At an open meeting yesterday, the SEC announced that it was considering potential designations of additional credentials that would qualify an individual as an accredited investor. That may seem like an unusual way to expand accredited investor status, but remember that Rule 501(a)(10) of Reg D allows the Commission to designate “one or more professional certifications or designations or credentials from an accredited educational institution” as qualifying an individual for accredited investor status.
Here are the credentials that the SEC proposes to designate as conveying accredited investor status along with links to the individual notices the agency issued with respect to each potential designation:
(1) Passing an accredited investor examination to be developed by FINRA;
(2) Holding a license as a U.S. certified public accountant;
(3) Holding a charter as a Chartered Financial Analyst;
(4) Holding a certification as a Certified Financial Planner in the United States;
(5) Holding a license as a FINRA Investment Banking Representative license (Series 79) or a FINRA Research Analyst license (Series 86 and Series 87).
Rule 501(a)(10) requires the SEC to designate qualifying credentials only after notice and an opportunity for public comment, and to post the credentials recognized as satisfying the criteria for accredited investor status on its website. The comment period for the proposed designation of these credentials will end 60 days after publication of the relevant notices in the federal register.
Commissioner Hester Peirce’s last day on the job is Friday, October 2nd, and her departure will leave the SEC with just two sitting commissioners. As Meredith blogged earlier this year, the way the SEC’s quorum rules work, having only two commissioners won’t affect its ability to act, but yesterday the SEC nevertheless opted to amend its quorum rule to account for the possibility that one commissioner might recuse himself from a particular matter. Here’s an excerpt from the SEC’s release adopting the amendment:
In prior years, the Commission has occasionally been in the position of having fewer than three members and believes it prudent to adapt its quorum rule to further accommodate that contingency. Moreover, the Commission has found that situations often arise in which one or more Commissioners have disqualified themselves or are otherwise disqualified from participating in a matter.
When such situations arise, it is important that the Commission be able to continue to conduct business. Accordingly, the Commission is amending the quorum rule to specify that, in a situation in which only one Commissioner is able to participate in a matter because all other Commissioners currently in office are disqualified from participating in that matter, the remaining member would constitute a quorum for that particular matter.
By now, you may well be asking how the Commission could adopt this rule without notice and opportunity for comment. The adopting release addresses that issue too:
The Commission finds, in accordance with the Administrative Procedure Act (the “APA”), that these amendments relate solely to agency management and organization and do not constitute a substantive rule. Accordingly, the APA’s provisions regarding notice of proposed rulemaking and opportunity for public comment are not applicable.
I doubt very much that appointing new SEC commissioners is high on the Trump administration’s agenda right now, but for the record, this is no way to run a railroad.
Check out our latest “Timely Takes” podcast featuring Cleary’s J.T. Ho & his monthly update on securities & governance developments. In this installment, J.T. reviews:
– SEC’s Rule 14a-8 Recission & Proxy Solicitation Modernization Proposals
– New CFIs on 13G/D & Form S-1
– SEC Proposal to Modernize Transfer Agent Regulation
– Insights from ISS’s 2026 Policy Survey
– NYSE’s Proposed five-year On-Ramp for Internal Audit Function
As a bonus, J.T. also discussed the SEC’s recent roundtable on 24-hour trading.
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
Over on The Cooley Governance Blog, Broc recently posted about some of the key takeaways from the SEC’s roundtable on 24-hour trading. Among other things, panelists indicated that retail investors are likely to lead the way when it comes to overnight trading, while institutional investors are likely to be more cautious. According to this excerpt, however, issuers are the most cautious market participants when it comes to 24-hour trading:
The issuer perspective was notably more cautious. Thin overnight liquidity could permit relatively small trades to create large price movements that may not reflect fundamental value or broad investor sentiment, with potential consequences for long-term shareholders and index-related considerations.
Extended trading also may affect when companies release earnings and other material information, since issuers traditionally have considered the availability of deep liquidity when timing disclosures. The issuer representative advocated greater public-company participation in developing volatility protections and other market-wide guardrails. The notes also flag for consideration whether issuers should develop escalation or overnight-monitoring procedures around significant anticipated events.
The blog reports that the issuer discussion placed 24-hour trading within the broader debate over the health of U.S. public markets. While participants noted that increased international participation could make U.S. markets more attractive, the cost and complexity associated with public company status and raising capital in the public markets raised more fundamental concerns.
Accordingly, the key from an issuer perspective isn’t whether longer trading hours generate greater trading volumes, but whether they improve issuers’ ability to raise capital, provide liquidity to investors, and support stable valuations.
