After announcing and canceling an open meeting last week to consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets, the SEC announced yesterday that it approved, without an open meeting, a rule proposal titled ‘Regulation Crypto Assets.’ Here’s the 402-page rule release and the 3-page fact sheet. Commissioners Peirce and Uyeda issued statements in support of the proposal, as did Chairman Atkins, who provided a succinct explanation of the proposed rules in his statement:
Today’s proposal would create a fit-for-purpose framework—consistent with the Commission’s recent interpretation—for non-security crypto assets that are subject to an investment contract. Specifically, the proposed rules include tailored offering exemptions, as well as a safe harbor that would provide clarity for issuers, investors and other market participants as to when the related investment contract ceases to exist. Of course, the proposed rules include certain conditions that preserve core investor protections.
The proposed rules include two offering exemptions tailored for innovations in the crypto asset markets: a “startup exemption,” which would allow for offerings up to $5 million during a four-year period, and a “fundraising exemption” allowing for offerings of up to $75 million each year.
Each proposed exemption includes principles-based disclosure requirements tailored to the unique aspects of crypto assets. The proposed fundraising exemption also requires disclosures regarding an issuer’s financial condition, including financial statements that must be audited at certain capital raising thresholds.
Additionally, the proposed rules include an “investment contract safe harbor.” Under this safe harbor, if the issuer certifies to the Commission that it has ceased or terminated all essential managerial efforts that it promised to undertake under the investment contract and satisfies certain other conditions, then the Commission would no longer deem the non-security crypto asset to be subject to an investment contract and, therefore, no longer subject to the authority of the Commission.
The proposal also would preempt state registration and qualification requirements for offers and sales of covered investment contracts pursuant to one of the exemptions contemplated by Regulation Crypto Assets and for certain secondary market transactions. The fact sheet and press release also make clear that proposed Regulation Crypto Assets builds on and complements the SEC’s interpretive guidance issued earlier this year regarding what digital assets are, and are not, securities.
There was some speculation online that the cancellation of the open meeting last week had to do with the status of the CLARITY Act. Chairman Atkins and Commissioner Uyeda both addressed the potential for (and welcomed!) crypto legislation in their statements:
Chairman Atkins: “Given the progress made in Congress to date on market structure legislation, let me be clear up front: legislation remains indispensable to enacting “future-proofed” rules of the road that are durable enough to protect the work we are undertaking today from being unwound by a future rogue regulator. The SEC has and will continue to support Congress in delivering the CLARITY Act to President Trump’s desk.”
Commissioner Uyeda: “Notably, with respect to any legislative developments, nothing in the proposal precludes the Commission from taking into account such developments in formulating or responding to future crypto policies. To the contrary, legislative CLARITY would be beneficial to market participants and regulatory agencies.”
Both also recognized and thanked (in addition to the Corp Fin and DERA staff) Commissioner Peirce for her leadership on crypto issues. I have to imagine it’s satisfying that this proposal was approved before she departs the SEC this fall. We all know how disappointing it feels when a big M&A deal or IPO you’ve spent countless hours on dies – or you switch jobs or go on parental leave when a deal has stalled, and you know you won’t be able to see it through to completion (if it ever closes).
Yesterday, Chairman Atkins issued a statement, on behalf of the Commission, soliciting candidates to serve on the board of the PCAOB. The statement notes:
The Act requires that PCAOB Board members be “appointed from among prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosures required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures.”
Only individuals who have never been a certified public accountant are eligible to serve in this seat, which is for a term ending on October 24, 2031. I strongly encourage applications from candidates interested in furthering the public interest through the efficient stewardship of PCAOB resources. Board members play an important role in serving the public interest by helping to protect the integrity of public markets in a manner that minimizes unnecessary costs for the public companies, brokers, and dealers who ultimately fund the PCAOB’s budget.
The statement notes that the PCAOB Board member selection process is administered by the SEC’s Office of the Chief Accountant. Submissions should be emailed to the SEC and the deadline for submissions is September 8, 2026.
