This Barnes & Thornburg blog cites recent comments from Corp Fin Director Jim Moloney about how he’d rather see more staff resources devoted to listening to earnings calls than to reviewing routine S-3 filings. I bet that part of the reason for Director Moloney’s position is that earnings calls are often a target rich environment for staff comments.
That’s because companies too often make the mistake of addressing something in their earnings call without considering whether the topic is appropriately addressed in the corresponding Exchange Act filings. When that happens, the blog points out that you should expect to receive a comment like this from the staff reviewer:
We note your disclosure indicating that you manage your business on the basis of one reportable segment and unit. Based upon comments made by management during your February 10, 2025, earnings call, it appears that discrete financial information below the consolidated level is both available to and reviewed by management. Please tell us how you considered ASC 280-10-50 in determining your operating and reportable segments. To the extent that you have aggregated multiple operating segments into a single reportable segment, please also tell us your basis for doing so.
That hiccup resulted in the company on the receiving end of this comment having to prepare a detailed response (which the blog reprints). That’s something that undoubtedly required significant time and resources which I’m sure the company and its management team would have preferred to devote to, well, almost anything else.
The blog points out that in order to reduce the probability of these situations arising, companies should be sure to have the accounting team to assess the earnings calls’ prepared remarks for such potential issues.
If your CEO can be an unguided missile at times (perish the thought!), I’d also suggest that, if you don’t already, you should consider holding off filing your 10-K or 10-Q until after the earnings call. That way, if the CEO or others on the call wander a bit in their remarks, you’ll have the chance to add any necessary disclosure to your 10-Q or 10-K before you file it.
The blog offers up one more thing to chew on – it notes the trend of companies shortening their earnings calls by issuing prepared remarks in advance, and just using the call as a Q&A forum. The blog also provides some recent examples of public companies that have opted for this approach.
I’ve always thought that one of the most interesting issues in securities litigation involves the circumstances under which an issuer has an obligation to disclose results for an incomplete quarter. We’ve touched on this topic in prior blogs here and on DealLawyers.com, and now a recent decision by a Massachusetts federal court in Buathongsri v. Zenas Biopharma, (D. Mass.; 6/26), gives me an opportunity to revisit the topic.
The case involved Section 11 claims arising out of Zenas Biopharma’s IPO. The plaintiffs’ alleged that the company’s failure to disclose information about significant increases in its R&D spend and cash burn during its first two quarters and during its ongoing third quarter was a material omission. The plaintiffs’ also contended that the failure to disclose this information in the prospectus’s MD&A discussion violated Item 303 of Reg S-K’s “known trends” disclosure requirement.
The Court disagreed with both of these allegations. This excerpt from AO Shearman’s blog on the case discusses the Court’s reasoning:
The Court first addressed whether the alleged omission of quarterly and intra-quarter financial data rendered the registration statement misleading. The Court noted that plaintiff did not dispute that the disclosed financials were accurate, nor did plaintiff identify any provision requiring disclosure of quarterly or in-progress data. The Court found that plaintiff’s theory was belied by the registration statement itself, which disclosed that the Company spent more than $56 million on R&D in the first half of 2024—nearly double the prior six months—and that the Company repeatedly warned that its R&D spending and losses were high and expected to increase for the foreseeable future.
Thus, the Court reasoned that plaintiff’s contention rested on an unreasonable inference that spending had peaked in early 2024 and declined in the third quarter because the Company’s own disclosures did not support this inference. The Court held that requiring further disclosures under these circumstances would amount to an untenable across-the-board rule requiring clinical-stage biotechnology firms to disclose in-progress quarterly burn-rate data.
Turning to Item 303 of SEC Regulation S-K, the Court held that the registration statement did not fail to disclose a known trend or uncertainty. Specifically, the Court held that, even assuming the increased spending was a “trend,” the Company’s disclosure in the registration statement was adequate because the roughly 50% quarter-over-quarter increase in R&D spending was fully consistent with the disclosed first-half 2024 figures.
The Court further observed that, when assessing the ways that R&D spending could double from one six-month period to the next, a fifty-percent quarterly increase was “something like a straight line.” The Court explained that an issuer conducting a public offering is not obligated to disclose interim results for a quarter in progress whenever it perceives that those results may disappoint the market.
