Paul Atkins was officially sworn in as SEC Chairman yesterday. The SEC’s announcement quotes Chairman Atkins as saying that he would join with his fellow commissioners & other SEC professionals to “advance [the agency’s] mission to facilitate capital formation; maintain fair, orderly, and efficient markets; and protect investors.” What does that mean in terms of his regulatory priorities? Chairman Atkins’ testimony during his confirmation hearing provides some clues. This excerpt from a recent Meridien Compensation Partners memo summarizes the key themes that he raised during his testimony:
Reaffirmation of the SEC’s Foundational Mission. Reiterating the agency’s statutory objectives, Chair Atkins called for a “reset of priorities” to restore “common sense and effectiveness” in regulation, reinforcing that the SEC’s primary function is to support well-functioning markets that foster economic opportunity and protect investors.
Emphasis on Practical, Investor-Focused Regulation. SEC regulations must be “smart, effective, and appropriately tailored,” with a focus on implementation that achieves intended outcomes without creating undue burdens. Chair Atkins acknowledged the gap that often exists between legal drafting and business application, underscoring the importance of translating complex regulatory requirements into actionable practices.
Investor Disclosures and Transparency Reform. Current disclosure requirements overwhelm rather than inform investors. Chair Atkins expressed his intent to simplify disclosures to better serve investor understanding and decision-making, which may signal future reforms to corporate reporting obligations.
Commitment to Capital Formation and Market Competitiveness. The current regulatory environment is overly complex, politicized and discouraging to investment. Chair Atkins pledged to advance policies that encourage innovation and capital access, particularly for U.S. businesses seeking to grow and compete globally.
Digital Asset Regulation as a Priority. The development of a “firm regulatory foundation” for digital assets is a top Commission priority to remove the current regulatory uncertainty which has become a barrier to innovation.
Depoliticization of Securities Regulation. SEC rulemaking and enforcement must be free from political influence, with the SEC’s work squarely on investor protection and market integrity, rather than on politically driven priorities.
Not surprisingly, these themes echo comments made by Acting Chair Uyeda and Commissioner Peirce prior to Chairman Atkins’ confirmation and are also reflected in the SEC’s actions in recent months. Of course, how much the need to address the fallout from a potentially extended period of tariff-related market volatility and the adequacy of the agency’s staffing will impact the SEC’s ability to execute this regulatory agenda remains to be seen.
While we’re on the topic of SEC staffing, Democratic senators Elizabeth Warren and Mark Warner have asked the GAO to investigate the impact of staffing cuts and related actions on the SEC’s ability to protect investors and comply with its statutory mandates. According to USA Today, the GAO is on the case:
The U.S. Government Accountability Office plans to scrutinize changes at the U.S. Securities and Exchange Commission, including any led by the White House or Elon Musk’s Department of Government Efficiency, according to a letter sent to Democratic lawmakers on Capitol Hill.
The GAO, Congress’ nonpartisan research arm, told Sens. Elizabeth Warren and Mark Warner it will review the SEC’s recent efforts to cut staff, end leases and consolidate its work, according to a copy of the April 8 letter seen by Reuters.
The lawmakers last month pressed the watchdog to investigate after Reuters and other media reported DOGE’s arrival and other major changes at the regulator, which oversees U.S. capital markets.
The report says that the GAO would begin its work within the next three months.
The senators’ letter also asked the GAO to conduct a detailed review of actions taken by SEC leadership, including acting leadership, to pause or halt enforcement and supervisory actions that were ongoing at the agency as of January 20, 2025, and to look into the involvement of the White House and DOGE in any of those decisions.
I don’t think there’s a more intimidating moment in a corporate lawyer’s career than the first time they’re asked to make a presentation to a board of directors. Heck, even experienced lawyers get a little nervous when they’re presenting to a board they haven’t worked with in the past or addressing a particularly complex topic. In this month’s issue ofThe Boardroom Insider, Ralph Ward offers some tips from personal development coach T.J. Walker on making more effective board presentations. I think this one is particularly relevant for lawyers:
You are the expert on the topic you’re addressing to directors, so the temptation is to stuff in every factoid and data bit you’ve accumulated. “The biggest problem I see is trying to cover too many facts. You don’t want them to think you’re stupid or unprepared, so you tell them everything you know.” This overwhelms the directors, and sets them to checking their cell phones. Write up your board talking points. Condense them. Then condense them some more.
Walker also cautions against being too formal in your approach – writing out and memorizing your comments will put the board to sleep. It’s okay to make a verbal slip every now and again, because trying to perfectly script yourself will cause any stumble to throw you off and will make you less flexible in responding to questions from directors.