Check out John’s latest “Timely Takes” Podcast featuring Cleary’s J.T. Ho sharing his monthly update on securities & governance developments. This month, their 24-minute podcast addresses the following topics:
SEC Proposes Regulation E-Delivery
SEC Releases 2026 Rulemaking Agenda
Recent SEC Guidance
Activism Trends at the 2026 Midpoint
Nasdaq 3rd Annual Global Governance Pulse Survey
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 at mervine@ccrcorp.com and/or John at john@thecorporatecounsel.net.
On Friday, the SEC posted notices and orders to solicit comments and approve, on an accelerated basis, proposed rule change filings (as amended) by NYSE and NYSE American regarding the exchanges’ stock price continued listing standards. The rule changes by NYSE and NYSE American would codify and increase the closing price at which they will take immediate delisting action.
Currently, regardless of where an issuer stands in its six-month price criteria cure period, NYSE will promptly initiate suspension and delisting procedures if a stock trades below $0.10 per share. Due to recent increases in trading of companies that have a very low trading price per share and concerns over manipulative trading activity, NYSE’s proposal would amend Section 802.01C of the Listed Company Manual to specify that if a closing price per share is less than $0.25 on any trading day, the exchange will immediately suspend trading and commence delisting proceedings. This change will not be effective until July 1, 2027, to allow listed companies time to implement reverse splits before the rule change takes effect. The amendments would also specify that NYSE’s general authority to suspend trading in the event of any condition that “makes further dealings on the Exchange unwarranted” includes the authority to suspend trading or delist a security where it believes the trading price has experienced a “precipitous decline and is at an abnormally low level from which it is unlikely to recover,” even when the closing price has not fallen below $0.25.
In the NYSE American order, the exchange proposes to amend Section 1003 of the NYSE American Company Guide to reflect similar changes. Both of these rule changes are part of a broader effort by both NYSE and Nasdaq to tighten listing standards. Some significant changes have impacted NYSE American specifically this year, with this order following a March approval of a proposal, after amendment, that made multiple NYSE American initial listing standards more rigorous.
Last week, the SEC posted an order approving proposed rule changes to amend DTC’s Redemptions Service Guide and Operational Arrangements to update its Payment without Presentation process, which, the order explains, “permits Agents to remit maturity or full call proceeds to DTC without requiring delivery of the associated physical certificate and allows them to rely instead on DTC’s book-entry records of entitlements.” This is a technical rule change, but I found there were times in practice when I needed at least a cursory understanding of how DTC processes work. Here’s how the order explains the old process and the new process:
Under the current procedure for redeeming a debt security at maturity, DTC submits a physical debt certificate and a Letter of Transmittal (“LT”) to the Agent prior to the release of redemption proceeds from the Agent to DTC. After receiving both documents, the Agent releases the funds, and DTC then distributes the funds to Participants and deletes the Participants’ positions from DTC’s records. Alternatively, Paying Agents and Issuers currently utilizing DTC’s Redemption PWP process for Fast Automated Securities Transfer (“FAST”) and Book-Entry-Only (“BEO”) issues agree to accept DTC’s automated notifications instead of physical Shipment Control List and Redemption Payment Summary forms for redemption payments. The Agent and Issuer must agree to review relevant details prior to the redemption date and report any discrepancies at the CUSIP level prior to payment. Redemption payments are then remitted to DTC in accordance with the procedures described in the OA.
The Proposed Rule Change seeks to amend the Redemptions Guide and the OA to update the PWP process. The Proposed Rule Change would: (i) eliminate the need for a LT or the presentment of certain other physical documents; (ii) include in the Rules that Agents may receive automated notifications; (iii) make participation in the PWP process mandatory, with optout permitted only where necessary; (iv) establish retention and destruction protocols for physical certificates; and (v) make clarifying and conforming changes.
With respect to items (i), (ii) and (iv) above, the Proposed Rule Change would no longer require a physical certificate presentment or related physical documentation for eligible redemption and maturity events. Agents may continue to receive automated notifications that provide information on the relevant security (including CUSIP), payment date, and amount due. These notifications would be sent electronically to Agents prior to the event. An agent must optin to receive these notifications and does so by sending an email to the redemptions operations team.