Last month, Meredith blogged about the SEC’s decision to approve Nasdaq’s new $5 million minimum market cap requirement for continued listing. Just to bring everyone up to date, last week, the SEC stayed the new listing standard’s implementation. This excerpt from a recent Goodwin blog explains the SEC’s action:
The stay was triggered after the Small Public Company Coalition (SPCC) and Cemtrex each filed notices of their intent to ask the full Commission to review the Division of Trading and Markets’ approval. SPCC says it represents small public companies affected by the rule and participated extensively in the rulemaking process, while Cemtrex says it is directly affected because its MVLS is already below the proposed $5 million threshold and the rule could subject it to suspension and delisting.
Under Rule 431(e) of the SEC’s Rules of Practice, filing a notice of intent to petition for Commission review automatically stays an action taken under delegated authority unless one of a few narrow exceptions applies. As a result, the SEC’s July 29 letter did not itself grant a stay; rather, it confirmed that the approval order had been automatically stayed pending further action by the Commission. The petitioners now have five days to file their petitions for review setting forth the basis for challenging the approval.
The blog says that if the petitioners move forward, the SEC must decide whether to review the Division’s approval of the rule. If it does, then it will then have to figure out whether to affirm, modify, reverse, set aside, or remand the matter for further proceedings. There’s no specified timeline for review, so this could take a while. Whatever action the SEC takes, the matter may ultimately end up in federal court.
According to a new Spencer Stuart report, S&P 500 boards added new directors at the slowest rate in a decade. The report also says that newly appointed directors are older, less diverse, and more likely to come from the ranks of CEOs than in recent years. Here are some of the specific findings:
– S&P 500 boards appointed 364 new independent directors in 2026, out of a total of 5,204 — the lowest number of new directors since 2016. Overall turnover remains low, declining from 0.8 new directors per board last year to 0.7 in 2026.
– This year, 37% of all new directors are CEOs, an increase of seven percentage points from last year. This is the highest share since a peak of 42% in 2012. Overall, 64% of incoming directors bring CEO or financial experience, up from 59% in 2025. Retired individuals again represent the majority of appointments.
– New directors averaged 60.1 years of age, up from 59.1 years in 2025. The youngest new director to join a board in 2026 was 29 years old. The oldest was 77, the same as last year. The average age of sitting independent directors is 63.8. Next-generation (next-gen) new directors (those aged 50 or under) represent 10% of the incoming class, down from 11% in 2025.
– The share of director appointments filled by diverse* executives declined in 2026. Women account for fewer director appointments this year, and the percentage of boards expanding to add one or more women directors is unchanged since last year at 10%. However, the share of new directors who self-identify as underrepresented minorities increased slightly, and more boards have expanded to add one or more directors from this group: 6%, compared with 5% in 2025.
The report also says that fewer first time directors were appointed to public company boards during 2026, and that more companies did not replace directors who left boards. That’s a departure from previous years, where new director appointments generally tracked director departures.
The results of the Spencer Stuart report came as a bit of a surprise to me, particularly since board refreshment is an increasingly important topic – not just to investors, but also to a surprising number of board members. This Debevoise memo has some advice for boards on how to approach the refreshment process. This excerpt says that an effective refreshment strategy starts with succession planning:
Start with Succession Planning. Rather than reacting to vacancies as they arise, boards should establish an ongoing process for evaluating future leadership needs and preparing for expected and unexpected director departures. Responsibility for overseeing succession planning typically rests with the nominating and governance committee, with clearly defined roles for both the full board and management.
Boards should consider making succession planning a recurring agenda item, periodically reviewing anticipated retirements and discussing directors’ longer-term plans. Documented succession procedures help to ensure that transitions occur efficiently and with minimal disruption.
Succession planning also provides an opportunity for boards to look beyond anticipated vacancies and consider what expertise may be needed over the coming years. Regular discussions about future strategies, emerging risks, and changing regulatory expectations help to identify the skills and experiences that would help future directors add value to the boardroom.
Boards should also consider creating a culture of refreshment (even without formal term limits) in which directors understand that after some period of time, it is expected that they will step down to allow for new directors to be added.
Other recommendations include using board evaluations to inform refreshment decisions, periodically assessing whether the board’s composition remains aligned with the company’s strategic priorities and risk profile, and maintaining an active candidate pipeline.
