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.
This kind of feels like it might be looked back on as the moment when the AI craze officially “jumped the shark,” but for what it’s worth, here’s the latest out of Delaware, via this Spotlight Delaware article:
A Delaware committee that has been studying the business uses of artificial intelligence proposed legislation earlier this month to temporarily ease state regulations on companies deploying the fast-growing technology.
The proposed legislation would create a testing ground for companies to use what are called AI agents to autonomously complete business tasks typically done by humans. The AI agents would oversee whole business operations under the umbrella of a new kind of entity, called an Artificial Intelligence Company, or AIC.
Supporters say the resulting regulatory “sandbox” would allow Delaware to test how autonomous AI businesses operate, and provide lawmakers with key data to develop rules governing their use within the state’s prominent corporate franchise.
The legislation is likely to be introduced in the General Assembly next year.
The proposal is intended to help shield the owners of an AIC from liability for AI agents doing, well, AI agent stuff. Over on The Business Law Prof Blog, Ann Lipton questions whether this kind of entity would actually provide the intended liability protection. My concern is more fundamental – why would anyone want to create a legal entity designed to protect the owners of Skynet from liability?
Check out our latest “https://www.thecorporatecounsel.net/blog/wp-admin/post-new.phpTimely Takes” Podcast featuring Cleary’s J.T. Ho & his monthly update on securities & governance developments. In this installment, J.T. reviews:
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.
The SEC recently issued its latest Reg Flex Agenda and boy, is there a lot! The list includes two items that are in the pre-rule stage, and a whopping 36 that are in the proposed rule stage. Everyone knows about the semiannual reporting, filer status, and registration reform proposals that the SEC has already put forward, but here are some other coming attractions that hare reached the proposed rule stage that you might find interesting:
Of course, the dates tied to these items are aspirational and signify general timeframes versus precise dates. As we always caution, while the Reg Flex Agenda provides insight into the SEC’s current rulemaking priorities, it isn’t a definitive guide for anyone trying to predict SEC rulemaking for purposes of specific board agendas, budget and workflow.
Yesterday, the SEC announced that Paul Knight has been appointed to serve as the agency’s Chief Operating Officer. Here’s an excerpt from the SEC’s announcement that provides information on Mr. Knight’s background:
Mr. Knight joins the SEC from JPMorgan Chase, where he most recently worked as the principal lead for driving growth across U.S. lines of business, after previously managing the program office for the Chase Bank expansion into 25 new states. Prior to his nearly 12 years at JPMorgan Chase, Mr. Knight served as a senior advisor and business manager at the U.S. Department of the Treasury from 2012 to 2014. Mr. Knight also previously served at the SEC from 2008 to 2012 in a variety of roles, including as the interim managing executive for the Division of Economic and Risk Analysis. He started his career during his college years working for a small business in his hometown of Annapolis, Maryland.
The COO oversees the SEC’s operational and administrative functions, and if you check out the Office of the Chief Operating Officer’s page on the agency’s website, you’ll get a sense for just how broad-ranging the COO’s responsibilities are.
Our 2026 Proxy Disclosure and Executive Compensation Conferences are just around the corner. Our conferences will be held on October 12th & 13th in person in Orlando and will also be available online for virtual participants. Our discounted “early bird” rate expires on July 24th, so you need to act fast to ensure that you don’t miss out!
With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
If you’ve been following our blogs, webcasts, podcasts and newsletters, you know that the SEC has turned on the rulemaking firehose – and the agency has indicated that there’s plenty more to come! This year more than ever, you can’t afford to miss the insights that our expert panelists will provide on the latest developments.
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!
In prior blogs, I’ve criticized the SEC’s longstanding practice of publicly trumpeting every enforcement victory on its website while remaining silent about its defeats. In a recent LinkedIn post, David Chaiken pointed out that last week, the SEC departed from that practice when it issued a litigation release announcing the dismissal of enforcement proceedings against the former CEO of FirstEnergy. The release was short, direct, and didn’t pull any punches:
The Securities and Exchange Commission announced that on June 27, 2026, the Honorable J. Philip Calabrese, United States District Judge for the Northern District of Ohio, granted a motion to dismiss filed by Defendant Charles E. Jones.
On September 12, 2024, the SEC filed a complaint against Jones, the former CEO of FirstEnergy Corp.
