Yesterday, Corp Fin updated its government shutdown guidance, as evidenced in this redline* (thanks, Corp Fin!), with a welcome change that addresses one of the major difficulties associated with relying on Section 8(a) so your registration statement can go effective in times like these when the SEC isn’t able to review registration statements or declare them effective. If this isn’t your first rodeo, you probably remember/know that a registration statement can go effective by operation of law 20 calendar days after filing under Section 8(a) of the Securities Act. Under normal circumstances, an issuer includes “delaying amendment” language from Rule 473 on the cover page of its registration statement to postpone effectiveness until the SEC has reviewed the filing and “accelerated” its effectiveness.
The prior version of the Staff’s shutdown guidance indicated that you couldn’t rely on Rule 430A to omit your offering price when filing a registration statement that would become effective after 20 days pursuant to Section 8(a) due to language in 430A that refers to a registration statement that is declared effective. (This would mean that the price is fixed for those 20 calendar days — yikes!) The new guidance now says:
Because the staff is not available to review or accelerate the effectiveness of registration statements during the shutdown, we will not recommend enforcement action to the Commission if a company omits the information specified in Rule 430A from the form of prospectus filed as part of a registration statement during the shutdown and such registration statement goes effective, either during or after the shutdown, by operation of law pursuant to Section 8(a) of the Securities Act.
You can launch your IPO with a price range. The updated guidance says a company can rely on Rule 430A during the shutdown, which means a company can launch its IPO with a price range on the cover and include the offering price in the final prospectus after the registration statement becomes effective (as it normally would in an IPO where the SEC declares the registration statement effective).
This is clearly a great change for companies looking to move forward with offerings right now because it makes using Section 8(a) a much more workable option. Cool beans!
The Davis Polk alert also goes one step further to say:
You can price outside the range as in a regular IPO.In addition, the availability of Rule 430A means companies have the ability to price above or below the range and benefit from the 20% safe harbor under the rule, just like they would in a regular way IPO that is declared effective by the SEC.
The staff’s existing guidance for IPOs is that a “price range in excess of $2, for offerings up to $10 per share, or in excess of 20% of the high end of the range, for offerings over $10 per share, will not be considered bona fide.” (C&DI 134.04)
We believe that given the price range will be included in the publicly filed registration statement 20 days before effectiveness, it would not be unreasonable for a company to include a price range in excess of the limits included in existing staff guidance, so long as the range is reasonable.
* Note that there were a few now moot FAQs that were deleted, but not shown in the redline, since they were relevant before a shutdown, but not during.
In the keynote address yesterday at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala, SEC Chairman Paul Atkins asked a provocative question: “Are precatory proposals a ‘proper subject’ for action by shareholders under Delaware law?” Chairman Atkins cited Kyle Pinder of Morris Nichols and his upcoming paper — and also former Vice Chancellor Leo Strine — for the proposition that there’s no firm basis under Delaware law for a shareholder right to submit non-binding proposals.
After a brief discussion of the history of the SEC’s position on precatory proposals, he dropped this:
Pulling all of this together, if there is no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals—and the company has not created that right through its governing documents—then one could make an argument that a precatory shareholder proposal submitted to a Delaware company is excludable under paragraph (i)(1) of Rule 14a-8.
If a company makes this argument and seeks the SEC staff’s views, and the company obtains an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law, this argument should prevail, at least for that company. I have high confidence that the SEC staff will honor this position.
He also seemed to suggest that the SEC may seek to certify this question to the Delaware Supreme Court for declaratory judgment — highlighting that the Commission has once used this option when Corp Fin was confronted with two conflicting legal opinions on Delaware law:
In 2007, Delaware amended its constitution to give the SEC the ability to certify questions to its highest court for declaratory judgements. So far, the Commission has taken advantage of this tremendous opportunity only once—in June of 2008, shortly before I left the SEC as a Commissioner in my prior tour of duty. Interestingly, that certification also involved whether a shareholder proposal was a “proper subject” for shareholder action.
The court issued its decision just 20 days after the Commission’s certification. As I stated at the time, I salute the court for its speed in deciding the issue. If the need for the Commission to certify a question to the court arises in the future, I hope that both the agency and the court will continue to benefit from this unique partnership to expeditiously resolve matters of Delaware law that arise in the context of the federal securities laws.
There’s a lot to unpack here — on this topic and others. This Gibson Dunn blog has more.
