors per board.
The number of appointments also lagged the number of director departures in 2025, suggesting that not all directors were replaced. Appointments of both first-time and next-generation (next-gen) directors (those aged 50 and younger) have also declined as boards favored experienced directors.
With all the fast-moving risks and opportunities presented by AI, I was – in some ways – surprised to see this stat. The Board Index also says that 64% of incoming directors were either CEOs or financial professionals and 54% are retired. Industry-wise, though, people with tech/telecommunications backgrounds were in high demand: Constituting 17% of new-director appointments, along with industrials/manufacturing backgrounds.
Here are a few other stats:
– 80% of S&P 500 boards now include a director skills matrix in the proxy – though quality may vary
– 99% of boards have some sort of annual performance evaluation – with 33% using a third-party
– 63% of boards have a mandatory retirement policy – reflecting a steady decline from 73% in 2016
– 100% of boards have at least one woman director, and 98% have at least one underrepresented minority director
– The average number of board meetings has decreased to 7.5, compared to 8.4 in 2016 – the average number of committee meetings is also slightly lower than ten years ago
This LinkedIn post from Adam Epstein caught my eye. The point of the post is to emphasize the importance of an experienced board chair – but it also shows how well-organized board dinners can improve overall board effectiveness. In the anecdote he gives, the (seasoned, new-to-the-company) independent chair added structure to board dinners after observing that the company’s earnings calls were not as polished as they could be and that the other directors may not have been listening to them. Adam explains what happened next:
The chair conferred with the CEO, corporate secretary (CFO), and the chair of the nominating/governance committee and made a recommendation.
Each independent board member – 6 total – will be assigned one of the company’s publicly-traded competitors. At each board dinner they should be prepared to: (1) succinctly discuss what they learned from listening to the competitor’s most recent earnings call; and (2) compare what they heard to what was said on the company’s most recent earnings call.
The results after just a couple of quarters were palpable.
– The board dinners became so focused that the subsequent board meetings were not only more nuanced, but the engagement level was transformed. Creating structure for the board dinners was unpopular at first, but the board members had no choice but to rise to the challenge lest their short dinner presentations telegraph unpreparedness.
– Upon greater reflection on the strategic challenges facing the company, the complete board realized that their board composition was no longer apt. One of the most tenured board members decided not to stand for re-election (with some measured cajoling) and they are now beginning a search for a new board member that has the experience the board requires.
– Several of the board members conferred about the professionalism delta between competitor earnings calls and the company, and two changes are now afoot: (1) the company is going to hire an experienced internal investor relations professional; and (2) the CEO is interviewing several prospective speaking coaches.
As Adam notes, “corporate governance ain’t rocket science”… and it’s impossible to overstate the importance of having an experienced chair.
To the extent your board is considering matters that will later require a stockholder vote, ensure that the minutes are sufficiently detailed to support the later drafting of a proxy statement. In the not-so-distant past, material discrepancies between the two was the “open sesame” for stockholders to demand the inspection of informal board materials in Section 220 litigation.
While the heightened standards of the revised Section 220 blocked that result here, best practices would still be to be mindful that the minutes adequately cover material matters that will likely need to be disclosed to the stockholders in a proxy statement.
Think of your entire package of board materials, the agenda, any board books, and the minutes of the meeting as materials that might someday be evidence in litigation where the board may need to convince a fact finder that it acted loyally and with due care on certain matters before it.
The Court of Chancery notes things like how long it appears (from the minutes) that certain matters were discussed and in what level of detail. Make sure your minutes reflect the relative importance of the matters under discussion. For instance, the minutes should not have a very robust discussion of something somewhat mundane (like whether to serve one brand of soda or another in the cafeteria) but a relatively miserly discussion of the merger transaction being considered.
If you’re looking for more guidance on preparing minutes, check out the resources in our “Board Minutes” Practice Area, including a variety of checklists on minutes-related topics.
