The Texas Stock Exchange (TXSE) commenced trading last week, showcasing the operations of a new national securities exchange seeking to compete with Nasdaq and the New York Stock Exchange. As this story from Houston Public Media notes, the TXSE initiated a phased rollout that will take place over the course of July. During this initial testing phase and going forward, equity securities of companies that are listed on other exchanges will be traded on the TXSE under the concept of “unlisted trading privileges.” This Goodwin Public Company Advisory Blog entry notes:
The Texas Stock Exchange (TXSE) commenced quoting and trading securities pursuant to unlisted trading privileges on July 6, 2026, and the new national securities exchange intends to commence trading of other securities on the exchange in the coming weeks. The TXSE published a trading launch schedule identifying securities that will begin trading on the exchange in the coming weeks.
A security may begin trading on the TXSE pursuant to unlisted trading privileges without any action by the issuer. Under Exchange Act Section 12(f), a national securities exchange may trade a security that is listed on another exchange on an unlisted trading privileges basis. The SEC has provided guidance confirming that a national securities exchange may generally extend UTP immediately to any exchange-listed security, subject to a limited IPO timing exception set forth in Exchange Act Rule 12f-2. Under unlisted trading privileges, a security can trade on an exchange while retaining its primary listing on the exchange where that security is listed. The commencement of trading on the TXSE pursuant to unlisted trading privileges does not change an issuer’s primary listing, transfer its listing to the TXSE, or alter its ongoing obligations to its primary listing exchange.
Why it matters
The commencement of trading on another national securities exchange may cause some concern, because companies have taken no action to facilitate such trading. In this regard, it should be noted that trading pursuant to unlisted trading privileges occurs without any action on the part of the issuer of the securities, and the issuer of the securities generally cannot object to the trading on the exchange. This contrasts with the process of listing on an exchange, in which case the issuer of the securities would file a registration statement with the SEC and a listing application with the exchange.
Practical takeaway
For investor relations and other purposes, public companies will typically monitor their trading activity across markets and exchanges. Companies included in the TXSE trading launch schedule may wish to notify their investor relations and communications teams in advance and consider whether to develop an investor relations and/or public relations response when trading commences on the TXSE. Companies should be prepared to respond to investor, analyst, or media inquiries regarding the commencement of trading and recognize that such trading does not reflect a decision by the issuer to list its securities on the TXSE.
It will be interesting to see what listings the TXSE will attract now that it is operational. In addition to initial listings, the TXSE also contemplates dual-listed securities, where a company’s stock would be listed on the TXSE in addition to the New York Stock Exchange or Nasdaq. It should also be noted that Nasdaq Texas and NYSE Texas recently launched their exchanges and companies can dual-list their securities on those exchanges, as Meredith noted in her blog post back in March.
Last week, SEC Chairman Paul Atkins spoke at the Society for Corporate Governance National Conference, and he outlined the SEC’s efforts to address the decline public companies in the United States. In his remarks, he noted:
Presented with a 40 percent decline in public companies over the past few decades, we are summoned not to create more complexity nor reinvent our mandate, but to restore it to its foundation: that is, disclosure of material information.
Years of accretive rulemakings—some eliciting immaterial information—have produced reams of paperwork that can do more to obscure than to illuminate. As Justice Thurgood Marshall once warned, “Some information is of such dubious significance that insistence on its disclosure may accomplish more harm than good. Bury[ing]…shareholders in an avalanche of trivial information [is] a result that is hardly conducive to informed decision[]making.”
As investors struggle to parse and understand—or choose to simply ignore—today’s lengthy annual reports and proxy statements, companies also incur substantial costs to prepare those documents. These costs are financial, of course, but temporal no less—composed not only of fees for armies of specialized lawyers, accountants, and consultants, but also the opportunity costs resulting from significant use of boards’ and management’s time.
In light of this current state of the SEC’s public company disclosure regime, one of my top priorities as Chairman is to restore the regime to one rooted in materiality—a fundamental concept that Congress weaved throughout the federal securities laws. Unfortunately, over the past several years, this term has been hijacked or substituted with phrases such as “double materiality” or “decision useful.” But these purported standards have no standing in the relevant jurisprudence.
Chairman Atkins went on to note that a number of comment letters on Regulation S-K suggested a “materiality overlay” that would be applicable throughout Regulation S-K, stating:
My chief aim of revising Regulation S-K is for these rules to elicit material information, without overly prescriptive line-item requirements that frequently elicit immaterial information. However, even with the best intentions and execution, the Commission may be unable to ensure that information called for by every line item will be material to investors of every public company. Additionally, disclosures mandated by prescriptive requirements that appear material today may become immaterial over time as corporate structures and business practices develop and change.