In prior blogs, Liz and Dave touched on risk factor and MD&A disclosure issues arising out of President Trump’s tariff-related actions. However, I wanted to address those issues again, because if you’re preparing your first quarter Form 10-Q, the timing of the President’s actions and the potential for another shoe to drop in less than 90 days create almost perfect conditions for companies to stumble into traps for the unwary when addressing these line-item disclosure requirements.
“Liberation Day” occurred on April 2nd, shortly after calendar year companies completed their first fiscal quarter. As a result, the financial statements for the first quarter that will appear in Form 10-Q filings typically won’t reflect the impact of the current tariff regime or the one that may be in place in 90 days. However, it’s pretty clear that most companies are already experiencing the impact of the change in tariff policy on their business – and that’s where the potential traps for the unwary start to unfold.
Under Item 105 of Regulation S-K, the fact that tariffs only began to impact a company’s business after the end of the quarter means that drafters should be particularly conscious of the “hypothetical” risk factor issue when updating risk factor disclosure. With events unfolding so rapidly, today’s risk may be tomorrow’s reality, and those responsible for drafting the 10-Q need to pay even closer attention to developments in the business than they have for previous filings.
There’s reason to think that in its current configuration, the SEC may be less enthusiastic about hypothetical risk factors as a basis for enforcement actions, but the same probably can’t be said for the plaintiffs’ bar. Since that’s the case, in updating risk factor disclosure companies should remember the Fifth Circuit’s admonition that “[t]o warn that the untoward may occur when the event is contingent is prudent; to caution that it is only possible for the unfavorable events to happen when they have already occurred is deceit.” Huddleston v. Herman & MacLean, 640 F. 2d 534, 544 (5th Cir. 1981). If you make disclosure in a risk factor, you need to be very clear about events that have occurred and those that may occur – otherwise you’re likely only digging a deeper hole.
Second, events that are currently impacting a company’s business but that are not reflected in the financial statements included in a periodic report are precisely what Item 303’s “known trends” disclosure requirement is intended to capture. What’s more, companies aren’t just dealing with the current tariff regime, but the more draconian one that may be in place a few months from now. That future tariff regime is a contingency, and when it comes to contingencies, the SEC’s position is that known trends disclosure under Item 303 is triggered by any contingent event that is “reasonably likely” to occur and would be material if it did. Here’s how the SEC characterized its standard in its 2020 MD&A Release:
[W]hen applying the “reasonably likely” threshold, registrants should consider whether a known trend, demand, commitment, event, or uncertainty is likely to come to fruition. If such known trend, demand, commitment, event or uncertainty would reasonably be likely to have a material effect on the registrant’s future results or financial condition, disclosure is required.
Known trends, demands, commitments, events, or uncertainties that are not remote or where management cannot make an assessment as to the likelihood that they will come to fruition, and that would be reasonably likely to have a material effect on the registrant’s future results or financial condition, were they to come to fruition, should be disclosed if a reasonable investor would consider omission of the information as significantly altering the mix of information made available in the registrant’s disclosures.
The TL;DR version of this standard is that if a contingent event likely would be material if it occurred and management can’t conclude that it isn’t reasonably likely to occur, then the MD&A discussion must address the consequences of that event assuming that it occurred. So, when assessing their MD&A disclosure obligations, companies should consider the implications of the current tariff regime and, unless they conclude that it’s not reasonably likely to be implemented, the more draconian one that may come into effect in a few months.
ISS-Corporate has a new report on the number of women serving as named executive officers in Russell 3000 companies. The report says that while there’s been some slow improvement in recent years, women are underrepresented among NEOs. Here are some of the key findings:
– Women occupy less than 17% of the NEO positions at Russell 3000 companies, and over the last five years that percentage has only grown by about 1% per year.
– The good news is that over the past 10 years, the percentage of women serving in NEO positions has doubled, going from 9.5% to 16.4%.
– The industries with the highest percentage of female NEOs are Household & Personal Products (25.2%), followed by Utilities (24.2%) and Consumer Discretionary Distribution & Retail (23%). The laggards are Semiconductors & Semiconductor Equipment (11%), Energy (12.2%), and Automobiles and Components (13.1%).
The report also found that women are least likely to hold the CEO position (7%), and most likely to hold a Human Resources position (68%).
The last few weeks have been a rollercoaster ride for investors, but a recent Financial Times article says that despite the wild gyrations that have followed “Liberation Day,” so far markets haven’t experienced a liquidity crisis. The article says that last year’s move to T+1 settlement is a big part of the reason they haven’t:
Shorter settlement time not only cuts the collateral that traders have to put up, but also reduces the risk that counterparties have disappeared by the time a trade settles. During periods of extended volatility, that fear can lead to a reduction in liquidity that, in turn, leads to even more volatility.