Physical certificates related to these events would no longer be delivered to Agents. Agents would remit proceeds to DTC without receipt of a LT or other physical certificates, then DTC would allocate redemption proceeds to Participants based on its book-entry records and remove any positions from its records following payment. The associated physical certificates would be segregated and imaged for record retention purposes, retained for at least ninety days following redemption, and then destroyed according to DTC’s procedures.
With respect to item (iii) above, participation in the PWP process would be mandatory for all eligible fully registered debt securities represented by physical certificates held at DTC and registered under the name Cede & Co. Exceptions to participation are permitted solely to comply with a state statute, court order, or other legal or regulatory obligation, or if the Agent is a governmental entity or authorized representative requiring physical documentation.
As I recently shared on DealLawyers.com, the Chancery Court’s recent decision in Drakes Landing Associates v. Tilden Park Capital Management(Del. Ch.; 7/26) answered a significant issue of first impression — whether Revlon applies to the board of a public benefit corporation navigating a change-of-control transaction. The decision summarizes the facts as follows:
Two of a public benefit corporation’s lenders proposed a financing transaction that would provide the company with $20 million in urgently needed financing. As part of the financing, the debt owed by the company to the two lenders would convert into equity, increasing the lenders’ stock holdings from around 25% to nearly 85%, and diluting the other stockholders. The public benefit corporation appointed an independent and disinterested special committee to evaluate the transaction. The special committee in turn retained independent legal and financial advisors and ultimately approved the deal.
The parties agreed that the financing was a change-of-control transaction to which Revlon would apply if the company was not a PBC, but disagreed on whether and how a company’s status as a PBC impacts Revlon‘s application. VC Cook said that this turned on whether Revlon is treated as imposing a standard of conduct (obtain the best price reasonably available) or a standard of review (enhanced scrutiny). A Richards Layton & Finger alert on the decision explains his analysis:
The Court held that the traditional Revlon obligation to seek the best price reasonably available for stockholders does not apply as a standard of conduct to PBC directors because, under Section 365(a) of the Delaware General Corporation Law (the “DGCL”), PBC directors are required to balance stockholders’ pecuniary interests, the interests of persons materially affected by the PBC’s conduct and the public benefits stated in the PBC’s certificate of incorporation. The Court explained that Revlon’s price-maximization mandate conflicts with Section 365(a)’s express balancing requirement, and that PBC directors cannot be required to pursue the highest value reasonably available for stockholders to the exclusion of the corporation’s public-benefit purpose and affected stakeholders. The Court nevertheless left open whether a modified form of enhanced scrutiny—referred to by the Court as “PBC enhanced scrutiny”—could apply to a change-of-control transaction involving a PBC as a standard of review, under which the Court would examine whether the directors’ balancing of these interests fell outside the range of reasonableness.
The Court did not directly decide this question because it found that the challenged transaction, which was approved by an independent special committee, invoked the statutory protections applicable to decisions of PBC directors under Section 365(b) of the DGCL. Section 365(b) provides, in relevant part, that with respect to director decisions implicating Section 365(a)’s balancing requirement, a director “will be deemed to satisfy such director’s fiduciary duties to stockholders and the corporation if such director’s decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.” Because the plaintiffs conceded that the special committee members were disinterested and independent, and their allegations regarding the adequacy of the committee’s market check expressed concerns only about stockholders’ pecuniary interests without challenging the committee’s consideration of the other interests implicated by the statutory balancing test, the Court dismissed the plaintiffs’ fiduciary duty and related aiding and abetting claims. The Court also suggested that even if the corporation were not a PBC, the fiduciary duty claims would have been dismissed under Delaware’s new statutory safe harbor, Section 144 of the DGCL.
RLF says the key takeaways are that:
– PBCs are never subject to a “singular obligation to maximize stockholder value.”
– Section 365(b) of the DGCL serves as a “statutory business judgment rule” that provides significant protection against challenges to the decisions of PBC directors.