While we’re on the topic of board refreshment, a recent paper says that refreshing your board can pay some significant governance dividends. Here’s an excerpt from a CLS Blue Sky Blog post by the paper’s authors:
Our results suggest that board refreshment is associated with stronger CEO turnover-performance sensitivity. In simpler terms, refreshed boards are more likely to replace the CEO after weak performance.
We also find that refreshment is associated with stronger pay-for-performance sensitivity. CEO wealth becomes more closely tied to stock price performance, and the difference is not trivial: It corresponds to tens of thousands of dollars in additional pay sensitivity for a board that has refreshed more than a typical peer. At the same time, refreshment is positively related to pay-for-risk sensitivity. This balance matters. Compensation should reward performance, but it should also give managers incentives to take appropriate risks rather than avoid valuable long-term projects.
Taken together, the results suggest that refreshed boards do not just look different. They appear to monitor differently. They are associated with stronger CEO dismissal discipline after poor performance and with stronger CEO pay structures that better connect performance and risk.
The authors also suggest that companies that take an active approach to refreshment may be missing an opportunity when it comes to their proxy disclosures, because most disclosures don’t address how the company’s board has evolved.
They argue that these companies should explain in their proxy disclosures the “capabilities, expertise, or perspectives recent appointments added relative to the previous board, and how those changes respond to the firm’s current governance and oversight needs.” The authors believe that disclosure like this would enable investors to distinguish between ordinary director turnover and genuine board renewal.
A number of comment letter deadlines have recently passed – or are approaching – for the various SEC proposals that are currently outstanding and under consideration (and other non-proposal calls for comment). Here’s where things stand:
The comment letter deadline just means that the Commission won’t act to issue a final rule before that date, it’s not a hard cutoff for submissions, and the Staff will consider all comments. At the same time, if you want the Staff to have enough time to thoroughly work through your suggestions and potentially implement them in the final proposal, you’d best be acting soon. I’ll also note here that – at least based on my understanding of and involvement from the outside with the rulemaking process – thoughtful comments tend to carry more weight than the volume of – hypothetically speaking – one-sentence letters.
Based purely on the number of comments received – too many for me to count, with 55,000 added on July 14th alone! – the semiannual reporting proposal appears to be the most controversial so far – or at least the one that is getting the most attention. I previously shared a comment letter tracker for this topic. To those of us who practice in the space, it’s been a bit of a head-scratcher to see this proposal in the spotlight out of all the things that are currently on the table, but maybe we were caught off-guard in part because we assumed that smaller, pre-revenue companies would be the most likely ones to take advantage of it. As John blogged, that assumption may not always hold true, because at least one mega-cap company has said it intends to move to semiannual reporting if the rule is finalized.
The semiannual reporting proposal is also likely easier for the public-at-large to understand and react to. It’s become such a hot topic that people are even making assertions (that sound dangerously close to conspiracy theories) about the email address that the release provided for the comment letter submission process. The SEC has now added this note to the comment page:
Questions have been raised about the operability of the email address listed in the Federal Register version of the semiannual proposing release, rule-comment@sec.gov. Both that email address and rule-comments@sec.gov are valid and operative means to submit comments, are receiving comments submitted regarding this rulemaking, and have been used in other rulemakings and comment solicitations. There is no need to resubmit comments if you used the email address listed in the proposing release.
Note: A large number of comments have been received for this proposing release, and we are working on posting them. We encourage the public to continue checking SEC.gov for submitted comments and note that submissions are not necessarily posted in the order of receipt.
Anyway, if you want to read comments on all the proposals, including the ones that may be more likely to move the needle, check out the links above. Here’s a 24-page letter from the Securities Industry and Financial Markets Association that addresses the “registered offering reform” and “filer status” proposals. Here’s one point from the letter that’s worth a read (see the letter for the detailed explanation of this recommendation):
The Commission should reconsider the proposed “ineligible issuer” disqualification for Form S-3 eligibility, in particular with respect to paragraphs (v) and (vi) of the Rule 405 definition, and permit ineligible issuers that are not BSP issuers to continue using Form S-3. We believe such a requirement would otherwise undermine the Commission’s capital formation objective and have significant adverse consequences for access to the public markets by disqualifying many issuers — including large, seasoned issuers that are currently eligible to use Form S-3—from continuing to use shelf registration. It would also impose a disproportionately severe penalty that is not necessary to achieving the Commission’s investor-protection objectives.