The article also notes that in addition to the direct benefit of a shorter settlement time, the investments made in preparation for T+1 improved communications among market participants and allowed them to better identify and address risks before they escalated out of control.
We (John) first addressed the topic of “remote-only” or “remote-first” public companies — that claim to have no physical address — (not surprisingly) in 2021. At the time, he shared that the SEC cleared an IPO S-1 even though the cover page did not identify the address of the company’s principal executive offices. John’s last blog about “remote-first” public companies was just over three years ago now, and, by that time, the SEC Staff would no longer declare a registration statement effective unless and until it included a physical address in response to the requirement to disclose principal executive offices. Consider not just the cover page requirement, but also the rules that require certain communications to be sent to the principal executive offices — like Rules 14a-8 and 14d-3(a)(2)(i).
Fast forward to 2025. Comment and response letters related to the same company’s 2022 and 2023 10-Ks were just made public, and the Staff is now saying it needs to disclose its principal executive offices. Here are the threerelevantcomments and responses on this issue:
Please revise your filing to provide the address of your principal executive offices.
The Company advises the Staff that since May 2020 the Company has been, and continues to be, a remote-first company with no headquarters or principal executive offices. Furthermore, the Company’s executive team and Board of Directors (the “Board”) are distributed. Since May 2020, all Board meetings have been held virtually with the exception of one meeting in 2023, which was held at a location that was not in the Company’s offices. Substantially all of the Company’s executive team meetings are also held virtually, with meetings occasionally held in-person at locations that are either not in the Company’s offices or in various of the Company’s offices distributed around the world. The Company holds all of its stockholder meetings virtually. The Company’s employees are distributed across over 40 states and ten countries.
Because it does not have a headquarters or principal executive offices, the Company currently includes a footnote on the cover page of its periodic and current reports filed with the Commission providing that stockholder communications be directed to an email address set forth in the Company’s proxy materials and/or identified on the Company’s investor relations website and, beginning with its Form 10-Q for the quarter ended September 30, 2023, the Company will update this footnote to further provide such email address, as well as the address of its agent for service of process in the state of Delaware, for purposes of receiving physical mailings from its stockholders and regulatory communications from the Commission.
We note your response to prior comment 2 and reissue. Please revise disclosure in future filings to provide the address of your principal executive offices. While we note that you are a remote-first company and you have provided the address of your agent for service of process, identification of a principal executive office is a requirement of Form 10-K.
The Company acknowledges the Staff’s comment and advises the Staff that as described in the Company’s response to prior comment 2, since May 2020 the Company has been, and continues to be, a remote-first company with no headquarters or principal executive offices. As previously noted, the Company’s employees are distributed across over 40 states and ten countries, the Company’s executive team and Board of Directors (the “Board”) are geographically distributed, and meetings of the executive team and the Board are generally held virtually. However, in response to the Staff’s comment, the Company advises the Staff that the Company has initiated a process to identify an address to satisfy the principal executive offices requirement for purposes of its filings with the Commission and will disclose such address in the Company’s future filings with the Commission no later than the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”).
We note your response to prior comment 1 that you have “initiated a process to identify an address to satisfy the principal executive offices requirement for purposes of [your] filings with the Commission and will disclose such address in the Company’s future filings with the Commission no later than the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.” Please disclose the address of your principal executive offices in your next Exchange Act report.
The Company advises the Staff that beginning with the Company’s Current Report on Form 8-K filed in connection with the Company’s public release of earnings for the quarter ended September 30, 2024 the Company has included, and will include in future filings with the Commission, an address as requested by the Staff.
John’s prior blog noted that the Staff sometimes accepted a P.O. Box and one company that had its related registration statement declared effective even said that any stockholder communication required to be sent to its principal executive offices may be directed to its agent for service of process. It’s unclear to me whether these options are still accepted. For similarly situated companies, the company did include an address on the cover of its 8-K and 10-Q, but it continues to omit a phone number and includes a footnote that reads: “We are a remote-first company. Accordingly, we do not maintain a headquarters. We are including this address solely for the purpose of compliance with the Securities and Exchange Commission’s rules. Stockholder communications may also be sent to the email address: secretary@coinbase.com.”