Because of these concerns, the “materiality overlay,” as suggested by commenters, may be helpful to creating a principles-based disclosure regime that represents the “minimum effective dose of regulation” and elicits material information based on the facts and circumstances of each company. Meanwhile, market forces would drive disclosure of other information that may be desired by the company’s investors. This already occurs to some extent today when companies provide non-GAAP financial measures and key performance indicators tailored to their business and their investors’ expectations.
Of course, a “materiality overlay” will reduce immaterial disclosures in filings only if companies use the discretion afforded to them and omit information called for by a line-item. Likewise, any amendments to Regulation S-K that replace prescriptive rules with principles-based rules will require companies to exercise judgement for the amendments to be effective. If companies are unwilling to do so, no disclosure regime can achieve the goal of providing material information to investors, without burying them in trivial information, as Justice Marshall warned.
Chairman Atkins also addressed shareholder proposals, noting that the decision of the Division of Corporation Finance to not issue no-action responses during the 2025-2026 proxy season “was akin to removing the training wheels from the shareholder proposal bicycle.” He noted:
Over the years, companies and shareholder proponents have grown all too comfortable leaning on that support simply because it was there—not because they needed it. As it turns out, both can pedal just fine on their own.
As he discussed the Commission’s efforts to look at Rule 14a-8, he repeated a statement from one of his own speeches back in 2008: “[W]e must be vigilant that the shareholder proposal process does not result in the tyranny of the minority.”
Now that we are only three months away from our 2026 Proxy Disclosure and Executive Compensation Conferences, which are taking on October 12th & 13th in Orlando, Florida and via webcast, I thought it is a great time to take a closer look at many of the important topics that we will be covering in this time of significant change.
At last week’s Society for Corporate Governance conference, SEC Chairman Paul Atkins focused in his remarks on the SEC’s consideration of Rule 14a-8, the shareholder proposal rule. At the 2026 Proxy Disclosure Conference, we have dedicated forty minutes to an in-depth discussion of the experiences with Rule 14a-8 during the unusual 2025-2026 proxy season, as well as the SEC’s efforts directed toward shareholder proposal reform. The agenda notes:
The Corp Fin Staff’s late-2025 shift in administering Rule 14a-8 was met with consternation from both investors and public companies (some justified, some not). While many companies took a cautious stance on exclusions, certain decisions triggered pushback from proponents in the form of litigation, “zero slate” contests and “vote no” campaigns.
In the meantime, Rule 14a-8 is on the SEC’s agenda for a potential overhaul. Will shareholder proposals, as we know them, survive the next few years?
This program will be moderated by Ryan Adams from Morrison Foerster and will feature the panelists Allison Handy from Ashurst Perkins Coie, Elizabeth Morgan from King & Spalding and Geoff Walter from Gibson Dunn.
This is a discussion that you definitely do not want to miss! Our agenda features two full days of fast-paced, topical panels, an all-star speaker lineup, and my interview with Corp Fin’s Deputy Director Christina Thomas. Our October Conferences will be a great opportunity to get up to speed on the SEC’s latest rulemaking initiatives, as well as other developments in executive compensation, governance, disclosure practices, activism and shareholder engagement.
You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
Yesterday, Corp Fin issued a grab bag of new CFIs addressing beneficial ownership reporting, the proxy rules, Regulation Crowdfunding & the tender offer rules. Here are links to the CFIs, along with a brief description of what’s addressed in them:
Exchange Act Sections 13(d) & 13(g)
Section 105. Rule 13d-3 — Determination of Beneficial Ownership
New Question 105.08 – Cash-based total return equity swap (TRS) generally does not result in beneficial ownership of reference securities or plan or scheme to evade reporting.
New Question 105.09 – When a TRS swap will result in beneficial ownership of reference securities.
New Question 105.10 – Mental state required for a “plan or scheme” to evade reporting & application to a TRS.
Section 110. Schedule 13D
New Question 110.09 – Disclosure of identity of investors in an entity filing a 13D.
New Question 110.10 – Reporting obligations for general partners of a 13D reporting person that is a general or limited partnership.
Proxy Rules and Schedules 14A/14C
Section 155. Item 4
New Question 155.02 – Status of investors in an entity conducting a proxy contest as “participants” in a solicitation.