In my experience, it is challenging (for multiple reasons) to work with a group of people to put together a thoughtful comment letter on an SEC proposal. Right now, though, I think submitting a letter might be the easier part! I respect and have gratitude for all those on the Staff sorting through this large volume of comments and analyzing how they all fit together alongside other in-process rule changes.
Yesterday, the SEC announced that Small Business Capital Formation Advisory Committee meeting that had kicked off on July 21, 2026 will reconvene virtually on Thursday, August 6th. I understand the first meeting was cut short because of some facility issues. You can watch the continuation of the meeting on SEC.gov.
Meredith shared a summary of remarks from the first installment of this meeting, and we’ll look forward to Part 2. Here’s the original agenda – and the announcement gives this overview:
The committee will continue its exploration into modernizing public market access and encouraging IPOs and small public company capital formation – including consideration of policy recommendations to reduce regulatory friction and facilitate capital formation in the public securities markets.
Our “Proxy Disclosure & 23rd Annual Executive Compensation Conferences” will be here before we know it – they’re happening October 12-13th in Orlando and virtually. With the Orlando location, I expect it to be extra magical this year. Unlike a certain large theme park, we do not have 30 different ticket combinations to parse through – but we do have an “Early Bird” rate that will allow you to save on your registration fee, and it expires today! Act now to secure your spot.
Register by the end of today – Friday, July 31st – to save on your in-person or virtual registration! You can register online or by contacting us at info@CCRcorp.com or 1-800-737-1271. Make sure to also book your hotel room, because the block is nearly full and the remaining rooms are going fast.
These Conferences are in a league of their own in terms of the experienced speaker lineup and the focus on practical guidance. With so many significant changes expected from the SEC this fall – as well as changing dynamics for shareholder proposals and investor voting – attending is the best thing you can do to arm yourself for the 2027 proxy season.
Here are the agendas for the Conferences – 14 sessions over two days – with a terrific speaker lineup, valuable course materials, and on-demand replay of all sessions for a year after the event:
– Christina Thomas: The Latest From Corp Fin
– The SEC All-Stars: Proxy Season Insights
– The Fate of Shareholder Proposals
– Fireside Chat with Top Activism Defense Lawyers
– Scary Stories to Tell in the (Securities Law Conference Spot)light
– Keeping Governance In Focus When the Future Is Hazy
– The SEC All-Stars: Executive Pay Nuggets
– Your Compensation Disclosures: New & Improved (We Hope)
– The Top Compensation Consultants Speak
– Bodyguards & Private Jets: Perks on the Radar
– Navigating ISS & Glass Lewis
As I mentioned above, our early bird rates apply to both in-person and virtual attendance, so register online or contact us at info@CCRcorp.com or 1-800-737-1271 before the reduced rates expire today – Friday, July 31st!
According to reports published last week by National Economic Research Associates (NERA) and Cornerstone Research, securities class action lawsuits are having a big year: Both the number of filings and the total value of settlements are on track to exceed annual figures from the past 5 years.
This D&O Diary blog from Kevin LaCroix gives color on the recent reports:
The increase in the number of filings in the year’s first six months is attributable to a number of filing trends. For example, according to the NERA report, there were 18 first half AI-related filings, already exceeding the 17 AI-related cases filed in all of 2025. There was also an increase in the number of cases with pump-and-dump allegations, from no more than two filings annually during the period 2022-2025 to 11 the first half of 2026. On the other hand, the number of crypto and SPAC-related filings declined sharply from 2025 levels, with only 2 crypto-related filings in the year’s first six months compared to 14 for the full year 2025, and only one SPAC-related filing in the 1H26 compared to five for the full year 2025.
Kevin shares his own analysis here, which includes these nuggets:
– Two industry groups that stood out in particular for the number of first half filings. Industry Group 283 (Drugs) had a total of 19 first half 2026 filings, representing about 16% of all first-half 2026 filings. Industry Group 737 (Computer Programming and Data Processing) had a total of 17 first-half 2026 filings, representing about 14% of all first-half 2026 filings. These two industry groups together accounted for 36 first-half 2026 filings, or nearly 31% of all first half 2026 filings.
– Among the first half 2026 securities suit filings were nine cases against IPO companies. The IPO companies named as defendants completed their IPOs in 2024 (one company); 2025 (seven companies); and 2026 (one company).