In granting the motion to dismiss, the court found that the Commission’s complaint, as alleged, did not state a claim against Jones for violations of federal securities laws.
The Atkins SEC’s rulemaking and enforcement decisions have been controversial, to say the least, but I think everyone should applaud its transparency about the outcome in this case. A regulatory agency in a democracy should be more concerned about being transparent when it comes to its enforcement program than it is about cheerleading for it. I think it’s fitting that the announcement was made just before the 4th of July, and I hope this becomes a standard practice.
It’s great to see the SEC move toward more transparency about its enforcement program, and it also deserves praise for its efforts to improve the Wells submission process. However, another issue that anyone who’s been involved with an SEC investigation knows needs some attention is the often interminable delays in the investigative process. This excerpt from a recent post on The CLS Blue Sky Blog explains the issue:
Regulation by delay occurs when an investigation remains open long after the Wells process has concluded, allowing the practical consequences of an SEC investigation to continue indefinitely without either a formal enforcement action or a formal decision to close the matter.
The issue is not merely administrative. SEC investigations frequently carry substantial consequences, even when no enforcement action is ultimately filed. Financing transactions become more difficult. Banking relationships become strained. Directors’ and officers’ insurance may become unavailable or prohibitively expensive. Strategic transactions are delayed or abandoned. Hiring and retention suffer. Key personnel depart. Investors discount uncertainty. Potential business partners walk away rather than assume regulatory risk.
In theory, investigations are designed to determine whether an enforcement action should be brought. In practice, however, excessively prolonged investigations can themselves become a source of significant economic and reputational harm. The result is a system in which the practical burdens associated with enforcement may persist even where no enforcement action is ever authorized.
In some circumstances, the investigation itself begins to function as the punishment.
The above excerpt focuses on the impact of investigative delays on the companies involved, but the SEC almost always also targets individuals in its investigations, and the personal toll that sitting under the sword of Damocles takes on them can be even more devastating. People’s careers and reputations hang in the balance, and delays that require them to wait years for a resolution to the investigation aren’t just punishment, they’re torture.
During his speech to the Economic Club of New York last week, SEC Chairman Paul Atkins said that the SEC would conduct a “thorough review of enforcement processes.” I’d submit that what the CLS blog refers to as “regulation by delay” should be near the top of the agenda for that review.
For our latest Timely Takes podcast, Meredith was joined by Chris Hayden, President, Georgeson Advisory, North America & Meighan McGowan, Head of Business Development, Computershare Investor Engagement, North America to discuss some of the key takeaways from this year’s proxy season. In this 25-minute podcast, they discussed:
– The impact of new SEC guidance on the 2026 proxy season
– Shareholder proposal trends in 2026
– Strategy shifts at the proxy advisors
– Asset managers moving toward AI-driven voting platforms
– Exxon’s “retail voting program”
– Expanded pass-through voting
– How the Big 3 asset managers are bifurcating their proxy voting teams
– DEXIT and Texas
– Tips for navigating trends in the voting and engagement ecosystem
If you’re interested in sharing your insights on a topic that you think would likely be of interest to members of TheCorporateCounsel.net or our other sites, we’d love to hear from you. You can contact me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
The requests for public comment just keep on coming from the SEC! Earlier this week, the SEC issued a request for public comment seeking input on exchange-traded funds seeking to invest in innovative asset classes or engage in novel investment strategies. The SEC’s announcement notes:
“Innovation in exchange-traded funds depends on a consistent, transparent, and efficient regulatory framework,” said SEC Chairman Paul S. Atkins. “The Commission’s request for comment seeks input from the public on how the U.S. ETF market can continue to grow and innovate while serving investors effectively, and I look forward to reviewing feedback from market participants as we evaluate how to best respond to recent market changes.”
“Exchange-traded funds are a tremendous success story, growing from $4 trillion in 2019 to over $12 trillion at the end of 2025. As ETFs continue to grow and novel strategies emerge, public engagement is essential to answering key questions to make the next years of development a success,” said Brian Daly, Director of the SEC’s Division of Investment Management.
The request for comment includes 27 questions on topics such as Investment Company Act status, Rule 6c-11 and registration process and mechanics. The comment period will be open for 60 days following publication in the Federal Register.