If you don’t already, you should subscribe to get our daily DealLawyers.com blogs in your inbox. (The blog is free!) And if you regularly handle hostile – or friendly – M&A, the site is full of very useful & practical info that will come in handy when you’re on a tight time frame. It’s also a great training resource for new associates! If you don’t have access to DealLawyers.com, reach out to info@ccrcorp.com or call 1.800.737.1271.
The Corp Fin Staff’s November 2025 announcement that it didn’t intend to referee the Rule 14a-8 process during the 2026 proxy season was explicit that the process change applied to the 2026 proxy season (October 1, 2025 – September 30, 2026) and no-action requests received before October 1 that had not yet been addressed by the Staff. But, given commentary from Chairman Atkins and Staff statements, it probably comes as no surprise to any readers of this blog that the Corp Fin Staff announced on Friday that it has no intention of getting back into the game.
Chairman Atkins previously likened this process change to “removing the training wheels from the shareholder proposal bicycle.” With this most recent announcement, it seems we were all riding a balance bike during the 2026 proxy season and now we’re graduating to the 10-speed. That’s because this announcement goes a bit further.
[T]he Division has determined to discontinue responding to Rule 14a-8 no-action requests entirely, including those submitted under Rule 14a-8(i)(1), effective immediately, unless and until the Division announces otherwise.
It also will no longer respond to notices filed under Rule 14a-8(j) with a letter indicating that it will not object if a company omits a proposal from its proxy materials. Although the staff “has for many years engaged in the informal practice of expressing its enforcement position” in response to notices submitted under Rule 14a-8(j), the Commission has also long recognized that “[n]o response or other action by the Commission or its staff is required in regard to such communications.”
Not only does it go further, but, as Broc noted in this Cooley blog, unlike the November 2025 announcement, “There is no sunset for these updated Staff positions – unless the SEC announces a change in its position. So this is ‘new normal’ for the foreseeable future…”
As required by the rule, the announcement reminds companies that they must still submit notices under Rule 14a-8(j) containing the information required, which they should do using the Shareholder Proposal Form. That form will also be used for any questions or other correspondence that companies or proponents submit to the Staff. The Corp Fin shareholder proposal email address has been deactivated. Investment Management will take a similar approach for Rule 14a-8 notices by investment companies, except Rule 14a-8(j) notices will be submitted via email to IMshareholderproposals@sec.gov.
Last month, EY announced the results of a survey it conducted with the Society for Corporate Governance on the use of sub-certifications, which (for any new securities lawyers out there) are “attestations from personnel across the organization regarding the accuracy and completeness of information provided for disclosure purposes.” Here are some of the key findings:
– Sub-certifications are used by 92% of surveyed companies on a quarterly basis. 84% require over 11 employees to provide sub-certifications, with the largest group (31%) reporting that 11 to 20 employees are included in the process.
– 57% of companies have automated the process, and 26% took a hybrid approach. (Examples of a “manual” process were email, Word, Excel, etc.)
– 38% provided a formal summary or compilation to the disclosure committee, while 44% treat it separately from the disclosure committee process. 62% report the results to the Audit Committee in some form.
– The CAO or Controller is most often responsible for administering the process, and the Finance or Accounting Department is typically tasked with vetting concerns.
– Most respondents (68%) that use sub-certifications used one form for all functional areas, roles and organizational levels, and most (78%) distribute them after the end of the reporting period. EY notes that they are often distributed late in the reporting cycle, sometimes when books are substantially closed but before disclosure committee review, so certifiers can “reflect on period-complete information.”
EY shares three recommended best practices based on common gaps in sub-certification programs identified by the survey responses. Those include:
1. Strengthen the connective tissue between sub-certifiers and the disclosure committee
Build tighter, more consistent linkages so insights flow upstream earlier, gaps surface faster and those charged with governance gain clearer visibility into emerging issues. If processes are separately managed (between finance and legal or the sub-certification process and disclosure committee, as examples), confirm productive teaming and open lines of communication exist.