You landed that job you wanted at that unicorn, it went public, the stock traded up and now the options you once worried might end up worthless are worth more than all your other assets combined. You’re living the dream! Right?!? Whether that scenario is your dream or not, I’m guessing it’s not that surprising to learn that all employees — including management — just don’t like working at a company as much after it goes public.
Employees become significantly less satisfied with their employers after an initial public offering (IPO).
Using 3.7 million employee reviews from Glassdoor between 2008 and 2022, we document that employee satisfaction drops measurably after companies go public. While employees at private firms typically rate their companies favorably, the ratings decline after an IPO and remain lower for years . . .
The drop occurs specifically after companies file their S-1 registration statements and enter the public markets, suggesting that the IPO process itself, rather than underlying company characteristics, drives the change.
Multiple aspects of the workplace experience are impacted, including, sadly, perceptions of senior management and (surprisingly?) work-life balance. But not all employees experience satisfaction declines equally. The research shows three trends:
First, the effect is concentrated among employees who were with the company before it went public.
Second, employees in management and compliance roles experience particularly large [roughly 2.5 times larger] drops in satisfaction.
Third, smaller companies and those audited by Big Four accounting firms see larger satisfaction declines. Smaller firms face proportionally higher regulatory costs relative to their resources, while Big Four auditors typically impose more rigorous compliance standards, amplifying the burden on employees.
And then there are these company-specific factors:
We find that [Emerging Growth Companies] experience only about half the satisfaction decline of traditional IPO firms, with the difference concentrated precisely in areas where regulatory burden was reduced. This evidence strongly supports regulatory costs as a driver of post-IPO satisfaction declines.
[N]ot all companies suffer equally from the IPO transition. Firms in industries with strong Environmental, Social, and Governance (ESG) reputations, particularly those with robust social practices, experience significantly smaller satisfaction declines. Companies in industries with low social reputation risk see drops only about half as large as the typical effect.
I know money can’t buy happiness, but I did actually do a text search in the paper for “options” and “equity” to see if it addressed whether the satisfaction trends are impacted by whether and how much the stock traded up. It doesn’t.
But it does at one point note the opposite — that is, “increases in employee satisfaction predict improvements in future operational performance and future stock returns.” So, in all seriousness, this impact on satisfaction sure seems like something companies should be considering and trying to manage. I’m not sure adding to that already 20+ page IPO checklist is the solution to the IPO-too-much-compliance-work-death-of-fun effect, but, IDK, maybe that intimidating checklist should also include human capital management and corporate culture.
Just in time for third-quarter 10-Qs, KPMG recently released the results of its analysis of disclosures about tariffs and trade policy in Form 10-Q filings from April through August 2025. “Out of approximately 880 Form 10-Q reports from Fortune 500 SEC registrants analyzed, nearly 90% mentioned tariff- and trade-related concerns” — not surprisingly, this was nearly double the number from the same period in 2024. The analysis also showed that disclosures are now more “detailed, quantified, and operationally focused.” Almost all related disclosures were in the financial statements, MD&A, risk factors, and disclosures about market risk.
– Financial Statements: Most disclosures were outside the financial statements, but in Q2, more companies began discussing the impact of tariff uncertainty and its impact on estimates — for example, whether tariff uncertainty has triggered a goodwill impairment, estimation uncertainty in allowance for loan losses for banks or incorporating tariff estimates into baseline economic forecasting.
– MD&A: 75% of 10-Qs reviewed addressed tariffs in MD&A. In Q1, disclosures were largely qualitative and addressed management’s strategies to address uncertainty. In Q2, disclosures became more specific and detailed, with many registrants reporting “actual, material effects—often quantified” and specific mitigation strategies.
– Quantitative and Qualitative Disclosures About Market Risk: Few tariff-related disclosures are included here currently, but KPMG expects this to change “to include anticipated macroeconomic effects and management strategies to mitigate risk exposures.”
– Risk Factors: Disclosures focus on uncertainty, regulatory compliance, supply chain risks and adaptation strategies, with risk factors in Q1 mostly anticipating effects and Q2 disclosures shifting away from hypothetical to start to address effects that are already occurring.
KPMG also addresses major themes in the disclosures. For example:
– Uncertainty: Companies acknowledge that the impact of tariff policies on the economy and their operations specifically is uncertain, discuss current and potential risk mitigation strategies and are beginning to quantify, model and embed tariff and trade policy risk into their financial processes — including economic forecasting and asset impairment testing — and providing detail about the actual and potential impact on financial results.