Over on The Harvard Governance Blog, a recent post from Paul Weiss speculates on how shareholder engagement might evolve if the SEC’s proposal to rescind Rule 14a-8 is adopted. Here are some of the blog’s predictions:
Shareholders may increasingly turn to a company’s governing documents to submit shareholder proposals. Many companies’ bylaws already permit shareholders to submit business for consideration at an annual meeting independent of Rule 14a-8, subject to advance notice and other procedural and disclosure requirements. These provisions have rarely been invoked because Rule 14a-8 offered a simpler and less costly path to include a shareholder proposal in the proxy materials.
With the rescission of Rule 14a-8, more shareholders may look to propose business under a company’s bylaws. Accordingly, companies may consider reviewing their advance notice provisions to ensure that appropriate procedural and disclosure requirements are in place to address a potential increase in shareholder proposals.
Shareholders may seek more direct engagement with the board. Shareholder proponents may seek to elevate their concerns to directors through direct communications to the board. Some proponents may also pursue books-and-records requests to scrutinize the scope and quality of board oversight. Consequently, companies may need to assess which communications and issues warrant board attention and ensure that board records appropriately reflect oversight of matters material to the company.
Shareholder proponents could, on occasion, seek to leverage hedge fund activist campaigns to advance their objectives. In the absence of Rule 14a-8, some proponents may attempt to capitalize on the heightened attention surrounding activist campaigns to draw focus to governance and other concerns that have historically been advanced through shareholder proposals. Although such strategies are likely to remain the exception rather than the rule, they may provide an alternative avenue for proponents seeking visibility and engagement.
Interestingly, the authors are skeptical that rescission of Rule 14a-8 will lead to widespread litigation over shareholder proposals, primarily due to the cost and compressed timelines involved. In addition, while they anticipate a rise in “vote no” campaigns, the authors are also skeptical that these will frequently move the needle.
It looks like somebody leaked Anthropic’s draft S-1 filing to Reuters. I haven’t seen any formal reaction from the company, but Claude seems unfazed. The S-1 apparently has an 80-page(!) Risk Factors section, but Reuters has zeroed in on some truly apocalyptic risk disclosure in its article on the filing:
Anthropic plans to caution potential investors in its IPO that advanced AI could pose “catastrophic or existential risks to humanity,” an extraordinary warning by a company seeking to profit from the same technology.
The company’s IPO prospectus, reviewed by Reuters, highlights risks associated with its AI models, which it said could exhibit “self-preserving behaviors,” including attempts to “resist shutdown,” to “conceal or manipulate information” and behavior “resembling blackmail.”
“Our development of highly advanced models, platforms, and applications and expansion of use cases could further increase the risk that our models cause harm,” Anthropic said in the filing.
Reuters goes on to say that while companies routinely outline risks, “few, if any, have issued warnings suggesting their technology could cause potential human extinction.” Yeah, well, I can’t argue with that assertion.
Anthropic deserves credit for confronting some of the downright terrifying risks of AI head-on in its filing. Nevertheless, I think this prospectus disclosure could be enhanced by the use of graphics, and I have a very specific graphic in mind, courtesy of Ren & Stimpy:
We live in very crazy times, and sometimes the only alternative to giving in to existential dread is to shake your head and laugh.
Yesterday, Corp Fin’s Office of Mergers & Acquisitions issued a no-action letter to Goldman Sachs Group addressing a retail voting program modeled after the one Exxon established last year. Goldman outlined the terms of its “voting instruction plan” (VIP) in its no-action request. The terms of the VIP program are similar to Exxon’s plan, but this Goodwin blog highlights some matters that weren’t addressed in Exxon’s no-action letter:
– Enrollment in retail voting program permitted before a meeting-specific definitive proxy statement is furnished. The Division’s no-action relief extends beyond Rules 14a-4(d)(2) and (d)(3) to Rules 14a-3(a), 14a-4(f) and 14a-12(a)(2), which generally require investors to receive a definitive proxy statement before or together with a proxy card and regulate solicitations made before a definitive proxy statement is furnished. The practical effect is that program enrollment communications may be sent, and investors may enroll, before the definitive proxy statement for a particular meeting is furnished and outside a particular annual or special meeting proxy solicitation. Investors must still receive the definitive proxy statement before or at the same time as the related proxy card or voting instruction form.
– Participant information may be omitted from enrollment communications. The separate relief under Rule 14a-12(a)(1) concerns the requirement that pre-proxy solicitation communications identify the participants in a solicitation and describe their interests. Under the relief, that information will instead be included in each definitive proxy statement. Program enrollment communications would remain subject to the applicable Rule 14a-12 legend and filing requirements. As a practical matter, enrollment communications may focus on how the program operates and the choices available to investors without including the participant information in each communication.