2. Evaluate questionnaires periodically and expand questions to capture emerging risks
Sub-certifications should evolve in tandem with the risk landscape. Treat questionnaires as living tools, periodically pressure-test them and add coverage for new technologies, operational shifts and regulatory developments.
3. Regularly educate sub-certifiers
Even brief refreshers reinforce expectations, sharpen judgment and prevent outdated assumptions from prevailing. Continuous micro-teach-ins keep the process accurate, efficient and audit-ready.
We’ve posted the transcript for our recent webcast, “The SEC’s Registered Offering Reform Proposal: What You Need to Know Now.” This program featured Valian Afshar and Ted Yu of the SEC’s Division of Corporation Finance, Sonia Gupta Barros of Sidley and Edwin O’Connor of Goodwin, with our colleague and Goodwin partner, Dave Lynn, moderating. They discussed:
Key changes to Form S-3 eligibility
Expanded communications flexibility
Modernization of registration processes and shelf offerings
Transition timing, open questions and practical implementation considerations
Impacts on capital-raising strategy
Members of TheCorporateCounsel.net can access the transcript of this program. If you are not a member, email info@ccrcorp.com to sign up today and get access to the full transcript – or call us at 800.737.1271.
Yesterday, the SEC issued notice of a proposed NYSE rule change that, if approved, will extend the transition period in which a listed company must establish an internal audit function. Currently, companies listing in connection with an IPO, carve-out or spin-off transaction have a one-year transition period to establish an internal audit function. The proposal would change that to 5 years. Here’s some color on why the NYSE is proposing this change:
Section 303A.07(c) of the Manual states that each company listed on the Exchange must have an internal audit function. The purpose of the internal audit function is to provide an issuer’s management and audit committee with ongoing assessments of the issuer’s risk management processes and system of internal controls. The function may be outsourced to a third-party service provider other than an issuer’s independent auditor.
Like other elements of the Exchange’s corporate governance rules, Sections 303A.00 and 303A.07 provide a transition period for certain issuers to become compliant with the internal audit function.3 Pursuant to Section 303A.07 issuers must have an internal audit function in place no later than the first anniversary of their listing date. Over time, issuers have expressed concern that developing a capable internal audit function within the first year of listing presents challenges as issuers adjust to life as a newly public company. Accordingly, the Exchange is proposing to extend the transition period to implement an internal audit function from one year to five years.
In expressing concern over the current one-year compliance period, issuers often cite competing business and regulatory obligations requiring management’s attention and the challenges of building an internal audit function to assess a company’s internal control environment while a company is still in its early stages and continuing to grow. The Exchange continues to believe that having a robust internal audit function is a key component of sound corporate governance, but agrees that providing issuers with additional time to develop such function will result in a more effective function.
In this regard, the Exchange notes that newly public companies are typically in the process of upgrading their accounting systems and internal controls and hiring additional staff to meet the greater demands placed on public companies. Given the oversight role of directors — and members of the Audit Committee, in particular — with respect to risk management and internal controls, the Exchange believes it is appropriate to extend the transition period for compliance in order to provide a new slate of directors with sufficient time to assess an issuer’s operations to help design a valuable internal audit function.
NYSE believes that other listing requirements will provide assurance that companies are sufficiently managing risk during the 5-year transition period. For example, companies must have an Audit Committee that receives an annual report from the company’s independent auditor describing internal quality control procedures, and the Sarbanes-Oxley Act requires assessments and (for some companies) attestations of the effectiveness of internal controls, as well as CEO and CFO certifications. NYSE says that SOX was adopted after the exchange had adopted its internal audit requirement – and because the internal audit requirement can now be viewed as a supplement to the statutory protections, a longer phase-in period shouldn’t raise investor protection concerns. NYSE also contends that its proposal to extend the transition period shouldn’t raise concern because Nasdaq doesn’t require listed companies to maintain an internal audit function at all.
Interested persons are invited to submit comments. To do that electronically, use the Commission’s internet comment form or send an email to rule-comments@sec.gov (include file number SR-NYSE-2026-37 on the subject line).