– Increased Costs: Disclosures about increased raw material costs and impact on margins have become more explicit in Q2 with many companies providing “specific dollar amounts or quantified margin effects.”
– Supply Chain Disruptions: Similarly, Q2 disclosures addressed actual supply chain disruptions and specific strategies used to address them.
– Adaptation: Disclosures discuss ways companies are adapting their business strategies to address tariff risks and also getting more specific. These adaptations include supply chain reconfigurations and supplier diversification efforts, the use of new technologies, price increases and changes to sourcing and business models to reduce exposure.
– Regulations: Disclosures highlight increasing compliance costs and regulatory challenges.
Also, take a look at this Deloitte article that addresses accounting implications of tariffs — for example, asset impairments, revenue recognition and income tax implications — that you should consider when preparing your third quarter 10-Q.
At the end of last month, the Commission announced that it issued a concept release soliciting input on the disclosure requirements for offerings of residential mortgage-backed securities (RMBS) and certain rules related to asset-backed securities (ABS) more generally. If this sounds familiar, as this Mayer Brown alert highlights, the SEC solicited feedback on issues impacting registered RMBS in October 2019, but that effort stalled.
Apparently, there have been no public RMBS offerings since 2013. Notably, this is just before the SEC’s adoption of Reg. AB II in 2014. So the SEC is considering how existing rules have contributed to the absence of these offerings — on the basis that these public offerings are an “important part of a healthy mortgage market.” The release requests input on:
– How to revise Reg. AB requirements for asset-level disclosures about the underlying residential mortgages to enable public offerings of RMBS
– Potential approaches to address privacy concerns stemming from public disclosure of information about mortgage obligors, including credit scores and income
– Whether the definition of “asset-backed security” in Reg. AB should be harmonized with the definition in Section 3(a)(79) of the Exchange Act
The Mayer Brown alert describes this definitional discrepancy further:
The SEC’s adoption of Regulation AB in 2004 included a definition of “asset-backed security” that was intended to capture the securities and offerings to which the registration, disclosure and reporting requirements under the Securities Act of 1933 and the Exchange Act would apply . . . As part of the litany of laws, rules, and regulations adopted as a result of the global financial crisis of 2008, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Exchange Act to include a separate, broader definition of “asset-backed security” . . .
The SEC recognizes that securitization transactions have become more diverse and complex, both structurally and in the types of assets that are securitized. As a result, transactions and structures that do not meet the requirements of an “asset-backed security” under Regulation AB are not able to take advantage of the SEC’s disclosure regime or utilize Form SF-1 (absent staff no-action letters or guidance permitting exceptions) or Form SF-3 to issue publicly registered securities.
The SEC also believes the competing definitions in Regulation AB and Exchange Act has caused market confusion with respect to the differences, overlap, and purpose of each definition. As a result, the SEC is seeking comment about whether it should amend the definition in Regulation AB to better align with the Exchange Act definition, and broaden the types of assets and transaction structures that can facilitate publicly registered transactions and use the SEC’s disclosure and reporting regime.
We’ve recently posted another episode of our “Understanding Activism with John & J.T.” podcast. This time, J.T. Ho and John were joined by LDG Advisory’s Lauren Gojkovich. They discussed a range of topics relating to value investors’ approach to activism. Topics covered during this 30-minute podcast include:
– Key motivators for value investors.
– The most and least productive ways to engage with value investors.
– The best way to engage with a value investor who is on the board.
– Factors driving the recent trend toward quicker settlements with activists.
– Increasing quality of value investor candidates for board positions.
– Key takeaways for companies from recent value investor activism successes.
– Thoughts on how value investing may evolve over the next few years.
This podcast series is intended to share perspectives on key issues and developments in shareholder activism from representatives of both public companies and activists. John and J.T. continue to record new podcasts, and they’re full of practical and engaging insights from true experts – so stay tuned!
My fingers (and toes) are crossed that this government shutdown will be short-lived. Most are resolved quickly, but this Fenwick alert says companies need to plan for the possibility that this shutdown may be dragged out. It says, “public companies should evaluate and understand which critical functions of their business depend on the federal government, consider potential delays, maintain robust disclosure and communication strategies, and ensure contingency planning is in place.” Specifically:
Shutdowns can increase uncertainty in markets. In this light, companies should proceed with caution when providing any forward-looking guidance and ensure they are basing any such guidance on realistic assumptions.