New Question 104.03 – Circumstances under which an issuer may use a widely disseminated press release to “publish, send, or give” the disclosure required by Rule 13e-4(d) to security holders.
New Question 131.04 – Circumstances under which a bidder may use a widely disseminated press release to “publish, send, or give” the disclosure required by Rule 14d-6 to security holders.
One of the things that we’ve all speculated about when it comes to the SEC’s semiannual reporting proposal is whether large cap companies would elect to move to semiannual reporting. While most issuers have remained mum about their intentions, one mega cap company recently went public about its plans to move to semiannual reporting. In a LinkedIn post, Prof. Ann Lipton flagged a recent comment letter submitted by Eli Lilly on the SEC’s proposal in which the pharmaceutical giant voiced its support and said that it currently intends to opt in if the rule is adopted.
Lilly says that it will supplement its semiannual reports with voluntary quarterly earnings releases, and that as a result, its decision will have a minimal impact on its investors. This excerpt explains Lilly’s position:
Lilly believes that the proposal will not meaningfully diminish the financial information available to our investors. In line with current market practice, Lilly initially and broadly disseminates its quarterly financial results through an earnings release. As a general matter, our earnings release contains all material information related to the applicable quarter. Subsequent to our earnings release, we file our quarterly report on Form 10-Q. Given this practice, we receive few inquiries from investors and other stakeholders about information available exclusively in our Form 10-Q filings.
If adopted, Lilly anticipates continuing to furnish quarterly earnings releases containing financial and operational metrics relied upon by investors to make informed and timely decisions. This is consistent with our longstanding practice and investor expectations. In combination with ongoing Form 8-K disclosure obligations, we believe that our investors and the public at large would continue to be well-informed with decision-useful information.
It appears that Lilly may not be the only member of Big Pharma that will move to semiannual reporting if the SEC approves the rule proposal. Check out this comment letter from a group of pharmaceutical companies that include not only Eli Lilly, but also Bristol Myers Squibb, Gilead Sciences, Johnson & Johnson, Merck and Pfizer. That letter says that “If the proposal is adopted, some of our Companies currently anticipate electing semiannual reporting on Form 10-S while continuing to furnish voluntary quarterly earnings releases to keep investors informed.”
It should be noted that Lilly and other commenters supporting the proposal are vastly outnumbered. In fact, if you judge solely on the comments submitted, allowing a semiannual reporting option looks to be less popular than wet socks. According to Prof. Tzachi Zach’s comment tracker, 99% of the 11,997 comments submitted to date oppose the proposal. Only 62 letters voice full-throated support for the proposal, while 67 offer conditional support. If you think that Prof. Zach got to that 99% number by including “astroturfed” form letters, you’re wrong – he excluded almost 60,000 of those letters from the count.
In addition to a distinguished group of expert practitioners, senior staff members from the SEC’s Division of Corporation Finance will also participate on the panels for both webcasts. Luna Bloom, Associate Director (Legal and Regulatory Policy), will participate in the filer status webcast, and Valian Afshar, Chief, Office of Rulemaking, and Ted Yu, Associate Director (Specialized Policy and Disclosure), will join us for the registration reform webcast.
Current members of The Corporate Counsel have access to this webcast with their subscription. Non-members can register here for complimentary access. We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for both of these one-hour webcasts.
By the way, if you’re a member of TheCorporateCounsel.net and you missed last month’s program on the SEC’s semiannual reporting proposal, you can always access a replay of that webcast and review the transcript. You can also pick up one hour of on-demand CLE credit for listening if you haven’t already. Not a member? We can fix that – try a no-risk trial now. Sign up online or contact our sales team at Sales@CCRcorp.com or by phone at 800-737-1271.
Yesterday, the SEC announced that its Small Business Capital Formation Advisory Committee will meet on Tuesday, July 21st at 10:00 am Eastern. Here’s the agenda for the meeting, which, as this overview from the SEC’s press release indicates, will continue the discussion about how to encourage more IPOs that began at the Committee’s last meeting:
Building upon ideas generated during the prior committee meeting, members will continue exploring ways to encourage more companies to go and stay public. The committee will consider ways to modernize the IPO process and potential regulatory reforms, including certain recently proposed SEC rulemakings aimed at reducing regulatory friction and facilitating capital formation in the public securities markets.