– Tailored employee and alumni outreach, including internal-system enrollment for current employees. The request contemplates communications tailored to current employees and partners, former partners and other former employees, as well as enrollment by current employees through an internal company system. This would permit the issuer to use regular employee and alumni communications and an internal enrollment channel, rather than relying only on enrollment materials distributed through the vote processing agent. The Division specifically noted Goldman Sachs’ representations that communications to current employees would not state or imply that enrollment was a condition of employment or partnership, that enrollment would have no bearing on compensation or advancement potential, and that the company would implement reasonable measures designed to prevent abuse or misuse of current-employee enrollment status.
– Potential administrative and technological improvements. The request contemplates updates to the company’s program’s enrollment and processing mechanics as the program matures. These updates may include allowing a single enrollment form to cover multiple registered or beneficial accounts, enabling additional broker-dealers to participate through one vote-processing agent, and offering enrollment through a centralized or persistent portal. These features could simplify enrollment and expand access through additional intermediaries while maintaining the investor protections described in the request.
Here’s Goldman’s press release announcing the VIP program.
Update: Looks like a big week for retail voting programs. Here’s a no-action letter that Tesla received for its program today.
Yesterday, the SEC’s Chief Accountant and the Director of its Division of Investment Management issued a joint statement on fair value measurement and disclosure issues relating to private credit assets. Here’s the intro:
Investment in private assets continues to grow, including for an increasing number of registrants that are required to subsequently measure these investments at fair value, such as registered closed-end funds, interval funds, tender offer funds, business development companies and private funds registered under the Securities Exchange Act of 1934.
The growing accessibility of private assets, including private credit, calls for a critical reminder that registrants maintain rigor over how these assets are valued and how those valuations and asset risk characteristics are disclosed to investors. Likewise, these issues are relevant for auditors who are responsible for evaluating management’s judgments and the sufficiency of a registrant’s disclosures.
This statement offers reminders from the staff of the U.S. Securities and Exchange Commission’s Office of the Chief Accountant and the Division of Investment Management (collectively, the “Staff”), regarding areas of significant judgment under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, and the importance of targeted and transparent disclosure.
The Staff believes that reinforcing existing requirements under U.S. generally accepted accounting principles (“U.S. GAAP”)—and, for certain registrants, including business development companies, the regulatory framework under the Investment Company Act of 1940 (the “Investment Company Act”)—will promote greater consistency and clarity in the financial information provided to investors.
The statement says that private credit investment within registered fund portfolios has increased by nearly 60% over the past five years, and that exposure to private credit assets is not limited to funds registered under the Investment Company Act and BDCs. Accordingly, the statement says that its reminders are relevant to any registrant with exposure to private credit assets.
I’ve only been to Orlando once, many years ago. We took our family to Disney World around Christmas one year when our kids were very young. We did the whole Disney experience – went to all the parks, rode the rides, did a character breakfast with Cinderella and a character dinner with Mickey himself. We accomplished all of this with a minimum of meltdowns from the kids and, perhaps more surprisingly, with a minimum of meltdowns from me.
I promise I’ll also be on my best behavior in couple of weeks when I return to Orlando for our Proxy Disclosure & 23rd Annual Executive Compensation Conferences. Our conferences will be held at the Hilton Orlando on October 12th and 13th, and there’s a virtual option if you can’t be there in person.
We’ve got a terrific agenda and a powerhouse roster of expert speakers who will share their insights into the latest SEC developments – including the agency’s most recent rulemaking proposals. In that regard, we’re devoting an entire panel to “The Fate of Shareholder Proposals.” Our panelists will address the SEC’s recently announced proposal to rescind Rule 14a-8 & what that may mean for the future of shareholder proposals and engagement.
If you haven’t registered yet, the clock is ticking! We’re less than two weeks away. Visit our online store, email info@ccrcorp.com or call our team at 800-737-1271 today. There’s so much to talk about, and with the pace of change, no doubt there will be even more to discuss by the time October 12th rolls around!
On Friday, Corp Fin updated a whole bunch of CFIs. This included the issuance of seven revised CFIs and the withdrawal of a whopping 26 CFIs across a wide range of topics. None of these are earth shattering. For the most part, the revised CFIs update references to rules that have changed since they were first issued, while the withdrawn CFIs address outdated guidance relating to repealed or superseded rules or transition arrangements for rules that have long since been implemented.
Nevertheless, we’re a full service blog, so we’ll run through them all. Let’s start with the revised CFIs, all of which involve Securities Act Rules or Securities Act Forms CFIs. I’ll link to the markup of each that Corp Fin posted, since that’s probably what will be most useful to you.
Okay, now for the withdrawn CFIs, which include previously issued Securities Act Rules, Securities Act Forms, Exchange Act Rules, Exchange Act Forms, and Interactive Data CFIs. I’ll link to the marked copies for these as well.