Companies should evaluate the potential impact of the shutdown on their cash flows and business operations, particularly if the company depends on government payments or regulatory approvals for revenue recognition or operations.
Companies should also ensure their disclosure committees are aware of potential shutdown impacts.
With a longer-term shutdown, companies may also be considering disclosing how the curtailment of government operations might affect their operations and financial performance. The alert says that corporate communications strategies should address:
– Potential impacts of the shutdown on current quarter earnings
– Delays in regulatory licensing, permits, inspections, communications and other approvals
– Supply chain disruptions and risk mitigation efforts
The SEC has announced that effective Wednesday, October 1, 2025, it will continue operating in accordance with its updated Government Shutdown Operations Plan released in August 2025, and that any further updates will be posted at https://www.sec.gov.
The Division of Corporation Finance likewise posted an announcement confirming that EDGAR Next remains operational, the shutdown has no effect on SEC filing requirements or due dates for Section 16 filings (or for Form 144, Schedule 13D/G or any other EDGAR filings), and staff will remain available to process requests for EDGAR access codes and password resets.
However, given the even more limited staffing, Form ID processing times during the shutdown will likely exceed the 8-10 business days that staff had recently indicated as the current realistic timeframe.
If Section 16 is in your purview and you’re not following Alan’s blog posts — or a member of Section16.net — you’re missing out on Alan’s coverage of the latest developments and the premier compliance resource on all things pertaining to Section 16. You can subscribe here and try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
There are schemes circulating that impersonate the SEC. This Investor.gov article says, “SEC impersonators may make posts or send messages that include the SEC’s seal, a link to the SEC’s actual website, or the name or photo of an actual SEC official.” It shows a fake social media post and a profile impersonating Commissioner Peirce, plus an unsolicited text message that falsely claims to be from the SEC.
The messages don’t seem to be targeting folks who interact with the SEC as part of their day jobs — and I’m confident our readers wouldn’t click on a link that says “Join the ‘SEC-designated U.S. Stock Strategy Group’ — weekly returns of 30%+ are within reach!” — but still, stay safe out there, folks! Remember the SEC does not recommend groups officially or unofficially, and only verified accounts should be used when engaging with the SEC on social media.
Last year, Liz shared the annual report of the SEC’s Office of Inspector General addressing the agency’s top management and performance challenges. One of the concerns expressed was the SEC’s consideration of potential judicial scrutiny in its rulemaking process. The report noted that the OIG was also auditing the agency’s rulemaking process and internal controls — specifically the processes for giving interested persons an opportunity to participate in rulemaking and assessing and documenting the impact of proposed rules on efficiency, competition, and capital formation.
Just last week, the OIG issued its 25-page report of findings from its review of 24 rulemaking activities from January 2018 through December 2022. Here are the top takeaways from the summary:
– The SEC defined processes to give interested persons an opportunity to participate in rulemaking. The Agency provided a comment period ranging from 30 to 92 days.
– While the rulemaking divisions consistently collaborated with DERA and OGC in accordance with internal guidance, they did not always involve other divisions and offices in rulemakings within their subject matter expertise.
– The SEC also defined processes to assess and document the impact(s) of proposed rules on efficiency, competition, and capital formation. Yet, some SEC staff expressed concerns about limited data and time to perform economic analyses.
– The SEC further established processes to ensure staff with sufficient and appropriate skills, experience, and expertise are involved in formulating and reviewing proposed rules. However, an Agencywide assessment of the knowledge, skills, and competencies of rulemaking staff was not available until December 2024, and non-federal personnel who worked at the SEC under Intergovernmental Personnel Act (IPA) agreements and who were involved in rulemaking performed unauthorized supervisory functions.
– Technological errors impacted the SEC’s receipt of public comments, and SEC personnel released embargoed rulemaking information without authorization from the Commission.
The report notes that the OIG is not currently making formal recommendations because the SEC took actions during the audit to address these concerns and is continuing to assess its rulemaking process. Comment periods and the rulemaking process more generally have been cited in a number of Commissioner dissents on both sides of the aisle in recent years. In March, Commissioner Uyeda, then Acting SEC Chair, suggested some best practices — for example, a 60- or even 90-day minimum for comment periods depending on a rule’s complexity and more frequent use of reproposals or reopening a comment file to address rule changes in response to comments or the passage of time.
Did you know we have a Checklist on “How to Write SEC Rulemaking Comment Letters”? If you do not have access to our Handbooks, Checklists, and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