To facilitate discussion and deepen the committee’s understanding of the regulatory landscape, members will hear from SEC staff in the Division of Corporation Finance who will provide an overview of recent relevant rulemakings. Members will also hear from Daniel Zinn, General Counsel and Chief of Staff, OTC Markets Group, and Sue Washer, biotechnology consultant and former CEO of Applied Genetic Technologies Corporation, who will share their experiences and views on ways to further support small public company capital formation.
The meeting will be open to the public and will be live streamed on SEC.gov.
This Foley blog reviews a NACD chapter meeting with senior PCAOB officials during which the auditor inspection process was addressed. Topics addressed included how an inspection works, the QC 1000 audit standard, the PCAOB’s ongoing assessment of the use of AI tools by auditors.
The blog also highlights the fact that the while the results of a PCAOB inspection are shared with auditors, they won’t be shared with audit clients unless the directors ask questions about them. This excerpt from the blog shares some specific questions relating to PCAOB inspections and “hot button” issues at the PCAOB that it recommends boards ask their auditors to address:
– Was our company’s audit reviewed this past cycle as part of your firm’s annual inspection? What areas, and any findings? And if not us, were there findings on your firm’s audits of other companies in our industry?
– What is the auditor doing with AI on our audit? Under what controls? How are those AI-assisted judgments documented?
– What are we doing with AI? How is our own finance team’s use of it weighed in the audit’s risk review? Are we ahead of, even with, or behind our peers?
– Where does the accounting firm stand on QC1000? What is changing, and what gaps should we watch?
– Of the PCAOB’s usual problem areas, revenue, impairment, internal controls, deal accounting, which apply to us this cycle? And what is the firm doing about them?
The blog also says that CFOs and legal teams should be asking about AI-related issues as well, because the auditor’s use of AI and their own will be judged together.
Here’s the latest edition of our “Understanding Activism” podcast. This time around, Cleary’s J.T. Ho and I were joined by Joshua Black, Editor in Chief of Diligent Market Intelligence, to discuss Diligent’s recent activism publications. Topics in this 23-minute podcast include:
– Identification of the most prolific activists this proxy season.
– How to evaluate and weigh activist rankings.
– The dominance of settlements over proxy fights.
– The shift toward financial versus operational activism.
– The rise of digital campaigning by activists.
– Regional divergence in activism trends, especially Japan versus Europe.
– The increase in “sell the company” activism.
– The growth and evolution of short activism.
– Key takeaways from data on activism challenging M&A deals.
This podcast series is intended to share perspectives on key issues and developments in shareholder activism from representatives of both public companies and activists. We continue to record new podcasts, and they’re full of practical and engaging insights from true experts – so stay tuned!
We’ve all been blogging quite a bit about prediction markets in recent months. Many of those blogs have discussed the need for public companies to consider addressing issues associated with prediction markets in their insider trading policies. However, this BCLP blog says that recent enforcement actions highlight the need for companies to take into account the implications of prediction markets on other corporate policies & controls and procedures. Here’s an excerpt:
Even though wagers or participation in prediction markets may not necessarily involve trading in traditional securities, federal authorities view them as potentially implicating anti-fraud and related statutes – with focus on the use of material nonpublic or confidential information.
Companies should consider updating their controls and procedures, which were likely developed before the emergence of events contracts. Careful drafting will be important, including defined terms, scope of trading restrictions, and oversight for internal reporting, compliance and enforcement.
Codes of Conduct. Key areas of focus could include:
– Reviewing prohibitions on use of confidential information for personal gain – whether they capture new types of trading or betting.
– Consider expressly addressing prediction markets, as well as prohibiting betting or trading based on confidential information.
– Potential application of policies relating to conflicts of interest and reputational risk.
Insider Trading Policies.
– Consider addressing trading based on confidential information that may not involve securities, such as event-based contracts or otherwise not involving company stock.
– Consider whether to reference or include relevant provisions of the Code of Conduct in such policies.
– Any discussion of Rule 10b5-1 plans may need to be revised as it may not be clear how the Rule could work, if at all, for prediction market contracts.
Education.
Many employees may not recognize the relevance of compliance rules to prediction markets given the wide proliferation of betting on political, sporting and other public events.
– Consider whether to address these concerns in training materials, including examples of problematic event-based trades.
– Consider whether to address them in employee certifications.
The blog also points out that these issues may also be relevant to private companies and non-profits, since they often aren’t related to traditional transactions in securities. These enterprises would be prudent to undertake similar reviews of their own controls and procedures, codes of conduct, and policies relating to confidentiality, conflicts of interest or reputational risk, as well as codes of conduct.