Apparently, CFOs are not immune to the trends that are causing record CEO turnover. Russell Reynolds reports that CFO tenure reached a 5-year low of 5.6 years in 2024. KPMG’s April 2025 Directors Quarterly discusses the need for robust CFO succession planning to avoid disruption from unexpected turnover. Key to effective succession planning is ensuring that the process evolves to reflect the skills and experiences that CFOs need in today’s business environment. And the role is expanding. The article points to the fact that CFOs now:
– Take on more responsibility as strategic leaders
– Lead (versus support) technology & innovation projects
– Have responsibility for cybersecurity, AI, digital transformations and sustainability
Accordingly, it says, CFOs often come to the role without traditional accounting and financial reporting backgrounds. That means talent management is also an increasingly important skill for CFOs since having a strong controller and accounting team is as important as ever. Given the increased dependence on CFO reports, KPMG suggests that effective CFO succession planning should also address those roles.
The article also discusses signs of a healthy (or not so healthy) relationship between the CFO and the audit committee. The KPMG team spoke to audit committee members & CFOs who cited these potential red flags that the relationship between the CFO and the audit committee isn’t what it should be:
– An audit committee member asks a question and the controller or CAE hesitates before answering
– The audit committee chair learns bad news from someone other than the CFO
Audit committees need to be vigilant. Lack of accounting resources/expertise was still one of the top 5 reasons for material weaknesses in internal controls in 2024, and the talent shortage in accounting isn’t going away anytime soon.
The transcript for our recent “Conduct of the Annual Meeting” webcast is now available. Chevron’s Mary Francis, The Shareholder Service Optimizer’s Carl Hagberg and Peder Hagberg, Lucky Strike Entertainment’s Matthew Kane and Alliance Advisors’ Jason Vinick discussed the latest developments and timely considerations for before, during and after your annual meeting.
During the program, Carl shared this helpful reminder of the importance of someone on the team sounding alarm bells if something in the voting or tabulation process doesn’t look right:
My number one suggestion, make sure you have a good inspector of election who, (A) has written presumptions as to the validity of proxies, and (B) knows what they mean, knows how to enforce them and rule on them, and (C) who can stand up if challenged and explain. At least five times a year, our inspectors get questions like, “How do you really know these votes are right?” We have a little mini script in our heads, where we tell them what we did to assure that the numbers are right.
Make sure that your inspector and your proxy solicitor has what I call a “good sniffer.” They smell trouble when the numbers don’t look right. We’ve had many cases where they discovered, “Oh, they forgot to mail to the employee plan,” or some big giant pile of proxies got left in a corner and didn’t get counted, or there’s something wrong, and you need to swing into action, or it’s just a mistake. Somebody made a big mistake and voted the wrong way.
We always look at the big voters. If you don’t see JP Morgan Chase voting only 70% of their position, you know there’s something wrong there. That would be number one – to make sure that you see potential problems coming and you’re prepared to respond to it.
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This Paul Weiss client alert highlights a recent decision by a federal district court in Colorado, Cupat v. Palantir Technologies, Inc. (D. Colo.; 4/25), that dismisses a Section 11 claim arising out of a direct listing after applying the strict tracing requirement from SCOTUS’s Slack decision. The Slack decision required that a plaintiff plead and prove that it purchased shares traceable to the registration statement it claims was materially misleading when making a Section 11 claim.
[The court] noted that the Supreme Court “did not assess whether any specific allegations were sufficient to plead traceability, nor what evidence is sufficient to prove it.”
Plaintiffs sought to satisfy the tracing requirement by alleging that (i) the probability that plaintiffs “purchased at least one registered share is so high as to constitute a legal certainty”; (ii) they would be able to prove traceability with appropriate discovery; and (iii) “any unregistered shares they purchased should be deemed registered on an integrated offering theory.”
[But] the district court held that plaintiffs could not plausibly allege that the shares they purchased were issued pursuant to the allegedly deficient registration statement because both registered and unregistered shares of the issuer’s stock were available at the time of the direct listing.
The alert continues with these implications, which are similar to those Liz had highlighted when Slack was released:
– The decision confirms that Slack’s strict tracing requirement may effectively insulate companies that go public through a direct listing from Section 11 liability.
– The decision further suggests that nothing short of chain-of-title allegations will suffice to plead traceability, posing a significant challenge to plaintiffs seeking to plead a Section 11 claim arising out of a direct listing.
– The decision may also have implications in other circumstances where tracing shares to a particular registration statement is difficult, such as where unregistered shares enter the market after an IPO lockup period expires, or where there have been multiple offerings pursuant to multiple registration statements. Ultimately, this decision and others interpreting Slack may make direct listings a more attractive avenue for companies that are looking to go public, as a direct listing may reduce associated litigation exposure.